STOCK PURCHASE AGREEMENT
by and between
OMNICOM GROUP INC.
and
MARKETING SERVICES GROUP, INC.,
Dated July 18, 2001
TABLE OF CONTENTS
Page
ARTICLE I PURCHASE AND SALE OF THE SHARES......................................1
Section 1.1 Purchase and Sale...............................................1
Section 1.2 Purchase Price..................................................1
ARTICLE II THE CLOSING.........................................................3
Section 2.1 Closing.........................................................3
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER..................3
Section 3.1 Stock Ownership.................................................3
Section 3.2 Organization and Qualification..................................3
Section 3.3 Subsidiaries....................................................4
Section 3.4 Capitalization..................................................4
Section 3.5 Authority; Non-Contravention; Statutory Approvals; Compliance...5
Section 3.6 Financial Statements and Books and Records......................6
Section 3.7 Absence of Certain Changes or Events............................7
Section 3.8 Litigation......................................................8
Section 3.9 Tax Matters.....................................................8
Section 3.10 Employee Matters; ERISA........................................10
Section 3.11 Environmental Protection.......................................12
Section 3.12 Insurance......................................................14
Section 3.13 Takeover Provisions............................................14
Section 3.14 Intellectual Property..........................................15
Section 3.15 Contracts......................................................15
Section 3.16 Property and Assets............................................16
Section 3.17 Real Property..................................................16
Section 3.18 Client Relations...............................................18
Section 3.19 Accounts Receivable; Work-in-Process; Accounts Payable.........19
Section 3.20 Employment Relations...........................................19
Section 3.21 Interests in Customers, Suppliers, Etc.........................20
Section 3.22 Bank Accounts and Powers of Attorney...........................20
Section 3.23 Compensation of Employees......................................20
Section 3.24 Corporate Controls.............................................21
Section 3.25 Brokers........................................................21
Section 3.26 Indebtedness...................................................21
Section 3.27 Copies of Documents............................................21
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER............................22
Section 4.1 Regulatory Organization and Qualification......................22
Section 4.2 Authority; Non-Contravention; Statutory Approvals; Compliance..22
Section 4.3 Litigation.....................................................23
ARTICLE V COVENANTS OF STOCKHOLDER............................................23
Section 5.1 Regulatory and Other Approvals.................................23
Section 5.2 HSR Filings....................................................23
Section 5.3 Full Access....................................................24
Section 5.4 No Solicitations...............................................24
Section 5.5 Conduct of Business............................................24
Section 5.6 Financial Information..........................................27
Section 5.7 Notice and Cure................................................27
Section 5.8 Consultation...................................................27
Section 5.9 Fulfillment of Conditions......................................27
Section 5.10 Repayment of Indebtedness......................................27
Section 5.11 Security for Certain Stockholder Indebtedness..................28
ARTICLE VI COVENANTS OF BUYER.................................................28
Section 6.1 Regulatory and Other Approvals.................................28
Section 6.2 HSR Filings....................................................28
Section 6.3 Notice and Cure................................................28
Section 6.4 Fulfillment of Conditions......................................29
ARTICLE VII MUTUAL COVENANTS..................................................29
Section 7.1 Reasonable Efforts to Consummate Transaction...................29
Section 7.2 Certain Tax Matters............................................29
Section 7.3 Disclosure Schedules...........................................30
ARTICLE VIII CONDITIONS TO OBLIGATIONS OF BUYER...............................31
Section 8.1 Representations and Warranties.................................31
Section 8.2 Certain Employee Agreements....................................31
Section 8.3 Good Standing Certificates.....................................31
Section 8.4 Performance....................................................32
Section 8.5 Certified Resolutions..........................................32
Section 8.6 No Injunctions or Restraints...................................32
Section 8.7 Regulatory Approvals...........................................32
Section 8.8 Required Consents..............................................32
Section 8.9 Opinions of Counsel............................................32
Section 8.10 Company Material Adverse Effect................................32
Section 8.11 Repayment of Certain Indebtedness..............................33
Section 8.12 Proceedings....................................................33
Section 8.13 Employment Agreements..........................................33
Section 8.14 Non-Solicitation/Non-Servicing Agreement.......................33
Section 8.15 Transitional Services..........................................33
Section 8.16 Strategic Partnership..........................................33
Section 8.17 Actions Under Shared Services Agreement........................33
ARTICLE IX CONDITIONS TO OBLIGATIONS OF STOCKHOLDER...........................33
Section 9.1 Representations and Warranties.................................33
Section 9.2 Good Standing Certificates.....................................34
Section 9.3 Performance....................................................34
Section 9.4 Certified Resolutions..........................................34
Section 9.5 No Injunctions or Restraints...................................34
Section 9.6 Regulatory Approvals...........................................34
Section 9.7 Required Consents..............................................34
Section 9.8 Opinion of Counsel.............................................34
Section 9.9 Proceedings....................................................34
Section 9.10 Transitional Services..........................................34
Section 9.11 Strategic Partnership..........................................35
ARTICLE X INDEMNIFICATION.....................................................35
Section 10.1 Survival.......................................................35
Section 10.2 Obligation of Stockholder to Indemnify.........................35
Section 10.3 Obligation of Buyer to Indemnify...............................36
Section 10.4 Tax Matters....................................................36
Section 10.5 Indemnification Procedures.....................................39
Section 10.6 Limitations On and Other Matters Regarding Indemnification.....42
ARTICLE XI GENERAL PROVISIONS.................................................43
Section 11.1 Expenses......................................................43
Section 11.2 Notices.......................................................43
Section 11.3 Miscellaneous.................................................44
Section 11.4 Interpretation................................................45
Section 11.5 Counterparts; Effect..........................................45
Section 11.6 Parties in Interest...........................................45
Section 11.7 Specific Performance..........................................45
Section 11.8 WAIVER OF JURY TRIAL..........................................45
Section 11.9 "Person" Defined..............................................45
Section 11.10 "Knowledge" Defined...........................................46
Section 11.11 "Affiliate" Defined...........................................46
Section 11.12 Publicity.....................................................46
Section 11.13 No Strict Construction........................................46
Section 11.14 Amendment.....................................................46
Section 11.15 Waiver........................................................46
Section 11.16 Termination...................................................46
Section 11.17 Effect of Termination.........................................47
EXHIBITS
Exhibit A-1...Form of Opinion of ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, LLP.
Exhibit A-2...Form of Opinion of ▇▇▇▇▇▇▇▇ Carano ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
... & ▇▇▇▇▇ LLP.
Exhibit B-1...Form of Amended and Restated Employment Agreement of ▇▇▇▇▇▇▇ ▇.
... Dzvonik.
Exhibit B-2...Form of Amended and Restated Employment Agreement of ▇▇▇▇▇▇ ▇▇▇▇▇.
Exhibit B-3...Form of Amended and Restated Employment Agreement of ▇▇▇▇▇
... ▇▇▇▇▇▇▇▇.
Exhibit C ...Form of Non-Solicitation/Non-Servicing Agreement.
Exhibit D ...Form of Shared Services Agreement.
Exhibit E ...Form of Strategic Partnership Agreement.
Exhibit F ...Form of Opinion of ▇▇▇▇▇ and ▇▇▇▇▇▇▇ LLP.
INDEX OF DEFINED TERMS
Term Page
AAA........................................................................ 2
Acquisition Proposal....................................................... 24
Advisors................................................................... 24
Affiliate.................................................................. 46
Agreement.................................................................. 1
Audited Financials......................................................... 6
Buyer...................................................................... 1
Buyer Disclosure Schedule.................................................. 22
Buyer Indemnified Parties.................................................. 35
Buyer Required Consents.................................................... 22
Buyer Required Statutory Approvals......................................... 23
CERCLA..................................................................... 13
Closing.................................................................... 1
Closing Balance Sheet...................................................... 3
Closing Date............................................................... 3
Code....................................................................... 9
Common Stock............................................................... 4
Company.................................................................... 1
Company Employee Benefit Plans............................................. 10
Company Financial Statements............................................... 7
Company Material Adverse Effect............................................ 4
Continuing Employee........................................................ 32
Contracts.................................................................. 15
Defense Counsel............................................................ 40
Defense Notice............................................................. 40
Disclosure Schedules....................................................... 30
Election................................................................... 29
Environmental Claim........................................................ 13
Environmental Condition.................................................... 14
Environmental Laws......................................................... 13
ERISA...................................................................... 10
ERISA Affiliate............................................................10-11
Fourth-Quarter Preliminary Interim Financials.............................. 7
Governmental Authority..................................................... 6
Hazardous Materials........................................................ 14
Holdback Agreement......................................................... 28
HSR Act.................................................................... 6
Immigration Act............................................................ 19
Improvements............................................................... 17
Indemnified Party.......................................................... 39
Indemnifying Party......................................................... 39
Independent Auditors....................................................... 2
Intellectual Property...................................................... 15
Knowledge.................................................................. 46
Liens...................................................................... 3
Losses..................................................................... 35
New Plans.................................................................. 32
Non Third Party Acknowledgement of Liability............................... 39
Non Third Party Claim...................................................... 39
Non Third Party Claim Notice............................................... 39
Non Third Party Dispute Notice............................................. 40
Non Third Party Dispute Period............................................. 40
Old Plans.................................................................. 32
Omnicom CFO................................................................ 2
Owned Real Property........................................................ 17
Paribas Credit Agreement................................................... 25
PBGC....................................................................... 12
Permits.................................................................... 6
Permitted Liens............................................................ 16
Person..................................................................... 46
Potential Acquiror......................................................... 24
Purchase Price............................................................. 1
Purchase Price Allocation.................................................. 30
Real Property Lease........................................................ 18
Reconciliation Period...................................................... 2
Related Group.............................................................. 20
Release.................................................................... 14
SEC........................................................................ 7
Shares..................................................................... 1
Special Determination...................................................... 2
Stockholder................................................................ 1
Stockholder Disclosure Schedule............................................ 3
Stockholder Required Consents.............................................. 5
Stockholder Required Statutory Approvals................................... 6
subsidiary................................................................. 4
Takeover Laws.............................................................. 14
Taxes...................................................................... 9
Tax Return................................................................. 10
Title IV Plan.............................................................. 12
Third Party Claim.......................................................... 40
Third Party Claims Notice.................................................. 40
Third Party Defense Period................................................. 40
Third-Quarter Interim Financials........................................... 7
Transaction................................................................ 1
U.S. GAAP.................................................................. 7
Violation.................................................................. 5
Working Capital............................................................ 1
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT, dated July 18, 2001 (this "Agreement"), by
and between OMNICOM GROUP INC., a New York corporation ("Buyer") and Marketing
Services Group, Inc., a Nevada corporation ("Stockholder").
WHEREAS, Stockholder is the record and beneficial owner of all
of the issued and outstanding shares of common stock, par value $.01 per share,
of ▇▇▇▇▇▇▇▇ Communications Group, Inc., a Delaware corporation (the "Company"),
constituting all issued and outstanding shares of capital stock of Company (such
shares being referred to herein as the "Shares"); and
WHEREAS, Buyer desires to purchase from Stockholder, and
Stockholder desires to sell to Buyer, the Shares, on the terms and subject to
the conditions set forth herein.
NOW THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements contained herein, the
parties hereto, intending to be legally bound, hereby agree as follows:
ARTICLE I
PURCHASE AND SALE OF THE SHARES
Section 1.1 Purchase and Sale. At the Closing on the Closing Date (each as
defined in Section 2.1 below) and in accordance with the provisions of this
Agreement, Stockholder agrees to sell, transfer and deliver to Buyer, free and
clear of all Liens (as defined in Section 3.1), and Buyer agrees to purchase
from Stockholder all of the Shares for the consideration specified in Section
1.2 below (the "Transaction").
Section 1.2 Purchase Price.
(a) At the Closing on the Closing Date, Buyer shall pay to Stockholder in
cash, by wire transfer of immediately available funds to an account(s)
designated by Stockholder, a total aggregate amount of Ninety-One Million Three
Hundred Thousand and No/100 ($91,300,000.00) Dollars (the "Purchase Price").
(b) (i) If the Working Capital (as defined below) as finally determined
pursuant to the procedures set forth in this Section 1.2(b), is less than
$13,900,000, within five business days after the calculation of Working Capital
shall have become binding on the parties pursuant to the procedures set forth in
this Section 1.2(b), Stockholder shall pay Buyer the difference between
$13,900,000 and the Working Capital. If the Working Capital as finally
determined pursuant to the procedures set forth in this Section 1.2(b), is more
than $13,900,000, within five business days after the calculation of Working
Capital shall have become binding on the parties pursuant to the procedures set
forth in this Section 1.2(b), Buyer shall pay Stockholder the difference between
the Working Capital and $13,900,000. As used in this Agreement, the term
"Working Capital" shall mean the amount by which the current assets of the
Company as reflected
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on the Closing Balance Sheet (as defined in Section 1.2(b)(ii) below) exceed the
current liabilities of the Company as reflected on the Closing Balance Sheet.
(ii) The Chief Financial Officer of Buyer ("Omnicom CFO") shall cause, as
soon as practicable after the Closing, the preparation of an unaudited
consolidated balance sheet of the Company and its subsidiaries as of the Closing
Date at the point in time immediately after the consummation of the Closing (the
"Closing Balance Sheet"), together with a statement of the Omnicom CFO which
sets forth the Working Capital (the "Special Determination"). The Closing
Balance Sheet shall be prepared in accordance with U.S. GAAP (as defined in
Section 3.6). If Stockholder does not agree that the Special Determination
correctly states the Working Capital, Stockholder shall promptly (but not later
than 45 days after the delivery to them of the Special Determination) give
written notice to Buyer of any exceptions thereto (in reasonable detail
describing the nature of the disagreement asserted). If Stockholder and Buyer
reconcile their differences, the Working Capital calculation shall be adjusted
accordingly and shall thereupon become binding, final and conclusive upon all of
the parties hereto and enforceable in a court of law. If Stockholder and Buyer
are unable to reconcile their differences in writing within 20 days after
written notice of exceptions is delivered to Buyer (the "Reconciliation
Period"), the items in dispute shall be submitted to a mutually acceptable
accounting firm (other than the independent auditors then auditing the books and
records of Buyer and Stockholder) selected from any of the five largest
accounting firms in the United States in terms of gross revenues (the
"Independent Auditors") for final determination. The Working Capital calculation
shall be deemed adjusted in accordance with the determination of the Independent
Auditors and shall become binding, final and conclusive upon all of the parties
hereto and enforceable in a court of law. The Independent Auditors shall
consider only the items in dispute and shall be instructed to act within 20 days
(or such longer period as Stockholder and Buyer may agree) to resolve all items
in dispute. If Stockholder does not give notice of any exception within 45 days
after the delivery to it of the Special Determination or if Stockholder gives
written notification of its acceptance of the Working Capital prior to the end
of such 45 day period, the Working Capital set forth in the Special
Determination shall thereupon become binding, final and conclusive upon all the
parties hereto and enforceable in a court of law.
(iii) In the event the Independent Auditors are for any reason unable or
unwilling to perform the services required of it under this Section 1.2(b), then
Buyer and Stockholder agree to select another accounting firm (other than the
independent auditors then auditing the books and records of Buyer and
Stockholder) from among the five largest accounting firms in the United States
in terms of gross revenues to perform the services to be performed under this
Section 1.2(b) by the Independent Auditors. If Buyer and Stockholder fail to
select the Independent Auditors as required by clause (ii) above within seven
days after the expiration of the Reconciliation Period or fail to select another
accounting firm within seven days after it is determined that the Independent
Auditors will not perform the services required, either Buyer or Stockholder may
request the American Arbitration Association in New York, New York (the "AAA")
to appoint an independent firm of certified public accountants to perform the
services required under this Section 1.2(b) by the Independent Auditors. The
fees of the AAA shall be
2
shared equally by Buyer, on the one hand, and Stockholder, on the other hand.
For purposes of this Section 1.2(b) the term "Independent Auditors" shall
include such other accounting firm chosen in accordance with this clause (iii).
(iv) The Independent Auditors shall determine the party (i.e., Buyer or
Stockholder) whose asserted position as to the calculation of Working Capital
for the period under examination before the Independent Auditors is furthest
from the determination of Working Capital by the Independent Auditors, which
non-prevailing party shall pay the fees and expenses of the Independent Auditors
and shall reimburse the prevailing party for the portion of the fees of the AAA
previously paid by such party.
ARTICLE II
THE CLOSING
Section 2.1 Closing. The closing of the Transaction (the "Closing") shall
take place at the offices of ▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP, ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇ ▇▇▇▇▇ (or at such place as may be mutually agreed upon by the parties
hereto) at 10:00 A.M., New York City time, on the second business day
immediately following the date on which the last of the conditions set forth in
Articles VIII and IX is fulfilled or waived by the applicable party or parties
to be satisfied thereto (other than conditions that by their nature are required
to be performed on the Closing Date, but subject to satisfaction of such
conditions), or at such other time and date as Stockholder and Buyer shall
mutually agree (the "Closing Date").
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER.
Except as set forth in the corresponding sections or subsections of the
Stockholder Disclosure Schedule, dated as of the date hereof, delivered by
Stockholder to Buyer (the "Stockholder Disclosure Schedule"), Stockholder
represents and warrants to Buyer as follows:
Section 3.1 Stock Ownership. Stockholder is the record and beneficial owner
of the Shares, all of which have been validly issued, fully paid, nonassessable
and are free of preemptive rights. The Shares are (and immediately prior to the
Closing will be) owned beneficially and of record by Stockholder, free and clear
of any pledges, liens, claims, encumbrances, security interests, equities,
charges and options of any nature whatsoever (collectively, "Liens"), except for
any restrictions which may be created by operation of state or federal
securities laws.
