<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
Date of Report (Date of earliest event reported): September 26, 1997
EAGLE RIVER INTERACTIVE, INC.
(Exact name of registrant as specified in its charter)
Delaware 84-1320277
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
11000 N. Scottsdale Road, Suite 260
Scottsdale, Arizona 85254
(Address of principal executive offices) (Zip Code)
(602) 998-7500
(Registrant's telephone number, including area code)
<PAGE> 2
Item 2. Acquisition or Disposition of Assets.
On September 26, 1997, Eagle River Interactive, Inc. and its subsidiaries (the
"Company") completed the sale of the assets of its Interactive Development
Group to Eagle River Acquisition Inc., an affiliate of the Omnicom Group. The
Company received cash consideration of $13.5 million and was relieved of
certain liabilities at the closing in exchange for the Interactive Development
Group assets. In addition, the Asset Purchase Agreement provides for Eagle
River Acquisition Inc. to pay the Company certain additional future cash
consideration contingent on the business' future earnings through calendar year
2000. The Interactive Development Group's assets include those located in
offices in Chicago; New York; Dallas; Avon, CO; Denver, CO; Portland, OR;
Mountain View and Los Angeles, CA; and Paris, France. The principal assets
sold by the Company include accounts receivable, furniture, fixtures,
equipment, leasehold improvements and certain intangibles, all of which are
more fully described in the Asset Purchase Agreement, which is attached hereto
as Exhibit 1 and incorporated by reference herein. The Asset Purchase
Agreement also contains the formula by which any contingent payouts are to be
determined.
Item 7. Financial Statements and Exhibits.
(b) Pro Forma Financial Information
EAGLE RIVER INTERACTIVE, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
The following unaudited pro forma consolidated statements of operations of the
Company for the fiscal year ended December 31, 1996 have been prepared assuming
that the sale of the Interactive Development Group discussed in Item 2 had
occurred as of the beginning of the fiscal year ended December 31, 1996. These
unaudited pro forma consolidated statements of operations are not necessarily
indicative of the results which would have been reported if the transaction had
occurred at the beginning of the fiscal year ended December 31, 1996, or which
may be reported in the future. These unaudited pro forma consolidated
statements of operations have been prepared on the basis of and give effect to
the adjustments described in the accompanying notes, and should be read in
conjunction with the related notes, the description contained in Item 2, the
Company's Form 10-Q for the period ended June 30, 1997 and the audited
financial statements included in the Company's Form 10-K for the fiscal year
ended December 31, 1996.
The pro forma adjustments are based upon preliminary estimates only. As a
result, they may differ from amounts actually determined.
In addition to the sale of the Interactive Development Group discussed above, in
September 1997 the Company also sold the assets of SkiView Inc. ("SkiView")
which were an insignificant part of the Company's operations. The pro formas
include not only adjustments relating to the Interactive Development Group but
also adjustments relating to the sale of assets of SkiView. Refer to the
Company's segmental disclosure included in the Company's Form 10-K for the
fiscal year ended December 31, 1996 for additional financial information related
to SkiView.
<PAGE> 3
EAGLE RIVER INTERACTIVE, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION> Pro Forma
Historical Adjustments Pro Forma
---------- ----------- ---------
<S> <C> <C> <C>
Revenue $ 39,264 $18,246(a) $ 21,018
---------- ------- ----------
Operating Expenses:
Cost of revenue 21,018 15,722(a) 5,296
Marketing and selling expenses 12,403 3,099(a) 9,304
General and administrative
expenses 10,630 3,909(a) 6,721
Depreciation and amortization 2,149 1,896(a) 253
---------- ------- ----------
Total Operating Expenses 46,200 24,626 21,574
---------- ------- ----------
Net Operating Loss (6,936) (6,380) (556)
Other Income, net 1,586 49 1,537
---------- ------- ----------
(Loss) Income from Continuing Operations
Before tax Benefit (5,350) (6,331) 981
Tax Benefit (Provision) 2,260 2,721(b) (461)
---------- ------- ----------
(Loss) Income from Continuing Operations $ (3,090) $(3,610) $ 520
========== ======= ==========
(Loss) Income from Continuing Operations
Per Common Share $ (0.25) $ .04
========== ==========
Weighed Average Number of
Common Shares and Common Share
Equivalents Outstanding 12,285,782 13,737,434(c)
========== ==========
</TABLE>
a) Reflects the elimination of the historical revenue, cost of revenue,
marketing and selling expenses, depreciation and amortization and
administrative expenses associated with the Interactive Development Group
sold. In addition, the eliminations include pro forma adjustments to
eliminate amounts relating to the sale of the assets of SkiView.
b) Represents the estimated income tax effect of the pro forma adjustments
discussed in Note a.
c) Includes common share equivalents that were anti-dilutive for historical
reporting purposes and dilutive for pro forma reporting purposes.
<PAGE> 4
e) Exhibits
Exhibit 1 Asset Purchase Agreement dated September 26,
1997 by and among Omnicom Group Inc., Eagle
River Interactive, Inc., Graphic Media, Inc.
and Eagle River Acquisition Inc.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
EAGLE RIVER INTERACTIVE, INC.
