EXHIBIT 2.1
EXECUTION COPY
STOCK PURCHASE AGREEMENT
AMONG
▇▇▇▇▇▇▇▇▇▇ ▇▇▇.,
HACHETTE BOOK GROUP USA, INC.
AND
LAGARDERE NORTH AMERICA, INC.
DATED APRIL 13, 2000
E-1
TABLE OF CONTENTS
PAGE
1. DEFINITIONS............................................................1
2. SALE AND TRANSFER OF SHARES; CLOSING...................................7
2.1 Shares...........................................................7
2.2 Purchase Price...................................................7
2.3 Closing..........................................................7
2.4 Closing Obligations..............................................7
3. REPRESENTATIONS AND WARRANTIES OF SELLERS..............................9
3.1 Organization and Good Standing...................................9
3.2 Authority; No Conflict...........................................9
3.3 Capitalization..................................................10
3.4 Financial Statements............................................10
3.5 Title to Properties; Encumbrances...............................11
3.6 No Undisclosed Liabilities......................................11
3.7 Taxes...........................................................11
3.8 No Material Adverse Effect......................................13
3.9 Employee Benefits...............................................13
3.10 Compliance with Legal Requirements..............................16
3.11 Legal Proceedings; Orders.......................................16
3.12 Absence of Certain Changes and Events...........................17
3.13 Contracts.......................................................18
3.14 Insurance.......................................................20
3.15 Environmental Matters...........................................20
3.16 Labor Relations; Compliance.....................................20
3.17 Intellectual Property...........................................21
3.18 Brokers or Finders..............................................24
3.19 Year 2000.......................................................24
4. REPRESENTATIONS AND WARRANTIES OF BUYER...............................24
4.1 Organization and Good Standing..................................24
4.2 Authority; No Conflict..........................................24
4.3 Investment Intent...............................................25
4.4 Certain Proceedings.............................................25
4.5 Brokers or Finders..............................................25
5. COVENANTS OF SELLER PRIOR TO CLOSING DATE.............................26
5.1 Access and Investigation........................................26
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5.2 Operation of the Businesses of the Acquired Companies...........26
5.3 Approvals.......................................................26
5.4 Notification....................................................27
6. COVENANTS OF BUYER PRIOR TO CLOSING DATE..............................27
6.1 Approvals.......................................................27
7. SECTION 338(h)(10) ELECTION...........................................27
8. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE...................29
8.1 Accuracy of Representations.....................................29
8.2 Seller's Performance............................................30
8.3 Consents........................................................30
8.4 Additional Documents............................................30
8.5 No Proceedings..................................................30
9. CONDITIONS PRECEDENT TO SELLER'S OBLIGATION TO CLOSE..................30
9.1 Accuracy of Representations.....................................30
9.2 Buyer's Performance.............................................31
9.3 Consents........................................................31
9.4 Additional Documents............................................31
9.5 No Injunction...................................................31
9.6 Post-Closing Tax Matters........................................31
10. TERMINATION...........................................................34
10.1 Termination Events..............................................34
10.2 Effect of Termination...........................................35
10.3 Breakup Fee.....................................................35
11. INDEMNIFICATION; REMEDIES.............................................35
11.1 Indemnification and Payment of Damages by Sellers...............35
11.2 Indemnification and Payment of Damages by Buyer.................35
11.3 Time Limitations................................................36
11.4 Limitations on Amount -- Seller.................................36
11.5 Limitations on Amount -- Buyer..................................36
11.6 Procedure for Indemnification -- Third Party Claims.............37
11.7 Procedure for Indemnification -- Other Claims...................38
11.8 Sole Remedy.....................................................38
12. GENERAL PROVISIONS....................................................38
12.1 Expenses........................................................38
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12.2 Public Announcements............................................38
12.3 Confidentiality.................................................38
12.4 Notices.........................................................39
12.5 Jurisdiction; Service of Process................................40
12.6 Further Assurances..............................................40
12.7 Waiver..........................................................40
12.8 Entire Agreement and Modification...............................41
12.9 Disclosure Letter...............................................41
12.10 Assignments, Successors, and No Third-Party Rights..............41
12.11 Severability....................................................41
12.12 Section Headings, Construction..................................41
12.13 Time of Essence.................................................42
12.14 Governing Law...................................................42
12.15 Counterparts....................................................42
12.16 Non-Competition.................................................42
SCHEDULES
Schedule 1 -- Persons with Knowledge
Schedule 4.2 -- Conflicts and Consents Required on Behalf of Buyer
Schedule 4.5 -- Broker's Fees
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STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement ("AGREEMENT") is made as of April 13, 2000,
by ▇▇▇▇▇▇▇▇▇▇ ▇▇▇., a New York corporation ("BUYER"), Hachette Book Group USA,
Inc., a Delaware corporation ("SELLER"), and Lagardere North America, Inc., a
Delaware corporation and the parent of Seller ("SELLER'S PARENT" and together
with Seller, "SELLERS").
RECITALS
Seller desires to sell, and Buyer desires to purchase, all of the issued
and outstanding shares (the "SHARES") of capital stock of Grolier Incorporated,
a Delaware corporation (the "COMPANY"), for the consideration and on the terms
set forth in this Agreement.
AGREEMENT
The parties, intending to be legally bound, agree as follows:
1. DEFINITIONS.
For purposes of this Agreement, the following terms have the meanings
specified or referred to in this Section 1:
"ACQUIRED COMPANIES" -- the Company and its Subsidiaries, collectively.
"ALLOCATION" -- as defined in Section 7(b).
"APPLICABLE CONTRACT" -- any Contract (a) under which an Acquired Company
has any rights, (b) under which an Acquired Company has an obligation or
liability, or (c) by which any Acquired Company or any of the assets owned by it
is bound.
"BALANCE SHEET" -- as defined in Section 3.4.
"BENEFIT PLAN" -- as defined in Section 3.9(a).
"BUYER" -- as defined in the first paragraph of this Agreement.
"CLOSING" -- as defined in Section 2.3.
"CLOSING DATE" -- the date and time as of which the Closing actually takes
place.
"COMPANY" -- as defined in the Recitals of this Agreement.
"CONSENT"-- any approval, consent, ratification, waiver, or other
authorization (including any Governmental Authorization).
"CONTEMPLATED TRANSACTIONS" -- all of the transactions contemplated by
this Agreement, including:
(a) the sale of the Shares by Seller to Buyer;
(b) the performance by Buyer and Seller of their respective
covenants and obligations under this Agreement.
"CONTRACT" -- any agreement, contract, obligation, promise, or undertaking
(whether written or oral and whether express or implied) that is legally
binding.
"COPYRIGHTS" -- as defined in Section 3.17(a).
"CUSTOMER LIST" -- as defined in Section 3.17(a).
"DAMAGES" -- as defined in Section 11.1.
"DISCLOSURE LETTER" -- the disclosure letter delivered by Sellers to Buyer
concurrently with the execution and delivery of this Agreement.
"ENCUMBRANCE" -- any charge, claim, encumbrance, title defect, community
property interest, equitable interest, lien, mortgage, option, pledge, security
interest, right of first refusal, or restriction of any kind, including any
restriction on use, voting, transfer, receipt of income or exercise of any other
attribute of ownership.
"ENVIRONMENT" -- water (including both surface and ground water), air and
land (including subsurface strata).
"ENVIRONMENTAL LAW" -- any Legal Requirement that requires or relates to:
(a) advising appropriate authorities, employees and the public of
intended or actual releases of pollutants or hazardous substances or materials,
violations of discharge limits or other prohibitions and of the commencements of
activities, such as resource extraction or construction, that could have
significant impact on the Environment;
(b) preventing or reducing to acceptable levels the release of
pollutants or hazardous substances or materials into the Environment;
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(c) reducing the quantities, preventing the release or minimizing
the hazardous characteristics of wastes that are generated;
(d) assuring that products are designed, formulated, packaged, and
used so that they do not present unreasonable risks to human health or the
Environment when used or disposed of;
(e) protecting resources, species or ecological amenities;
(f) reducing to acceptable levels the risks inherent in the
transportation of hazardous substances, pollutants, oil or other potentially
harmful substances;
(g) cleaning up pollutants that have been released, preventing the
threat of release, or paying the costs of such clean-up or prevention; or
(h) making responsible parties pay private parties, or groups of
them, for damages done to their health or the Environment or permitting
self-appointed representatives of the public interest to recover for injuries
done to public assets.
"ERISA" -- the Employee Retirement Income Security Act of 1974, as
amended, or any successor law and regulations and rules issued pursuant to that
Act or any successor law.
"ERISA AFFILIATE" -- with respect to an Acquired Company, any other person
that, together with any of the Acquired Companies, would be treated as a single
employer under IRC ss. 414 or Section 4001 of ERISA.
"FACILITIES" -- any real property currently owned, leased or occupied by
any Acquired Company and any buildings, plants, structures, fixtures or
equipment currently owned, leased or occupied by any Acquired Company.
"FOREIGN BENEFIT PLAN" -- as defined in Section 3.9(i).
"GAAP" -- generally accepted United States accounting principles
consistently applied.
"GOVERNMENTAL AUTHORIZATION" -- any approval, consent, license, permit,
waiver, or other authorization issued, granted, given or otherwise made
available by or under the authority of any Governmental Body or pursuant to any
Legal Requirement.
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"GOVERNMENTAL BODY" -- any:
(a) nation, state, county, city, town, village, district, or other
jurisdiction of any nature;
(b) Federal, state, local, municipal, foreign, or other government;
(c) governmental or quasi-governmental authority of any nature
(including any governmental agency, branch, department, official or entity and
any court or other tribunal); or
(d) body exercising, or entitled to exercise, any administrative,
executive, judicial, legislative, police, regulatory or taxing authority or
power of any nature.
"HAZARDOUS MATERIALS" -- any waste or other substance that is listed,
defined, designated, or classified as, or otherwise determined to be, hazardous,
radioactive, or toxic or a pollutant or a contaminant under or pursuant to any
Environmental Law.
"HSR ACT" -- the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as
amended, or any successor law and regulations and rules issued pursuant to that
Act or any successor law.
"INDEMNIFIED PERSONS" -- as defined in Section 11.1.
"INTELLECTUAL PROPERTY ASSETS" -- as defined in Section 3.17(a).
"BALANCE SHEET" -- as defined in Section 3.4.
"IRC" -- the Internal Revenue Code of 1986, as amended, or any successor
law, and regulations issued by the IRS pursuant to the Internal Revenue Code or
any successor law.
"IRS" -- the United States Internal Revenue Service or any successor
agency, and, to the extent relevant, the United States Department of the
Treasury.
"KNOWLEDGE" -- a Person who is an individual will be deemed to have
"Knowledge" of a particular fact or other matter if such individual is actually
aware of such fact or other matter.
"KNOWLEDGE OF THE SELLERS" -- the Knowledge of any and all of the Persons
specified in Schedule 1.
"LEGAL PROCEEDING" -- any action, arbitration, hearing, litigation or suit
(whether civil, criminal or administrative) commenced, brought, conducted, or
heard by or before, or otherwise involving, any Governmental Body or arbitrator.
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"LEGAL REQUIREMENT" -- any Federal, state, local, municipal, foreign,
international, multinational, or other administrative order, constitution, law,
ordinance, principle of common law, regulation, statute, or treaty.
"MADSP -- as defined in Section 7(b).
"▇▇▇▇" -- as defined in Section 3.17(a).
"MATERIAL ADVERSE EFFECT" -- a material adverse effect on the consummation
of the Contemplated Transactions or on the business, operations, properties
(including intangible properties), assets, liabilities or results of operations
or financial condition of the Acquired Companies taken as a whole, other than
effects relating to (i) one or more downturns in the economy or the securities
markets in general, or (ii) one or more downturns in the children's book
publishing and direct marketing industries in which the Acquired Companies
operate, or (iii) the announcement or consummation of the Contemplated
Transactions.
"MATERIAL CONTRACT" -- an Applicable Contract in which required payments
thereunder are in excess of $25,000 per year in year 2000 or any year
thereafter.
"NEW $15 MILLION CLAIM" -- as defined in Section 8.1.
"ORDER" -- any award, decision, injunction, judgment, order, ruling,
subpoena, or verdict entered, issued, made, or rendered by any court,
administrative agency, or other Governmental Body or by any arbitrator.
"ORDINARY COURSE OF BUSINESS" -- an action taken by a Person will be
deemed to have been taken in the "Ordinary Course of Business" if such action is
consistent with the past practices of such Person and is taken in the ordinary
course of operations of such Person.