Section 3.2 Organization and Qualification. Company and each of its
subsidiaries (as defined below) is a corporation or other legal entity duly
organized, validly existing and in good standing under the laws of its
jurisdiction of existence, has all
3
requisite corporate power and authority, and has been duly authorized by all
necessary approvals and orders, to own, lease and operate its assets and
properties to the extent owned, leased and operated and to carry on its business
as it is now being conducted and is duly qualified and in good standing to do
business in each jurisdiction in which the nature of its business or the
ownership or leasing of its assets and properties makes such qualification
necessary, other than in such jurisdictions where the failure to be so qualified
and in good standing would not, when taken together with all other such
failures, reasonably be expected to have a material adverse effect on the
business, properties, financial condition or results of operations (other than
effects that are the result of general economic or financial market changes or
changes in the direct marketing industry generally) of the Company and its
subsidiaries taken as a whole or on the consummation of this Agreement (any such
material adverse effect being hereafter referred to as a "Company Material
Adverse Effect"). Section 3.2 of the Stockholder Disclosure Schedule sets forth
each state or other jurisdiction in which the Company is qualified to do
business as a foreign corporation. As used in this Agreement, the term
"subsidiary" of a Person (as defined in Section 11.9) shall mean any corporation
or other entity (including partnerships and other business associations) of
which a majority of the outstanding capital stock or other voting securities
having voting power under ordinary circumstances to elect directors or similar
members of the governing body of such corporation or entity shall at the time be
held, directly or indirectly, by such Person. True, accurate and complete copies
of the articles of incorporation, as amended, and by-laws of the Company and
each of its subsidiaries as in effect on the date hereof have been delivered to
Buyer by Stockholder.
Section 3.3 Subsidiaries. Section 3.3 of the Stockholder Disclosure
Schedule sets forth a description as of the date hereof of all subsidiaries of
the Company, including the name of each such entity, the state or jurisdiction
of its incorporation or organization, each state or other jurisdiction in which
it is qualified to do business as a foreign corporation, the Company's interest
therein and a brief description of the principal line or lines of business
conducted by each such entity. All of the issued and outstanding shares of
capital stock of, or other equity interests in, each subsidiary of the Company
are validly issued, fully paid, nonassessable and free of preemptive rights, and
are owned, directly or indirectly, by the Company in such proportionate amount
as set forth on Section 3.3 of the Stockholder Disclosure Schedule, free and
clear of any Liens. There are no outstanding subscriptions, options, calls,
contracts, voting trusts, proxies, rights (including phantom stock rights) or
warrants, including any right of conversion or exchange under any outstanding
security, instrument or other agreement, obligating Stockholder, the Company or
any subsidiary of the Company to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of its capital stock or obligating
Stockholder, the Company or any of its subsidiaries to grant, extend or enter
into any such agreement or commitment.
Section 3.4 Capitalization. The authorized capital stock of the Company
consists of 100 shares of common stock, par value $.01 per share (the "Common
Stock"), of which as of the date hereof 50 shares of Common Stock are
outstanding, no shares of Common Stock are held in the treasury of the Company,
and no shares of Common Stock are reserved for issuance pursuant to options
granted or to be granted by the Company. All of the issued and outstanding
shares of Common Stock are duly authorized, validly issued, fully paid and
nonassessable, and free of preemptive rights. Other than as set forth on Section
3.4 of the Stockholder Disclosure Schedule, there are no outstanding
subscriptions, options, calls,
4
contracts, voting trusts, proxies, or warrants, including any right of
conversion or exchange under any outstanding security, instrument or other
agreement, obligating Stockholder, the Company or any of its subsidiaries to
issue, deliver or sell, or cause to be issued, delivered or sold, additional
shares of capital stock of the Company, or obligating Stockholder, the Company
or any of its subsidiaries to grant, extend or enter into any such agreement or
commitment.
Section 3.5 Authority; Non-Contravention; Statutory Approvals; Compliance.
-------------------------------------------------------------
(a) Authority. Stockholder has all requisite corporate power and authority
to enter into this Agreement and, subject to obtaining the Stockholder Required
Statutory Approvals (as defined in Section 3.5(c)), to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation by Stockholder of the transactions contemplated hereby have
been duly and validly authorized by the board of directors of Stockholder, there
being necessary no other corporate action on the part of Stockholder, including
without limitation the submission of the transactions contemplated by this
Agreement to the stockholders of Stockholder for the requisite vote of such
stockholders under the laws of Nevada. This Agreement has been duly and validly
executed and delivered by Stockholder and, assuming the due authorization,
execution and delivery by Buyer, constitutes a legal, valid and binding
obligation of Stockholder enforceable against it in accordance with its terms,
except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles (whether such
enforceability is considered in a proceeding in equity or at law).
(b) Non-Contravention. The execution and delivery of this Agreement by
Stockholder does not, and the consummation of the transactions contemplated
hereby will not, violate, conflict with, or result in a breach of any provision
of, or constitute a default (with or without notice or lapse of time or both)
under, or result in a right of termination, cancellation, or acceleration of any
obligation under, or result in the creation of any Lien, charge, "put" or "call"
right or other encumbrance on, or the loss of, any of the properties or assets,
including Intellectual Property (as defined in Section 3.14), of the Company or
any of its subsidiaries (any such violation, conflict, breach, default, right of
termination, cancellation or acceleration, loss or creation, a "Violation" with
respect to the Company (such term when used in Article IV having a correlative
meaning with respect to Buyer)) or any of its subsidiaries pursuant to any
provisions of (i) the articles of incorporation or by-laws of the Company or any
of its subsidiaries, (ii) subject to obtaining the Stockholder Required
Statutory Approval, any statute, law, ordinance, rule, regulation, judgment,
decree, order, injunction, writ, permit or license of any Governmental Authority
(as defined in Section 3.5(c)) applicable to the Company or any of its
subsidiaries, or to any of their respective properties or assets, or (iii)
subject to obtaining the third-party consents or other approvals set forth in
Section 3.5(b) of the Stockholder Disclosure Schedule (the "Stockholder Required
Consents"), any note, bond, mortgage, indenture, deed of trust, license,
franchise, permit, concession, contract, lease or other instrument, obligation
or agreement of any kind to which the Company or any of its subsidiaries is a
party or by which the Company or any of its subsidiaries or any of their
respective properties or assets may be bound or affected.
(c) Statutory Approvals. No declaration, filing or registration with, or
notice to or authorization, consent or approval of, any federal, state, local or
foreign government, any
5
instrumentality, subdivision, court, administrative agency or commission or
authority thereof, or any quasi-governmental or private body exercising any
regulatory, taxing, importing or other governmental or quasi-governmental
authority or regulatory body (including a stock exchange or other
self-regulatory body) or any other authority (each, a "Governmental Authority")
is necessary for the execution and delivery of this Agreement by Stockholder or
the consummation by Stockholder of the transactions contemplated hereby, except
for those required under or in relation to (A) the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust
Improvements Act of 1976, as amended, and the rules and regulations promulgated
thereunder (the "HSR Act"), and (B) such consents, approvals, order,
authorizations, registrations, declarations and filings as are set forth in
Section 3.5(a) of the Stockholder Disclosure Schedule (the "Stockholder Required
Statutory Approvals"), it being understood that references in this Agreement to
"obtaining" such Stockholder Required Statutory Approvals shall mean making such
declarations, filings or registrations; giving such notice; obtaining such
consents or approvals; and having such waiting periods expire as are necessary
to avoid a violation of law.
(d) Compliance. Neither the Company nor any of its subsidiaries is in
violation of, or under investigation with respect thereto, or has been given
notice of any purported violation of, any law, statute, order, rule, regulation
or judgment (including, without limitation, any applicable Environmental Law, as
defined in Section 3.11) of any Governmental Authority. The Company and its
subsidiaries have all permits, licenses, franchises and other governmental
authorizations, consents and approvals necessary to conduct their respective
businesses as currently conducted in all respects (collectively, "Permits"),
except those which the failure to obtain would, in the aggregate, not reasonably
be expected to have a Company Material Adverse Effect. The Company and each of
its subsidiaries are not in breach or violation of or in default in the
performance or observance of any term or provision of, and no event has occurred
which, with lapse of time or action by a third party, could result in a default
under, (i) its articles of incorporation or by-laws or (ii) any contract,
commitment, agreement, indenture, mortgage, loan agreement, note, lease, bond,
license, approval or other instrument to which it is a party or by which it is
bound or to which any of its properties or assets is subject.
(e) Restrictive Contracts. There is no "non-competition" or other similar
consensual contract or agreement of the Company or any of its subsidiaries that
restricts the ability of the Company or any of its subsidiaries to conduct
business in any geographic area or accept or service the business of any Person
or that, following the consummation of the Transaction, would reasonably be
likely to restrict Buyer or any of its affiliates to conduct business in any
geographic area or accept or service the business of any Person.
Section 3.6 Financial Statements and Books and Records. Buyer has been
------------------------------------------
furnished with each of the following:
(a) The audited consolidated balance sheet of the Company and its
subsidiaries at December 31, 1999 and for the period from March 22, 2000 through
June 30, 2000 and the related audited statements of earnings and stockholders
equity and cash flows for the fiscal periods then ended, accompanied by the
notes thereto and the report thereon of Deloitte & Touche LLP and
PricewaterhouseCoopers LLP, respectively (collectively, the "Audited
Financials").
6
(b) The unaudited balance sheet of the Company and its subsidiaries at
March 31, 2001 and related unaudited consolidated statements of earnings and
cash flows for the nine-month period then ended (the "Third-Quarter Interim
Financials").
(c) The projected preliminary estimate of the unaudited balance sheet of
the Company and its subsidiaries at June 30, 2001 and the projected preliminary
estimate of the related unaudited consolidated statement of earnings and
stockholders equity and cash flows for the quarter ended June 30, 2001 (the
"Fourth-Quarter Preliminary Interim Financials") and, together with the
Third-Quarter Interim Financials and the Audited Financials, the "Company
Financial Statements").
(d) The Company Financial Statements were complied as to form in all
material respects with the published rules and regulations of the Securities and
Exchange Commission (the "SEC") with respect thereto, were prepared in
accordance with United States generally accepted accounting principles ("U.S.
GAAP") applied on a consistent basis during the periods involved (except (i) as
set forth on Section 3.6 of the Stockholder Disclosure Schedule, (ii) with
respect to the Third-Quarter Interim Financials as permitted by Form 10-Q of the
SEC, and (iii) with respect to the Fourth Quarter Preliminary Interim
Financials). Each of the consolidated balance sheets of the Company included in
the Third-Quarter Interim Financials and the Audited Financials fairly present
the consolidated financial position of the Company and its subsidiaries as of
the dates thereof and reflect all claims against and all debts and liabilities
of the Company and its subsidiaries, fixed or contingent, as at the date
thereof, required to be shown under U.S. GAAP, and the related statements of
earnings, stockholders equity and cash flows fairly present the consolidated
results of operations, stockholders' equity and cash flows for the respective
periods then ended. Each subsidiary of the Company is treated as a consolidated
subsidiary of the Company in the Company Financial Statements for all periods
covered thereby.
(e) All accounts, books and ledgers material to the business of the Company
and its subsidiaries taken as a whole have been properly and accurately kept and
completed in accordance with sound business practices in all material respects,
and there are no material inaccuracies or discrepancies of any kind contained or
reflected therein. Except as set forth on Section 3.6(e) of the Stockholder
Disclosure Schedule, neither the Company nor any of its subsidiaries has any of
its records, systems, controls, data or information recorded, stored,
maintained, operated or otherwise wholly or partly dependent on or held by any
means (including any electronic, mechanical or photographic process, whether
computerized or not) which (including all means of access thereto and therefrom)
are not under the exclusive ownership and direct control of the Company or such
subsidiary.
Section 3.7 Absence of Certain Changes or Events. Since December 31, 2000,
the Company and each of its subsidiaries have conducted their business only in
the ordinary course of business consistent with past practice, and except as
otherwise expressly permitted by this Agreement, there has not been (i) any
change that has had or that would reasonably be expected to have a Company
Material Adverse Effect, (ii) any declaration, setting aside or payment of any
dividend or other distribution (whether in cash, stock or property) with respect
to any of the Company's outstanding capital stock, (iii) any split, combination
or reclassification of any of its outstanding capital stock or any issuance or
the authorization of any other securities in
7
respect of, in lieu of or in substitution for shares of its outstanding capital
stock, (iv) any entry by the Company or any of its subsidiaries into any
employment, severance, change-of-control, termination or similar agreement with
any officer, director or other employee, or any increase in the compensation or
severance or termination benefits payable to any director, officer or other
employee of the Company or any of its subsidiaries (except in the ordinary
course of business consistent with past practice, or as was required under
employment agreements in effect as of June 30, 2000), (v) any change in the
method of accounting or policy used by the Company or any of its subsidiaries
not disclosed in the Company Financial Statements, (vi) permitted any of its
assets to be subjected to any Lien, (vii) sold, transferred or otherwise
disposed of any of its assets except in the ordinary course of business; (viii)
made any capital expenditure or commitment therefor which individually or in the
aggregate exceeded $50,000, other than as set forth on Section 3.7 of the
Stockholder Disclosure Schedule, (ix) made any bonus or profit sharing
distribution to any individual in excess of $25,000, other than as set forth on
Section 3.7 of the Stockholder Disclosure Schedule, (x) increased or prepaid its
indebtedness for borrowed money, except current borrowings under credit lines
listed on Section 3.15 of the Stockholder Disclosure Schedule or made any loan
to any Person other than to any employee for normal travel and expense advances,
(xi) written down the value of any work-in-process, or written off as
uncollectible any notes or accounts receivable, except write-downs and
write-offs in the ordinary course of business, none of which individually or in
the aggregate, is material to the Company and its subsidiaries taken as a whole,
(xii) canceled or waived any claims or rights of material value, (xiii) amended
or terminated any agreement which is material to its business, (xiv) renewed,
extended or modified any real property lease or except in the ordinary course of
business, any lease of personal property, (xv) adopted, amended or terminated
any Company Employee Benefit Plan (as defined in Section 3.10), or (xvi) agreed,
whether or not in writing, to do any of the actions set forth in any of the
above clauses.
Section 3.8 Litigation. Other than as set forth on Section 3.8 of the
Stockholder Disclosure Schedule, (i) there are no claims, suits, actions or
proceedings, pending or, to the knowledge of Stockholder, threatened, nor to the
knowledge of Stockholder are there any investigations or reviews pending or
threatened, against or affecting the Company or any of its subsidiaries, or any
of their respective assets or properties; and no acts, facts, circumstances,
events or conditions occurred or exist which are a basis for any such claim,
suit or action, proceeding, investigation or review, (ii) there are no claims,
suits, actions or proceedings, pending or, to the knowledge of Stockholder,
threatened against Stockholder, the Company or any of its subsidiaries relating
to the Transaction or which could reasonably be expected to result in the
issuance of and orders restraining, enjoining or otherwise prohibiting or making
illegal the consummation of the Transaction, and (iii) there are no judgments,
decrees, injunctions, rules or orders of any court, arbitrator or Governmental
Authority applicable to the Company or any of its subsidiaries or any of their
respective assets or properties.
Section 3.9 Tax Matters.
-----------
(a) Except as set forth on Section 3.9 of the Stockholder Disclosure Schedule:
(i) The Company and its subsidiaries and
any combined, consolidated, unitary or affiliated group of which the Company and
its subsidiaries are or have been a member prior to the Closing Date: (x) have
paid all Taxes required to be paid on or prior to the Closing
8
Date (including, without limitation, payments of estimated Taxes) for which the
Company or any of its subsidiaries could be held liable; and (y) has accurately
and timely filed (or timely filed an extension for), all federal, state, local,
and foreign Tax Returns, reports, and forms with respect to such Taxes required
to be filed by them on or before the Closing Date.
(ii) There is no material dispute or claim,
or any action, suit, proceeding, audit or investigation concerning any liability
for Taxes of the Company and its subsidiaries either (x) claimed or raised by
any Governmental Authority in writing or (y) as to which Stockholder has
knowledge based upon personal contact with any agent of such Governmental
Authority. There are no deficiencies for any Taxes and no deficiency has been
asserted or assessed in writing for which Stockholder, the Company or any of its
subsidiaries could be liable, which remains unpaid or unsettled.
(iii) Neither Stockholder, the Company nor
any of its subsidiaries has waived any statute of limitations in respect of
income Taxes or agreed to any extension of time with respect to an income Tax
assessment or deficiency.
(iv) (A) Neither the Company nor any of its
subsidiaries has filed a consent under Section 341(f) of the Internal Revenue
Code of 1986, as amended (the "Code") concerning collapsible corporations; (B)
the Company and its subsidiaries have not made any payments, are not obligated
to make any payments, and are not a party to any agreement that under certain
circumstances could obligate it or them to make any payments that will not be
deductible under Code Section 280G or 162(m), and (C) the Company and its
subsidiaries will not have any liability on or after the Closing Date pursuant
to any tax allocation or sharing agreement.