Date: October 10, 1997
By: /s/ Marc Pinto
Marc Pinto
Executive Vice President,
Chief Financial Officer
EXHIBIT INDEX
The following Exhibits are filed herewith:
Exhibit 1 Asset Purchase Agreement dated September 26,
1997 by and among Omnicom Group Inc., Eagle
River Interactive, Inc., Graphic Media, Inc.
and Eagle River Acquisition Inc.
<PAGE> 5
EXHIBIT INDEX
The following Exhibits are filed herewith:
Exhibit 1 Asset Purchase Agreement dated September 26,
1997 by and among Omnicom Group Inc., Eagle
River Interactive, Inc., Graphic Media, Inc.
and Eagle River Acquisition Inc.
<PAGE> 1
________________________________________________________________________________
ASSET PURCHASE AGREEMENT
by and among
OMNICOM GROUP INC.,
EAGLE RIVER INTERACTIVE, INC.,
GRAPHIC MEDIA, INC.
and
EAGLE RIVER ACQUISITION INC.
________________________________________________________________________________
Dated September 26, 1997
<PAGE> 2
TABLE OF CONTENTS
ARTICLE I
SALE OF ASSETS
<TABLE>
<S> <C>
Section 1.1 Assets Transferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.2 Excluded Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 1.3 Assumed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 1.4 Retained Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE II
PURCHASE PRICE AND CLOSING
Section 2.1 Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.1.1 Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.1.2 PBT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.1.3 Other Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.1.4 Accounting Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.1.5 Examination of Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 2.2 Payment of the Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 2.3 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 2.4 Further Assurance; Post Closing Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 2.5 Third Party Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 2.6 Good Faith Negotiation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE III
REPRESENTATIONS OF THE PARENT AND SUB
Section 3.1 Execution and Validity of Agreement; Existence and Good Standing . . . . . . . . . . . . . . . 16
Section 3.2 Subsidiaries and Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 3.3 Financial Statements and No Material Changes . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 3.4 Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 3.5 Title to Properties; Encumbrances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 3.6 Real Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.6.1 Owned Real Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.6.2 Leased Real Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 3.7 Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 3.8 Non-Contravention; Approvals and Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.8.1 Non-Contravention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.8.2 Approvals and Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 3.9 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 3.10 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 3.11 Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 3.12 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 3.13 Intellectual Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 3.14 Compliance with Laws; Licenses and Permits . . . . . . . . . . . . . . . . . . . . . . . . . . 22
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
3.14.1 Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
3.14.2 Licenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 3.15 Client Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 3.16 Accounts Receivable; Work-in-Process; Accounts Payable . . . . . . . . . . . . . . . . . . . . 23
Section 3.17 Employment Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 3.18 Employee Benefit Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.18.1 List of Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.18.2 Severance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
3.18.3 Multi-Employer Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
3.18.4 Welfare Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
3.18.5 Administrative Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
3.18.6.Tax Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
3.18.7 Funding; Excise Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
3.18.8 Tax Deductions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 3.19 Interests in Customers, Suppliers, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 3.20 Compensation of Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 3.21 No Changes Since the Balance Sheet Date . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 3.22 Corporate Controls . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 3.23 Prepayment for Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 3.24 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 3.25 Copies of Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE IV
REPRESENTATIONS OF OMNICOM AND THE PURCHASER
Section 4.1 Existence and Good Standing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 4.2 Execution and Validity of Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 4.3 Non-Contravention; Approvals and Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
4.3.1 Non-Contravention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
4.3.2 Approvals and Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 4.4 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 4.5 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 4.6 No Prior Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE V
ACTIONS AT CLOSING BY THE COMPANIES
Section 5.1 Required Approvals, Notices and Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 5.2 Assumed Employment Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 5.3 Non-Competition Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 5.4 Certified Resolutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 5.5 Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 5.6 Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
</TABLE>
ii
<PAGE> 4
ARTICLE VI
ACTIONS AT CLOSING BY OMNICOM AND THE PURCHASER
<TABLE>
<S> <C>
Section 6.1 Required Approvals, Notices and Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 6.2 Certified Resolutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 6.3 Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 6.4 License Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 6.5 Assumed Employment Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 6.6 Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE VII
OTHER AGREEMENTS
Section 7.1 Allocation of Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 7.2 Change of Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 7.3 Agreements Regarding Business Employees After Closing . . . . . . . . . . . . . . . . . . . . 35
7.3.1 Affected Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
7.3.2 Service Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.3.3 Transfer of 401(K) Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.4 Special Bonus Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
7.5 Operation of the Business by the Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . . 37
7.6 Financial Statements of the Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
7.7 Sales Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
7.8 Transfer Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
7.9 Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
7.10 Transition Services Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
7.10.1 Services by the Parent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
7.10.2 Services by the Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
ARTICLE VIII
SURVIVAL; INDEMNITY
Section 8.1 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 8.2 Obligation of the Companies to Indemnify . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 8.3 Obligation of Omnicom and the Purchaser to Indemnify . . . . . . . . . . . . . . . . . . . . . 41
Section 8.4 Right of Offset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 8.5 Indemnification Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
8.5.1 Notice of Asserted Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
8.5.2 Defense of Asserted Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