"ORGANIZATIONAL DOCUMENTS" -- (a) the articles or certificate of
incorporation and the bylaws of a corporation; (b) the partnership agreement and
any statement of partnership of a general partnership; (c) the limited
partnership agreement and the certificate of limited partnership of a limited
partnership; (d) any charter or similar document adopted or filed in connection
with the creation, formation, or organization of a Person, including, with
respect to a limited liability company, its member or operating agreement; and
(e) any amendment to any of the foregoing.
"PATENT" -- as defined in Section 3.17(a).
"PBGC" -- as defined in Section 3.9(c).
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"PERSON" -- any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union, or other entity
or Governmental Body.
"PROCEEDING" -- any action, arbitration, audit, hearing, investigation,
litigation, or suit (whether civil, criminal, administrative, investigative, or
informal) commenced, brought, conducted, or heard by or before, or otherwise
involving, any Governmental Body or arbitrator.
"PURCHASE PRICE" -- as defined in Section 2.2.
"RELEASE" -- any spilling, leaking, emitting, discharging, depositing,
escaping, leaching, dumping, or other releasing into the Environment, whether
intentional or unintentional.
"REPRESENTATIVE" -- with respect to a particular Person, any director,
officer, employee, agent, consultant, advisor, or other representative of such
Person, including legal counsel, accountants and financial advisors.
"SECTION 338(h)(10) ELECTION" -- as defined in Section 7(a).
"SECTION 338 FORMS" -- as defined in Section 7(c).
"SECURITIES ACT" -- the Securities Act of 1933, as amended, or any
successor law and regulations and rules issued pursuant to that Act or any
successor law.
"SELLER" -- as defined in the first paragraph of this Agreement.
"SELLERS" -- as defined in the first paragraph of this Agreement.
"SELLER'S PARENT" -- as defined in the first paragraph of this Agreement.
"SHARES" -- as defined in the Recitals of this Agreement.
"SUBSIDIARY" -- with respect to any Person (the "OWNER"), any corporation
or other Person of which securities or other interests having the power to elect
a majority of that corporation's or other Person's board of directors or similar
governing body or otherwise having the power to direct the business and policies
of that corporation or other Person (other than securities or other interests
having such power only upon the happening of a contingency that has not
occurred) are held by the Owner or one or more of its Subsidiaries; when used
without reference to a particular Person, "Subsidiary" means a Subsidiary of the
Company.
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"TAX" -- any tax (including any income tax, capital gains tax, value-added
tax, sales tax, property tax, gift tax, or estate tax), tariff, duty (including
any customs duty) or other deficiency and any related fine, penalty, interest,
or addition to tax), imposed, assessed or collected by or under the authority of
any Governmental Body or payable pursuant to any tax-sharing agreement or any
other Contract relating to the sharing or payment of any such tax, levy,
assessment, tariff, duty, deficiency, or fee.
"TAX RETURN" -- any return (including any information return), report,
statement, schedule, notice, form, or other document or information filed with
or submitted to, or required to be filed with or submitted to, any Governmental
Body in connection with the determination, assessment, collection, or payment
of, any Tax or in connection with the administration, implementation, or
enforcement of or compliance with any Legal Requirement relating to any Tax.
"THREATENED" -- a claim, Proceeding, dispute, action, or other matter will
be deemed to have been "Threatened" if any demand or statement has been made in
writing or any notice has been given in writing.
"U.S. ACQUIRED COMPANY" -- any Acquired Company that is incorporated in a
state or commonwealth of the United States.
2. SALE AND TRANSFER OF SHARES; CLOSING.
2.1 SHARES. Subject to the terms and conditions of this Agreement, at the
Closing, Seller will sell and transfer the Shares to Buyer, and Buyer will
purchase the Shares from Seller free and clear of all Encumbrances.
2.2 PURCHASE PRICE. The purchase price (the "PURCHASE PRICE") for the
Shares will be Four Hundred Million Dollars ($400,000,000).
2.3 CLOSING. The purchase and sale (the "CLOSING") provided for in this
Agreement will take place at the offices of Seller's counsel at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, at 10:00 a.m. (local time) on the later of (i) June 1, 2000
or (ii) the date that is two business days following the termination of the
applicable waiting period under the HSR Act, or at such other time and place as
the parties may agree. Subject to the provisions of Section 11, failure to
consummate the purchase and sale provided for in this Agreement on the date and
time and at the place determined pursuant to this Section 2.3 will not result in
the termination of this Agreement and will not relieve any party of any
obligation under this Agreement.
2.4 CLOSING OBLIGATIONS. At the Closing:
(a) Sellers will deliver to Buyer:
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(i) certificates representing the Shares, duly endorsed (or
accompanied by duly executed stock powers), in a form sufficient to permit
the valid transfer to Buyer of title to the Shares;
(ii) certificates of ownership, representing all equity
securities of the Acquired Companies;
(iii) a certificate executed by Sellers to the effect that the
conditions to Buyer's obligations to close specified in Sections 8.1,
8.2(a) and (with respect to covenants and obligations) 8.2(b) have been
satisfied;
(iv) the legal opinion of Sellers' counsel and the legal
opinion of Company's counsel as described in Section 8.4;
(v) certificates of the secretaries of Sellers certifying all
resolutions adopted by the Board of Directors of Sellers evidencing the
authorization for the execution and delivery of this Agreement and
consummation of the Contemplated Transactions and the signature and
incumbency of the individuals executing on behalf of Sellers this
Agreement and any of the documents or instruments delivered pursuant
hereto and copies of the Organizational Documents of the Acquired
Companies;
(vi) certificates issued by the appropriate Governmental
Authority evidencing the good standing of the U.S. Acquired Companies in
the jurisdictions in which they are formed (or an appropriate equivalent)
as of a date not more than thirty business days prior to the Closing Date
and certificates of good standing in each U.S. jurisdiction in which such
U.S. Acquired Company is qualified to do business;
(vii) a certificate of Seller certifying that Seller is not a
"foreign person" within the meaning of Section 1445 of the IRC, which
certificate shall be reasonably satisfactory to Buyer; and
(viii)such other customary closing documentation as Buyer may
reasonably request.
(b) Buyer will deliver to Seller:
(i) the Purchase Price by wire transfer of immediately
available funds delivered in accordance with the instructions provided by
Seller;
(ii) a certificate executed by Buyer to the effect that the
conditions to Sellers' obligations to close specified in Sections 9.1 and
9.2(a) have been satisfied;
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(iii) the legal opinion of Buyer's counsel as described in
Section 9.4;
(iv) certificate of the Secretary of Buyer certifying all
resolutions adopted by its Board of Directors evidencing the authorization
for the execution and delivery of this Agreement and the consummation of
the Contemplated Transactions and the signature and incumbency of the
individuals executing on behalf of Buyer this Agreement and of the
documents or instruments delivered pursuant hereto and copies of the
Certificate of Incorporation and Bylaws of the Buyer;
(v) certificate evidencing the good standing of Buyer from the
Secretary of State of New York as of a date not more than thirty business
days prior to the Closing Date; and
(vi) such other customary closing documentation as Sellers may
reasonably request.
3. REPRESENTATIONS AND WARRANTIES OF SELLERS.
Sellers jointly and severally represent and warrant to Buyer as follows:
3.1 ORGANIZATION AND GOOD STANDING.
(a) PART 3.1 OF THE DISCLOSURE LETTER contains a complete and
accurate list for each Acquired Company of its name, its jurisdiction of
organization, other jurisdictions in which it is authorized to do business and
its capitalization. Except as set forth on PART 3.1 OF THE DISCLOSURE LETTER,
each Acquired Company is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of organization, with full
corporate power and corporate authority to conduct its business as it is now
being conducted, to own or use the properties and assets that it purports to own
or use, and to perform all its obligations under its agreements. Each U.S.
Acquired Company is duly qualified to do business as a foreign corporation and
is in good standing under the laws of each state or other jurisdiction in which
either the ownership or use of the properties owned or used by it, or the nature
of the activities conducted by it, requires such qualification, except where the
failure to do so, individually or taken as a whole, would not have a Material
Adverse Effect and would not be reasonably likely to result in a Material
Adverse Effect.
(b) Except as set forth in Part 3.1(b) of the Disclosure Letter,
Sellers have made available to Buyer copies of the Organizational Documents of
each Acquired Company, as currently in effect.
3.2 AUTHORITY; NO CONFLICT.
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(a) This Agreement constitutes the legal, valid, and binding
obligation of Sellers, enforceable against Sellers in accordance with its terms
subject to bankruptcy, reorganization, insolvency and other similar laws
affecting the enforcement of creditors' rights in general and to general
principles of equity (regardless of whether considered in a proceeding in equity
or an action at law). Sellers have full corporate power and authority to execute
and deliver this Agreement and to perform their obligations under this
Agreement.
(b) Except as set forth in PART 3.2 OF THE DISCLOSURE LETTER,
neither the execution and delivery of this Agreement nor the consummation or
performance of any of the Contemplated Transactions by Sellers will:
(i) contravene, conflict with, or result in a violation of (A)
any provision of the Organizational Documents of any of the Sellers or the
Acquired Companies, or (B) any resolution adopted by the board of
directors or the stockholders of any of the Sellers or any Acquired
Company;
(ii) to the Knowledge of the Sellers and subject to compliance
with HSR, contravene, conflict with, or result in a violation of, or give
any Governmental Body the right to challenge any of the Contemplated
Transactions or to exercise any remedy or obtain any relief under any
Legal Requirement to which any Acquired Company is subject; or
(iii) contravene or result in a violation or breach of any
provision of, or give any Person the right to terminate or modify any
Material Contract or any Order to which any Acquired Company is subject.
Except as set forth in PART 3.2 OF THE DISCLOSURE LETTER, and except where
the failure to do so, individually or taken as a whole, would not have a
Material Adverse Effect and would not be reasonably likely to result in a
Material Adverse Effect, neither the Sellers nor any of the Acquired Companies
is or will be required to give any notice to or obtain any Consent from any
Person in connection with the execution and delivery of this Agreement or the
consummation or performance of any of the Contemplated Transactions.
3.3 CAPITALIZATION. The authorized equity securities of the Company
consist of 1,000 shares of common stock, par value $1.00 per share, of which 100
shares are issued and outstanding and constitute the Shares. Seller is and will
be on the Closing Date the record and beneficial owner and holder of the Shares,
free and clear of all Encumbrances. Except as set forth in PART 3.3 OF THE
DISCLOSURE LETTER and except for nominee shares, as required under local laws,
all of the outstanding equity securities and other securities of each Acquired
Company are owned of record and beneficially by one or more of the Acquired
Companies, free and clear of all Encumbrances. All of the outstanding equity
securities of each Acquired Company have been duly authorized and validly issued
and are fully paid and nonassessable and were not issued in violation of any
preemptive rights. Except as set forth in PART 3.3 OF THE DISCLOSURE LETTER,
there
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are no options, warrants, rights of conversion or other Contracts relating to
the issuance, sale, voting or transfer of any equity securities or other
securities of any Acquired Company. None of the outstanding equity securities or
other securities of any Acquired Company was issued in violation of the
Securities Act or any other Legal Requirement. Except as set forth in PART 3.3
OF THE DISCLOSURE LETTER, no Acquired Company owns, or has any Contract to
acquire, any equity securities or other securities of any Person (other than
Acquired Companies) or any direct or indirect equity or ownership interest in
any other business.
3.4 FINANCIAL STATEMENTS. Sellers have delivered to Buyer audited
consolidated balance sheets of the Company and consolidated subsidiaries as at
December 31 in each of the years 1997 through 1999, and the related consolidated
statements of income, changes in stockholders' equity, and cash flow for each of
the fiscal years then ended, together with the report thereon of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
& Co., independent certified public accountants (the balance sheet as at
December 31, 1999 being referred to as the "BALANCE SHEET"). Such financial
statements and notes fairly present the financial condition and the results of
operations, changes in stockholders' equity, and cash flow of the Acquired
Companies as at the respective dates of and for the periods referred to in such
financial statements, all in accordance with GAAP.