(b) Section 3.9 of the Stockholder Disclosure Schedule sets
forth all federal, state, local and foreign income Tax Returns filed with
respect to the Company and its subsidiaries for taxable periods ended on or
after December 31, 1999, indicates those income Tax Returns filed with respect
to the Company or any of its subsidiaries that have been audited, and indicates
those income Tax Returns filed with respect to the Company or any of its
subsidiaries that currently are the subject of audit. Stockholder has delivered
or made available to Buyer correct and complete copies of all federal income Tax
Returns, examination reports, and statements of deficiencies assessed against,
or agreed to by the Company and its subsidiaries since December 31, 1999.
(c) The unpaid Taxes of the Company and its subsidiaries (A)
did not as of March 31, 2001 exceed the reserve for Tax liability (other than
any reserve for deferred taxes established to reflect timing differences between
book and tax income) set forth on the face of the Third-Quarter Interim
Financials (rather than in any notes thereto) and (B) will not exceed that
reserve as adjusted for operations and transactions through the Closing Date in
accordance with the past custom and practices of the Company and its
subsidiaries in filing their Tax Returns.
(d) "Taxes" means all United States federal, state or local
taxes and foreign taxes, including, but not limited to, those which are payable
or remittable by the Company and its subsidiaries or levied on its property,
income or assets, and all withholding and employment
9
taxes, and all additions to tax, penalties and interest relating thereto. "Tax
Return" means any return or report filed with a Governmental Authority with
respect to Taxes.
Section 3.10 Employee Matters; ERISA.
-----------------------
(a) Section 3.10(a) of the Stockholder Disclosure Schedule lists all
employee benefit plans (as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")) and all bonus, incentive,
deferred compensation, retiree medical or life insurance, supplemental
retirement, severance or other benefit plans, programs or arrangements, and all
termination, severance or other contracts or agreements, whether formal or
informal, whether or not set forth in writing, whether covering one Person or
more than one Person, and whether or not subject to any of the provisions of
ERISA, which are maintained, contributed to or sponsored by Stockholder, the
Company or any of its subsidiaries for the benefit of any employee or which
otherwise cover any employee or former employee of the Company or any of its
subsidiaries (each item so listed on Section 3.10(a) of the Stockholder
Disclosure Schedule being referred to herein individually, as a "Company
Employee Benefit Plan" and collectively, as the "Company Employee Benefit
Plans"). Stockholder has delivered to Buyer a complete and accurate copy (where
applicable) of (i) each written Company Employee Benefit Plan and descriptions
of any unwritten Company Employee Benefit Plan (including all amendments thereto
whether or not such amendments are currently effective), (ii) each summary plan
description and summary of material modifications relating to a Company Employee
Benefit Plan, (iii) each trust agreement or other funding arrangement with
respect to each Company Employee Benefit Plan, including insurance contracts,
(iv) the most recently filed Internal Revenue Service Form 5500 relating to each
Company Employee Benefit Plan (if any), (v) the most recently received Internal
Revenue Service determination letter for each Company Employee Benefit Plan, if
applicable, and (vi) the most recently prepared actuarial reports and the three
most recently prepared financial statements, if applicable, in connection with
each Company Employee Benefit Plan. Except as set forth on Section 3.10(a) of
the Stockholder Disclosure Schedule, neither Stockholder nor the Company nor any
of its subsidiaries has made any express or implied commitment, whether legally
enforceable or not, (i) to create or cause to exist any other employee benefit
plan, program or arrangement or (ii) to modify, change or terminate any Company
Employee Benefit Plan. (b) Except as set forth on Section 3.10(b) of the
Stockholder Disclosure Schedule, none of the Company Employee Benefit Plans, or
any employment agreement or other contract to which the Company is a party or
bound, provides for the payment of or obligates the Company or any of its
subsidiaries to pay separation, severance, termination or similar-type benefits
to any Person or obligates the Company or any of its subsidiaries to pay
separation, severance, termination or similar-type benefits solely as a result
of any transaction contemplated by this Agreement or as a result of a "change in
control," within the meaning of such term under Section 280G of the Code.
(c) Neither the Company nor any subsidiary of the Company nor any ERISA
Affiliate (as herein defined) has maintained, contributed to or participated in
a multi-employer plan (within the meaning of Section 3(37) or 4001(a)(3) of
ERISA or a multiple employer plan subject to Sections 4063 and 4064 of ERISA)
nor has any obligations or liabilities, including withdrawal or successor
liabilities, regarding any such plan. As used herein, the term "ERISA
10
Affiliate" means any Person that, together with the Company or any of its
subsidiaries, is considered a "single employer" pursuant to Section 4001(b) of
ERISA.
(d) Section 3.10(d) of the Stockholder Disclosure Schedule sets forth a
complete and accurate list of each Company Employee Benefit Plan which provides
or promises retiree medical, disability or life insurance benefits to any
current or former employee, officer or director of the Company or any of its
subsidiaries. Except as set forth on Section 3.10(d) of the Stockholder
Disclosure Schedule, the Company has expressly reserved the right, in all
Company Employee Benefit Plan documents relating to welfare benefits provided to
employees, former employees, officers, directors and other participants and
beneficiaries, to amend, modify or terminate at any time the Company Employee
Benefit Plans which provide for welfare benefits, and Stockholder is not aware
of any fact, event or condition that could reasonably be expected to restrict or
impair such right.
(e) Each Company Employee Benefit Plan is now and has been operated in all
respects in accordance with the requirements of all applicable law, including,
without limitation, ERISA and the Code, and the regulations and authorities
published thereunder. The Company and each of its subsidiaries has performed all
obligations required to be performed by it under, is not in any respect in
default under or in violation of, and there exists no default or violation by
any party to, any Company Employee Benefit Plan. No legal action, suit, audit,
investigation or claim is pending or, to the knowledge of Stockholder,
threatened, with respect to any Company Employee Benefit Plan (other than claims
for benefits in the ordinary course) and, except as set forth on Section 3.10(e)
of the Stockholder Disclosure Schedule, no fact, event or condition exists that
would be reasonably likely to provide a legal basis for any such action, suit,
audit, investigation or claim. All reports, disclosures, notices and filings
with respect to such Company Employee Benefit Plans required to be made to
employees, participants, beneficiaries, alternate payees and government agencies
have been timely made or an extension has been timely obtained.
(f) Except as set forth on Section 3.10(f) of the Stockholder Disclosure
Schedule, each Company Employee Benefit Plan which is intended to be qualified
under Section 401(a) of the Code has received a favorable determination letter
from the Internal Revenue Service that it is so qualified and each trust
established in connection with any Company Employee Benefit Plan which is
intended to be exempt from federal income taxation under Section 501(a) of the
Code has received a determination letter from the Internal Revenue Service that
it is so exempt, and no fact or event has occurred or condition exists since the
date of such determination letter from the Internal Revenue Service which would
be reasonably likely to adversely affect the qualified status of any such
Company Employee Benefit Plan or the exempt status of any such trust.
(g) Except as set forth on Section 3.10(g) of the Stockholder Disclosure
Schedule, there has been no prohibited transaction (within the meaning of
Section 406 of ERISA or Section 4975 of the Code) with respect to any Company
Employee Benefit Plan subject to ERISA. The Company has not incurred any
liability for any excise tax arising under Sections 4971, 4972, 4975, 4976,
4977, 4978, 4978B, 4979, 4980 or 4980B of the Code or any civil penalty arising
under Sections 502(i) or 502(l) of ERISA, and no fact, event or condition exists
which could give rise to any such liability. Neither the Company nor
11
any of its subsidiaries nor any ERISA Affiliate has incurred any liability
under, arising out of or by operation of Title IV of ERISA (other than liability
for premiums to the Pension Benefit Guaranty Corporation ("PBGC"), or
contributions to a Company Employee Benefit Plan, in either case arising in the
ordinary course), including, without limitation, any liability in connection
with the termination of any defined benefit plan defined under Section 3(35) of
ERISA (a "Title IV Plan"); and no fact, event or condition exists which could
give rise to any such liability. No Title IV Plan maintained by the Company or
any of its subsidiaries or any ERISA Affiliate had an accumulated funding
deficiency (within the meaning of Section 302 of ERISA or Section 412 of the
Code), whether or not waived, as of the most recently ended year of such Company
Employee Benefit Plan. None of the assets of the Company or any of its
subsidiaries or any ERISA Affiliate is the subject of any lien arising under
Section 302(f) of ERISA or Section 412(n) of the Code; neither the Company nor
any of its subsidiaries nor any ERISA Affiliate has been required to post any
security under Section 307 of ERISA or Section 401(a) (29) of the Code; and no
fact or event exists which could give rise to any such lien or requirement to
post any such security.
(h) All contributions, premiums or payments required to be made, paid or
accrued with respect to any Company Employee Benefit Plan have been made, paid
or accrued on or before their due dates, including extensions thereof. All such
contributions have been fully deducted for income tax purposes, no such
deduction has been challenged or disallowed by any government entity and no fact
or event exists which could give rise to any such challenge or disallowance.
Section 3.11 Environmental Protection. Except as set forth in
-------------------------
Section 3.11 of the Stockholder Disclosure
Schedule:
(a) Compliance. The Company and each of its subsidiaries are in compliance
with all applicable Environmental Laws (as defined in Section 3.11(d)(ii)), and
the Company and each of its subsidiaries have operated their businesses in
compliance with all Environmental Laws. Neither the Company nor any of its
subsidiaries has received any written communication from any Governmental
Authority that alleges that the Company or any of its subsidiaries is not in
compliance with applicable Environmental Laws. None of the Company or any of its
subsidiaries has any liability under any Environmental Law (including without
limitation any obligation to remediate any Environmental Condition (as defined
in Section 3.11(d)(v)). There exists no Environmental Condition with respect to
the Owned Real Property (as defined in Section 3.17)(a) or the business
currently or previously operated by the Company and its subsidiaries. None of
the Company, any of its subsidiaries or any of the respective predecessors has
generated, manufactured, refined, transported, treated, stored, handled,
disposed, released, spilled, transferred, produced or processed any Hazardous
Materials at the Owned Real Property, except in compliance with all applicable
Environmental Laws and there has not been a release or threat of release of any
Hazardous Material at or in the vicinity of the Owned Real Property. No
Hazardous Material are used or stored at any of the Owned Real Property. No
Hazardous Material has migrated from other properties upon, about or beneath the
Owned Real Property. None of the Company, any of its subsidiaries or any of
their respective predecessors or Stockholder has received (i) any request for
information, notice, demand letter or notice of a legal proceeding, or is
subject to a pending or ongoing investigation, with respect to any Environmental
Condition relating to any of the Owned Real Property or any facilities or
operations thereon or (ii) any notice under the citizen suit provision of any
Environmental Law
12
in connection with any of the Owned Real Property or any facilities or
operations thereon. Stockholder has delivered to Buyer all documents and records
in possession or control of the Company or any of its affiliates concerning
Environmental Conditions at any of the Owned Real Property or any facilities or
operations thereon, whether generated by the Company or others, including
without limitation environmental audits, environmental risk assessments or site
assessments of any of the Owned Real Property and/or any adjacent property or
any property in the vicinity of any of the Owned Real Property owned or operated
by the Company, any of its subsidiaries or other Person, documentation regarding
off-site disposal of Hazardous Materials, spill control plans and environmental
agency reports and correspondence.
(b) Environmental Claims; Judgments. There is no Environmental Claim (as
defined in Section 3.11(d)(i)) pending (i) against the Company or any of its
subsidiaries, or (ii) against any real or personal property or operations that
the Company or any of its subsidiaries now or previously owned, leased, managed
or operated, in whole or in part. Neither the Company nor any of its
subsidiaries (i) has entered into or agreed to any consent decree or order, or
(ii) is subject to any judgment, decree or judicial order, in each case,
relating to compliance with any Environmental Law or to the investigation or
cleanup of Hazardous Materials (as defined in Section 3.11(d)(iii)) under any
Environmental Law.
(c) CERCLA. Neither the Company nor any of its subsidiaries has received
any written request for information, or been notified (or otherwise has
knowledge) that the Company or any of its subsidiaries is a "potentially
responsible party" under the Federal Comprehensive Environmental Response,
Compensation and Liability Act, as amended ("CERCLA"), or any similar state law.
The Owned Real Property is not listed on the National Priorities List under
CERCLA or on any similar state list of sites, as a property requiring
investigation or remediation, and none of the Company or any of its subsidiaries
or Stockholder has received written notice that the Owned Real Property is
proposed to be so listed.
(d) As used in this Agreement:
(i) "Environmental Claim" means any and all administrative, regulatory
or judicial actions, suits, demands, demand letters, directives, claims,
liens, investigations, proceedings or notices of noncompliance or violation
by any Person or entity (including any Governmental Authority) alleging
potential liability (including, without limitation, potential
responsibility for or liability for enforcement costs, investigatory costs,
cleanup costs, governmental response costs, removal costs, remedial costs,
natural resources damages, property damages, personal injuries, fines or
penalties) arising out of, based on or resulting from (A) the presence, or
Release (as defined below) or threatened Release into the environment, of
any Hazardous Materials at any location, whether or not owned, operated,
leased or managed by the Company or any of its subsidiaries; or (B)
circumstances forming the basis of any violation, or alleged violation, of
any Environmental Law; or (C) any and all claims by any third party seeking
damages, contribution, indemnification, cost recovery, compensation or
injunctive relief resulting from the presence or Release of any Hazardous
Materials.
(ii) "Environmental Laws" means all federal, state, local laws, rules,
ordinances and regulations, relating to pollution, the environment
(including, without
13
limitation, ambient air, surface water, groundwater, land surface or subsurface
strata) or protection of natural resources or human health as it relates to the
environment including, without limitation, laws and regulations relating to
Releases or threatened Releases of Hazardous Materials, or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Materials.
(iii)"Hazardous Materials" means (A) any petroleum or petroleum
products, radioactive materials, asbestos in any form that is or could
become friable, urea formaldehyde foam insulation, coal tar residue, and
transformers or other equipment that contain dielectric fluid containing
polychlorinated biphenyls in regulated concentrations; and (B) any
chemicals, materials or substances which are now defined as or included in
the definition of "hazardous substances," "hazardous wastes," "hazardous
materials," "extremely hazardous wastes," "restricted hazardous wastes,"
"toxic substances," "toxic pollutants," "hazardous constituents" or words
of similar import, under any Environmental Law; and (C) any other chemical,
material, substance or waste, exposure to which is now prohibited, limited
or regulated under any Environmental Law in a jurisdiction in which the
Company or any of its subsidiaries operates or has stored, treated or
disposed of Hazardous Materials.
(iv) "Release" means any release, spill, emission, leaking, injection,
deposit, disposal, discharge, dispersal, leaching or migration into the
atmosphere, soil, surface water, groundwater or property.
(v) "Environmental Condition" means a condition with respect to the
environment, which is reasonably likely to result in Losses (as defined in
Section 10.2) to the Company or any of its subsidiaries.
Section 3.12 Insurance. Section 3.12 of the Stockholder Disclosure Schedule
sets forth a description as of the date hereof, of all insurance policies
currently maintained by the Company and/or any of its subsidiaries. The Company
and each of its subsidiaries is, and has been continuously since December 31,
2000, insured in such amounts and against such risks and losses as are customary
for companies conducting the respective businesses conducted by the Company and
its subsidiaries during such time period. All material insurance policies of the
Company and its subsidiaries are valid and enforceable policies in all material
respects. None of such policies shall lapse or terminate by reason of the
transactions contemplated by this Agreement and all such policies shall continue
in effect after the Closing Date for the benefit of the Company and its
subsidiaries. Neither the Company nor any of its subsidiaries has received any
notice of cancellation of any such policy. Neither the Company nor any of its
subsidiaries has received written notice from any of their insurance carriers
that any premiums will be materially increased in the future or that any
insurance coverage listed on Section 3.12 of the Stockholder Disclosure Schedule
will not be available in the future on substantially the same terms now in
effect.
Section 3.13 Takeover Provisions. The Company has taken all necessary
actions so that this Agreement and the transactions contemplated hereby are
exempt from (i) the requirements of any "moratorium," "control share," "fair
price" or other anti-takeover laws and regulations (collectively, "Takeover
Laws") of the State of Delaware, and (ii) the anti-takeover provisions contained
in the articles of incorporation of the Company.