8.5.3 Control by Omnicom . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 8.6 Limitations on Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
8.6.1 Indemnity Cushion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
8.6.2 Termination of Indemnification Obligations of the Companies . . . . . . . . . . . . . . . . . 43
8.6.3 Termination of Indemnification Obligations of Omnicom and the Purchaser . . . . . . . . . . . 44
8.6.4 Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
8.6.5 Deductions; Exclusive Remedy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
</TABLE>
iii
<PAGE> 5
ARTICLE IX
MISCELLANEOUS
<TABLE>
<S> <C>
Section 9.1 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 9.2 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 9.3 Person Defined . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 9.4 Knowledge Defined . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 9.5 Affiliate Defined . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 9.6 Captions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 9.7 Publicity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 9.8 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 9.9 Parties in Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 9.10 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 9.11 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 9.12 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 9.13 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 9.14 Third Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 9.15 Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
</TABLE>
iv
<PAGE> 6
EXHIBITS
<TABLE>
<S> <C>
Exhibit A Non-Competition Agreement
Exhibit B-1 Legal Opinion of Sidley & Austin
Exhibit B-2 Legal Opinion of Fred McCallister
Exhibit C Legal Opinion of Davis & Gilbert
</TABLE>
SCHEDULES
<TABLE>
<S> <C>
Schedule 1.2 Excluded Assets
Schedule 3.1 Execution and Validity of Agreement; Existence
and Good Standing
Schedule 3.3 (A) Financial Statements and No Material Changes
Schedule 3.3 (B) GAAP Exceptions
Schedule 3.4 Books and Records
Schedule 3.5 Title to Properties; Encumbrances
Schedule 3.6.2 Leased Real Property
Schedule 3.7 Contracts
Schedule 3.8.2 Approvals and Consents
Schedule 3.9 Litigation
Schedule 3.10 Taxes
Schedule 3.12 Insurance
Schedule 3.13 Intellectual Properties
Schedule 3.15 Client Relations
Schedule 3.18.1 List of Plans
Schedule 3.18.2 Severance
Schedule 3.18.3 Multi-Employer Plans
Schedule 3.18.4 Welfare Benefit Plans
Schedule 3.18.7 Funding; Excise Taxes
Schedule 3.19 Interests in Customers, Suppliers, Etc.
Schedule 3.20 Compensation of Employees
Schedule 3.21 No Changes Since the Balance Sheet
Schedule 3.23 Prepayment for Services
Schedule 4.3.2 Approvals and Consents
Schedule 5.1 Required Approvals, Notices and Consents
Schedule 5.2 Assumed Employment Agreements
Schedule 7.9 Guarantees
Schedule 7.10.2 Services by the Purchaser
</TABLE>
v
<PAGE> 7
INDEX OF DEFINED TERMS
<TABLE>
<S> <C>
Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Affected Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
AM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Annual Determination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
AP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Arm's Length Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Asserted Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Assumed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Assumed Medical Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Balance Sheet Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Balance Sheet Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Balance Sheet Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Business Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Business Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Business Employee on Leave . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Business Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Claims Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Companies Indemnified Party . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
DAS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
ERISA Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Excluded Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
FIP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
FP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
</TABLE>
vi
<PAGE> 8
<TABLE>
<S> <C>
GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Governmental Or Regulatory Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Guaranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
HSR Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Incumbent Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Indemnified Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Indemnifying Party . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Independent Auditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Intangible Personal Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Knowledge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Licenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Material Adverse Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Measuring Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Omnicom . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Omnicom Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Orders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Other Business Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Parent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Parent's Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Parent Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
PBGC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
PBT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Personal Property Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Prepaid Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Profit Margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Purchase Price Allocation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
</TABLE>
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<PAGE> 9
<TABLE>
<S> <C>
Purchased Net Worth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Purchaser's Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Purchaser's Savings Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Purchaser Indemnified Party . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
RB1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
RB2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Real Property Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Related Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Retained Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Retention Bonuses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SBP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Service Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SIP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Special Bonus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Special Determination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SRC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
SRC Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Stub PBT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Stub Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Sub . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Tangible Personal Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Tenant Security Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
TIP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Title IV Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Transfer Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Valuation Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Work-In-Progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
</TABLE>
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<PAGE> 10
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT (the "AGREEMENT") dated September 26, 1997 by
and among OMNICOM GROUP INC., a New York corporation ("OMNICOM"); EAGLE RIVER
ACQUISITION INC., a Delaware corporation and a wholly-owned subsidiary of
Omnicom; (the "PURCHASER"); EAGLE RIVER INTERACTIVE, INC., a Delaware
corporation (the "PARENT"); and GRAPHIC MEDIA, INC., an Oregon corporation and
wholly-owned subsidiary of the Parent ("SUB;" together with the Parent
sometimes collectively called the "COMPANIES" and individually a "COMPANY").