3.5 TITLE TO PROPERTIES; ENCUMBRANCES. PART 3.5 OF THE DISCLOSURE LETTER
contains a complete and accurate list of all real property, material leaseholds
or other material interests therein owned by any Acquired Company. Sellers have
made available to Buyer copies of the deeds and other instruments (as recorded)
by which the Acquired Companies acquired such real property and interests, and
copies of all title insurance policies, opinions, abstracts, and surveys in the
possession of Sellers or the Acquired Companies relating to such property or
interests. Except as set forth in PART 3.5 OF THE DISCLOSURE LETTER, the
Acquired Companies own (with valid title in the case of real property free and
clear of all Encumbrances), subject to the matters shown in Buyer's title
reports, surveys and other due diligence reports, or in Sellers' materials
referred to in the preceding sentence all of which are listed in PART 3.5 OF THE
DISCLOSURE LETTER and copies of which have been made available to Buyer) all the
properties and assets reflected in the Balance Sheet (except for assets held
under capitalized leases disclosed or not required to be disclosed in PART 3.5
OF THE DISCLOSURE LETTER and personal property sold since the date of the
Balance Sheet in the Ordinary Course of Business). The Acquired Companies own or
have the right to use all of the assets and properties used in the conduct of
the businesses of the Acquired Companies as currently conducted.
3.6 NO UNDISCLOSED LIABILITIES. Except (a) as and to the extent disclosed
or provided for in the Balance Sheet, (b) as set forth in PART 3.6 OF THE
DISCLOSURE LETTER, the Company had no liabilities or obligations of any nature
required to be set forth on a balance sheet prepared in accordance with GAAP
that were not reflected or reserved against on the Balance Sheet. Except as
disclosed in PART 3.6 OF THE DISCLOSURE LETTER, the Company has not, except in
the Ordinary Course of Business, incurred any material liabilities or
obligations of any nature since December 31, 1999.
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3.7 TAXES.
(a) The Acquired Companies have filed or caused to be filed and will
file or cause to be filed (in all cases on a timely basis) all Federal income
Tax Returns and all other material Tax Returns (whether Federal, state, local or
foreign) that are or were required to be filed by or with respect to any of the
Acquired Companies prior to the date hereof or on or prior to the Closing Date,
either separately or as a member of a group of corporations, pursuant to
applicable Legal Requirements. PART 3.7(a) OF THE DISCLOSURE LETTER contains a
complete and accurate list of all such Tax Returns (whether Federal, state,
local or foreign) relating to income or franchise Taxes filed since December 31,
1997, and Sellers have delivered or made available to Buyer copies of
consolidating schedules or pro forma Tax Returns with respect thereto that
relate to the Acquired Companies.
(b) Except as set forth in PART 3.7(b) OF THE DISCLOSURE LETTER, the
United States Federal, state and foreign income Tax Returns of each Acquired
Company subject to such Taxes have been audited by the IRS or relevant state or
foreign tax authorities or are closed by the applicable statute of limitations
for all taxable years ended December 31, 1991 through December 31, 1996. PART
3.7(b) OF THE DISCLOSURE LETTER contains a complete and accurate list of all
audits of all such Tax Returns. All deficiencies proposed as a result of such
audits have been paid, reserved against, settled, or, as described in PART
3.7(b) OF THE DISCLOSURE LETTER, are being contested in good faith by
appropriate proceedings. Except as described in PART 3.7(b) OF THE DISCLOSURE
LETTER, neither the Sellers nor any Acquired Company has given or been requested
to give waivers or extensions (or is or would be subject to a waiver or
extension given by any other Person) of any statute of limitations relating to
the payment of Taxes of any Acquired Company or for which any Acquired Company
may be liable.
(c) No consent to the application of Section 341(f)(2) of the IRC
has been filed with respect to any property or assets held, acquired, or to be
acquired by any Acquired Company.
(d) All Tax Returns filed by (or that include on a consolidated
basis) any Acquired Company are true, correct, and complete in all material
respects. On or before the Closing Date, (i) all United States Federal, state
and local income and franchise Taxes which are imposed on or with respect to any
Acquired Company for any period ending on or before the Closing Date (whether or
not shown on any Tax Return) and (ii) all Taxes other than United States
federal, state and local income and franchise Taxes which are imposed on or with
respect to any Acquired Company and which have become or will become due and
payable on or before the Closing Date (whether or not shown on any Tax Return)
have been or will be paid in a timely manner, except for the Taxes described in
Part 3.7(d) or Part 3.7(e) of the Disclosure Letter, and in either case only to
the extent of the dollar amounts of the reserve or accrual for such Taxes set
forth in Part 3.7(d) or Part 3.7(e), respectively. There is no tax sharing
agreement that will require any payment by any Acquired Company after the date
of this Agreement and any tax sharing agreement between any of the Acquired
Companies and the Seller (or its Affiliates) will be terminated as of the
Closing Date.
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(e) None of the Acquired Companies is, or has been, a "United States
real property holding company," within the meaning of IRC Section 897.
(f) None of the Acquired Companies has any liability for the Taxes
of any person (other than the Acquired Companies) under Treasury Regulation
Section 1.1502-6 (or any similar provision of state, local or foreign law), as a
transferee or successor, by contract, or otherwise.
(g) With respect to taxable periods beginning before and ending
after the Closing Date, Taxes imposed on or with respect to any Acquired Company
for any period ending on or before the Closing Date shall be deemed to include
Taxes allocable to the portion of such taxable period ending on the Closing Date
as determined in accordance with this Section 3.7(g). The portion of Taxes
allocable to the portion of such taxable period ending on the Closing Date shall
(x) in the case of any Taxes other than Taxes based upon or related to income or
receipts, be deemed to be the amount of such Taxes for the entire taxable period
multiplied by a fraction, the numerator of which is the number of days in the
taxable period ending on the Closing Date and the denominator of which is the
number of days in the entire taxable period, and (y) in the case of any Taxes
based upon or related to income, receipts or single business, be deemed to be
the amount of Taxes which would be payable if the relevant taxable period ended
on the Closing Date.
3.8 NO MATERIAL ADVERSE EFFECT. Since the date of the Balance Sheet, there
has not been any Material Adverse Effect or any event reasonably likely to
result in a Material Adverse Effect.
3.9 EMPLOYEE BENEFITS.
(a) Except as set forth in PART 3.9(a) OF THE DISCLOSURE LETTER,
none of the Acquired Companies maintains or contributes to, or has any
obligation with respect to, and none of the employees of the Acquired Companies
are covered by, any bonus, deferred compensation, severance pay, pension, profit
sharing, retirement, insurance, stock purchase, stock option, fringe benefit,
health, welfare, post-retirement benefit, life, disability, individual
employment, executive compensation, incentive or other plan, arrangement or
practice, written or otherwise, domestic or foreign, insured or self-insured or
any other "employee benefit plan", as defined in Section 3(3) of ERISA, whether
formal or informal (the "BENEFIT PLANS"). None of the Acquired Companies (or any
of their respective predecessors) participates in or in any way, directly or
indirectly, has any liability with respect to any "MULTIEMPLOYER PLAN," as
defined in Sections 3(37) or 4001 of ERISA or 414 of the IRC, a funded benefit
plan, as defined in Section 419 of the IRC or a "SINGLE-EMPLOYER PLAN" within
the meaning of Section 4001 of ERISA which is subject to Section 4063 and 4064
of ERISA. Except as set forth in PART 3.9(a) OF THE DISCLOSURE LETTER, none of
the U.S. Acquired Companies has any agreement or commitment to create any
additional Benefit Plan, or modify or change any existing Benefit Plan and, to
the Knowledge of the Sellers, no non-US Acquired Company has any such agreement
or commitment with respect to Benefit Plans maintained or contributed to by it.
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(b) With respect to each Benefit Plan, Sellers have made available
to Buyer true and complete copies of (A) all documents which comprise the most
current version of each Benefit Plan, including written summaries of any
unwritten Benefit Plan, any related trust agreements and amendments thereto, and
insurance and annuity contracts and policies, (B) the current summary plan
description, or other written summary if a summary plan description is not
required under applicable law, (C) the most recent Annual Report (Form 5500) and
accompanying schedules for each of the Benefit Plans for which such a report is
required, (D) the most recent determination letter issued by the IRS for each
Benefit Plan intended to be "QUALIFIED" within the meaning of Section 401(a) of
the IRC, and (E) the most recent actuarial report prepared for any "DEFINED
BENEFIT PLAN," as such term is defined in Section 3(35) of ERISA, and for any
other Benefit Plan which is a pension plan providing defined benefits, and for
which such a report is required.
(c) With respect to each "EMPLOYEE PENSION BENEFIT PLAN," as defined
in Section 3(2) of ERISA, in which a U.S. Acquired Company, or any ERISA
Affiliate participates or has participated at any time in the last five years,
(i) none of the U.S. Acquired Companies, or any ERISA Affiliate has filed a
notice of intent to terminate any such employee pension benefit plan or adopted
any amendment to treat any such employee pension benefit plan as terminated,
(ii) the Pension Benefit Guaranty Corporation ("PBGC") has not instituted or
threatened to institute proceedings to terminate any such employee pension
benefit plan, (iii) no other event or condition has occurred which might
constitute grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any such employee pension benefit plan,
(iv) no accumulated funding deficiency, whether or not waived, exists with
respect to any such employee pension benefit plan, and no condition has
occurred, or exists or is expected to occur which by the passage of time would
be expected to result in an accumulated funding deficiency as of the last day of
the current plan year of any such employee pension benefit plan, (v) all
required premium payments to the PBGC have been paid when due, (vi) no
reportable event, as described in Section 4043 of ERISA (whether or not
waived), has occurred or is expected to occur with respect to any such employee
pension benefit plan, and (vii) no amendment with respect to which security is
required under Section 307 of ERISA or Section 401(a)(29) of the IRC has been
made or is reasonably expected to be made.
(d) Except as set forth in PART 3.9(d) OF THE DISCLOSURE LETTER,
with respect to each Benefit Plan, (i) each Benefit Plan intended to qualify
under Section 401(a) of the IRC (or to the Knowledge of the Sellers, similar
provisions for plans of non-United States jurisdictions) has received a
favorable determination letter from the IRS (or, if applicable, has received
similar approval or Government Authorization from a foreign Government Body)
and, to the Knowledge of the Sellers, nothing has occurred or is expected to
occur that caused or could cause the loss of such status or the imposition of
any penalty or tax liability, (ii) there is no pending, threatened or, to the
Knowledge of the Sellers, anticipated claim (other than any non-material routine
claims for benefits) or Proceeding and (iii) all payments required by any
Benefit Plan, any collective bargaining agreement or other agreement, or by law
(including, without limitation, all contributions or insurance premiums) through
the Closing Date shall have been made prior to the Closing Date (on a pro rata
basis where such payments are otherwise discretionary at year end) or
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provided for by the Acquired Companies by full accruals (as if all targets
required by such Benefit Plan for the payment of benefits had been or will be
met at maximum levels) on its financial statements, to the extent such accruals
are required by GAAP. Each of the Benefit Plans (i) has been administered in all
material respects and has been invested in accordance with its terms, and (ii)
complies in all material respects in form, operation and administration with the
requirements of ERISA, the IRC and all other applicable laws. No material
"PROHIBITED TRANSACTION," as defined in Section 406 of ERISA or Section 4975 of
the IRC has occurred with respect to any Benefit Plan. To the Knowledge of the
Sellers, with respect to each Benefit Plan that is funded primarily or partially
through an insurance policy, no Acquired Company has any liability in the nature
of retroactive rate adjustment, loss sharing arrangement or other actual or
contingent liability arising wholly or partially out of events occurring on or
before the Closing Date. Except as set forth in PART 3.9(d) OF THE DISCLOSURE
LETTER, the fair market value of the assets of any Benefit Plan maintained by an
Acquired Company would not exceed such Acquired Company's liability to such
Benefit Plan if such Plan were to be terminated as of the Closing Date.
(e) The U.S. Acquired Companies have complied in all material
respects with the requirements of Part 6 of Title 1 of ERISA. Except as set
forth in PART 3.9(e) OF THE DISCLOSURE LETTER, the U.S. Acquired Companies (and,
to the Knowledge of the Sellers, any non-U.S. Acquired Company) have no
obligation to provide medical, health, death or other welfare benefits to any of
its current or prior employees or any other person other than while an employee
of the Acquired Companies, except as specifically required by Part 6 of Title 1
of ERISA.
(f) Except as set forth in PART 3.9(f) OF THE DISCLOSURE LETTER, the
consummation of the Contemplated Transactions, either alone or in combination
with any termination of employment, will not (i) entitle any individual to
severance pay or any similar payment, (ii) accelerate the time of payment or
vesting, or increase the amount, of any compensation or benefits due to any
individual or (iii) directly result in any payment made or to be made to or on
behalf of any person to constitute a "PARACHUTE PAYMENT" within the meaning of
Section 280G of the IRC.