14
Section 3.14 Intellectual Property. Section 3.14 of the Stockholder
Disclosure Schedule sets forth all Intellectual Property (as defined below) that
is material to the conduct of the business of the Company and its subsidiaries,
taken as a whole. Except as set forth on Section 3.14 of the Stockholder
Disclosure Schedule: (i) the Company and each of its subsidiaries owns, or is
licensed to use (in each case, free and clear of any Liens), all Intellectual
Property used in or necessary for the conduct of its business as currently
conducted; (ii) to the knowledge of Stockholder, the use of any Intellectual
Property by the Company and its subsidiaries does not infringe on or otherwise
violate the rights of any Person; (iii) the use of the Intellectual Property is
in accordance with the applicable licenses pursuant to which the Company or any
subsidiary acquired the right to use any Intellectual Property; and (iv) to the
knowledge of Stockholder, no Person is challenging, infringing on or otherwise
violating any right of the Company or any of its subsidiaries with respect to
any Intellectual Property owned by and/or licensed to the Company or its
subsidiaries. There are no pending claims, orders or proceedings with respect to
any Intellectual Property used by the Company or its subsidiaries and, to the
knowledge of Stockholder, no Intellectual Property owned and/or licensed by the
Company or its subsidiaries is being used or enforced in a manner that would
reasonably be expected to result in the abandonment, cancellation or
unenforceability of such Intellectual Property. For purposes of this Agreement,
"Intellectual Property" shall mean trademarks, service marks, brand names, trade
names, logos, domain names, certification marks, trade dress and other
indications of origin, the goodwill associated with the foregoing and
registrations in any jurisdiction of, and applications in any jurisdiction to
register, the foregoing, including any extension, modification or renewal of any
such registration or application; mask works and mask work registrations and
applications therefor, industrial designs and applications and registrations
therefor, inventions, discoveries and ideas, whether patentable or not, in any
jurisdiction; patents, applications for patents (including, without limitation,
divisions, continuations, continuations in part and renewal applications), and
any renewals, extensions or reissues thereof, in any jurisdiction; nonpublic
information, trade secrets, know-how and confidential information and rights in
any jurisdiction to limit the use or disclosure thereof by any Person; technical
data; customer lists; writings and other works, whether copyrightable or not, in
any jurisdiction; and registrations or applications for registration of
copyrights in any jurisdiction, and any renewals or extensions thereof; computer
software, including all source codes, object codes, firmware, development tools,
files, records and data, all media on which any of the foregoing is recorded and
all documentation relating to the foregoing; and any similar intellectual
property or proprietary rights.
Section 3.15 Contracts. Section 3.15 of the Stockholder Disclosure Schedule
contains an accurate and complete list of the following agreements, contracts or
commitments (collectively, "Contracts") to which the Company or any of its
subsidiaries is a party or to which any of the assets or properties of the
Company or any of its subsidiaries is bound: (i) any personal property lease
with a fixed annual rental of $50,000 or more; (ii) any Contract relating to
capital expenditures which involve payments of $50,000 or more in any single
transaction or series of related transactions; (iii) any Contract relating to
the making of a loan or advance to or investment in, any other Person; (iv) any
Contract evidencing or relating in any way to indebtedness for money borrowed or
to be borrowed, whether directly or indirectly, by way of loan, purchase money
obligation, guarantee (other than the endorsement of negotiable instruments for
collection in the ordinary course of business), conditional sale, purchase or
otherwise; (v) any management service, employment, consulting or similar type of
Contract which is not cancelable by the
15
Company or any of its subsidiaries party thereto without penalty or other
financial obligation within 30 days; (vi) any Contract limiting the freedom of
the Company or any of its subsidiaries to engage in any line of business or to
compete with any other Person, including agreements limiting the ability of the
Company or any of its subsidiaries or any affiliate thereof (including a
Contract which after Closing would apply to Buyer or any of its subsidiaries) to
service competitive accounts during or after the term thereof; (vii) any
collective bargaining or union agreement; (viii) any Contract with any of its
officers or directors not covered by subsection (v) above (including
indemnification agreements); (ix) any secrecy or confidentiality agreement
(other than standard confidentiality agreements in computer software license
agreements or agreements with clients entered into in the ordinary course of
business); (x) any Contract with respect to any Intellectual Property, other
than "shrink-wrap" and similar end-user licenses; (xi) any agreement with a
client required to be listed on Section 3.18 of the Stockholder Disclosure
Schedule; (xii) any Contract with a media buying service; provided, however,
commitments to purchase media in the ordinary course of business do not have to
be set forth on Section 3.15 of the Stockholder Disclosure Schedule; (xiii) any
joint venture agreement involving a sharing of profits not covered by clauses
(i) through (xii) above; and (xiv) any Contract (not covered by another
subsection of this Section 3.15) which involves $75,000 or more over the
unexpired term thereof and is not cancelable by the Company or any of its
subsidiaries party thereto without penalty or other financial obligation within
30 days. Notwithstanding the foregoing, (x) commitments to media and production
expenses which are fully reimbursable from clients, and (y) estimates or
purchase orders given in the ordinary course of business relating to the
execution of projects, do not have to be set forth in Section 3.15 of the
Stockholder Disclosure Schedule. Each Contract to which the Company or any of
its subsidiaries is a party, including, but not limited to those set forth in
Section 3.15 of the Stockholder Disclosure Schedule, is in full force and
effect, and there exists no default or event of default by the Company or any of
its subsidiaries or, to the knowledge of Stockholder, by any other Person, or
occurrence, condition, or act (including the Transaction) which, with the giving
of notice, the lapse of time or the happening of any other event or condition,
would become a default or event of default thereunder by the Company or any of
its subsidiaries, and there are no outstanding claims of breach or
indemnification or notice of default or termination of any such Contract.
Section 3.16 Property and Assets. Except as disclosed in Section 3.16 of
the Stockholder Disclosure Schedule, the Company and its subsidiaries have good
and marketable title to, or have valid leasehold interests in or valid rights
under contract to use, all property and assets used in the conduct of the
Company and its subsidiaries, free and clear of all Liens other than (i) any
statutory Liens arising in the ordinary course of business by operation of law
with respect to a liability that is not yet due or delinquent, (ii) Liens for
Taxes not delinquent or being contested in good faith, (iii) deposits or pledges
for goods or services made in the ordinary course of business and (iv) any minor
imperfection of title or similar Lien which in the aggregate with other such
Liens does not materially impair the value of the property or asset subject to
such Lien or the use of such property or asset in the conduct of the business of
the Company and its subsidiaries, as the case may be (collectively, "Permitted
Liens"). To the knowledge of Stockholder, the facilities, structures, and
equipment of the Company and its subsidiaries are structurally sound with no
known defects and are in good operating condition and repair and are adequate
for the uses to which they are being put, subject to ordinary wear and tear.
Section 3.17 Real Property.
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16
(a) Owned Real Property. Section 3.17 of the Stockholder Disclosure
Schedule lists all real property owned by the Company or any of its subsidiaries
or which the Company or any of its subsidiaries has an option to purchase
("Owned Real Property"). With respect to each such parcel of Owned Real
Property, and except as set forth in Section 3.17 of the Stockholder Disclosure
Schedule:
(i) the Company or such subsidiary has good and marketable fee simple
title to the Owned Real Property, free and clear of all Liens and
mechanics' and materialmen's liens, except for Liens set forth in Section
3.16 of the Stockholder Disclosure Schedule. The Company or such subsidiary
is and always has been during its ownership of such Owned Real Property in
possession of the Owned Real Property and has adequate rights of ingress
and egress with respect to, and may lawfully use and occupy, the Owned Real
Property and all buildings, structures, facilities, fixtures and other
improvements thereto (the "Improvements") for their existing uses. None of
the Owned Real Property or the Improvements, or the use thereof,
contravenes or violates any building, zoning, administrative, occupational
safety and health or other applicable Law or Order (whether or not
permitted on the basis of prior non-conforming use, waiver or variance);
(ii) there are no pending or, to the knowledge of Stockholder,
threatened condemnation or other proceedings, lawsuits, arbitrations,
mediations, or administrative actions relating to the Owned Real Property
or entities owning same;
(iii) the Company has delivered to Purchaser prior to the execution of
this Agreement true and complete copies of all mortgages, deeds of trust,
title insurance policies and similar documents, and all amendments thereof,
with respect to the Owned Real Property;
(iv) the Owned Real Property and the Improvements are in good
operating condition and in a state of good maintenance and repair, ordinary
wear and tear excepted and, in the reasonable good faith judgment of
Stockholder, are adequate and suitable for the purposes for which they are
properly being used;
(v) no entity has an option to purchase the Owned Real Property or an
interest therein, except the Company or a subsidiary of the Company;
(vi) the Improvements located on each parcel of Owned Real Property
have received all approvals of Governmental Authorities (including Permits)
required in connection with the ownership and operation thereof, and each
facility has been operated and maintained in accordance with applicable
laws, rules and regulations;
(vii) the Company and its subsidiaries maintain adequate casualty and
liability insurance with respect to its interest in the Owned Real Property
and leases;
(viii) there are no covenants, easements and restrictions affecting
the Owned Real Property;
17
(ix) there are no existing improvement projects, alterations or other
work being performed to the Owned Real Property; and
(x) none of the Owned Real Property exists in a flood plain.
(b) Leased Real Property Section 3.17 of the Stockholder Disclosure
Schedule contains an accurate and complete list of each "Real Property Lease,"
defined as any real property lease, sublease, license or other occupancy
agreement, including without limitation, any modification, amendment or
supplement thereto and any other related document or agreement executed or
entered into by the Company or any of its subsidiaries (including, without
limitation, any of the foregoing which the Company or any of its subsidiaries
has subleased or assigned to another Person and as to which the Company or any
of its subsidiaries remains liable) which is currently in effect. With respect
to each Real Property Lease set forth in Section 3.17 of the Stockholder
Disclosure Schedule (or required to be set forth in Section 3.17 of the
Stockholder Disclosure Schedule): (i) it is valid, binding and in full force and
effect; (ii) all rents and additional rents and other sums, expenses and charges
due thereunder to date have been paid; (iii) the lessee has been in peaceable
possession since the commencement of the original term thereof; (iv) no waiver,
indulgence or postponement of the lessee's obligations thereunder has been
granted by the lessor; (v) there exists no default or event of default
thereunder by the Company or any of its subsidiaries or to the knowledge of
Stockholder, by any other party thereto; (vi) there exists no occurrence,
condition or act which, with the giving of notice, the lapse of time or the
happening of any further event or condition, would become a default or event of
default by the Company or any of its subsidiaries thereunder; and (vii) there
are no outstanding claims of breach or indemnification or notice of default or
termination thereunder. The Company or a subsidiary of the Company, as the case
may be, holds the leasehold estate on each Real Property Lease, free and clear
of all Liens, except as set forth in Section 3.17 of the Stockholder Disclosure
Schedule and the liens of mortgagees of the real property in which such
leasehold estate is located. The real property leased by the Company and its
subsidiaries is in a state of maintenance and repair in all material respects
adequate and suitable for the purposes for which it is presently being used, and
there are no material repair or restoration works likely to be required in
connection with any of the leased real properties. The Company or a subsidiary
of the Company is in physical possession and actual and exclusive occupation of
the whole of each of its leased properties, other than those which are subleased
or assigned to another Person pursuant to an agreement set forth in Section 3.17
of the Stockholder Disclosure Schedule. Neither the Company nor any of its
subsidiaries owes any brokerage commission with respect to any Real Property
Lease.
Section 3.18 Client Relations. Section 3.18 of the Stockholder Disclosure
Schedule sets forth for the Company and its subsidiaries taken as a whole (a)
the 20 largest clients (measured by net revenues), and the revenues from each
such client and from all clients (in the aggregate) for the fiscal years ended
December 31, 1999 and December 31, 2000, respectively, as applicable, and (b)
the clients projected to be the 20 largest clients (measured by net revenues)
based on the Company's current profit plan for the twelve months ending December
31, 2001, together with the estimated revenues from each such client and all
clients (in the aggregate) for such period. Stockholder does not warrant that
the estimated revenues set forth in Section 3.18 of the Stockholder Disclosure
Schedule will prove to be accurate; provided, however, Stockholder does
represent that they were made in good faith and on a reasonable basis. Except as
set forth in Section 3.18 of the Stockholder Disclosure Schedule, no client of
the Company and/or any of its
18
subsidiaries has advised the Company or Stockholder in writing that it is (x)
terminating or considering terminating the handling of its business by the
Company or any of its subsidiaries as a whole or in respect of any particular
product, project or service or (y) planning to reduce its future spending with
the Company in any material manner; and, to the knowledge of Stockholder
(without making any special inquiry of any clients), no client has orally
advised the Company, any subsidiary of the Company or Stockholder of any of the
foregoing events.
Section 3.19 Accounts Receivable; Work-in-Process; Accounts Payable. Except
as set forth in Section 3.19 of the Stockholder Disclosure Schedule, the amount
of all work-in-process, accounts receivable, unbilled invoices (including
without limitation unbilled invoices for services and out-of-pocket expenses)
and other debts due or recorded in the records and books of account of the
Company and its subsidiaries as being due to the Company or any of its
subsidiaries and reflected on the Third-Quarter Interim Financials represent or
will represent valid obligations arising from sales actually made or services
actually performed in the ordinary course of business and will be good and
collectible in full (less the amount of any provision, reserve or similar
adjustment therefor reflected on the Third-Quarter Interim Financials) in the
ordinary course of business, and none of the accounts receivable or other debts
(or accounts receivable arising from any such work-in-process or unbilled
invoices) is or will be subject to any counterclaim or set-off except to the
extent of any such provision, reserve or adjustment. There has been no change
since March 31, 2001 in the amount or aging of the work-in-process, accounts
receivable, unbilled invoices, or other debts due to the Company or any of its
subsidiaries, or the reserves with respect thereto, or accounts payable of the
Company or any of its subsidiaries, which would have a Company Material Adverse
Effect.
Section 3.20 Employment Relations. Except as set forth on Section 3.20 of
the Stockholder Disclosure Schedule, (a) neither the Company nor any of its
subsidiaries is engaged in any unfair labor practice; (b) no unfair labor
practice complaint against the Company or any of its subsidiaries is pending
before any Governmental Authority; (c) there is no organized labor strike,
dispute, slowdown or stoppage actually pending or, to the knowledge of
Stockholder, threatened against or involving the Company or any of its
subsidiaries; (d) there are no labor unions representing or, to the knowledge of
Stockholder, attempting to represent the employees of the Company or any of its
subsidiaries; (e) no claim or grievance nor any arbitration proceeding arising
out of or under any collective bargaining agreement is pending, and to the
knowledge of Stockholder, no such claim or grievance has been threatened; (f) no
collective bargaining agreement is currently being negotiated by the Company or
any of its subsidiaries; and (g) neither the Company nor any of its subsidiaries
has experienced any work stoppage or similar organized labor dispute during the
last three years. With respect to each Employee (as defined in 8 C.F.R.
274a.1(f)) of the Company or any of its subsidiaries for whom compliance with
the Immigration Act (the "Immigration Act") is required, the Company or such
subsidiary has on file a true, accurate and complete copy of (i) each Employee's
Form I-9 (Employment Eligibility Verification Form) and (ii) all other records,
documents or other papers prepared, procured and/or retained pursuant to the
Immigration Act. Neither the Company nor any of its subsidiaries has been cited,
fined, served with a Notice of Intent to Fine or with a Cease and Desist Order,
nor has any action or administrative proceeding been initiated or, to the
knowledge of Stockholder, threatened against the Company or any of its
subsidiaries by the Immigration and Naturalization Service by reason of any
actual or alleged failure to comply with the Immigration Act.
19
Section 3.21 Interests in Customers, Suppliers, Etc. Except as set forth on
Section 3.21 of the Stockholder Disclosure Schedule, to the knowledge of
Stockholder (without making any inquiry of any member of the Related Group, as
hereinafter defined), no officer, director, or employee of the Company or any of
its subsidiaries, and no parent, brother, sister, child or spouse of any such
officer, director or employee (collectively, the "Related Group"), and no entity
controlled by anyone in the Related Group:
(i) owns, directly or indirectly, any interest in (excepting for
ownership, directly or indirectly, of less than 1% of the issued and
outstanding shares of any class of securities of a publicly held and traded
company) or received or has any right to receive payments from, or is an
officer, director, employee or consultant of, any Person which is, or is
engaged in business as, a competitor, lessor, lessee, supplier,
distributor, sales agent, customer or client of the Company or any of its
subsidiaries;
(ii) owns, directly or indirectly, in whole or in part, any tangible
or intangible property (including, but not limited to, Intellectual
Property), that the Company or any of its subsidiaries uses in the conduct
of the business of the Company or any of its subsidiaries, other than
immaterial personal items owned and used by employees at their work
stations; or
(iii) has any cause of action or other claim whatsoever against, or
owes any amount to, the Company or any of its subsidiaries, except for
claims in the ordinary course of business such as for accrued vacation pay,
accrued benefits under employee benefit plans, and similar matters and
agreements existing on the date hereof.
Section 3.22 Bank Accounts and Powers of Attorney. Section 3.22 of the
Stockholder Disclosure Schedule sets forth an accurate and complete list showing
(a) the name of each bank in which the Company or any of its subsidiaries has an
account, credit line or safe deposit box and the names of all Persons authorized
to draw thereon or to have access thereto, and (b) the names of all Persons, if
any, holding powers of attorney from the Company or any of its subsidiaries and
a summary statement of the terms thereof.
Section 3.23 Compensation of Employees. Section 3.23 of the Stockholder
Disclosure Schedule is an accurate and complete list showing (a) the names and
positions of all employees and exclusive consultants who are currently being
compensated by the Company or any of its subsidiaries at an annualized rate of
$50,000 or more, together with a statement of the current annual salary, and the
annual salary, bonus and incentive compensation paid or payable with respect to
calendar years 2000 and 2001, and the material fringe benefits of such employees
and exclusive consultants not generally available to all employees of the
Company or such subsidiary; (b) all bonus and incentive compensation paid or
payable (whether by agreement, custom or understanding) to any employee of the
Company or any of its subsidiaries not listed in clause (a) above for services
rendered during calendar years 2000 and 2001; (c) the names of all retired
employees, if any, of the Company or any of its subsidiaries who are receiving
or entitled to receive any healthcare or life insurance benefits or any payments
from the Company or any of its subsidiaries not covered by any pension plan to
which the Company or any of its subsidiaries is a party, their ages and current
unfunded pension rate, if any; and (d) a description of the current severance
and vacation policies of the Company and its subsidiaries. Neither the Company
nor
20
any of its subsidiaries has, because of past practices or previous commitments
with respect to its employees, established any rights on the part of any of its
employees to additional compensation with respect to any period after the
Closing Date (other than wage increases in the ordinary course of business).