W I T N E S S E T H :
WHEREAS, the Parent has adopted a plan to focus on its information
training business and accordingly, to sell its other businesses; and
WHEREAS, a division of the Parent, conducted through the Parent and
Sub, is in the business of developing custom interactive solutions, including
without limitation, Web sites, intranets, extranets, interactive CD-Roms, and
kiosks (the "BUSINESS"); and
WHEREAS, the Companies wish to sell, and the Purchaser wishes to
purchase, substantially all of the assets of the Companies related solely to
the Business, subject to certain liabilities, upon the terms and subject to the
conditions of this Agreement; and
WHEREAS, the Companies are not selling, and the Purchaser is not
purchasing, any assets of the Companies, or assuming any liabilities of the
Companies, relating to any business activities of the Companies other than the
Business.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth in this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties do hereby agree as follows:
ARTICLE I
SALE OF ASSETS
SECTION 1.1 ASSETS TRANSFERRED. On the terms and subject to the
conditions set forth in this Agreement, each of the Companies will sell,
transfer, convey, assign and deliver to the Purchaser, and the Purchaser will
purchase, at the Closing (as defined in Section 2.3), except as set forth in
Section 1.2, all of such Company's right, title and interest in, to and under
the following assets, properties and rights of such Company used or held for
use
<PAGE> 11
primarily in connection with the Business (collectively, the "ASSETS"), free
and clear of all mortgages, liens, security interests, encumbrances, claims,
charges and restrictions of any kind or character (collectively, "LIENS"):
(i) Balance Sheet Assets. All of the assets, properties and
rights of the Companies reflected on the Balance Sheet referred to in
Section 3.3 (except as specifically set forth in Section 1.2 below),
as modified or changed between the Balance Sheet Date (as defined in
Section 3.3) and the Closing Date (as defined in Section 2.3) without
violation of the provisions of Section 3.21 ("BALANCE SHEET ASSETS");
(ii) Real Property Leases. (A) The real property leases,
subleases, licenses and other occupancy agreements related to the
Business set forth on SCHEDULE 3.6.2 as to which either of the
Companies is the lessor or sublessor and (B) the real property leases,
subleases, licenses and other occupancy agreements related to the
Business set forth on SCHEDULE 3.6.2 as to which either of the
Companies is the lessee or sublessee, together with any options to
purchase the underlying property and leasehold improvements thereon
(the leases, subleases, licenses and other occupancy agreements
described in subclauses (A) and (B) are collectively referred to
herein as, the "REAL PROPERTY LEASES");
(iii) Work-in-Process. All inventories of work-in-process, active
job orders, items under the balance sheet caption "costs and estimated
earnings in excess of billings," office and other supplies, and other
accessories related thereto, which are used or held for use by either
of the Companies primarily in the conduct of the Business, together
with all rights of the Companies against suppliers of such inventories
(the "WORK-IN- PROCESS");
(iv) Accounts Receivable. All trade accounts receivable and all
notes, bonds and other evidences of indebtedness of and rights to
receive payments arising out of sales occurring in the conduct of the
Business ("ACCOUNTS RECEIVABLE");
(v) Tangible Personal Property. All furniture, fixtures,
equipment, machinery and other tangible personal property (other than
Inventory) used or held for use by either of the Companies primarily
in the conduct of the Business, including without limitation, the
tangible personal property listed on SCHEDULE 3.5, and any of the
foregoing purchased subject to any conditional sales or title
retention agreement in favor of any other Person (as defined in
Section 9.3 below) (the "TANGIBLE PERSONAL PROPERTY");
(vi) Personal Property Leases. (A) The leases or subleases of
Tangible Personal Property related primarily to the Business
(including but not limited to those set forth on SCHEDULE 3.7) as to
which the Company is the lessor or sublessor and (B) the leases of
Tangible Personal Property related primarily to the Business
(including but not limited to those set forth on SCHEDULE 3.7) as to
which the Company is the lessee or
2
<PAGE> 12
sublessee, together with any options to purchase the underlying
property (the leases and subleases described in subclauses (A) and (B)
are collectively referred to herein as, the "PERSONAL PROPERTY
LEASES");
(vii) Client List and Business Contracts. The current and
prospective client list of each of the Companies relating primarily to
the Business, all of the existing contracts and agreements of each of
the Companies relating primarily to the Business with clients and the
right to service such clients in respect of the Business, and the
rights of each of the Companies under its open media commitments,
purchase orders and other contracts and agreements related primarily