(g) Except as set forth in PART 3.9(g) OF THE DISCLOSURE LETTER,
with respect to any Benefit Plan, (i) no filing, application, audit,
investigation or other matter is pending with the IRS, the PBGC, the United
States Department of Labor or any other Governmental Body, and (ii) there are no
outstanding liabilities for taxes, penalties or fees (except for fees payable to
third parties in the ordinary course for administrative service to a Benefit
Plan or Plans).
(h) Except as set forth in PART 3.9(h) OF THE DISCLOSURE LETTER,
with respect to each Benefit Plan that is subject to the provisions of Title I,
Subtitle B, Part 3 of ERISA, (i) the actuarial present value (based on the
actuarial assumptions used in the most recent actuarial valuation) of vested and
nonvested "BENEFIT LIABILITIES," as defined in Section 4001(a)(16) of ERISA
(calculated on a funding basis using actuarial assumptions under Section 412 and
calculated as required by the PBGC on a plan termination basis), of each such
Benefit Plan, determined as of the most recent valuation date for each such
Benefit Plan, did not exceed the fair market value of the assets of such Benefit
Plan as of such date, and
15
(ii) since the most recent valuation date for each such Benefit Plan, there has
been no amendment or change to such Benefit Plan that would increase the amount
of benefit liabilities thereunder and, to the Knowledge of the Sellers, there
has been no event or occurrence that would materially increase or decrease the
value of such assets or liabilities.
(i) To the Knowledge of the Sellers, with respect to each scheme or
arrangement mandated by a Government Body outside of the United States and with
respect to each Benefit Plan maintained or contributed to by any Acquired
Company in respect of individuals employed outside of the United States
("FOREIGN BENEFIT PLAN"), the fair market value of the assets of each funded
Foreign Benefit Plan, the liability of each insurer for any Foreign Benefit Plan
funded through insurance, or the book reserve established for any Foreign
Benefit Plan, together with any accrued contributions, is sufficient to provide
for the accrued liabilities, as of the date of this Agreement, to all current
and former participants in such Foreign Benefit Plan according to the applicable
actuarial assumptions and valuations, if any, most recently used to determine
employer contributions to such Foreign Benefit Plan.
(j) No Acquired Company has failed to provide coverage under any
Benefit Plan to any individual who should have been covered under such Plan
under applicable law.
3.10 COMPLIANCE WITH LEGAL REQUIREMENTS. Except (a) for any noncompliance
specifically covered by another specific representation or warranty contained in
this Section 3 (it being the intention of the parties that any such
noncompliance, if it exists, will be governed, if at all, by such other
representations and warranties specifically related thereto), (b) as set forth
in PART 3.10 OF THE DISCLOSURE LETTER or (c) when failure to do so would not
have a Material Adverse Effect and is not reasonably likely to result in a
Material Adverse Effect:
(i) each Acquired Company is, and at all times since January
1, 1997 has been, in compliance with each Legal Requirement that is or was
applicable to the ownership or use of any of its assets;
(ii) no event has occurred or circumstance exists that (A)
would constitute or result in a violation by any Acquired Company of, or a
failure on the part of any Acquired Company to comply with, any Legal
Requirement, or (B) would give rise to any obligation on the part of any
Acquired Company to undertake, or to bear all or any portion of the cost
of, any remedial action of any nature; and
(iii) no Acquired Company has received, at any time since
January 1, 1997, any written notice from any Governmental Body regarding
any actual or alleged violation of, or failure to comply with, any Legal
Requirement.
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3.11 LEGAL PROCEEDINGS; ORDERS.
(a) Except as set forth in PART 3.11(a) OF THE DISCLOSURE LETTER,
there is no pending Legal Proceeding:
(i) that has been commenced against any U.S. Acquired Company;
or
(ii) that, to the Knowledge of the Sellers, has been commenced
against any non-U.S. Acquired Company; or
(iii) that challenges or prevents, delays, makes illegal, or
otherwise seeks to interfere with, any of the Contemplated Transactions.
(b) Except as set forth in PART 3.11(b) OF THE DISCLOSURE LETTER and
except for such exceptions, individually or taken as a whole, as would not have
a Material Adverse Effect or are not reasonably likely to result in a Material
Adverse Effect:
(i) there is no Order to which any of the Acquired Companies,
or any of the assets owned by any Acquired Company, is subject;
(ii) Sellers are not subject to any Order that affects any of
the assets owned by any Acquired Company; and
(iii) each Acquired Company is in compliance with each Order
to which it, or any of the assets owned by it, is subject.
3.12 ABSENCE OF CERTAIN CHANGES AND EVENTS. Except as set forth in PART
3.12 OF THE DISCLOSURE LETTER, since the date of the Balance Sheet, the Acquired
Companies have conducted their businesses only in the Ordinary Course of
Business and there has not been any:
(a) change in any Acquired Company's authorized or issued capital
stock; grant of any stock option or right to purchase shares of capital stock of
any Acquired Company; issuance of any security convertible into such capital
stock; grant of any registration rights; or purchase, redemption, retirement, or
other acquisition by any Acquired Company of any shares of any such capital
stock or declaration or payment of any dividend or distribution on any capital
stock of the Company;
(b) amendment to the Organizational Documents of any Acquired
Company;
(c) except in the Ordinary Course of Business, payment of any
bonuses or increase of any salaries or other compensation by any Acquired
Company to any director, officer, or employee or entry into any employment,
severance, or similar Contract with any director, officer, or employee;
17
(d) adoption, amendment or termination of, or increase or change in
the payments to or benefits under, any profit sharing, bonus, deferred
compensation, savings, insurance, pension, retirement, or other employee benefit
plan for or with any employees of any Acquired Company;
(e) except in the Ordinary Course of Business and except for
ordinary wear and tear, damage to or destruction or loss of any asset or
property of any Acquired Company, whether or not covered by insurance, except
where such damage, destruction or loss would not (individually or in the
aggregate) have a Material Adverse Effect or would not reasonably be likely to
result in a Material Adverse Effect;
(f) except in the Ordinary Course of Business, entry into,
termination of, or receipt of notice of termination of (i) any license,
distributorship, dealer, sales representative, joint venture, credit, or similar
agreement, or (ii) any Contract or transaction involving a total remaining
commitment by or to any Acquired Company of at least $25,000;
(g) except in the Ordinary Course of Business, sale, lease, or other
disposition of any asset or property of any Acquired Company or mortgage,
pledge, or imposition of any lien or other encumbrance on any material asset or
property of any Acquired Company, including the sale, lease, or other
disposition of any of the Intellectual Property Assets;
(h) cancellation or waiver of any claims or group of related claims
or rights with a value to any Acquired Company in excess of $25,000;
(i) material changes in the accounting practices, principles,
policies or methods used by any Acquired Company, except as required by law or a
change in applicable accounting regulations;
(j) material change in business practices or policies, including
selling or marketing practices, returns, discounts or other terms of sale,
collection of receivables or payment of accounts payable or other obligations or
management of inventory levels (including restocking of inventory);
(k) failure to pay all Taxes as they come due and file all Tax
Returns in a timely manner, in each case in the Ordinary Course of Business,
subject to Part 3.7(e) of the Disclosure Letter; or
(l) agreement, whether oral or written, by any Acquired Company to
do any of the foregoing.
3.13 CONTRACTS.
(a) PART 3.13(a) OF THE DISCLOSURE LETTER contains a complete and
accurate list as of the date hereof, and Sellers have made available to Buyer
true copies (to the extent written) of:
18
(i) each Material Contract pursuant to which any of the
Acquired Companies is a party;
(ii) each lease, rental or occupancy agreement, license,
installment or conditional sale agreement, or other Applicable Contract
affecting the ownership of, leasing of, title to, use of, or any leasehold
or other interest in, any real or personal property (except for real
property and personal property leases and installment and conditional
sales agreements having a value per item or aggregate payments of less
than $25,000 per year);
(iii) each collective bargaining agreement and other
Applicable Contract to or with any labor union or other employee
representative of a group of employees;
(iv) each joint venture, partnership and other Applicable
Contract involving a sharing of profits, losses, or liabilities by any
Acquired Company with any other Person;
(v) each written warranty, guaranty and/or other similar
undertaking with respect to contractual performance extended by any
Acquired Company other than in the Ordinary Course of Business;
(vi) any Contract that limits the ability of any Acquired
Company to compete in any line of business with any Person or in any
geographic area or that limits hiring;
(vii) any intercompany agreements or arrangements for the
provision of services or products between an Acquired Company and either
Seller or any affiliate thereof other than an Acquired Company that will
continue in effect beyond the Closing, whether or not in the Ordinary
Course of Business;
(viii) any Contract relating to indebtedness for borrowed
money of any Acquired Company involving payment of amounts in excess of
$25,000, in any year, including loan agreements, notes, letters of
credit, mortgages, security agreements, pledge agreements, deeds of
trust, guarantees and any other instruments or documents granting an
Encumbrance that will continue in effect beyond the Closing;
(ix) any other agreement on which the business of the Acquired
Companies (taken as a whole) is substantially dependent, which materially
restricts the operation of their business (taken as a whole) or which is
otherwise material to the conduct of their business (taken as a whole);
and
(x) each amendment, supplement and modification in respect of
any of the foregoing.
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(b) Except as set forth in PART 3.13(b) OF THE DISCLOSURE LETTER,
each Contract identified or required to be identified in PART 3.13(a) OF THE
DISCLOSURE LETTER is in full force and effect and is valid and enforceable in
accordance with its terms and neither any Acquired Company nor, to the Knowledge
of the Sellers, any other party thereto is in breach or default of any material
obligations thereunder.
3.14 INSURANCE. Sellers have made available to Buyer true and complete
copies of all policies of insurance to which any Acquired Company is a party or
under which any Acquired Company, or any director of any Acquired Company, is or
has been covered at any time since January 1, 1998 and such policies shall
remain in full force and effect through the Closing Date.
3.15 ENVIRONMENTAL MATTERS. Except as set forth in PART 3.15 OF THE
DISCLOSURE LETTER, and except for such exceptions as would not have a Material
Adverse Effect,
(a) the Acquired Companies have operated the Facilities and
conducted their business in compliance with the Environmental Laws;
(b) the Acquired Companies possess all permits required under the
Environmental Laws for the conduct of their business and are in compliance with
such permits;
(c) during the period of the Acquired Companies' operation of the
Facilities, there have been no Releases, discharges or disposals of Hazardous
Materials by the Acquired Companies into the air, ground, surface or ground
water at, on, under or adjacent to the Facilities;
(d) the Acquired Companies have no liability for Releases,
discharges or disposals of Hazardous Materials which the Acquired Companies have
transported or arranged for the transportation of to a property not included in
the Facilities;
(e) there are no pending or, to the Knowledge of the Sellers,
Threatened claims, or Encumbrances arising under or pursuant to any
Environmental Law, with respect to or affecting any of the Facilities.
The Sellers have no Knowledge of, nor have the Sellers or any
Acquired Company received, any written citation, directive, inquiry, notice,
Order, summons, warning, or other communication that relates to Hazardous
Materials, or any alleged, actual, or potential violation of or liability under
any Environmental Law.
Except as set forth in PART 3.15 OF THE DISCLOSURE LETTER, Sellers
have made available to Buyer true and complete copies and results of any
reports, studies, analyses, tests, or monitoring possessed or initiated by
Sellers or the Acquired Companies pertaining to Hazardous Materials or in, on,
under or adjacent to the Facilities, or concerning compliance by the Acquired
Companies with Environmental Laws.
20
3.16 LABOR RELATIONS; COMPLIANCE. Except as set forth in PART 3.16 OF THE
DISCLOSURE LETTER, since January 1, 1997, no Acquired Company has been or is a
party to any collective bargaining or other labor Contract. Since January 1,
1997, there has not been, there is not presently pending or existing, and to the
Knowledge of the Sellers there is not Threatened, (a) any strike, slowdown,
picketing, work stoppage, or employee grievance process, (b) any Proceeding
against or affecting any Acquired Company relating to the alleged violation of
any Legal Requirement pertaining to labor relations or employment matters,
including any charge or complaint filed by an employee or union with the
National Labor Relations Board, the Equal Employment Opportunity Commission, or
any comparable Governmental Body, organizational activity, or other labor or
employment dispute against or affecting any of the Acquired Companies or their
premises, or (c) any application for certification of a collective bargaining
agent. To the Knowledge of the Sellers no event has occurred or circumstance
exists that could provide the basis for any work stoppage or other labor
dispute. There is no lockout of any employees by any Acquired Company and no
such action is contemplated by any Acquired Company. Except as set forth in PART
3.16 OF THE DISCLOSURE LETTER, each Acquired Company has complied in all
material respects with all Legal Requirements relating to employment, equal
employment opportunity, nondiscrimination, immigration, wages, hours, benefits,
collective bargaining, the payment of social security and similar taxes,
occupational safety and health, and plant closing. Except as set forth in PART
3.16 OF THE DISCLOSURE LETTER, no Acquired Company is liable for the payment of
any compensation, damages, taxes, fines, penalties, or other amounts, however
designated, for failure to comply with any of the foregoing Legal Requirements.