Section 3.24 Corporate Controls. Neither Stockholder, nor, to the knowledge
of Stockholder, any officer, authorized agent, employee or any other Person
acting on behalf of the Company or any of its subsidiaries, has, directly or
indirectly: used any corporate fund for unlawful contributions, gifts, or other
unlawful expenses relating to political activity; made any unlawful payment to
foreign or domestic government officials or employees or to foreign or domestic
political parties or campaigns from corporate funds; established or maintained
any unlawful or unrecorded fund of corporate monies or other assets; knowingly
made any false or fictitious entry on its books or records; participated in any
racketeering activity; or made any bribe, rebate, payoff, influence payment,
kickback, or other unlawful payment, or other payment of a similar or comparable
nature, to any Person, private or public, regardless of form, or entity, private
or public, regardless of form, whether in money, property, or services, to
obtain favorable treatment in securing business or to obtain special
concessions, or to pay for favorable treatment for business secured or for
special concessions already obtained, and neither the Company nor any of its
subsidiaries has participated in any illegal boycott or other similar illegal
practices affecting any of its actual or potential customers.
Section 3.25 Brokers. Except as set forth on Section 3.25 of the
Stockholder Disclosure Schedule, no broker, finder, agent, consultant or similar
intermediary has acted on behalf of the Company, its subsidiaries or Stockholder
in connection with this Agreement or the transactions contemplated hereby, and
no brokerage commissions, finder's fees, consulting fees or similar fees or
commissions are payable by the Company or any of its subsidiaries in connection
therewith based on any agreement, arrangement or understanding with any of them.
Section 3.26 Indebtedness. Except as set forth in Section 3.26 of the
Stockholder Disclosure Schedule, (a) the Company and its subsidiaries are not
(and as of the Closing will not be) indebted to (i) any bank or other financial
institution or (ii) Stockholder or any affiliate thereof (except for obligations
by and among the Company and its subsidiaries) and (b) Stockholder and its
affiliates are not (and as of the Closing will not be) indebted to the Company
and its subsidiaries.
Section 3.27 Copies of Documents. Stockholder has delivered to Buyer and
its advisers, true, complete and correct copies of all documents referred to in
this Article III or in any part of the Stockholder Disclosure Schedule.
Summaries of all oral contracts described in the Stockholder Disclosure Schedule
are complete and accurate in all material respects.
21
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Except as set forth in the corresponding sections or
subsections of Buyer Disclosure Schedule, dated as of the date hereof, delivered
by Buyer to Stockholder (the "Buyer Disclosure Schedule"), Buyer represents and
warrants to Stockholder as follows:
Section 4.1 Regulatory Organization and Qualification. Buyer is a
corporation duly organized, validly existing and in good standing under the laws
of New York, has all requisite corporate power and authority, and has been duly
authorized by all necessary approvals and orders, to own, lease and operate its
assets and properties to the extent owned, leased and operated and to carry on
its business as it is now being conducted. True, accurate and complete copies of
the articles of incorporation, as amended, and by-laws of Buyer as in effect on
the date hereof, have been delivered to Stockholder.
Section 4.2 Authority; Non-Contravention; Statutory Approvals; Compliance.
-------------------------------------------------------------
(a) Authority. Buyer has, and as of the Closing Date, Buyer will have, all
requisite corporate power and authority to enter into this Agreement and,
subject to obtaining the Buyer Required Statutory Approvals (as defined below),
to consummate the transactions contemplated hereby. The execution and delivery
of this Agreement by Buyer and the consummation of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the part
of Buyer. This Agreement has been duly and validly executed and delivered by
Buyer and, assuming the due authorization, execution and delivery by Stockholder
constitutes a legal, valid and binding obligation of Buyer enforceable against
Buyer in accordance with its terms, except as such enforceability may be limited
by bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally and by general
equitable principles (whether such enforceability is considered in a proceeding
in equity or at law).
(b) Non-Contravention. The execution and delivery of this Agreement by
Buyer does not, and the consummation of the transactions contemplated hereby
will not, result in a Violation by Buyer pursuant to any provisions of (i) the
articles of incorporation or by-laws of Buyer or any of its subsidiaries, (ii)
subject to obtaining the Buyer Required Statutory Approvals, any statute, law,
ordinance, rule, regulation, judgment, decree, order, injunction, writ, permit
or license of any Governmental Authority applicable to Buyer or any of its
properties or assets, or (iii) subject to obtaining the third-party consents or
other approvals set forth in Section 4.2(b) of the Buyer Disclosure Schedule
(the "Buyer Required Consents"), any note, bond, mortgage, indenture, deed of
trust, license, franchise, permit, concession, contract, lease or other
instrument, obligation or agreement of any kind to which Buyer is a party or by
which Buyer or any of its properties or assets may be bound or affected.
(c) Statutory Approvals. No declaration, filing or registration with, or
notice to or authorization, consent or approval of, any Governmental Authority
is necessary for the execution and delivery of this Agreement by Buyer or the
consummation by Buyer of the transactions contemplated hereby, except for those
required under or in relation to (A) the HSR
22
Act, and (B) such consents, approvals, order, authorizations, registrations,
declarations and filings set forth on Section 4.2(c) of the Buyer Disclosure
Schedule (the "Buyer Required Statutory Approvals"), it being understood that
references in this Agreement to "obtaining" such Buyer Required Statutory
Approvals shall mean making such declarations, filings or registrations; giving
such notice; obtaining such consents or approvals; and having such waiting
periods expire as are necessary to avoid a violation of law.
Section 4.3 Litigation. There are no claims, suits, actions or proceedings,
pending or, to the knowledge of Buyer, threatened, nor to the knowledge of
Buyer, are there any investigations or reviews pending or threatened against
Buyer relating to the Transaction or which could reasonably be expected to
result in the issuance of an order restraining enjoining or otherwise
prohibiting or making illegal the consummation of the Transaction.
ARTICLE V
COVENANTS OF STOCKHOLDER
Stockholder covenants and agrees with Buyer that, at all times
from and after the date hereof until the Closing, Stockholder will comply with
all covenants and provisions of this Article V, except to the extent Buyer may
otherwise consent in writing.
Section 5.1 Regulatory and Other Approvals. Stockholder will and will cause
the Company and its subsidiaries to (a) take all commercially reasonable efforts
and proceed diligently and in good faith, as promptly as practicable, to obtain
all consents, approvals or actions of, to make all filings with and to give all
notices to Governmental Authorities or any other Person required of Stockholder
to consummate the transactions contemplated hereby, (b) provide such other
information and communications to such Governmental Authorities or other Persons
as such Governmental Authorities or other Persons may reasonably request in
connection therewith and (c) provide reasonable cooperation to Buyer in
obtaining all consents, approvals or actions of, making all filings with and
giving all notices to Governmental Authorities or other Persons required of
Buyer to consummate the transactions contemplated hereby. The Company will
provide prompt notification to Buyer when any such consent, approval, action,
filing or notice referred to in clause (a) above is obtained, taken, made or
given, as applicable, and will advise Buyer of any communications (and, unless
precluded by law, provide copies of any such communications that are in writing)
with any Governmental Authority or other Person regarding any of the
transactions contemplated by this Agreement.
Section 5.2 HSR Filings. In addition to and without limiting the covenants
contained in Section 5.1, Stockholder will, and will cause the Company and its
subsidiaries to, (a) take promptly all actions necessary to make the filings
required of Stockholder under the HSR Act, (b) comply at the earliest
practicable date with any request for additional information received by
Stockholder from the Federal Trade Commission or the Antitrust Division of the
Department of Justice pursuant to the HSR Act and (c) cooperate with Buyer in
connection with Buyer's filing under the HSR Act and in connection with
resolving any investigation or other inquiry concerning the transactions
contemplated by this Agreement commenced by either the Federal Trade Commission
or the Antitrust Division of the Department of Justice or state attorneys
general.
23
Section 5.3 Full Access. Stockholder will, and will cause the Company and
its subsidiaries to, (a) provide Buyer and its officers, employees, counsel,
accountants, financial advisors, consultants and other representatives
(collectively, "Advisors") with full access, upon reasonable prior notice and
during normal business hours, to the executive officers and agents of the
Company and its subsidiaries who have any material responsibility for the
conduct of the business of the Company and its subsidiaries, and to the
accountants of the Company and its subsidiaries, but only to the extent that
such access does not unreasonably interfere with the business of the Company and
its subsidiaries and (b) furnish Buyer and the Advisors with all such
information and data concerning the Company and its subsidiaries as Buyer or the
Advisors reasonably may request in connection with such investigation, except to
the extent that furnishing any such information or data would violate any
applicable law or regulation.
Section 5.4 No Solicitations. Stockholder will refrain, and will cause the
Company and its subsidiaries to refrain, from directly or indirectly taking, or
permitting any affiliate thereof (or authorizing or permitting any investment
banker, financial advisor, attorney, accountant or other Person retained by or
acting for or on behalf of it or them or any such affiliate) to take, directly
or indirectly, any action to solicit, encourage, receive, negotiate, assist or
otherwise facilitate (including by furnishing confidential information with
respect to the Company or any of its subsidiaries) any offer or inquiry
concerning the acquisition of the Company from any Person (a "Potential
Acquiror") other than Buyer (an "Acquisition Proposal"). Stockholder shall
promptly inform Buyer, orally and in writing, of the material terms and
conditions of any proposal or offer for, or which may reasonably be expected to
lead to, an Acquisition Proposal that it receives and the identity of the
Potential Acquiror. Stockholder shall immediately cease, and shall cause its
affiliates and any Person acting on its behalf to cease, any existing
activities, discussions or negotiations with any parties with respect to any
Acquisition Proposal.
Section 5.5 Conduct of Business. From the date hereof to the Closing Date,
except as set forth on any part of the Stockholder Disclosure Schedule or as
contemplated or otherwise permitted under the terms of this Agreement,
Stockholder will cause the Company and its subsidiaries to operate their
businesses only in the ordinary course consistent with past practice. Without
limiting the generality of the foregoing, except as contemplated by or otherwise
permitted by the terms of this Agreement or any part of the Stockholder
Disclosure Schedule, Stockholder shall refrain, and shall cause the Company and
its subsidiaries to refrain, from taking any of the following actions unless
consented to in writing by Buyer, which consent shall not be unreasonably
withheld:
(a) selling, leasing or otherwise disposing of all or a substantial part of
its assets or business;
(b) amending its Articles of Incorporation or By-Laws (or equivalent
charter documents);
(c) changing its equity capitalization;
(d) engaging in any acquisition of the stock, assets or business of another
Person or making any equity investment of corporate funds in another Person;
24
(e) merging or consolidating with and into any Person, or merging or
consolidating any Person with and into it;
(f) engaging in any liquidation or dissolution of the Company or any of its
subsidiaries, other than the dissolution of ▇▇▇▇▇▇▇▇ Advertising (Canada) Ltd.,
the Company's Canadian subsidiary;
(g) engaging in any transaction involving an amount in excess of $50,000,
other than in the ordinary course of business;
(h) engaging in the issuance or sale of stock or securities, or options,
warrants or obligations convertible into such stock or securities, or issuing
any phantom stock, equity participation units, stock appreciation rights or
similar rights;
(i) entering into any new line of business;
(j) prepaying or incurring any indebtedness for borrowed money (other than
payments made and indebtedness incurred under the Company's indebtedness with
BNP Paribas, as Administrative Agent, pursuant to a certain Credit Agreement
dated as of March 22, 2000, as amended through the date hereof (the "Paribas
Credit Agreement"); creating or modifying any term of any (i) Lien on any of its
assets or properties, other than a Permitted Lien, or (ii) guarantee by it of
the obligations of any third party, including any obligation of a director,
officer or employee of the Company or any of its subsidiaries;
(k) making any loans to (i) any employee of the Company or any of its
subsidiaries other than (A) normal travel and expense advances or relocation
allowances, in each case consistent with past practices, or (B) loans or
advances not in excess of $10,000 to any individual employee of the Company or
any of its subsidiaries (who is not an officer or director of the Company or any
of its subsidiaries) on a short term basis in the ordinary course of business
when such loan or advance is in the best interests of the Company or such
subsidiary; or (ii) to any other Person other in the ordinary course of
business;
(l) entering into (i) any real estate lease or (ii) personal property lease
with a fixed rental over the term in excess of $100,000, or (iii) any contract
for the purchase of real property or construction of improvements on any Owned
Real Property or leased real property in excess of $50,000;
(m) granting any salary compensation increase to any existing employee
whose total annual base salary compensation would after such increase exceed
$50,000; or entering into any employment agreement which is not cancelable
without penalty or financial obligation within 30 days and which has total
compensation of more than $50,000 over the term thereof;
(n) entering into any contract or agreement with any officer or director of
the Company or any of its subsidiaries;
(o) declaring or paying any dividends to Stockholder or making other
distributions in respect of its capital stock, splitting, combining or
reclassifying any of its capital stock, or issuing or authorizing or proposing
the issuance of any other securities in respect of, in lieu
25
of, or in substitution for, shares of its capital stock; or repurchasing,
redeeming or otherwise acquiring any of its shares of capital stock;
(p) amending in any material respect any contract or agreement material to
its business;
(q) entering into any severance agreement involving a payment or obligation
to pay any amount in excess of the normal severance benefit of the Company or
any of its subsidiaries, consistent with past practice;
(r) releasing, canceling or assigning any indebtedness for borrowed money
owed to it, or waiving any material right relating to its properties;
(s) creating or modifying any Company Employee Benefit Plan or increasing
the fringe benefits of any director or officer of the Company or any of its
subsidiaries, other than as consistent with past practice;
(t) entering into any transaction or performing any act which would be
reasonably likely to result in any of the representations and warranties of
Stockholder contained in this Agreement not being true and correct in any
material respect; or agreeing to take any of the actions that are prohibited
herein or which would constitute a violation of any of the covenants of
Stockholder contained herein;
(u) making any changes in its or their respective accounting methods,
except as required by law, rule, regulation or U.S. GAAP;
(v) ceasing to maintain with financially responsible insurance companies,
insurance in such amounts and against such risks and losses as are at least
equal to what is currently maintained by the Company or such subsidiary;
(w) taking any action that would cause the transactions contemplated by
this Agreement to be subject to requirements imposed by any Takeover Law;
(x) making or rescinding any express or deemed material election relating
to Taxes, settling or compromising any material claim, audit, dispute,
controversy, examination, investigation or other proceeding relating to Taxes,
changing any of its methods of reporting income or deductions for federal income
Tax purposes, except as may be required by applicable law; or filing any
material Tax Return other than in a manner consistent with past custom and
practice; and
(y) delegating to directors or officers of the Company or any of its
subsidiaries the power to take any of the actions prohibited by any of the
foregoing clauses.
Stockholder also agrees to cause the Company and its subsidiaries to take all
necessary steps within its or their respective control to exempt (or ensure the
continued exemption of) the transactions contemplated by this Agreement from any
applicable Takeover Law.
26
Section 5.6 Financial Information. Within 30 business days after the close
of each fiscal month between the date hereof and the Closing Date, Stockholder
shall cause the Company to furnish to Buyer the unaudited consolidated balance
sheet of the Company and its subsidiaries, as at the close of such month, and
the related consolidated statement of income for the period then ended and the
fiscal year-to-date of the Company. The unaudited financial statements referred
to in this Section 5.6 shall be prepared in accordance with U.S. GAAP applied on
a consistent basis with the Third-Quarter Interim Financials provided to Buyer
in connection with this Agreement.
Section 5.7 Notice and Cure. Stockholder will notify Buyer in writing of,
and contemporaneously will provide Buyer with true and complete copies of any
and all information or documents relating to, and will use all commercially
reasonable efforts to cure before the Closing, as soon as practicable after it
becomes known to Stockholder, any event, transaction or circumstance occurring
after the date of the Agreement and prior to the Closing that causes or will
cause any covenant or agreement of Stockholder under this Agreement to be
breached or that renders or will render untrue any representation or warranty of
Stockholder contained in this Agreement as if the same were made on or as of the
date of such event, transaction or circumstance. Stockholder also will notify
Buyer in writing of, and will use all commercially reasonable efforts to cure
before the Closing, as soon as practicable after it becomes known to
Stockholder, any other violation or breach of any representation, warranty,
covenant or agreement made by Stockholder in this Agreement. No notice given
pursuant to this Section 5.7 shall have any effect on the representations,
warranties or agreements contained in this Agreement for purposes of determining
satisfaction of any condition contained herein.
Section 5.8 Consultation. Between the date hereof and the Closing Date,
Stockholder will consult with the management of Buyer with a view to informing
such management as to the operation and management of the Company and its
subsidiaries. Stockholder will use commercially reasonable efforts to preserve
the business organization of the Company and its subsidiaries, to preserve the
present business relationships of the Company and its subsidiaries, and to
preserve all of the confidential information and trade and business secrets of
the Company and its subsidiaries.