to the Business, including but not limited to (A) the employment
agreement between the Parent and Kevin Rowe, (b) the employment
agreement between the Sub and each of Joseph Parker and Philip Meurer
(collectively, the agreements described in subclauses (A) and (B) are
collectively referred to herein as the "Assumed Employment
Agreements") and (c) the Employee Proprietary Rights Agreement with
any Affected Employees (as defined in Section 7.3.1 below), and except
as otherwise provided in Section 1.4, the other agreements set forth
on SCHEDULE 3.7 (the "BUSINESS CONTRACTS");
(viii) Prepaid Expenses. The prepaid expenses relating primarily to
the Business other than prepaid insurance ("PREPAID EXPENSES");
(ix) Intangible Personal Property. All Intellectual Property (as
defined in Section 3.13 below) used or held for use by either of the
Companies primarily in the conduct of the Business (including such
Company's goodwill therein), including without limitation, the items
listed on SCHEDULE 3.13 and the name "Eagle River Interactive" and any
derivation thereof (but excluding any rights in the Eagle River
Interactive logo consisting of a fish pursuing another fish and the
trademark "Lifeguard"), all of the Companies' rights, privileges,
claims, and causes of action to the extent relating or pertaining to
the Business or the Assets, and the rights of each of the Companies
under those commitments, leases, contracts and agreements assumed by
the Purchaser pursuant to Section 1.3 below (the "INTANGIBLE PERSONAL
PROPERTY");
(x) Licenses. All licenses, permits and other governmental
certificates, authorizations and approvals (collectively, "LICENSES"),
including applications therefor utilized primarily in the conduct of
the Business;
(xi) Security Deposits. All security deposits deposited by or on
behalf of either of the Companies as lessee or sublessee under the
Real Property Leases (but excluding any cash collateralized letters of
credit) ("TENANT SECURITY DEPOSITS");
(xii) Books and Records. All books and records used or held for use
in the conduct of the Business or otherwise relating to the Assets,
other than the minute books, stock transfer books, and corporate seal
of either of the Companies and other than any books
3
<PAGE> 13
and records pertaining primarily to the Excluded Assets or Retained
Liabilities. ("BUSINESS BOOKS AND RECORDS");
(xiii) Goodwill. The goodwill of the Business ("GOODWILL");
(xiv) Capital Stock of SRC. All of the shares of capital stock of
SRC Localization ("SRC") held beneficially or of record by the Parent
("SRC STOCK"); and
(xv) Other Business Assets. Except as otherwise provided in
Section 1.2 below, all other assets and properties of every kind and
nature owned or held by either of the Companies, or in which either of
the Companies has an interest, known or unknown, fixed, unfixed,
choate or inchoate, accrued, absolute, contingent, or otherwise,
whether or not specifically referred to in this Agreement, but in each
case only if primarily used or held for use in the conduct of the
Business ("OTHER BUSINESS ASSETS").
SECTION 1.2 EXCLUDED ASSETS. Anything in this Agreement to the
contrary notwithstanding, there shall be excluded from the assets, properties,
rights and business to be transferred to the Purchaser hereunder (and the
Assets shall not be deemed to include), (i) the corporate seal, minute book,
charter documents and stock records, tax returns and tax records of each of the
Companies; (ii) cash, cash equivalents, bank deposits and collateralized
letters of credit; (iii) payments made and to be made to the Companies, and
other rights of the Companies under this Agreement; (iv) receivables of any
nature owing to the Parent by Sub or any other subsidiary of the Parent
(collectively, the Parent and its subsidiaries are sometimes called, the
"PARENT GROUP"); (v) receivables of any nature owing to Sub by Parent or any
other member of the Parent Group; (vi) insurance policies and rights under any
insurance policies (except as an insurance policy specifically relates to the
Assumed Medical Plan, as such term is defined in Section 7.3.1 below); (vii)
prepaid insurance (except if such prepaid insurance relates to the Assumed
Medical Plan); (viii) any income tax refunds relating to periods prior to the
Closing; (ix) any assets under the balance sheet caption "Deferred Tax Asset";
(x) shares of stock or other securities in any member of the Parent Group other
than SRC, or any other Person; (xi) all claims, rights or causes of action
relating to any Excluded Asset or Retained Liability; (xii) any right or
interest in the tradename "Mastering Computers," "SkiView," or any derivation
thereof or trademark or logo related thereto or in the Eagle River Interactive
logo consisting of a fish pursuing another fish, or the trademark "Lifeguard";
(xiii) any asset, property or record listed or described in SCHEDULE 1.2; and
(xiv) any asset, property or record used by the Companies primarily in
connection with their businesses other than the Business (collectively, the
"EXCLUDED ASSETS").