3.17 INTELLECTUAL PROPERTY.
(a) The term "INTELLECTUAL PROPERTY ASSETS" shall mean:
(i) the name Grolier Incorporated, all fictional business
names, trading names, registered trademarks, service marks and trademark
applications, including any good will associated therewith, owned by any
Acquired Company (collectively, "MARKS");
(ii) all patents and patent applications owned by any Acquired
Company (collectively, "PATENTS");
(iii) all copyrights whether or not registered in the United
States of any Acquired Company which are for works in print or in active
distribution in the United States (collectively, "COPYRIGHTS");
(iv) all customer lists owned or licensed by any Acquired
Company as licensee or licensor ("CUSTOMER LISTS");
(v) all confidential and proprietary information, including
trade secrets, know-how, data, methods and processes; and
21
(vi) all domain names owned by any Acquired Company ("DOMAIN
NAMES").
(b) Patents
(i) PART 3.17(b) OF THE DISCLOSURE LETTER contains a complete
and accurate list and summary description of all Patents. Except as set
forth on PART 3.17(b) OF THE DISCLOSURE LETTER, one or more of the
Acquired Companies is the owner of all right, title, and interest in and
to each of the Patents, free and clear of all liens, security interests,
and other adverse claims, and none of the Patents has been abandoned or is
subject to any outstanding order, decree, judgment, stipulation,
injunction, written restriction or agreement restricting the scope
thereof.
(ii) No Patent has been or is now involved in any
interference, reissue, reexamination, or opposition or litigation
proceeding, except as set forth on PART 3.17(b) OF THE DISCLOSURE LETTER.
(iii) Except as set forth on PART 3.17(b) OF THE DISCLOSURE
LETTER, to the Knowledge of the Sellers, no Patent is infringed or has
been challenged or Threatened in any way. The Sellers have received no
notice that any of the products manufactured and sold, nor any process or
know-how used, by any Acquired Company infringes or is alleged to infringe
any patent or other proprietary right of any other Person.
(iv) To the Knowledge of the Sellers, all products made, used,
or sold under the Patents have been marked with the proper patent notice.
(v) To the Knowledge of the Sellers, none of the Patents
infringe any rights of any Person.
(c) Marks
(i) PART 3.17(c) OF THE DISCLOSURE LETTER contains a complete
and accurate list of all registered Marks and all applications for
registering Marks. Except as set forth in PART 3.17(c) OF THE DISCLOSURE
LETTER, one or more of the Acquired Companies is the owner of all right,
title and interest in and to each of the registered Marks and Marks for
which an application for a trademark has been made, free and clear of all
liens and security interests, and none of the Marks is subject to any
outstanding order, decree, judgment, stipulation, injunction, written
restriction or agreement restricting the scope thereof.
(ii) No ▇▇▇▇ is involved in any opposition or cancellation or
litigation proceedings and, to the Knowledge of the Sellers, no such
action is Threatened with the respect to any of the Marks.
22
(iii) Neither Sellers nor any Acquired Company has received
written notice that any of the Marks infringes, is alleged to infringe or
otherwise violates or is alleged to violate any trade name, trademark, or
service ▇▇▇▇ or other right of any third party.
(iv) To the Knowledge of the Sellers, none of the Marks
infringe any rights of any Person.
(d) Copyrights
(i) PART 3.17(d) OF THE DISCLOSURE LETTER contains a complete
and accurate list of all registered Copyrights and all applications for
registering Copyrights. One or more of the Acquired Companies is the owner
of all right, title, and interest in and to each of the Copyrights, free
and clear of all liens and security interests, and none of the Copyrights
is subject to any outstanding order, decree, judgment, stipulation,
injunction, written restriction or agreement restricting the scope
thereof, except as set forth in PART 3.17(d) OF THE DISCLOSURE LETTER.
(ii) No Copyright is involved in any opposition, cancellation
or litigation proceedings and, to the Knowledge of the Sellers, no such
action is Threatened with respect to any of the Copyrights.
(iii) Neither Sellers nor any Acquired Company has received
written notice that any Copyright is infringed or has been challenged or
Threatened in any way or that the subject matter of any Copyright
infringes or is alleged to infringe any copyright of any third party,
except as set forth in PART 3.17(d) OF THE DISCLOSURE LETTER.
(iv) To the Knowledge of the Sellers, none of the Copyrights
infringe any rights of any Person.
(e) Each Acquired Company has the right to use the fictional
business names, trading names, registered trademarks, service marks and
copyrights used in its business but not owned by another Acquired Company.
(f) Domain Names
(i) PART 3.17(f) OF THE DISCLOSURE LETTER contains a complete
and accurate list of all Domain Names.
(ii) No Domain Name is involved in any litigation or
arbitration proceeding, and no such action is Threatened with respect to
any of the Domain Names.
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(g) Except as set forth in PART 3.17(g) OF THE DISCLOSURE LETTER,
the Acquired Companies own and immediately after the Closing will own the Domain
Names, free and clear of all liens or encumbrances created by any Acquired
Company. With respect to all Intellectual Property Assets and all intellectual
property assets used but not owned by Acquired Companies, immediately after the
Closing the Acquired Companies shall continue to be able to use such
intellectual property assets, free and clear of liens and encumbrances created
by any Acquired Company.
(h) After obtaining the consents specified in PART 3.2 OF THE
DISCLOSURE LETTER, the Acquired Companies will not, as a result of the execution
and delivery of this Agreement or the performance of their obligations under
this Agreement, be in breach of any license, sublicense or other agreement
relating to the intellectual property assets, the breach of which would
reasonably be expected to result in a Material Adverse Effect.
3.18 BROKERS OR FINDERS. Except as set forth in PART 3.18 OF THE
DISCLOSURE LETTER, Sellers and their agents have incurred no obligation or
liability, contingent or otherwise, for brokerage or finders' fees or agents'
commissions or other similar payment in connection with this Agreement.
3.19 YEAR 2000. The Acquired Companies' information technology systems,
facilities and production infrastructure have not experienced any material
adverse impacts as a result of the Year 2000 and leap year date transition.
Similarly, there have been no material Year 2000 impacts reported with respect
to the Acquired Companies' products that were classified as Year 2000 ready. In
addition, the Acquired Companies experienced no material supply chain problems
related to the date transition.
4. REPRESENTATIONS AND WARRANTIES OF BUYER.
Buyer represents and warrants to Sellers as follows:
4.1 ORGANIZATION AND GOOD STANDING. Buyer is a corporation duly organized,
validly existing, and in good standing under the laws of the State of New York.
4.2 AUTHORITY; NO CONFLICT.
(a) This Agreement constitutes the legal, valid, and binding
obligation of Buyer, enforceable against Buyer in accordance with its terms
subject to bankruptcy, reorganization, insolvency and other similar laws
affecting the enforcement of creditors' rights in general and to general
principles of equity (regardless of whether considered in a proceeding in equity
or an action at law). Buyer has full corporate power and corporate authority to
execute and deliver this Agreement and to perform its obligations under this
Agreement.
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(b) Except as set forth in SCHEDULE 4.2, neither the execution and
delivery of this Agreement by Buyer nor the consummation or performance of any
of the Contemplated Transactions by Buyer will:
(i) contravene, conflict with, or result in a violation of (A)
any provision of Buyer's Organizational Documents or (B) any resolution
adopted by the board of directors or the stockholders of Buyer;
(ii) to the Knowledge of Buyer and subject to compliance with
HSR and the Investment Canada Act, contravene, conflict with, or result in
a violation of, or give any Governmental Body the right to challenge any
of the Contemplated Transactions or to exercise any remedy or obtain any
relief under any Legal Requirement to which Buyer is subject; or
(iii) contravene or result in a violation or breach of any
provision of, or give any Person the right to terminate or modify any
Material Contract or any Order to which Buyer is subject.
Except as set forth in SCHEDULE 4.2, and except where the failure to do so,
individually or taken as a whole, would not have a material adverse effect and
would not be reasonably likely to result in a material adverse effect on the
Contemplated Transactions, Buyer is not and will not be required to give any
notice to or obtain any Consent from any Person in connection with the execution
and delivery of this Agreement or the consummation or performance of any of the
Contemplated Transactions.
4.3 INVESTMENT INTENT. Buyer is acquiring the Shares for its own account
and not with a view to their distribution within the meaning of Section 2(11) of
the Securities Act. Buyer will not resell the Shares in violation of the
Securities Act. Buyer confirms that Seller, Seller's Parent and the Acquired
Companies have made available to the Buyer the opportunity to ask questions of
the officers and management employees of the Seller, Seller's Parent and
Acquired Companies and to acquire additional information about the businesses
and financial condition of the Acquired Companies.
4.4 CERTAIN PROCEEDINGS. There is no pending Proceeding that has been
commenced against Buyer that challenges, or may have the effect of preventing,
delaying, making illegal, or otherwise interfering with, any of the Contemplated
Transactions. To Buyer's Knowledge, no such Proceeding has been Threatened.
4.5 BROKERS OR FINDERS. Except as set forth in SCHEDULE 4.5, Buyer and its
agents have incurred no obligation or liability, contingent or otherwise, for
brokerage or finders' fees or agents' commissions or other similar payment in
connection with this Agreement.
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5. COVENANTS OF SELLER PRIOR TO CLOSING DATE.
5.1 ACCESS AND INVESTIGATION. Between the date of this Agreement and the
Closing Date, Seller will, and will cause each Acquired Company and its
Representatives to, afford Buyer and its Representatives and prospective lenders
and their Representatives reasonable access to each Acquired Company's
personnel, properties, contracts, books and records, and other documents and
data. Any such investigation and examination shall be conducted at reasonable
times, under reasonable circumstances, with reasonable notice to the Seller and
must not unreasonably disrupt the normal operations of Seller or any Acquired
Company. Such investigation will not include access to any item relating to
businesses of Seller or Seller's Parent other than the business conducted by any
Acquired Company. All requests for access to the offices, properties, books, and
records will be made to such Representatives of Seller as Seller will designate,
who will be solely responsible for coordinating all such requests and all access
permitted hereunder. It is further understood and agreed that neither Buyer nor
its Representatives will contact any of the employees, customers, suppliers,
joint venture partners, licensors or other associates or Affiliates of Seller,
Seller's Parent, or any Acquired Company in connection with the Contemplated
Transactions, whether in person or by telephone, mail or other means of
communication, without the specific prior written authorization of such
Representatives of Seller as Seller may designate. The Seller shall cause each
Acquired Company to make available to Representatives of the Buyer during such
period all such information and copies of such documents concerning the affairs
of such Acquired Company as such Representatives may reasonably request, and
permit Representatives of the Buyer reasonable access to the properties of the
Acquired Company in connection with such review and examination.
5.2 OPERATION OF THE BUSINESSES OF THE ACQUIRED COMPANIES. Between the
date of this Agreement and the Closing Date, Seller will, and will cause each
Acquired Company to:
(a) conduct the business of such Acquired Company only in the
Ordinary Course of Business;
(b) use reasonable commercial efforts to preserve intact the current
business organization of such Acquired Company, keep available the services of
the current officers, employees, and agents of such Acquired Company, and
maintain the relations and good will with suppliers, customers, landlords,
creditors, employees, agents, and others having business relationships with such
Acquired Company; and
(c) use reasonable commercial efforts to obtain the release of any
liens of record with respect to any existing or prior credit agreements and
cooperate with Buyer after Closing in the event the liens are not discharged by
the Closing Date.
5.3 APPROVALS. As promptly as practicable after the date of this
Agreement, Seller will, and will cause each Acquired Company to, make all
filings required by Legal Requirements to be made by them and use its best
efforts to obtain any Government Authorizations needed to be obtained by them in
order
26
to consummate the Contemplated Transactions (including all filings under the HSR
Act). Between the date of this Agreement and the Closing Date, Sellers will, and
will cause each Acquired Company to, (a) use its best efforts to cooperate with
Buyer with respect to all filings that Buyer elects to make or is required by
Legal Requirements to make in connection with the Contemplated Transactions, and
(b) cooperate with Buyer in obtaining all consents identified in Schedule 4.2
(including taking all actions requested by Buyer to cause early termination of
any applicable waiting period under the HSR Act). Sellers shall use reasonable
commercial efforts to obtain the consents specified in Part 3.2 of the
Disclosure Letter; provided however, that Sellers shall not be required to spend
money to obtain any consents other than those marked with an asterisk in Part
3.2 of the Disclosure Letter.