Section 5.9 Fulfillment of Conditions. Subject to the terms and conditions
of this Agreement, at the Closing Stockholder will execute and deliver each
agreement that Stockholder is required hereby to execute and deliver as a
condition to the Closing, will take all commercially reasonable efforts and
proceed diligently and in good faith to satisfy each other condition applicable
to it with regard to the obligations of Buyer contained in this Agreement and
will not take or fail to take any action that could reasonably be expected to
result in the nonfulfillment of any such condition.
Section 5.10 Repayment of Indebtedness. Between the date hereof and the
Closing Date, all indebtedness of directors, officers and employees of the
Company or any of its subsidiaries to the Company or any of its subsidiaries
shall be repaid in full, other than (a) routine travel and expense advances made
in the ordinary course of business and consistent in amount with past practice,
(b) intercompany indebtedness, and (c) loans or advances of the kind described
in Section 5.5 (whether outstanding on or after the date hereof) and loans or
advances made with the consent of Buyer after the date hereof.
27
Section 5.11 Security for Certain Stockholder Indebtedness. To provide
security for any payments required to be paid by Stockholder pursuant to a
certain Amended and Restated Holdback Agreement dated as of July 18, 2001, as
amended (the "Holdback Agreement"), Stockholder shall simultaneously with the
Closing cause the Bank of New York to issue a standby letter of credit for the
benefit of the Stockholders' Representative (as defined in the Holdback
Agreement) in an amount equal to the remaining aggregate Holdback Amounts plus
Interest (as defined in the Holdback Agreement) for the remaining term of the
Holdback Agreement.
ARTICLE VI
COVENANTS OF BUYER
Buyer covenants and agrees with Stockholder that, at all times
from and after the date hereof until the Closing, Buyer will comply with all
covenants and provisions of this Article VI, except to the extent Stockholder
may otherwise consent in writing.
Section 6.1 Regulatory and Other Approvals. Buyer will (a) take all
commercially reasonable efforts and proceed diligently and in good faith, as
promptly as practicable, to obtain all consents, approvals or actions of, to
make all filings with and to give all notices to Governmental Authorities or any
other Person required of Buyer to consummate the transactions contemplated
hereby, (b) provide such other information and communications to such
Governmental Authorities or other Persons as such Governmental Authorities or
other Persons may reasonably request in connection therewith and (c) provide
reasonable cooperation to Stockholder, the Company and any of its subsidiaries
in obtaining all consents, approvals or actions of, making all filings with and
giving all notices to Governmental Authorities or other Persons required of the
Company, the Company or any of its subsidiaries to consummate the transactions
contemplated hereby. Buyer will provide prompt notification to Stockholder when
any such consent, approval, action, filing or notice referred to in clause (a)
above is obtained, taken, made or given, as applicable, and will advise
Stockholder of any communications (and, unless precluded by law, provide
Stockholder with copies of any such communications that are in writing) with any
Governmental Authority or other Person regarding any of the transactions
contemplated by this Agreement.
Section 6.2 HSR Filings. In addition to and without limiting the covenants
contained in Section 6.4, Buyer will (a) take promptly all actions necessary to
make the filings required of Buyer under the HSR Act, (b) comply at the earliest
practicable date with any request for additional information received by Buyer
from the Federal Trade Commission or the Antitrust Division of the Department of
Justice pursuant to the HSR Act and (c) cooperate with Stockholder in connection
with Stockholder's filing under the HSR Act and in connection with resolving any
investigation or other inquiry concerning the transactions contemplated by this
Agreement commenced by either the Federal Trade Commission or the Antitrust
Division of the Department of Justice or state attorneys general.
Section 6.3 Notice and Cure. Buyer will notify Stockholder in writing of,
and contemporaneously will provide Stockholder with true and complete copies of
any and all information or documents relating to, and will use all commercially
reasonable efforts to cure before the Closing, as soon as practicable after it
becomes known to Buyer, any event, transaction or
28
circumstance occurring after the date hereof and prior to the Closing that
causes or will cause any covenant or agreement of Buyer under this Agreement to
be breached or that renders or will render untrue in any material respect any
representation or warranty of Buyer contained in this Agreement as if the same
were made on or as of the date of such event, transaction or circumstance. Buyer
also will notify Stockholder in writing of, and will use all commercially
reasonable efforts to cure before the Closing, as soon as practicable after it
becomes known to Buyer, any other violation or breach of any representation,
warranty, covenant or agreement made by Buyer in this Agreement, whether
occurring or arising prior to, on or after the date of this Agreement. No notice
given pursuant to this Section 6.3 shall have any effect on the representations,
warranties, covenants or agreements contained in this Agreement for purposes of
determining satisfaction of any condition contained herein.
Section 6.4 Fulfillment of Conditions. Subject to the terms and conditions
of this Agreement, at the Closing Buyer will execute and deliver, or cause the
execution and delivery of, each agreement that Buyer is hereby required to
execute and deliver as a condition to the Closing, will take all commercially
reasonable efforts and proceed diligently and in good faith to satisfy each
other condition applicable to it with regard to the obligations of Stockholder
contained in this Agreement and will not take or fail to take any action that
could reasonably be expected to result in the nonfulfillment of any such
condition.
ARTICLE VII
MUTUAL COVENANTS
Buyer and Stockholder mutually covenant and agree with each
other that, at all times from and after the date hereof until the Closing Date,
they will comply with all covenants and provisions of this Article VII
applicable to each of them, respectively, except to the extent mutually agreed
in writing, as follows:
Section 7.1 Reasonable Efforts to Consummate Transaction. Each of Buyer and
Stockholder will use its commercially reasonable efforts consistent with the
prudent conduct of its business and will fully cooperate with each other to
consummate the transactions contemplated by this Agreement.
Section 7.2 Certain Tax Matters.
(a) Tax Sharing Agreement. Stockholder agrees that any tax allocation or
sharing agreement to which the Company or any of its subsidiaries is a party or
bound shall be cancelled as of the date prior to the Closing. There will be no
payment covered by any tax sharing agreement after the Closing due to or from
the Company or any of its subsidiaries, on the one hand, and Stockholder, on the
other hand, with respect to any tax year ending on or before the Closing Date.
(b) Election Pursuant to Section 338(h)(10) of the Code. Stockholder
agrees, if so directed by Buyer, to join in making an election pursuant to
Section 338(h)(10) of the Code (and any corresponding election under state,
local, or foreign law) (the "Election") with respect to the purchase of the
stock of the Company and its subsidiaries pursuant to this Agreement.
29
Stockholder will pay any Tax attributable to a deemed sale of assets pursuant to
the Election (including any corresponding election under state, local or foreign
law). The Purchase Price, as determined in accordance with Treasury Regulations
promulgated under Section 338(h)(10) of the Code, will be allocated to the
assets of both the Company and its subsidiaries for all purposes as set forth in
such section. As soon as practicable, on or after the Closing Date, but in all
cases on or before the due date for such forms, the parties hereto will file
such forms as are required to effect the Election (including any comparable
election under state, local or foreign law) with the appropriate taxing
authority.
(c) Allocation of Purchase Price. Stockholder and Buyer agree that the
Purchase Price shall be allocated to and deemed paid for the assets of the
Company and its subsidiaries as provided in this Section 7.2(c) (the "Purchase
Price Allocation"). Stockholder and Buyer further agree that it is their intent
that the assets of the Company and its subsidiaries (other than goodwill) be
purchased for their book value and that any Purchase Price amount paid hereunder
that is in excess of the book value of the assets of the Company and its
subsidiaries shall be attributable to goodwill, going concern value and similar
intangible assets. Of the total Purchase Price and the liabilities of the
Company and its subsidiaries (to the extent that such liabilities are treated as
consideration for federal income tax purposes), an amount equal to the book
value of the assets of the Company and its subsidiaries (net of depreciation)
shall be allocated to and deemed paid for those assets having such net book
value (exclusive of goodwill, going concern value and similar intangible
assets). Any remaining amount of the Purchase Price and the liabilities of the
Company shall be allocated to and deemed paid for the goodwill, going concern
value and similar intangible assets of the Company and its subsidiaries.
Stockholder and Buyer agree that they shall report the allocation of the
Purchase Price in a manner entirely consistent with the Purchase Price
Allocation in all tax returns and forms (including without limitation, Forms
8594 filed with Buyer's and Stockholder's respective federal income tax returns
for the taxable year that includes the Closing Date) and in the course of any
tax audit, tax review or tax litigation relating thereto unless otherwise
required under applicable law. Stockholder and Buyer shall cooperate with each
other to prepare the Forms 8594 in the manner required by this Section 7.2(c).
Stockholder and Buyer shall each deliver to the other a copy of the Form 8594 it
files with its respective federal income tax return.
Section 7.3 Disclosure Schedules.
--------------------
(a) On or before the date of this Agreement, the Company has delivered to
Buyer the Stockholder Disclosure Schedule accompanied by a certificate signed by
the chief financial officer of Stockholder stating that the Stockholder
Disclosure Schedule is being delivered pursuant to this Section 7.3(a); and
(b) On or before the date of this Agreement, Buyer has delivered to the
Company the Buyer Disclosure Schedule accompanied by a certificate signed by the
chief financial officer of Buyer stating that the Buyer Disclosure Schedule is
being delivered pursuant to this Section 7.3(b).
(c) The Stockholder Disclosure Schedule and the Buyer Disclosure Schedule
are collectively referred to herein as the "Disclosure Schedules." The
Disclosure Schedules constitute an integral part of this Agreement and modify
the respective representations,
30
warranties, covenants or agreements of the parties hereto contained herein to
the extent that such representations, warranties, covenants or agreements
expressly refer to the Disclosure Schedules. Any and all statements,
representations, warranties or disclosures set forth in the Disclosure Schedules
shall be deemed to have been made on and as of the date of this Agreement.
ARTICLE VIII
CONDITIONS TO OBLIGATIONS OF BUYER
The obligations of Buyer hereunder to effect the Transaction
on the Closing Date are subject to the fulfillment, at or before the Closing, of
each of the following conditions, all or any of which may be waived in whole or
in part by Buyer in its sole discretion:
Section 8.1 Representations and Warranties. The representations and
warranties made by Stockholder in this Agreement, or in any part of the
Stockholder Disclosure Schedule delivered pursuant hereto, shall be true and
correct in all material respects on and as of the Closing Date with the same
force and effect as though made on and as of the Closing Date or, in the case of
representations and warranties made as of a specified date earlier than the
Closing Date, on and as of such earlier date, and Stockholder shall have
delivered to Buyer a certificate, dated the Closing Date, to such effect.
Section 8.2 Certain Employee Agreements. For all purposes under the
employee benefit plans providing benefits after the Closing Date to any
individuals who are employed by the Company or any of its subsidiaries
immediately prior to the Closing Date and who continue in the employment of
Buyer or any of its subsidiaries after the Closing Date (a "Continuing
Employee"), such employee shall be credited in accordance with the terms of the
applicable plan with his or her years of service before the Closing Date, to the
same extent as such employee was entitled, before the Closing Date, to credit
for such service under any Company Employee Benefit Plan, except to the extent
such credit would result in a duplication of benefits or an accrual of benefits
under any defined benefit plan or any money purchase pension plan. In addition,
and without limiting the generality of the foregoing: (i) Buyer shall use its
best efforts to allow each Continuing Employee to be immediately eligible to
participate, without any waiting time, in any and all Company Employee Benefit
Plans or any employee benefit plans sponsored by Buyer and its subsidiaries
after the Closing Date (such plans, collectively the "New Plans") to the extent
coverage under such plan replaces coverage under a comparable Company Employee
Benefit Plan, in which such employee participates immediately before or at any
time following the Closing Date (such plans, collectively, the "Old Plans") and
(ii) for purposes of each New Plan providing medical, dental, pharmaceutical
and/or vision benefits to any Continuing Employee, Buyer shall use its best
efforts to cause all pre-existing condition exclusions and actively-at-work
requirements of such New Plan to be waived for such employee and his or her
covered dependents, except to the extent such exclusions and/or requirements
were applicable to such employee and/or his or her dependents under the
applicable Old Plan.
Section 8.3 Good Standing Certificates. Stockholder shall have delivered to
Buyer a certificate of existence from the Secretary of State of the State of
Delaware and a certificate from the Secretary of State (or comparable official)
of each jurisdiction in which the Company is
31
qualified to do business, to the effect that the Company is in good standing in
such jurisdiction (in each case together with the applicable tax status
certificate). The Company shall have delivered to Buyer, if available, a
certificate from the Secretary of State (or comparable official) of each
jurisdiction in which a subsidiary of the Company is organized or qualified to
do business, to the effect that such subsidiary is in good standing in such
jurisdiction (together with the applicable tax status certificate, if
available).
Section 8.4 Performance. Stockholder shall have performed and complied with
the agreements, covenants and obligations required by this Agreement to be so
performed or complied with by Stockholder at or before the Closing, and
Stockholder shall have delivered to Buyer a certificate, dated the Closing Date,
to such effect.
Section 8.5 Certified Resolutions. Stockholder shall have delivered to
Buyer copies of resolutions of its Board of Directors authorizing the execution,
delivery and performance of this Agreement and the transactions contemplated
hereby, certified to by an authorized officer of Stockholder.
Section 8.6 No Injunctions or Restraints. There shall not be pending any
litigation, proceeding, investigation, arbitration or claim by any Person or
Governmental Authority or the existence of any injunction or other court order
(whether temporary, preliminary or permanent) then in effect, and which in any
case has or could reasonably have the effect of making illegal or otherwise
restricting, preventing or prohibiting consummation of the Transaction or the
other transactions contemplated by this Agreement.
Section 8.7 Regulatory Approvals. All Stockholder Required Approvals shall
have been duly obtained, made or given and shall be in full force and effect,
and all terminations or expirations of waiting periods imposed by any
Governmental Authority necessary for the consummation of the transactions
contemplated by this Agreement, including under the HSR Act, shall have
occurred.
Section 8.8 Required Consents. Stockholder shall have obtained or given, as
the case may be, at no expense to Buyer, and there shall not have been withdrawn
or modified, any Stockholder Required Consents. Each such consent shall be in
form satisfactory to counsel for Buyer.
Section 8.9 Opinions of Counsel. Buyer shall have received the opinion of
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, LLP, counsel to Stockholder, dated the Closing Date, in the
form of Exhibit A-1 hereto, and Buyer shall have received the opinion of
▇▇▇▇▇▇▇▇ Carano ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ LLP, special counsel to
Stockholder, dated the Closing Date, in the form of Exhibit A-2 hereto.
Section 8.10 Company Material Adverse Effect. Except for the execution and
delivery of this Agreement and the transactions to take place pursuant hereto on
or prior to the Closing Date, since the date hereof there shall not have
occurred any Company Material Adverse Effect, or any event or development which,
individually or in the aggregate, could reasonably be expected to result in a
Company Material Adverse Effect, and Stockholder shall have delivered to
32
Buyer a certificate, dated the Closing Date and executed by the Chief Executive
Officer and Chief Financial Officer of Stockholder, to such effect.
Section 8.11 Repayment of Certain Indebtedness. At Closing, Stockholder
shall have directed Buyer to allocate a portion of the Purchase Price to repay
all outstanding indebtedness under the Paribas Credit Agreement.
Section 8.12 Proceedings. All proceedings to be taken on the part of
Stockholder in connection with the transactions contemplated by this Agreement
and all documents incident thereto shall be reasonably satisfactory in form and
substance to Buyer, and Buyer shall have received copies of all such documents
and other evidences as Buyer may reasonably request in order to establish the
consummation of such transactions and the taking of all proceedings in
connection therewith.
Section 8.13 Employment Agreements. The Company, Stockholder and each of
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ shall have entered into an
Amended and Restated Employment Agreement in the forms of Exhibits ▇-▇, ▇-▇ and
B-3, respectively hereto.
Section 8.14 Non-Solicitation/Non-Servicing Agreement. Buyer and
Stockholder shall have entered into a Non-Solicitation/Non-Servicing Agreement
in the form of Exhibit C hereto.
Section 8.15 Transitional Services. Stockholder shall have entered into a
Shared Services Agreement in the form of Exhibit D hereto.
Section 8.16 Strategic Partnership. Stockholder shall have entered into a
Strategic Partnership Agreement in the form of Exhibit E hereto.
Section 8.17 Actions Under Shared Services Agreement. The actions required
to be taken under Section 1.1 of the Shared Services Agreement shall have
occurred to the satisfaction of Buyer and its counsel..
ARTICLE IX
CONDITIONS TO OBLIGATIONS OF STOCKHOLDER
The obligations of Stockholder hereunder to effect the
Transaction on the Closing Date are subject to the fulfillment, at or before the
Closing, of each of the following conditions, all or any of which may be waived
in whole or in part by Stockholder in its sole discretion:
Section 9.1 Representations and Warranties. The representations and
warranties made by Buyer in this Agreement, or in any part of the Buyer
Disclosure Schedule delivered pursuant hereto, shall be true and correct in all
material respects on and as of the Closing Date with the same force and effect
as though made on and as of the Closing Date or, in the case of
33
representations and warranties made as of a specified date earlier than the
Closing Date, on and as of such earlier date, and Buyer shall have delivered to
Stockholder a certificate, dated the Closing Date, to such effect.
Section 9.2 Good Standing Certificates. Buyer shall have delivered to
Stockholder a certificate of existence from the Secretary of State of New York,
to the effect that Buyer is in good standing in such jurisdiction.