SECTION 1.3 ASSUMED LIABILITIES. Except as set forth in Section
1.4 below, in connection with the sale, transfer, conveyance, assignment and
delivery of the Assets pursuant to this Agreement, on the terms and subject to
the conditions set forth in this Agreement, at the Closing, the Purchaser will
assume on the Closing Date and agrees to pay, perform and
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discharge when due, the following obligations of the Companies arising solely
in connection with the operation of the Business (the "ASSUMED LIABILITIES"),
and no others:
(i) Balance Sheet Obligations. All liabilities of the Companies
to the extent reflected on the Balance Sheet, as modified or changed
between the Balance Sheet Date and the Closing Date in the ordinary
course of business without violation of Section 3.21, unless any such
liability is specifically excluded under Section 1.4 below (the
"BALANCE SHEET OBLIGATIONS");
(ii) Real Property Lease Obligations. All obligations of the
Companies under the Real Property Leases arising and to be performed
on or after the Closing Date, and excluding any such obligations
arising or to be performed prior to the Closing Date which is not
reflected on the Balance Sheet or set forth on any Schedule to this
Agreement;
(iii) Personal Property Lease Obligations. All obligations of the
Companies under the Personal Property Leases arising and to be
performed on or after the Closing Date, and excluding any such
obligations arising or to be performed prior to the Closing Date which
is not reflected on the Balance Sheet or set forth on any Schedule to
this Agreement(unless not required by the terms of this Agreement to
be so set forth on a Schedule);
(iv) Obligations under Contracts and Licenses. All obligations of
the Companies under the Business Contracts, Licenses and licenses to
and for the Intangible Personal Property arising and to be performed
on or after the Closing Date, and excluding any such obligations
arising or to be performed prior to the Closing Date which is not
reflected on the Balance Sheet or set forth on any Schedule to this
Agreement (unless not required by the terms of this Agreement to be so
set forth on a Schedule);
(v) Non-Income Related Taxes. Any obligation of the Companies for
Taxes not related to or based on the income or profits of the
Companies, but only to the extent accrued on the audited consolidated
balance sheet of the Companies as of the Closing Date prepared in
connection with Section 2.1.4 or as set forth in Section 7.7 below;
(vi) Obligations to Affected Employees. All obligations of the
Companies to the Affected Employees (as defined in Section 7.3.1
below) arising and to be performed on or after the Closing Date
(including obligations under the Assumed Employment Agreements), and
excluding any such obligations arising or to be performed prior to the
Closing Date which is not reflected on the Balance Sheet or any
obligation relating to any stock option or stock purchase right
granted to any Affected Employee by the Parent; and
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(vii) Other Obligations. All other obligations of the Companies
related primarily to the Business which are specifically reflected on
any Schedule to this Agreement as a liability of either of the
Companies related primarily to the Business.
SECTION 1.4 RETAINED LIABILITIES. Except for the Assumed
Liabilities, the Purchaser shall not assume by virtue of this Agreement or the
transactions contemplated hereby, and shall have no liability for, any
liabilities of either of the Companies of any kind, character or description
whatsoever (the "RETAINED LIABILITIES"). Without limiting the generality of
the foregoing, the Purchaser shall not assume the following:
(i) any liability or obligation of the Companies arising out of or
in connection with the negotiation and preparation of this Agreement
and consummation and performance of the transactions contemplated
hereby, including without limitation, legal and accounting fees,
brokerage commissions, finder's fees or similar fees or commissions,
and income, sales (except as provided in Section 7.7 below) or other
tax liability so arising;
(ii) any liability or obligation of the Parent or the Sub to
distribute to its stockholder(s) all or any part of the Purchase Price
(as defined in Section 2.1 below);
(iii) any liability or obligation of the Companies arising from the
failure of either of the Companies to perform or discharge any of its
agreements contained herein;
(iv) any liability or obligation of the Companies which was
required to be disclosed to the Purchaser pursuant to this Agreement
and which was not so disclosed;
(v) any liability or obligation of the Companies with respect to
any insurance policies;
(vi) any obligation of the Companies for Taxes (as defined in
Section 3.10) other than non-income related Taxes to the extent
accrued on the audited consolidated balance sheet of the Companies as
of the Closing Date prepared in connection with Section 2.1.4 or as
set forth in Section 7.7 below;
(vii) any liability or obligation of the Companies to any employees
of either of the Companies engaged in the conduct of the Business and
who are offered the opportunity to become employees of the Purchaser
as provided in Section 7.3.1 below (individually, a "BUSINESS
EMPLOYEE" and collectively, the "BUSINESS EMPLOYEES"), but who on the
Closing Date do not accept such employment;
(viii) any claim, cause of action, proceeding or other litigation
pending or threatened on the Closing Date (including without
limitation those set forth on SCHEDULE 3.9) or which is initiated at
any time thereafter against either of the Companies to the extent
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the same is based on acts, facts, circumstances, events or conditions
occurring or existing prior to the Closing;
(ix) any Plan (as defined in Section 3.18.1 below) of either of the
Companies, and any liability or obligation created thereunder other
than as provided in Section 7.3 below in respect of the Parent's
401(K) Plan and the Assumed Medical Plan, or any liability or
obligation of the Companies to any of their employees in respect of
any stock option or stock purchase right granted by the Parent to any
Affected Employee;
(x) any obligation or liability to former employees of either of
the Companies who were engaged in the conduct of the Business and who
are receiving or are entitled to receive any healthcare or life
insurance benefits or any other payment from one of the Companies,
whether covered by a Plan or otherwise; and
(xi) any liability or obligation of the Companies incurred by or
accruing to the Companies prior to or after the Closing Date unless
specifically assumed by the Purchaser under this Agreement.
ARTICLE II
PURCHASE PRICE AND CLOSING
SECTION 2.1 PURCHASE PRICE. In full consideration for the
purchase by the Purchaser of the Assets, the Purchaser shall pay to the Parent,
on behalf of the Companies, the purchase price (the "PURCHASE PRICE")
consisting of the five Basic Payments (comprised of a Closing Payment, three
Interim Payments and a Final Payment). The Purchaser and the Companies agree
that the Purchase Price shall be allocated among and deemed paid for the Assets
as provided in Section 7.1. The Basic Payments shall be calculated and paid by
the Purchaser to the Companies as follows:
2.1.1 Payments.
(i) Closing Payment. At the Closing, the Purchaser shall pay to
the Parent, on behalf of the Companies, an amount equal to $13,500,000
(the difference between $13,500,000 and the Purchased Net Worth (as
defined in Section 2.1.3(i) below) is herein called the "AP")).