5.4 NOTIFICATION. Between the date of this Agreement and the Closing Date,
Sellers will promptly notify Buyer in writing if Sellers or any Acquired Company
becomes aware of any fact or condition that causes or constitutes a material
breach of any of Seller's representations and warranties as of the date of this
Agreement, or if such Seller or any Acquired Company becomes aware of the
occurrence after the date of this Agreement of any fact or condition that would
(except as expressly contemplated by this Agreement) cause or constitute a
material breach of any such representation or warranty had such representation
or warranty been made as of the time of occurrence or discovery of such fact or
condition. Should any such fact or condition require any change in the
Disclosure Letter if the Disclosure Letter were dated the date of the occurrence
or discovery of any such fact or condition, Seller will promptly deliver to
Buyer a supplement to the Disclosure Letter specifying such change. During the
same period, Seller will promptly notify Buyer of the occurrence of any breach
of any covenant of Seller in this Section 5 or of the occurrence of any event
that may make the satisfaction of the conditions in Section 8 impossible or
unlikely.
6. COVENANTS OF BUYER PRIOR TO CLOSING DATE.
6.1 APPROVALS. As promptly as practicable after the date of this
Agreement, Buyer will make all filings required by Legal Requirements to be made
by it and use its best efforts to obtain any Government Authorizations needed to
be obtained by it to consummate the Contemplated Transactions (including all
filings under the HSR Act); provided, however, use of best efforts shall not
include the requirement to divest a core business of Buyer. Between the date of
this Agreement and the Closing Date, Buyer will (a) use its best efforts to
cooperate with Seller with respect to all filings that Seller is required by
Legal Requirements to make in connection with the Contemplated Transactions, and
(b) cooperate with Seller in obtaining all consents identified in PART 3.2 OF
THE DISCLOSURE LETTER.
7. SECTION 338(h)(10) ELECTION.
(a) If Buyer, in its sole discretion, decides that it wishes to have
an election made under IRC Section 338(h)(10) (and the Treasury Regulations and
the administrative pronouncements thereunder) and any comparable provision of
state or local Tax law (collectively, a "SECTION 338(h)(10) ELECTION"), with
respect to the Shares and one or more U.S. Acquired Companies, Buyer shall
notify Seller
27
of such intent. Seller agrees that it shall, in such event, along with Buyer,
jointly make an express election under IRC Section 338(h)(10) with respect to
each U.S. Acquired Company other than Grolier Overseas, Incorporated and, at
Buyer's election, any analogous state election or any express election under
state law that would result in the treatment of the transaction contemplated by
this Agreement as a sale by such Acquired Company of its assets rather than as a
sale of the shares of such Acquired Company. Buyer and Seller will report any
transactions that occur under this Agreement consistent with the Section
338(h)(10) Election, and will take no position contrary thereto. Buyer shall not
make any election under IRC Section 338 with respect to Grolier Overseas,
Incorporated, or with respect to any entity that is not a U.S. Acquired Company.
Seller agrees that the only assets of Grolier Overseas, Incorporated shall be
shares of stock of entities that are not U.S. Acquired Companies and of ▇.▇.
▇▇▇▇▇▇▇, Inc.
(b) Seller and Buyer agree that the computation of the "modified
aggregate deemed sale price" (as defined in the applicable regulations issued
under the Code) (the "MADSP") of the assets of the Company and each of its
relevant Subsidiaries shall be reasonable and prepared in accordance with IRC
Section 338. Buyer and Seller shall agree on the allocation of the MADSP among
the assets of the Company and each of its relevant Subsidiaries (the
"ALLOCATION"). Buyer and Seller shall sign a copy of such Allocation and the
parties hereto shall prepare and file such forms as may be required under
Section 1060 of the IRC in a manner consistent therewith.
(c) Seller and Buyer shall each provide to the other all necessary
information to permit the Section 338(h)(10) Election to be made. Buyer shall be
responsible for the preparation and filing of all forms or documents required to
be filed with any taxing authority in connection with (including, without
limitation, IRS Form 8023) the Section 338(h)(10) Election (the "SECTION 338
FORMS"). Within five (5) months after the Closing Date, Buyer and Seller shall
execute IRS Form(s) 8023 and any forms required to make any elections under
state or local law that are analogous to a Section 338(h)(10) Election. Seller
shall execute and deliver to Buyer any other documents or forms as Buyer
reasonably requires to complete properly the Section 338 Forms. Seller hereby
authorizes Buyer to file the Section 338 Forms and any other forms referred to
in the preceding sentence with the appropriate taxing authorities at Buyer's
election, and Buyer shall provide Seller with copies of such Section 338 Forms
after such Section 338 Forms are filed with the appropriate taxing authorities.
Buyer and Seller agree to prepare and file all Tax Returns on a basis consistent
with any Section 338(h)(10) Election (or, if such election is made and is not
available under any state or local income tax law, on a basis consistent with
any election available under such law that is analogous to an election under IRC
Section 338(g)) and with an allocation of the MADSP that is consistent with the
Allocation of MADSP provided for in paragraph (b) of this Section 7.
(d) Seller shall calculate the gain or loss, if any, resulting from
the Section 338(h)(10) Election in a manner consistent with the determination of
MADSP and the Allocation and shall not take any position inconsistent with the
Section 338(h)(10) Election, the MADSP or the Allocation in connection with any
Tax Return or otherwise. Seller shall pay all federal, state and local income
and franchise Taxes resulting from the Section 338(h)(10) Election, and in the
event that Buyer or the Acquired Companies pay
28
such Taxes, Seller shall indemnify and hold harmless Buyer and the Acquired
Companies from and against all such Taxes and reasonable costs and fees incurred
in connection therewith.
(e) Buyer shall determine its tax basis for the assets of the
Company and each of its Subsidiaries in a manner consistent with the
determination of MADSP and the Allocation and shall not take any position
inconsistent with the Section 338(h)(10) Election, the MADSP or the Allocation
in any Tax Return or otherwise.
8. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE.
Buyer's obligation to purchase the Shares and to take the other actions
required to be taken by Buyer at the Closing is subject to the satisfaction, at
or prior to the Closing, of each of the following conditions (any of which may
be waived by Buyer, in whole or in part):
8.1 ACCURACY OF REPRESENTATIONS.
All of Seller's representations and warranties in this Agreement
(considered collectively), and each of these representations and warranties
(considered individually), must have been accurate in all material respects as
of the date of this Agreement, and must be accurate in all material respects as
of the Closing Date as if made on the Closing Date; provided, however, that the
representation and warranties (considered collectively), or any representation
or warranty (considered individually) will not be deemed to be inaccurate in all
material respects for purposes of this Section 8.1 unless such inaccuracy is
reasonably likely to result in a Material Adverse Effect. For purposes of
determining the fulfillment of the condition precedent set forth in this Section
8.1 or determining whether the aggregate amount of Damages referred to in
Section 11.4 has been reached, no supplement to the Disclosure Letter shall be
given effect; provided that the Buyer's consummation of the Closing shall
constitute without any further action on the part of the Buyer, a waiver by the
Buyer of its right to require satisfaction of the condition precedent set forth
in this Section 8.1, but shall not be deemed to preclude or restrict any claim
by the Buyer for indemnification pursuant to Section 11 if Sellers do not, as
provided in clauses (i) or (ii) of the following sentence, determine that a New
$15 Million Claim (as defined below) has arisen. If Sellers determine in their
reasonable judgment that any disclosure required by Section 5.4 is (i) with
respect to a matter that arises after the date hereof or (ii) with respect to a
matter that arose prior to the date hereof but of which Sellers did not have
Knowledge prior to the date hereof, and is reasonably likely to give rise to a
claim by Buyer for indemnification against the Sellers under Section 11.1 in an
amount in excess of $10 million (after giving effect to the limitation specified
in Section 11.4 of this Agreement, I.E., $15 million of Damages would result in
an indemnification claim of $10 million after giving effect to the limitation of
Section 11.4) (a "NEW $15 MILLION CLAIM"), Sellers shall have the right to
notify Buyer in writing of said determination ("Sellers' Section 8.1 Notice")
and require Buyer to make an election either to (a) terminate the Agreement or
(b) waive its right to use the disclosure as a failure to satisfy its conditions
to close, which shall automatically constitute a waiver of its right to make a
claim for indemnification against Sellers with respect to any matters so
disclosed. Buyer must notify Seller of its election on the later of (x) five
business days after its receipt
29
of Sellers' notice and (y) two business days prior to the scheduled Closing
Date. Buyer will be deemed to have made the election specified in clause (b)
above if it does not deliver the notice specified in the preceding sentence in a
timely manner. The parties agree that the threshold amount that gives rise to
Sellers' right to require Buyer to make said election shall not be construed as
evidence for determining the meaning of "material" or "materiality" under any
provision of this Agreement. The parties acknowledge that the terms "material
amounts" or "materiality" for the purposes of this Agreement may contemplate
amounts less than or greater than $15 million.
8.2 SELLER'S PERFORMANCE.
(a) All of the covenants and obligations that Seller is required to
perform or to comply with pursuant to this Agreement at or prior to the Closing
(considered collectively), and each of these covenants and obligations
(considered individually), must have been duly performed and complied with in
all material respects.
(b) Each document required to be delivered pursuant to Section 2.4
must have been delivered, and each of the other covenants and obligations in
Sections 5.2 and 5.3 must have been performed and complied with in all respects.
8.3 CONSENTS. Each of the Consents identified in PART 3.2 OF THE
DISCLOSURE LETTER as Required Consents must have been obtained and must be in
full force and effect.
8.4 ADDITIONAL DOCUMENTS. An opinion of ▇▇▇▇▇▇ ▇▇▇▇▇, General Counsel to
the Company, dated the Closing Date, and an opinion of ▇▇▇▇, Scholer, Fierman,
▇▇▇▇ & Handler, LLP, counsel to the Sellers, dated the Closing Date, must have
been delivered to Buyer and be reasonably satisfactory in form and substance to
Buyer's counsel.
8.5 NO PROCEEDINGS. There must not be in effect any Legal Requirement or
any injunction or other Order that prohibits the sale of Shares by Seller to
Buyer.
9. CONDITIONS PRECEDENT TO SELLER'S OBLIGATION TO CLOSE.
Seller's obligation to sell the Shares and to take the other actions
required to be taken by Seller at the Closing is subject to the satisfaction, at
or prior to the Closing, of each of the following conditions (any of which may
be waived by Seller, in whole or in part):
9.1 ACCURACY OF REPRESENTATIONS. All of Buyer's representations and
warranties in this Agreement (considered collectively), and each of these
representations and warranties (considered individually), must have been
accurate in all material respects as of the date of this Agreement and must be
accurate in all material respects as of the Closing Date as if made on the
Closing Date.
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9.2 BUYER'S PERFORMANCE.
(a) All of the covenants and obligations that Buyer is required to
perform or to comply with pursuant to this Agreement at or prior to the Closing
(considered collectively), and each of these covenants and obligations
(considered individually), must have been performed and complied with in all
material respects.
(b) Buyer must have delivered each of the documents required to be
delivered by Buyer pursuant to Section 2.4 and must have delivered the Purchase
Price by wire transfer of immediately available Funds to Seller.
9.3 CONSENTS. Each of the Consents identified in SCHEDULE 4.2 must have
been obtained and must be in full force and effect.
9.4 ADDITIONAL DOCUMENTS. An opinion of ▇▇▇▇▇▇▇ ▇▇▇▇▇, Senior Vice
President and General Counsel of Buyer, dated the Closing Date must have been
delivered to Seller and be reasonably satisfactory in form and substance to
Seller's counsel.
9.5 NO INJUNCTION. There must not be in effect any Legal Requirement or
any injunction or other Order that prohibits the sale of the Shares by Seller to
Buyer.
9.6 POST-CLOSING TAX MATTERS.
(a) TAX RETURNS.
(i) Seller shall file or cause to be filed when due all Tax
Returns due to be filed on or prior to the Closing Date and all U.S.
Federal, state and local income and franchise Tax Returns with respect to
the Acquired Companies with respect to the taxable periods ending on or
before the Closing Date.