Section 9.3 Performance. Buyer shall have performed and complied with the
agreements, covenants and obligations required by this Agreement to be so
performed or complied with by Buyer at or before the Closing, and Buyer shall
have delivered to Stockholder a certificate, dated the Closing Date, to such
effect.
Section 9.4 Certified Resolutions. Buyer shall have delivered to
Stockholder copies of resolutions of its Board of Directors authorizing the
execution, delivery and performance of this Agreement and the transactions
contemplated hereby, certified to by an authorized officer of Buyer.
Section 9.5 No Injunctions or Restraints. There shall not be pending any
litigation, proceeding, investigation, arbitration or claim by any Person or
Governmental Authority or the existence of any injunction or other court order
(whether temporary, preliminary or permanent) then in effect, and which in any
case has or could reasonably have the effect of making illegal or otherwise
restricting, preventing or prohibiting consummation of the Transaction or the
other transactions contemplated by this Agreement.
Section 9.6 Regulatory Approvals. All Buyer Required Approvals shall have
been duly obtained, made or given and shall be in full force and effect, and all
terminations or expirations of waiting periods imposed by any Governmental
Authority necessary for the consummation of the transactions contemplated by
this Agreement, including under the HSR Act, shall have occurred.
Section 9.7 Required Consents. Buyer shall have obtained or given, as the
case may be, at no expense to Stockholder, and there shall not have been
withdrawn or modified, any Buyer Required Consents. Each such consent shall be
in form satisfactory to counsel for Stockholder.
Section 9.8 Opinion of Counsel. Buyer shall have received the opinion of
▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP, counsel to Buyer, dated the Closing Date, in the form of
Exhibit F hereto.
Section 9.9 Proceedings. All proceedings to be taken on the part of Buyer
in connection with the transactions contemplated by this Agreement and all
documents incident thereto shall be reasonably satisfactory in form and
substance to Stockholder, and Stockholder shall have received copies of all such
documents and other evidences as Buyer may reasonably request in order to
establish the consummation of such transactions and the taking of all
proceedings in connection therewith.
Section 9.10 Transitional Services. Buyer shall have entered into a Shared
Services Agreement in the form of Exhibit D hereto.
34
Section 9.11 Strategic Partnership. The Company shall have entered into a
Strategic Partnership Agreement in the form of Exhibit E hereto.
ARTICLE X
INDEMNIFICATION
Section 10.1 Survival. Notwithstanding any right of any party hereto fully
to investigate the affairs of any other party, and notwithstanding any knowledge
of facts determined or determinable pursuant to such investigation or right of
investigation, each party hereto shall have the right to rely fully upon the
representations, warranties, covenants and agreements of the other parties
contained in this Agreement and the Disclosure Schedules furnished by any other
party pursuant to this Agreement, or in any certificate delivered at the Closing
by any other party. Subject to the limitations set forth in Section 10.6, the
respective representations, warranties, covenants and agreements of Stockholder
and Buyer contained in this Agreement shall survive the Closing.
Section 10.2 Obligation of Stockholder to Indemnify. Subject to the
limitations contained in Sections 10.6(a) and 10.6(b), Stockholder hereby agrees
to indemnify Buyer and its affiliates, officers, directors, employees, agents,
representatives, successors and permitted assignees (collectively, the "Buyer
Indemnified Parties," and individually, a "Buyer Indemnified Party") against,
and to protect, save and keep harmless Buyer Indemnified Parties from, and to
pay on behalf of or reimburse Buyer Indemnified Parties as and when incurred
for, any and all liabilities (including liabilities for Taxes), obligations,
losses, damages, penalties, demands, claims, actions, suits, judgments,
settlements, penalties, interest, out-of-pocket costs, expenses and
disbursements (including reasonable costs of investigation, and reasonable
attorneys', accountants' and expert witnesses' fees) of whatever kind and nature
(collectively, "Losses"), that may be imposed on or incurred by any Buyer
Indemnified Party as a consequence of, in connection with, incident to,
resulting from or arising out of or in any way related to or by virtue of: (a)
any misrepresentation, inaccuracy or breach of any warranty or representation
contained in Article III hereof or in any certificate delivered by Stockholder
at the Closing; (b) any action, demand, proceeding, investigation or claim by
any third party (including any Governmental Authority) against or affecting any
Buyer Indemnified Party which may give rise to or evidence the existence of or
relate to a misrepresentation or breach of any of the representations and
warranties of Stockholder contained in Article III hereof or in any certificate
delivered by Stockholder at the Closing, (c) any breach or failure by
Stockholder to comply with, perform or discharge any obligation, agreement or
covenant by Stockholder contained in this Agreement, (d) any litigation or claim
disclosed on Section 3.8 of the Stockholder Disclosure Schedule, (e) any
employee benefit plan or pension plan or any other "employee benefit plan"
within the meaning of Section 3(3) of ERISA maintained by, contributed to or to
which there is or was an obligation to contribute to by Stockholder, the
Company, any subsidiary of the Company, or any ERISA Affiliate and (f) any claim
made with respect to employment prior to or on the Closing Date with the Company
or any subsidiary of the Company including, without limitation, any claim with
respect to, relating to arising out of or in connection with discrimination by
the Company or any of its subsidiaries or wrongful discharge (including
constructive discharge).
35
Section 10.3 Obligation of Buyer to Indemnify. Subject to the limitations
set forth in Section 10.6(c) hereof, Buyer hereby agrees to indemnify
Stockholder against, and to protect, save and keep harmless Stockholder from,
and to pay on behalf of or reimburse Stockholder as and when incurred for, any
and all Losses that may be imposed on or incurred by Stockholder as a
consequence of, in connection with, incident to, resulting from or arising out
of or in any way related to or by virtue of: (a) any misrepresentation,
inaccuracy or breach of any warranty or representation of Buyer contained in
Article IV hereof or in any certificate delivered by Buyer at the Closing; (b)
any action, demand, proceeding, investigation or claim by any third party
(including any Governmental Authority) against or affecting Stockholder which
may give rise to or evidence the existence of or relate to a misrepresentation
or breach of any of the representations and warranties of Buyer contained in
Article IV hereof or in any certificate delivered by Buyer at the Closing; or
(c) any breach or failure by Buyer to comply with, perform or discharge any
obligation, agreement or covenant by Buyer contained in this Agreement.
Section 10.4 Tax Matters.
(a) Tax Indemnification.
(i) Stockholder agrees to be responsible for and to indemnify and hold
Buyer Indemnified Parties harmless from and against any and all Taxes that
may be imposed upon or assessed against the Company or any of its
subsidiaries or the assets thereof:
(A) with respect to all taxable periods ending on or prior to the
Closing Date;
(B) with respect to any and all Taxes of the Company and its
subsidiaries for the period allocated to Stockholder pursuant to
Section 10.4(b)(ii);
(C) arising by reason of any breach by Stockholder of any of the
representations contained in Section 3.9 hereof;
(D) by reason of being a successor-in-interest or transferee of
another entity; and
(E) with respect to any and all Taxes of any member of a
consolidated, combined or unitary group of which the Company or any of
its subsidiaries (or any of their respective predecessors) is or was a
member on or prior to the Closing Date, by reason of the liability of
the Company or any of its subsidiaries pursuant to Treasury Regulation
Section 1.1502-6(a) or any analogous or similar state, local or
foreign law or regulation.
(ii) Buyer agrees to indemnify and hold harmless Stockholder from and
against any and all Taxes of the Company and its subsidiaries:
36
(A) with respect to any taxable period of the Company and its
subsidiaries beginning after the Closing Date and
(B) attributable to the period allocated to Buyer pursuant to
Section 10.4(b)(ii).
(b) Preparation of Tax Returns; Payment of Taxes.
(i) Stockholder shall include the Company and its subsidiaries, or
cause the Company and its subsidiaries to be included in, and shall file or
cause to be filed, (A) the United States consolidated federal income Tax
Returns of Stockholder or its affiliates for the taxable periods of the
Company and its subsidiaries ending on or prior to the Closing Date and (B)
where applicable, all other consolidated, combined or unitary Tax Returns
of Stockholder or its affiliates for the taxable periods of the Company and
its subsidiaries ending (or the portion of any taxable period ending) on or
prior to the Closing Date, and shall pay any and all Taxes due with respect
to the returns referred to in clause (A) or (B) of this Section 10.4(b)(i).
Stockholder also shall file or shall cause the Company and its subsidiaries
to file all other Tax Returns of or which include the Company and its
subsidiaries required to be filed (taking into account any extensions) on
or prior to the Closing Date and shall pay any and all Taxes due with
respect to such Tax Returns. The following shall apply: (A) all Tax Returns
described in this Section 10.4(b)(i) shall be prepared in a manner
consistent with prior practice unless a past practice has been finally
determined to be incorrect by the applicable taxing authority or a contrary
treatment is required by applicable tax laws (or the judicial or
administrative interpretations thereof); (B) Stockholder shall provide
Buyer with copies of such Tax Returns at least 25 days prior to the due
date for filing such return; and (C) Buyer shall have the right to review
and approve (which approval shall not be unreasonably withheld) such Tax
Returns for 30 days following receipt thereof. The failure of Buyer to
propose any changes to any such Tax Return within such 30-day period shall
be deemed to be an indication of its approval thereof.
(ii) Following the Closing, Buyer shall be responsible for preparing
or causing to be prepared all federal, foreign, state and local Tax Returns
required to be filed by the Company and its subsidiaries after the Closing
Date. To the extent any Taxes shown due on any such Tax Return are
indemnifiable by Stockholder, (A) such Tax Return shall be prepared in a
manner consistent with Buyer's prior practice unless a past practice has
been finally determined to be incorrect by the applicable taxing authority
or a contrary treatment is required by applicable tax laws (or the judicial
or administrative interpretations thereof); (B) Buyer shall provide
Stockholder with copies of such Tax Returns at least 25 days prior to the
due date for filing such return; and (C) Stockholder shall have the right
to review and approve (which approval shall not be unreasonably withheld)
such Tax Returns for 30 days following receipt thereof. The failure of
Stockholder to propose any changes to any such Tax Return within such 30
days shall be deemed to be an indication of its approval thereof.
Stockholder and Buyer shall attempt in good faith mutually to resolve any
disagreements regarding such Tax Returns prior to the due date for filing
thereof. Buyer shall file or cause to be filed all such Tax Returns and
shall, subject to receiving the payments from Stockholder referred to in
Section
37
10.4(b)(iii), pay the Taxes shown due thereon; provided, however, that
nothing contained in the foregoing shall in any manner terminate, limit or
adversely affect any right of Buyer Indemnified Parties or Stockholder to
receive indemnification pursuant to any provision in this Agreement.
(iii) Not later than 5 days before the due date for payment of Taxes
with respect to any Tax Returns which Buyer has the responsibility to file,
Stockholder shall pay to Buyer an amount equal to that portion of the Taxes
shown on such return for which Stockholder has an obligation to indemnify
Buyer and its affiliates pursuant to the provisions of Section 10.4(a)(i).
Not later than 5 days before the due date for payment of Taxes with respect
to any Tax Returns which Stockholder has the responsibility to file, Buyer
shall pay to Stockholder an amount equal to that portion of the Taxes shown
on such return for which Buyer has an obligation to indemnify Stockholder
pursuant to the provisions of Section 10.4(a)(ii).
(iv) For federal income tax purposes, the taxable year of the Company
and its subsidiaries shall end as of the close of the Closing Date and,
with respect to all other Taxes, Stockholder and Buyer will, unless
prohibited by applicable law, close the taxable period of the Company and
its subsidiaries as of the close of the Closing Date. Neither Stockholder
nor Buyer shall take any position inconsistent with the preceding sentence
on any Tax Return. In any case where applicable law does not permit the
Company or any of its subsidiaries to close its taxable year on the Closing
Date or in any case in which a Tax is assessed with respect to a taxable
period which includes the Closing Date (but does not begin or end on that
day), then Taxes, if any, attributable to the taxable period of the Company
and/or its subsidiaries beginning before and ending after the Closing Date
shall be allocated (i) to Stockholder for the period up to and including
the Closing Date, and (ii) to Buyer for the period subsequent to the
Closing Date. Any allocation of income or deductions required to determine
any Taxes attributable to any period beginning before and ending after the
Closing Date shall be prepared by Buyer and shall be made by means of a
closing of the books and records of the Company and its subsidiaries as of
the close of the Closing Date, provided that exemptions, allowances or
deductions that are calculated on an annual basis (including, but not
limited to, depreciation and amortization deductions) and Taxes that are
not based on income or receipts shall be allocated between the period
ending on the Closing Date and the period after the Closing Date in
proportion to the number of days in each such period. Buyer shall provide
Stockholder with a schedule showing the computation of the allocation at
least 25 days prior to the due date for filing a Tax Return which includes
the Closing Date. Stockholder shall have the right to review such schedule,
and Buyer and Stockholder shall attempt in good faith mutually to resolve
any disagreements regarding the determination of such allocation. Any
amount owing from Stockholder under this Section 10.4(b)(iv) shall be paid
no later than five (5) days prior to the filing of the underlying Tax
Return.
(c) Cooperation with Respect to Tax Returns. Buyer and Stockholder agree to
furnish or cause to be furnished to each other, and each at their own expense,
as promptly as practicable, such information
38
(including access to books and records) and assistance, including making
employees available on a mutually convenient basis to provide additional
information and explanations of any material provided, relating to the Company
as is reasonably necessary for the filing of any Tax Return, for the preparation
for any audit relating to any Tax Return, and for the prosecution or defense of
any claim, suit or proceeding relating to any adjustment or proposed adjustment
with respect to Taxes. Buyer or the Company shall retain in its possession, and
shall provide Stockholder reasonable access to (including the right to make
copies of), such supporting books and records and any other materials that
Stockholder may specify with respect to Tax matters relating to any taxable
period ending on or prior to the Closing Date until the relevant statute of
limitations has expired. After such time, Buyer may dispose of such material,
provided that prior to such disposition Buyer shall give Stockholder a
reasonable opportunity to take possession of such materials.
(d) Transfer Taxes. Stockholder shall be liable for and shall pay (and
shall indemnify and hold harmless Buyer against) all sales, use, stamp,
documentary, filing, recording, transfer or similar fees or taxes or
governmental charges (including, without limitation, real property transfer
gains taxes, UCC-2 filing fees, FAA, ICC, DOT, real estate and motor vehicle
registration, title recording or filing fees and other amounts payable in
respect of transfer filings) as levied by any taxing authority or Governmental
Authority in connection with the transactions contemplated by this Agreement
(other than taxes measured by or with respect to income imposed on Stockholder
or on Buyer or its affiliates). Stockholder hereby agrees to file all necessary
documents (including, but not limited to, all Tax Returns) with respect to all
such amounts in a timely manner.
Section 10.5 Indemnification Procedures.
(a) Non-Third-Party Claims.
(i) In the event that any Person entitled to indemnification under
this Agreement (an "Indemnified Party") asserts a claim for indemnification
which does not involve a Third Party Claim (as defined in Section 10.5(b))
(a "Non-Third Party Claim"), against which a Person is required to provide
indemnification under this Agreement (an "Indemnifying Party"), the
Indemnified Party shall give written notice to the Indemnifying Party (the
"Non-Third Party Claim Notice"), which Non-Third Party Claim Notice shall
(A) describe the claim in reasonable detail, (B) indicate the amount
(estimated, if necessary, and to the extent feasible) of the Losses that
have been or may be suffered by the Indemnified Party, and (C) indicate if
the Non-Third Party Claim arises as a result of a breach of a
representation under Section 3.1, 3.8, 3.9, 3.10, 3.11, 3.25 or 3.26 or any
other provision hereof relating to Taxes (including without limitation
Section 10.4).
(ii) The Indemnifying Party may acknowledge and agree by written
notice (the "Non-Third Party Acknowledgement of Liability") to the
Indemnified Party to satisfy the Non-Third Party Claim within 30 days of
receipt of the Non-Third Party Claim Notice. In the event that the
Indemnifying Party disputes the Non-Third Party Claim, the Indemnifying
Party shall provide written notice of such dispute (the "Non-Third Party
Dispute Notice") to the Indemnified Party within 30 days of receipt of the
Non-Third Party Claim Notice (the "Non-Third Party Dispute Period"),
setting forth a reasonable basis of such dispute. In the event that the
Indemnifying Party shall fail to deliver
39
the Non-Third Party Acknowledgement of Liability or Non-Third Party Dispute
Notice within the Non-Third Party Dispute Period, the Indemnifying Party
shall be deemed to have acknowledged and agreed to pay the Non-Third Party
Claim in full and to have waived any right to dispute the Non-Third Party
Claim. Once the Indemnifying Party has acknowledged and agreed to pay any
Non-Third Party Claim pursuant to this Section 10.5(a)(ii), or once any
dispute under this Section 10.5(a) has been finally resolved in favor of
indemnification by a court or other tribunal of competent jurisdiction,
subject to the provisions of Section 10.6(a), the Indemnifying Party shall
pay the amount of such Non-Third Party Claim to the Indemnified Party
within 10 days of the date of acknowledgement or resolution, as the case
may be, to such account and in such manner as is designated in writing by
the Indemnified Party.
(b) Third-Party Claims.