(ii) First Interim Payment. Within five business days after the
Annual Determination (as defined in Section 2.1.4(ii) below) for the
Stub Period (as defined in Section 2.1.3(ii) below) and any
adjustments thereto shall have become binding on the parties as
provided in Section 2.1.4, the Purchaser shall pay to the Parent, on
behalf of the Companies, the First Interim Payment ("FIP"), calculated
as follows:
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{(AM x Stub PBT)} - (AP + SBP)
( 3.25)
(iii) Second Interim Payment. Within five business days after the
Annual Determination for calendar year 1998 and any adjustments
thereto shall have become binding on the parties as provided in
Section 2.1.4, the Purchaser shall pay to the Parent, on behalf of the
Companies, the Second Interim Payment ("SIP"), calculated as follows:
SIP = {AM x (Stub PBT + 1998 PBT)} - (AP + FIP + SBP+ 667,000 + RB1)
( 3.25 )
(iv) Third Interim Payment. Within five business days after the
Annual Determination for calendar year 1999 and any adjustments
thereto shall have become binding on the parties as provided in
Section 2.1.4, the Purchaser shall pay the Parent, on behalf of the
Companies, the Third Interim Payment ("TIP"), calculated as follows:
TIP = {AM x (Stub PBT+1998 PBT + 1999 PBT)} - (AP + FIP + SIP + SBP + 1,333,000
+ RB1 + RB2)
( 3.25 )
(v) Final Payment. Within five business days after the Annual
Determination for calendar year 2000 and any adjustments thereto shall
have become binding on the parties as provided in Section 2.1.4, the
Purchaser shall pay the Parent, on behalf of the Companies, the Final
Payment ("FP"), calculated as follows:
FP = {AM x (Stub PBT + 1998 PBT + 1999 PBT + 2000 PBT)} - (AP + FIP + SIP + TIP
+ SBP+ 2,000,000 + RB1 + RB2)
( 3.25 )
(vi) No Negative Payments. If the amount calculated under any of
clauses (i) through (v) above is negative, the payment under such clause shall
be zero and the Companies shall have no obligation to refund to the Purchaser
the amount of such negative calculation expressed as a positive number.
2.1.2 PBT. For purposes of this Agreement, "PBT" for each relevant
period shall mean the consolidated net income (loss) of the Purchaser and its
subsidiaries, if any, before provision for all Federal, state and local income
taxes for such period, determined in accordance with generally accepted
accounting principles, consistently applied from year to year ("GAAP") and in
manner consistent with the Companies' preparation of the Balance Sheet (as
defined in Section 3.3 below), but modified as follows:
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(i) neither the proceeds from nor any dividends or refunds with
respect to, nor any increases in the cash surrender value of, any life
insurance policy under which the Purchaser or any subsidiary thereof
is the named beneficiary or otherwise entitled to recovery, shall be
included as income, and the premium expense related thereto shall not
be included as an expense;
(ii) any write-off, amortization or depreciation of goodwill or
other intangible assets (such as covenants not to compete, client
lists and workforce) arising out of the purchase of the Assets
hereunder shall not be treated as an expense; provided, however (x)
any write-off, amortization or depreciation of goodwill or other
intangible assets on the books of the Companies on the Closing Date
relating to SRC and transferred to the Purchaser pursuant to this
Agreement shall be treated as an expense and (y) any goodwill or other
intangible assets arising out of any acquisition of another entity by
the Purchaser after the Closing Date shall be amortized and expensed
over a period of not less than ten years;
(iii) intercompany management fees, management charges or overhead
charges charged by Omnicom, the Diversified Agency Services Division
("DAS"), or another Omnicom subsidiary, to the Purchaser and its
subsidiaries, shall not be treated as an expense;
(iv) for any service rendered or provided (other than as described
in clause (iii) above) to the Purchaser or any subsidiary by a member
of the Omnicom Group (as defined in Section 2.1.3(ix) below), (it
being understood that except as provided below, no such service shall
be rendered or provided to the Purchaser or any subsidiary without the
consent of the senior management of the Purchaser or such subsidiary,
as the case may be) the Purchaser or such subsidiary shall be charged
at an Arm's Length Rate (as defined in Section 2.1.3(xiii) below)
agreed to by such Omnicom Group member and such senior management, and
further provided that it is agreed that Omnicom will provide casualty
insurance coverage to the Purchaser and its subsidiaries under its
umbrella policy and the Purchaser and its subsidiaries shall be
charged for such coverage on the same basis as all other Omnicom Group
companies who are covered thereby; and any charge permitted by this
clause (iv) shall be treated as an expense;
(v) any service rendered or provided by the Purchaser or any
subsidiary to any member of the Omnicom Group shall be at an Arm's
Length Rate agreed to by senior management of the Purchaser or such
subsidiary and such member of the Omnicom Group; and revenues
generated by any such services shall be included in income;
(vi) any Losses (as defined in Section 8.2) of a Purchaser
Indemnified Party (as defined in Section 8.2) which give rise to an