(ii) Buyer shall file or cause to file when due all other Tax
Returns with respect to the Acquired Companies due to be filed after the
Closing Date.
(b) FOREIGN TAX RECEIPTS. Buyer shall deliver to the tax director of
Seller certified copies of all receipts for any foreign Tax paid with respect to
taxable periods ending on or before the Closing Date and with respect to which
Seller or any of its Affiliates could claim a foreign tax credit (except for
foreign Taxes paid by Buyer or any of the Acquired Companies after the Closing
Date), and any other documentation required in connection with Seller or any of
its Affiliates claiming or supporting a claim for such foreign tax credits
promptly following a request by Seller for such receipts or documentation.
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(c) CONTEST PROVISIONS. Buyer shall promptly notify Seller in
writing upon receipt by Buyer, of notice of any pending or threatened audits or
assessments with respect to Taxes which may affect the liabilities for Taxes of
Seller. Seller shall be entitled to participate at its expense in the defense of
and, at its option, take control of the complete defense of, Seller's interests
in any tax audit or administrative or court proceeding (a "CONTEST") relating to
such Taxes, and to employ counsel of its choice at its expense. Buyer may not
agree to settle any claim for such Taxes without the prior written consent of
Seller which may not be unreasonably withheld. With respect to any Contest as to
which Seller either has taken control of the defense pursuant to this Section
9.6(c) or controls pursuant to Section 11.6, Seller agrees (i) to keep Buyer
informed of this progress of such Contest, (ii) to consult with Buyer and to
consider in good faith Buyer's reasonable request with respect to the conduct of
such Contest, and (iii) to notify Buyer of any action taken or proposed to be
taken from time to time by Seller with respect to such Contest.
(d) CERTAIN POST-CLOSING SETTLEMENT PAYMENTS.
(i) BUYER'S CLAIMING, RECEIVING OR USING OF REFUNDS AND
OVERPAYMENTS. If, after the Closing, Buyer or its Affiliates (A) receive
any refund, or (B) utilize the benefit of any overpayment, of Taxes which
were paid by Seller or any of its Affiliates (as determined at the time
such Taxes were paid), Buyer shall promptly transfer, or cause to be
transferred, to Seller the entire amount of the refund or overpayment
(including interest) received or utilized as a credit by Buyer or its
Affiliates. Buyer agrees to notify Seller promptly of both the discovery
of a right to claim any such refund or overpayment and the receipt of any
such refund or utilization as a credit of any such overpayment. Buyer
agrees to claim any such refund or to utilize as a credit any such
overpayment and to furnish to Seller all information, records and
assistance necessary to verify the amount of the refund or overpayment.
(ii) BUYER'S CLAIMING AND REALIZING OF TAX BENEFITS IN RESPECT
OF INDEMNIFIED LIABILITIES. If, after the Closing, (A) Buyer or its
Affiliates realizes any loss for which it is indemnified by Seller
pursuant to this Agreement, or (B) an adjustment is required by any taxing
authority in any item reflected on a Tax Return for which Seller is
obligated to indemnify any party hereunder, Buyer and its Affiliates
agree, as soon as possible, to claim any such loss and recognize any such
adjustment on their Tax Returns and claim to the fullest extent possible
all deductions available as a result of any such loss or adjustment. Buyer
agrees to furnish to Seller all information, records and assistance
necessary to verify the amount of the decrease, if any, in Buyer and its
Affiliate's cumulative income and franchise Taxes paid (as compared to the
cumulative income and franchise Taxes Buyer and its Affiliates would
otherwise have paid) as a result of recognizing such loss or adjustment
and claiming all such available deductions. Buyer shall promptly transfer,
or cause to be transferred, to Seller an amount equal to the entire amount
of such decrease at the time such decrease is realized, whether realized
by Buyer and its Affiliates paying less income and franchise Taxes,
receiving a refund or otherwise utilizing a credit.
(e) POST-CLOSING ACTIONS WHICH AFFECT SELLER'S LIABILITY FOR TAXES.
32
(i) Except with respect to the Section 338(h)(10) Election and
elections under comparable provisions of state or local Tax law (which the
parties agree will be governed by Section 7 hereof), Buyer shall not
permit any Acquired Company to take any action after the Closing Date
which could materially increase Seller's liability for Taxes (including
any liability of Seller to indemnify Buyer for Taxes pursuant to this
Agreement).
(ii) Except to the extent required by law, Buyer or its
Affiliates shall not, without prior written consent of Seller, amend any
Tax Return filed by, or with respect to, any Acquired Company for any
taxable period, or portion thereof, beginning before the Closing Date.
(f) TERMINATION OF TAX ALLOCATION AGREEMENTS. Any agreement or
arrangement with respect to the allocation or sharing of Taxes, whether or not
written, that may have been entered into by Seller and any Acquired Company
shall be terminated as to Seller and any Acquired Company as of the Closing
Date, and no payments which are owed by any party pursuant thereto shall be made
thereunder.
(g) ASSISTANCE AND COOPERATION. After the Closing Date, each of
Seller and Buyer shall:
(A) assist (and cause their respective Affiliates to assist) the
other party in preparing any Tax Returns which such other party is
responsible for preparing and filing in accordance with this Agreement;
(B) cooperate fully in preparing for any audits of, or disputes with
taxing authorities regarding, any Tax Returns and payments in respect
thereof;
(C) make available to the other and to any taxing authority as
reasonably requested all relevant information, records, and documents
relating to Taxes;
(D) provide timely notice to the other in writing or any pending or
proposed audits or assessments with respect to Taxes for which the other
may have a liability under this Agreement;
(E) furnish the other with copies of all relevant correspondence
received from any taxing authority in connection with any audit or
information request with respect to any Taxes referred to in subsection
(D) above; and
(F) bear the other party's reasonable out-of-pocket expenses in
complying with a request by a party for the other party's assistance or
cooperation to the extent that those expenses are attributable to fees and
other costs of unaffiliated third-party service providers.
33
(h) Taxes Attributable to Pre-Closing Reorganization. Seller agrees
to pay all Taxes resulting from the reorganizations contemplated by Parts 3.1
and 3.12 of the Disclosure Letter and Section 7 hereof.
9.7 CANADIAN BUSINESS. Sellers agree to negotiate in good faith with Buyer
to restructure the mechanics and timing of the transfer of the Canadian
operations, at the reasonable request and direction of Buyer; provided that
Sellers shall not be required to take any action that would have an adverse
legal, financial, commercial or tax impact on Sellers (after giving effect to
any compensation provided therefor by Buyer).
10. TERMINATION.
10.1 TERMINATION EVENTS. This Agreement may, by notice given prior to or
at the Closing, be terminated:
(a) by either Buyer or Seller if a material breach of any provision
of this Agreement has been committed by the other party and such breach has not
been waived;
(b) (i) by Buyer if any of the conditions contained in the first
sentence of Section 8.1 or in Sections 8.2, 8.3, 8.4 or 8.5 has not been
satisfied as of the Closing Date or if satisfaction of such a condition is or
becomes impossible (other than through the failure of Buyer to comply with its
obligations under this Agreement) and Buyer has not waived such condition on or
before the Closing Date; or (ii) by Seller, if any of the conditions in Section
9 has not been satisfied as of the Closing Date or if satisfaction of such a
condition is or becomes impossible (other than through the failure of Seller to
comply with their obligations under this Agreement) and Seller has not waived
such condition on or before the Closing Date;
(c) by mutual consent of Buyer and Seller;
(d) by either Buyer or Seller if the Closing has not occurred (other
than through the failure of any party seeking to terminate this Agreement to
comply fully with its obligations under this Agreement) on or before August 31,
2000, or such later date as the parties may agree upon; or
(e) by Buyer if it elects to terminate after receipt of a Sellers'
Section 8.1 Notice in accordance with the provisions of Section 8.1.
10.2 EFFECT OF TERMINATION. Each party's right of termination under
Section 10.1 is in addition to any other rights it may have under this Agreement
or otherwise, and the exercise of a right of termination will not be an election
of remedies. If this Agreement is terminated pursuant to Section 10.1, all
further obligations of the parties under this Agreement will terminate, except
that the obligation in Section 10.3 will survive; provided, however, that if
this Agreement is terminated by a party because of the breach of the Agreement
by the other party or because one or more of the conditions to the terminating
party's
34
obligations under this Agreement is not satisfied as a result of the other
party's failure to comply with its obligations under this Agreement, the
terminating party's right to pursue all legal remedies will survive such
termination unimpaired provided that Buyer shall have no rights against Sellers
in the event Buyer elects to terminate pursuant to Section 10.1(e).
10.3 BREAKUP FEE. If Seller terminates this Agreement pursuant to Section
10.1(a) above, or if Buyer terminates this Agreement for any reason other than a
reason permitted under Section 10.1, Buyer shall be required to pay Seller a
termination fee equal to $20 million. Such payment shall be made by wire
transfer, in immediately available funds, no later than 48 hours after receipt
by Buyer of Seller's notice, or in the case of a termination by Buyer,
concurrent with Buyer's notice to Seller.
11. INDEMNIFICATION; REMEDIES.
11.1 INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLERS. Sellers will
jointly and severally indemnify and hold harmless Buyer, the Acquired Companies,
and their respective stockholders, controlling persons, and affiliates
(collectively, the "INDEMNIFIED PERSONS") for, and will pay to the Indemnified
Persons the amount of, any loss, liability, claim, damage (excluding incidental
and consequential Damages) and expense (including reasonable costs of
investigation and defense and reasonable attorneys' fees) (collectively,
"DAMAGES"), arising from or in connection with: (a) any breach of any
representation or warranty made by Sellers in this Agreement, the Disclosure
Letter, the supplements to the Disclosure Letter, or any certificate or other
document delivered at Closing by either Seller pursuant to this Agreement; or
(b) any breach by a Seller of any covenant or obligation of such Seller in this
Agreement; or (c) any claim by any Person for brokerage or finders fees or
commissions or similar payments based upon any agreement or understanding
alleged to have been made by such Person with either Seller (or any Person
acting on its behalf) in connection with any of the Contemplated Transactions;
or (d) any liability or obligation arising from or in connection with any
employee benefit plan under Section 3(3) of ERISA established, maintained or
contributed to by an ERISA Affiliate of any Acquired Company.
11.2 INDEMNIFICATION AND PAYMENT OF DAMAGES BY BUYER. Buyer will indemnify
and hold harmless Seller, and will pay to Seller the amount of any Damages
arising from or in connection with (a) any breach of any representation or
warranty made by Buyer in this Agreement or in any certificate delivered by
Buyer pursuant to this Agreement, (b) any breach by Buyer of any covenant or
obligation of Buyer in this Agreement, or (c) any claim by any Person for
brokerage or finder's fees or commissions or similar payments based upon any
agreement or understanding alleged to have been made by such Person with Buyer
(or any Person acting on its behalf) in connection with any of the Contemplated
Transactions.
11.3 TIME LIMITATIONS. If the Closing occurs, Sellers will have no
liability (for indemnification or otherwise) with respect to any representation
or warranty (other than the representations and warranties contained in Sections
3.7, 3.9, 3.15 and with respect to claims based on intentional misrepresentation
or fraud) or covenant or obligation to be performed and complied with prior to
the Closing Date unless on or before the expiration of 21 months after the
Closing Date, Buyer notifies Seller of a claim specifying the
35
factual basis of that claim in reasonable detail to the extent then known by
Buyer. If the Closing occurs, Buyer will have no liability (for indemnification
or otherwise) with respect to any representation or warranty, or covenant or
obligation to be performed and complied with prior to the Closing Date, unless
on or before the expiration of 21 months after the Closing Date, Seller notifies
Buyer of a claim specifying the factual basis of that claim in reasonable detail
to the extent then known by Seller. With respect to claims based on
misrepresentations contained in Section 3.7 and relating to matters for which a
reserve has been taken as referenced in PART 3.7(e) OF THE DISCLOSURE LETTER,
Sellers shall have no liability unless Buyer notifies Sellers of such claim, in
the manner specified above, on or before the third anniversary of the Closing
Date. With respect to claims based on misrepresentations contained in Section
3.7 and relating to Taxes other than for matters for which a reserve has been
taken as referenced in PART 3.7(e) OF THE DISCLOSURE LETTER, Sellers shall have
no liability unless Buyer notifies Sellers of such claim, in the manner
specified above, no later than six months after the expiration of the applicable
statute of limitations (including any extensions thereof). With respect to
claims based on misrepresentations contained in Sections 3.9 and 3.15, Sellers
shall have no liability unless Buyer notifies Seller of such claim, in the
manner specified above, on or before the fifth anniversary of the Closing Date.