(i) In the event that any Indemnified Party asserts a claim for
indemnification or receives notice of the assertion of any claim or of the
commencement of any action or proceeding by any Person who is not a party
to this Agreement or an affiliate of a party to this Agreement (a "Third
Party Claim") in respect of which such Indemnified Party is entitled to
indemnification by an Indemnifying Party under this Agreement, the
Indemnified Party shall give written notice to the Indemnifying Party (the
"Third Party Claims Notice") within 20 days after learning of such Third
Party Claim (or within such shorter time as may be necessary to give the
Indemnifying Party a reasonable opportunity to respond to such claim),
together with a statement specifying the basis of such Third Party Claim.
The Third Party Claim Notice shall (A) describe the claim in reasonable
detail, (B) indicate the amount (estimated, if necessary, and to the extent
feasible) of the Losses that have been or may be suffered by the
Indemnified Party, and (C) indicate if the Third Party Claim arises as a
result of a breach of a representation under Section 3.1, 3.8, 3.9, 3.10,
3.11, 3.25 or 3.26 or any other provision hereof relating to Taxes
(including without limitation Section 10.4).
(ii) If the Indemnifying Party gives written notice to the Indemnified
Party within 20 days after receipt from the Indemnified Party of the Third
Party Claims Notice (the "Third Party Defense Period") that it assumes
responsibility for the Third Party Claim (the "Defense Notice"), the
Indemnifying Party shall conduct at its expense the defense against such
Third Party Claim in its own name, or if necessary in the name of the
Indemnified Party. The Defense Notice shall specify the counsel it will
appoint to defend such claim (the "Defense Counsel"); provided, however,
that the Indemnified Party shall have the right to approve the Defense
Counsel, which approval shall not be unreasonably withheld or delayed.
Notwithstanding, if the Indemnifying Party chooses to appoint either ▇▇▇▇▇
& ▇▇▇▇▇▇▇ LLP or ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, LLP as Defense Counsel, such
appointment shall be automatically approved hereby without further action.
In the event that the Indemnifying Party fails to give the Defense Notice
within the Third Party Defense Period, the Indemnified Party shall have the
right to conduct the defense and to compromise and settle such Third Party
Claim without prior consent of the Indemnifying Party and, subject to the
provisions of Section 10.6(a), the Indemnifying Party will be liable for
all settlement amounts or other Losses incurred in connection therewith.
40
(iii) In the event that the Indemnifying Party disputes the claim for
indemnification against it, such Indemnifying Party shall notify the
Indemnified Party to such effect within 20 days after receipt of the Third
Party Claims Notice (or within such shorter time as may be necessary to
give the Indemnified Party a reasonable opportunity to respond to such
Third Party Claim) by delivering written notice thereof to the Indemnified
Party. In such event, the Indemnified Party shall have the right to conduct
the defense and to compromise and settle such Third Party Claim, with the
prior consent of the Indemnifying Party (which consent will not be
unreasonably withheld or delayed), and, once such dispute has been finally
resolved in favor of indemnification by a court or other tribunal of
competent jurisdiction or by mutual agreement of the Indemnified Party and
Indemnifying Party, subject to the provisions of Section 10.6(a), the
Indemnifying Party shall, within 10 days of the date of such resolution or
agreement, pay to the Indemnified Party all settlement amounts or other
Losses incurred by the Indemnified Party in connection with such Third
Party Claim.
(iv) In the event that the Indemnifying Party delivers a Defense
Notice pursuant to which it elects to conduct the defense of the Third
Party Claim, the Indemnifying Party shall be entitled to have the exclusive
control over the defense of the Third Party Claim and the Indemnified Party
will cooperate in good faith with and make available to the Indemnifying
Party such assistance and materials as it may reasonably request, all at
the expense of the Indemnifying Party. The Indemnified Party shall have the
right at its expense to participate in the defense assisted by counsel of
its own choosing. The Indemnifying Party will not settle the Third Party
Claim or cease to defend against any Third Party Claim as to which it has
delivered a Third Party Defense Notice without the prior written consent of
the Indemnified Party, which consent will not be unreasonably withheld or
delayed; provided, however, such consent may be withheld for any reason if,
as a result of such settlement or cessation of defense, (i) injunctive
relief or specific performance would be imposed against the Indemnified
Party, or (ii) such settlement or cessation would lead to liability or
create any financial or other obligation on the part of the Indemnified
Party for which the Indemnified Party is not entitled to indemnification
hereunder.
(v) If an Indemnified Party refuses to consent to a bona fide offer of
settlement which provides for a full release of the Indemnified Party and
its affiliates relating to Third Party Claims underlying the offer of
settlement and solely for a monetary payment which the Indemnifying Party
wishes to accept, the Indemnified Party may continue to pursue such matter,
free of any participation by the Indemnifying Party, at the sole expense of
the Indemnified Party. In such an event, the obligation of the Indemnifying
Party shall be limited to the amount of the offer of settlement that the
Indemnified Party refused to accept plus the reasonable costs and expenses
of the Indemnified Party incurred prior to the date the Indemnifying Party
notified the Indemnified Party of the offer of settlement.
(vi) Notwithstanding clause (iv) above, the Indemnifying Party shall
not be entitled to control, but may participate in, and the Indemnified
Party shall be entitled to have sole control over, the defense or
settlement of (A) that part of any Third Party Claim (1) that seeks a
temporary restraining order, a preliminary or permanent
41
injunction or specific performance against the Indemnified Party, or (2) to
the extent such Third Party Claim involves criminal allegations against the
Indemnified Party or (B) the entire Third Party Claim, if such Third Party
Claim would impose liability on the part of the Indemnified Party in an
amount which is greater than the amount as to which the Indemnified Party
is entitled to indemnification under this Agreement. In the event the
Indemnified Party retains control of the Third Party Claim, the Indemnified
Party will not settle the subject claim without the prior written consent
of the Indemnifying Party, which consent will not be unreasonably withheld
or delayed.
(vii) A failure by an Indemnified Party to give timely, complete or
accurate notice as provided in this Section 10.5 will not affect the rights
or obligations of any party hereunder except and only to the extent that,
as a result of such failure, any party entitled to receive such notice was
deprived of its right to recover any payment under its applicable insurance
coverage or was otherwise directly and materially damaged as a result of
such failure to give timely notice.
Section 10.6 Limitations On and Other Matters Regarding Indemnification.
----------------------------------------------------------
(a) Subject to Section 10.6(e), Stockholder shall not have any liability to
any Buyer Indemnified Party with respect to Losses arising out of any of the
matters referred to in Section 10.2 of this Agreement until such time as the
aggregate amount of such liability shall exceed $750,000 (in which case
Stockholder shall be liable for all Losses in excess of $750,000).
Notwithstanding anything to the contrary herein, subject to Section 10.6(e), the
maximum aggregate liability of Stockholder for indemnity payments under Section
10.2 shall be $20,000,000.
(b) Termination of Indemnification Obligations of Stockholder. Subject to
Section 10.6(e), the obligation of Stockholder to indemnify under Section 10.2
hereof shall terminate 18 months after the date of the Closing, except (i) as to
matters as to which a Buyer Indemnified Party has made a claim for
indemnification on or prior to such date and (ii) with respect to any claim for
Losses pertaining to a misrepresentation or a breach of representation or
warranty under Section 3.1, 3.8, 3.9, 3.10, 3.11, 3.25 or 3.26 or any other
provision hereof relating to Taxes (including without limitation Section 10.4).
The obligation to indemnify referred to in:
(i) the preceding clause (a) shall survive the expiration of the
period stated therein until such claim for indemnification is finally
resolved and any obligations with respect thereto are fully satisfied; and
(ii) the preceding clause (b) shall terminate 180 days after the
expiration of the relevant federal, state or local statute of limitations
(taking into account any extensions or waivers thereof), except as to
matters as to which any Indemnified Party has made a claim for
indemnification on or prior to such date, in which case the right to
indemnification with respect thereto shall survive the expiration of any
such period until such claim for indemnification is finally resolved and
any obligations with respect thereto are fully satisfied.
42
(c) Termination of Indemnification Obligations of Buyer. The obligation of
Buyer to indemnify under Section 10.3 hereof shall terminate 18 months after the
date of the Closing, except as to matters as to which Stockholder has made a
claim for indemnification on or prior to such date, in which case the right to
indemnification with respect thereto shall survive such period until such claim
for indemnification is finally resolved and any obligations with respect thereto
are fully satisfied.
(d) Treatment. The parties shall treat any indemnity payments by an
Indemnifying Party to an Indemnified Party under this Article X as an adjustment
to the Purchase Price.
(e) Exceptions. Each of the limitations set forth above in this Section
10.6 shall in no event (i) apply to any Losses incurred by a Buyer Indemnified
Party which relate, directly or indirectly, to (A) any fraudulent acts committed
by Stockholder in connection with the transactions contemplated by this
Agreement; (B) any indemnity obligation under Section 10.2(c), Section 10.2(d);
(C) any breach of a representation or warranty contained in Section 3.1, 3.9,
3.10 or 3.25 or any other provision hereof relating to Taxes (including without
limitation Section 10.4); and (D) Stockholder's obligations set forth herein to
pay certain expenses; or (ii) apply to any Losses incurred by Stockholder which
relate, directly or indirectly, to (A) any fraudulent acts committed by Buyer in
connection with the transactions contemplated by this Agreement; and (B) Buyer's
obligations set forth herein to pay certain expenses.
ARTICLE XI
GENERAL PROVISIONS
Section 11.1 Expenses. Each of Buyer and Stockholder shall pay its own
expenses relating to the transactions contemplated by this Agreement, including,
without limitation, the fees and expenses of their respective counsel, financial
advisors and accountants. Stockholder shall pay any fees or commissions payable
to ▇▇▇▇▇▇▇, Sachs & Co, its investment banking firm, and A.R. Management, Inc.
based upon arrangements made by or on behalf of Stockholder, the Company or any
of its subsidiaries. As of the Closing Date, the books and records of the
Company shall not reflect any accrued but unpaid expenses relating to the
Transaction and, accordingly, any such expenses shall be borne by Stockholder.
Section 11.2 Notices. All notices and other communications hereunder shall
be in writing and shall be deemed given (a) if delivered personally, or (b) if
sent by overnight courier service (receipt confirmed in writing), or (c) if
delivered by facsimile transmission (with receipt confirmed), or (d) five (5)
days after being mailed by registered or certified mail (return receipt
requested) to the parties, in each case to the following addresses (or at such
other address for a party as shall be specified by like notice):
(i) If to the Company (prior to the Closing) or Stockholder, to:
Marketing Services Group, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: Chief Executive Officer
43
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. Annex, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
If to Buyer, to:
Omnicom Group Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Secretary
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Section 11.3 Miscellaneous. This Agreement (including the documents and
instruments referred to herein): (a) constitutes the entire agreement and
supersedes all other prior agreements and understandings, both written and oral,
among the parties, or any of them, with respect to the subject matter hereof
other than the Confidentiality Agreement dated February 9, 2001; and (b) shall
not be assigned by operation of law or otherwise. This Agreement shall be
governed by and construed in accordance with the laws of the State of New York
applicable to contracts executed in and to be fully performed in such State,
without giving effect to its conflicts of laws statutes, rules or principles.
The invalidity or unenforceability of any provision of this Agreement shall not
affect the validity or enforceability of any other provision of this Agreement,
which shall remain in full force and effect. The parties hereto shall negotiate
in good faith to replace any provision of this Agreement so held invalid or
unenforceable with a valid provision that is as similar as possible in substance
to the invalid or unenforceable provision.
44
Section 11.4 Interpretation. When reference is made in this Agreement to
Articles and Sections, such reference shall be to an Article or Section of this
Agreement, as the case may be, unless otherwise indicated. The table of contents
and headings contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this Agreement.
Whenever the words "include", "includes", or "including" are used in this
Agreement, they shall be deemed to be followed by the words "without
limitation." Whenever "or" is used in this Agreement it shall be construed in
the nonexclusive sense.
Section 11.5 Counterparts; Effect. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original, but all of
which together shall constitute one and the same agreement.
Section 11.6 Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto and its successors, assigns and
administrators, and nothing in this Agreement, express or implied, is intended
to confer upon any Person any rights or remedies of any nature whatsoever under
or by reason of this Agreement.
Section 11.7 Specific Performance. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties hereto shall be
entitled to an injunction or injunctions to prevent breaches of this Agreement
and to enforce specifically the terms and provisions hereof in any court of the
United States located in the State of New York or in New York state court, this
being in addition to any other remedy to which they are entitled at law or in
equity. In addition, each of the parties hereto (a) consents to submit itself to
the personal jurisdiction of any federal court located in the State of New York
or any New York state court in the event any dispute arises out of this
Agreement or any of the transactions contemplated by this Agreement, (b) agrees
that it will not attempt to deny such personal jurisdiction by motion or other
request for leave from any such court and (c) agrees that it will not bring any
action relating to this Agreement or any of the transactions contemplated by
this Agreement in any court other than a federal or state court sitting in the
State of New York.
Section 11.8 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING
TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON
CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK
TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER
PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
Section 11.9 "Person" Defined "Person" shall mean and include an
individual, a company, a joint venture, a corporation (including any non-profit
corporation), an estate, an
45
association, a trust, a general or limited partnership, a limited liability
company, a limited liability partnership, an unincorporated organization and a
government or other department or agency thereof.
Section 11.10 "Knowledge" Defined. Where any representation and warranty
contained in this Agreement is expressly qualified by reference to the knowledge
of Stockholder, such term shall be limited to the actual knowledge of the
executive officers of Stockholder and the Company and unless otherwise stated,
such knowledge that would have been discovered by such executive officers after
reasonable inquiry. Where any representation and warranty contained in this
Agreement is expressly specified by reference to the knowledge of Buyer, such
term shall be limited to the actual knowledge of the executive officers of Buyer
and unless otherwise stated, such knowledge that would have been discovered by
such executive officers after reasonable inquiry.
Section 11.11 "Affiliate" Defined. As used in this Agreement, an
"affiliate" of any Person shall mean any Person that directly, or indirectly
through one or more intermediaries, controls, or is controlled by, or is under
common control with such Person.
Section 11.12 Publicity. Buyer and Stockholder shall agree on the content
of the initial press release regarding the Transaction to be released upon the
execution of this Agreement, and shall further cooperate with each other in the
development and distribution of all news releases and other public information
disclosures with respect to this Agreement, or any of the transactions
contemplated hereby. Notwithstanding the foregoing, no party to this Agreement
shall, and Stockholder shall insure that no representative of Stockholder, the
Company or any of its subsidiaries shall, issue any press release or other
public document or make any public statement relating to this Agreement or the
matters contained herein without obtaining the prior approval of Buyer and
Stockholder.
Section 11.13 No Strict Construction. The language used in this Agreement
will be deemed to be the language chosen by Stockholder and Buyer to express
their mutual intent, and no rule of strict construction will be applied against
any party hereto.
Section 11.14 Amendment. This Agreement may not be amended except by an
instrument in writing signed on behalf of both of the parties hereto.
Section 11.15 Waiver. At any time prior to the Closing Date, any party may
(a) extend the time for the performance of any of the obligations or other acts
of the other party hereto, (b) waive any inaccuracies in the representations and
warranties of the other party contained herein or in any document delivered
pursuant hereto and (c) waive compliance with any of the agreements or
conditions for such party's benefit contained herein, to the extent permitted by
applicable law. Any agreement to any such extension or waiver shall be valid
only if set forth in an instrument in writing signed by a duly authorized
officer of the party to be bound thereby. No waiver by any party of any term or
condition of this Agreement, in any one or more instances, shall be deemed to be
or construed as a waiver of the same or any other term or condition of this
Agreement on any future occasion.
Section 11.16 Termination. This Agreement may be terminated and the
Transaction may be abandoned at any time prior to the Closing by:
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(a) mutual consent of the Boards of Directors of each of Stockholder
and Buyer;
(b) either Stockholder or Buyer (provided the terminating party is not
then in breach hereof), if the other party breaches its representations,
warranties or covenants hereunder in any material respect and such breach
is not cured within 30 days after the delivery of written notice thereof to
such breaching party, unless the breach of any such representation,
warranty, or covenant does not materially adversely affect the financial
condition, business or assets of the breaching party taken as a whole or
the ability of any or all parties to consummate the transactions
contemplated hereby;
(c) either Stockholder or Buyer, if a final and non-appealable order,
decree or judgment of any court, agency, commission or Governmental
Authority is issued or existing against the parties or any of them or any
of their directors which would enjoin the Transactions;
(d) either Stockholder or Buyer, if the Closing Date has not occurred
prior to the close of business on December 31, 2001; or
(e) either Stockholder or Buyer at any time prior to the scheduled
Closing Date, if the conditions to such parties' obligation to close set
forth in Articles VIII or IX, respectively, shall have become incapable of
being satisfied by the close of business on December 31, 2001.
Section 11.17 Effect of Termination. If this Agreement is terminated as
provided in Section 11.16 hereof, then except as otherwise provided in this
Section, this Agreement shall forthwith become void and there shall be no
liability on the part of any party hereto or its respective officers or
directors arising from the act of such permitted termination. Notwithstanding
the foregoing, in the event of a non-permitted termination or a failure to close
the transaction contemplated by this Agreement by reason of a breach by a party
hereto, nothing herein shall preclude any action or claim for damages to which
any party is otherwise entitled as a result of a breach by any other party
hereto.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their respective officers thereunto duly authorized as of the date
first above written.
OMNICOM GROUP INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Secretary
MARKETING SERVICES GROUP, INC.
By: /s/ J. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
--------------------------------
Name: J. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Chairman of the Board and
Chief Executive Officer
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