11.4 LIMITATIONS ON AMOUNT -- SELLER. Seller will have no liability (for
indemnification or otherwise) with respect to the matters described in clause
(a) or clause (b) of Section 11.1 (other than the covenants and obligations of
the Sellers under Section 7(d) and 9.6(h)) until the total of all Damages with
respect to such matters exceeds $5,000,000, and then only for the amount by
which such Damages exceed $5,000,000. Seller will have no liability (for
indemnification or otherwise) with respect to the matters described in clause
(a) or clause (b) of Section 11.1 in excess of $100 million of the Purchase
Price.
11.5 LIMITATIONS ON AMOUNT -- BUYER. Buyer will have no liability (for
indemnification or otherwise) with respect to the matters described in clause
(a) or (b) of Section 11.2 until the total of all Damages with respect to such
matters exceeds $5,000,000, and then only for the amount by which such Damages
exceed $5,000,000.
11.6 PROCEDURE FOR INDEMNIFICATION -- THIRD PARTY CLAIMS.
(a) Promptly after receipt by an indemnified party under Section
11.1 or 11.2 of notice of the commencement of any Proceeding against it, such
indemnified party will, if a claim is to be made against an indemnifying party
under such Section, or, if the indemnified party believes it is reasonably
likely that a claim will be made against an indemnifying party under Section
11.1 or 11.2, give notice to the indemnifying party of the assertion or
reasonable likelihood of assertion of such claim, but the failure to notify the
indemnifying party will not relieve the indemnifying party of any liability that
it may have to any indemnified party, except to the extent that the indemnifying
party demonstrates that the defense of such action is prejudiced by the
indemnified party's failure to give such notice.
(b) If any Proceeding referred to in Section 11.6(a) is brought
against an indemnified party and it gives notice to the indemnifying party of
the commencement of such Proceeding, the
36
indemnifying party will be entitled to participate in such Proceeding and, to
the extent that it wishes (unless (i) the indemnifying party is also a party to
such Proceeding and the indemnified party determines in good faith that joint
representation would be inappropriate, or (ii) the indemnifying party fails to
provide reasonable assurance to the indemnified party of its financial capacity
to defend such Proceeding and provide indemnification with respect to such
Proceeding), to assume the defense of such Proceeding with counsel satisfactory
to the indemnified party and, after notice from the indemnifying party to the
indemnified party of its election to assume the defense of such Proceeding, the
indemnifying party will not, as long as it diligently conducts such defense, be
liable to the indemnified party under this Section 11 for any fees of other
counsel or any other expenses with respect to the defense of such Proceeding, in
each case subsequently incurred by the indemnified party in connection with the
defense of such Proceeding, other than reasonable costs of investigation. If the
indemnifying party assumes the defense of a Proceeding, (i) it will be
conclusively established for purposes of this Agreement that the claims made in
that Proceeding are within the scope of and subject to indemnification; (ii) no
compromise or settlement of such claims may be effected by the indemnifying
party without the indemnified party's consent unless (A) there is no finding or
admission of any violation of Legal Requirements or any violation of the rights
of any Person and no effect on any other claims that may be made against the
indemnified party, and (B) the sole relief provided is monetary damages that are
paid in full by the indemnifying party; and (iii) the indemnified party will
have no liability with respect to any compromise or settlement of such claims
effected without its consent. If notice is given to an indemnifying party of the
commencement of any Proceeding and the indemnifying party does not, within ten
days after the indemnified party's notice is given, give notice to the
indemnified party of its election to assume the defense of such Proceeding, the
indemnifying party will be bound by any determination made in such Proceeding or
any compromise or settlement effected by the indemnified party.
(c) Notwithstanding the foregoing, if an indemnified party
determines in good faith that there is a reasonable probability that a
Proceeding may adversely affect it or its affiliates other than as a result of
monetary damages for which it would be entitled to indemnification under this
Agreement, the indemnified party may, by notice to the indemnifying party,
assume at its expense the exclusive right to defend, compromise, or settle such
Proceeding, but the indemnifying party will not be bound by any determination of
a Proceeding so defended or any compromise or settlement effected without its
consent (which may not be unreasonably withheld).
11.7 PROCEDURE FOR INDEMNIFICATION -- OTHER CLAIMS. A claim for
indemnification for any matter not involving a third-party claim may be asserted
by notice to the party from whom indemnification is sought.
11.8 SOLE REMEDY. The indemnification provisions of this Section 11 shall
constitute the exclusive remedy after the Closing of each party hereto with
respect to the breach or inaccuracy of any representation or warranty made by
any other party hereto in this Agreement.
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12. GENERAL PROVISIONS.
12.1 EXPENSES. Except as otherwise expressly provided in this Agreement,
each party to this Agreement will bear its respective expenses incurred in
connection with the preparation, execution, and performance of this Agreement
and the Contemplated Transactions, including all fees and expenses of agents,
representatives, counsel, and accountants. In the event of termination of this
Agreement, the obligation of each party to pay its own expenses will be subject
to any rights of such party arising from a breach of this Agreement by another
party.
12.2 PUBLIC ANNOUNCEMENTS. Except as may be required by law, any public
announcement or similar publicity with respect to this Agreement or the
Contemplated Transactions will be issued, if at all, at such time and in such
manner as agreed by Seller and Buyer. Neither party shall issue any press
release or written statement for general circulation relating to this Agreement
or the Contemplated Transactions unless approved in advance by the other party,
which approval will not be unreasonably delayed or withheld. Seller and Buyer
will consult with each other concerning the means by which the Acquired
Companies' employees, customers, and suppliers and others having dealings with
the Acquired Companies will be informed of the Contemplated Transactions.
12.3 CONFIDENTIALITY. Between the date of this Agreement and the Closing
Date, Buyer and Sellers will maintain in confidence, and will cause the
directors, officers, employees, agents, and advisors of Buyer and Sellers and
the Acquired Companies to maintain in confidence, and not use to the detriment
of another party or an Acquired Company any written, oral, or other information
obtained in confidence from another party or an Acquired Company in connection
with this Agreement or the Contemplated Transactions, unless (a) such
information is already known to such party or to others not bound by a duty of
confidentiality or such information becomes publicly available through no fault
of such party, (b) the use of such information is necessary or appropriate in
making any filing or obtaining any consent or approval required for the
consummation of the Contemplated Transactions, (c) the furnishing or use of such
information is required by or necessary in connection with legal proceedings or
(d) to financing sources, financial analysts and investors and rating agencies
if such disclosure is customary and appropriate for a publicly traded company.
The foregoing confidentiality obligations shall continue to apply to Sellers for
a period of three years following the Closing Date.
If the Contemplated Transactions are not consummated, each party will
return or destroy all written information provided by the other party.
12.4 NOTICES. All notices, consents, waivers, and other communications
under this Agreement must be in writing and will be deemed to have been duly
given when (a) delivered by hand (with written confirmation of receipt), (b)
sent by telecopier (with written confirmation of receipt), provided that a copy
is mailed by registered mail, return receipt requested, or (c) when received by
the addressee, if sent by a nationally recognized overnight delivery service
(receipt requested), in each case to the appropriate
38
addresses and telecopier numbers set forth below (or to such other addresses and
telecopier numbers as a party may designate by notice to the other parties):
Sellers:
Lagardere North America, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: President
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇, Scholer, Fierman, ▇▇▇▇ & Handler, LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Buyer:
▇▇▇▇▇▇▇▇▇▇ ▇▇▇.
▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Executive Vice President and
Chief Financial Officer
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇▇▇▇ ▇▇▇.
▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Senior Vice President; General Counsel
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
12.5 JURISDICTION; SERVICE OF PROCESS. Any action or proceeding seeking to
enforce any provision of, or based on any right arising out of, this Agreement
may be brought against any of the parties in the courts of the State of New
York, or, if it has or can acquire jurisdiction, in the United States District
39
Court for the Southern District of New York, and each of the parties consents to
the jurisdiction of such courts (and of the appropriate appellate courts) in any
such action or proceeding and waives any objection to venue laid therein.
Process in any action or proceeding referred to in the preceding sentence may be
served on any party anywhere in the world.
12.6 FURTHER ASSURANCES. The parties agree (a) to furnish upon request to
each other such further information, (b) to execute and deliver to each other
such other documents, and (c) to do such other acts and things, all as the other
party may reasonably request for the purpose of carrying out the intent of this
Agreement and the documents referred to in this Agreement. In addition, Sellers
agree to use commercially reasonable efforts to take such actions, if requested
by Buyer, to cause the transfer to Buyer of any nominee shares of the Acquired
Companies to such Person or Persons as Buyer may request. Seller also agrees to
request that its accounting firm cooperate with Buyer in Buyer's preparation of
any financial information that Buyer is required to include in its public
filings. The fees and expenses charged by such accounting firm for such work
shall be the responsibility of Buyer.
12.7 WAIVER. The rights and remedies of the parties to this Agreement are
cumulative and not alternative. Neither the failure nor any delay by any party
in exercising any right, power, or privilege under this Agreement or the
documents referred to in this Agreement will operate as a waiver of such right,
power, or privilege, and no single or partial exercise of any such right, power,
or privilege will preclude any other or further exercise of such right, power,
or privilege or the exercise of any other right, power, or privilege. To the
maximum extent permitted by applicable law, (a) no claim or right arising out of
this Agreement or the documents referred to in this Agreement can be discharged
by one party, in whole or in part, by a waiver or renunciation of the claim or
right unless in writing signed by the other party; (b) no waiver that may be
given by a party will be applicable except in the specific instance for which it
is given; and (c) no notice to or demand on one party will be deemed to be a
waiver of any obligation of such party or of the right of the party giving such
notice or demand to take further action without notice or demand as provided in
this Agreement or the documents referred to in this Agreement.
12.8 ENTIRE AGREEMENT AND MODIFICATION. This Agreement supersedes all
prior agreements between the parties with respect to its subject matter and
constitutes (along with the documents referred to in this Agreement) a complete
and exclusive statement of the terms of the agreement between the parties with
respect to its subject matter. This Agreement may not be amended except by a
written agreement executed by the party to be charged with the amendment.
12.9 DISCLOSURE LETTER. In the event of any inconsistency between the
statements in the body of this Agreement and those in the Disclosure Letter
(other than an exception expressly set forth as such in the Disclosure Letter
with respect to a specifically identified representation or warranty), the
statements in the body of this Agreement will control.
12.10 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS. Neither party
may assign any of its rights under this Agreement without the prior consent of
the other parties, except that Buyer may
40
assign to any of its wholly-owned subsidiaries or its parent without consent.
Subject to the preceding sentence, this Agreement will apply to, be binding in
all respects upon, and inure to the benefit of the successors and permitted
assigns of the parties. Nothing expressed or referred to in this Agreement will
be construed to give any Person other than the parties to this Agreement any
legal or equitable right, remedy, or claim under or with respect to this
Agreement or any provision of this Agreement. This Agreement and all of its
provisions and conditions are for the sole and exclusive benefit of the parties
to this Agreement and their successors and assigns.
12.11 SEVERABILITY. If any provision of this Agreement is held invalid or
unenforceable by any court of competent jurisdiction, the other provisions of
this Agreement will remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable.
12.12 SECTION HEADINGS, CONSTRUCTION. The headings of Sections in this
Agreement are provided for convenience only and will not affect its construction
or interpretation. All references to "Section" or "Sections" refer to the
corresponding Section or Sections of this Agreement. All words used in this
Agreement will be construed to be of such gender or number as the circumstances
require. Unless otherwise expressly provided, the word "including" does not
limit the preceding words or terms.
12.13 TIME OF ESSENCE. With regard to all dates and time periods set forth
or referred to in this Agreement, time is of the essence.
12.14 GOVERNING LAW. This Agreement will be governed by the laws of the
State of New York applicable to agreements entered into and to be fully
performed in that state.
12.15 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.
12.16 NON-COMPETITION. Sellers will not, directly or indirectly, compete
for a period of three (3) years from the Closing in the businesses of direct
marketing of children's book clubs, collectibles, card clubs, reference material
and educational products.
41
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the date first written above.
▇▇▇▇▇▇▇▇▇▇ ▇▇▇.
By: /s/
---------------------------------------
Name:
Title:
HACHETTE BOOK GROUP USA, INC.
By: /s/
---------------------------------------
Name:
Title:
LAGARDERE NORTH AMERICA, INC.
By: /s/
---------------------------------------
Name:
Title:
42