indemnity payment pursuant to the indemnification provisions of
Section 8.2 below and which are fully assumed by the
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Parent or as to which the Company or the Parent have fully reimbursed
(by offset or otherwise), the Purchaser Indemnified Parties shall not
be treated as an expense, and there shall be excluded from income any
amount received by any Purchaser Indemnified Party pursuant thereto;
(vii) interest charges (whether generated from loans relating to the
payment of management fees, dividend payments, working capital or
otherwise), or interest payments between any member of the Omnicom
Group, on the one hand, and the Purchaser or any subsidiary, on the
other hand, shall be treated as an expense or income, as the case may
be (it being agreed that interest charged or received shall be at the
rates then generally charged or paid to wholly-owned subsidiaries of
Omnicom under its cash management system); provided, however, interest
on loans to the Purchaser to finance any Purchase Price payments
hereunder shall not be treated as an expense;
(viii) any expenses of the Purchaser prior to or after the Closing
incurred in connection with the organization of the Purchaser, or the
negotiation, preparation and execution of this Agreement and the other
documents to be delivered at the Closing hereunder (including without
limitation the fees and disbursements of its attorneys and accountants
and any brokers or finder fees ) shall not be treated as an expense;
(ix) expenses incurred or to be incurred by action taken during the
Service Period (as defined in Section 7.10.1 below) relating to the
transition of the Business from the Companies to the Purchaser, such
as lease termination costs, relocation costs, moving costs or office
subleasing costs (net of sublease income), shall not be treated as an
expense;
(x) there shall be no charge against income for any payment or
accrual of any component of the Purchase Price;
(xi) any costs and expenses incurred by the Purchaser in resolving
a dispute regarding the Special Determination and/or any Annual
Determination or in pursuing any indemnity claim under Section 8.2
shall not be treated as an expense;
(xii) the amount of the Special Bonus (as defined in Section 7.4
below) paid or payable with respect to any period shall not be treated
as an expense;
(xiii) the fees and expenses of the Accountants (as defined in
Section 2.1.4(i) below) in preparing the Special Determination, and
performing the related audit, and the fees and expenses of the
Accountants in excess of $20,000 in preparing any Annual
Determination, and performing the related audit, with respect to the
Stub Period and each calendar year during the period January 1, 1998
through December 31, 2000, as the case may be, shall not be treated as
an expense;
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(xiv) there shall be no charge against income for any royalty
payments, amortization of advance royalty payments or amortization of
any intangible asset arising out of the License Agreement referred to
in Section 6.4 below; and
(xv) there shall be no charge against income for the payment or
accrual of any Retention Bonuses (as defined in Section 2.1.3(x)
below).
2.1.3 Other Definitions.
(i) "PURCHASED NET WORTH" shall be determined by reference to the
audited balance sheet of the Business prepared in connection with
Section 2.1.4 and shall mean the amount by which the book value of the
acquired Assets (exclusive of goodwill but inclusive of the carrying
value of the SRC capital stock included in the Assets) exceeds the
carrying value of the Assumed Liabilities, determined in accordance
with GAAP and consistent with the preparation by the Companies of the
Balance Sheet, and as finally determined pursuant to Section 2.1.4
below.
(ii) "STUB PERIOD" shall mean the period commencing on the Closing
Date and ending December 31, 1997.
(iii) "MEASURING PERIOD", with respect to any time of determination,
shall mean the cumulative period consisting of the Stub Period and any
full calendar year then concluded, as included in the applicable
Purchase Price calculation under clauses (ii) through (v) of Section
2.1.1 above, as the case may be.
(iv) "REVENUES" during any relevant period shall mean the total
revenues (exclusive of any related direct outside project costs)
earned by the Purchaser during such period determined in accordance
with GAAP.
(v) "PROFIT MARGIN" for the Measuring Period shall equal the
percentage equivalent of the quotient determined by dividing (1) the
total PBT for the Measuring Period, by (2) the total Revenues for the
Measuring Period.
(vi) "AM" or "Applicable Multiple" shall be:
(a) 6.0, if the Profit Margin for the Measuring Period is
less than 20%;
(b) 7.0, if the Profit Margin for the Measuring Period is
equal to or greater than 20% but less than 25.0%;
(c) 8.0, if the Profit Margin for the Measuring Period is
equal to or greater than 25.0%.
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(vii) "STUB PBT" shall mean PBT for the Stub Period.
(viii) "SBP" with respect to any time of determination, shall mean
the cumulative total of the Special Bonus (as defined in Section 7.4
below) paid or payable in respect of the Stub Period and each full
calendar year included in the applicable Purchase Price calculation
under clauses (ii) through (v) of Section 2.1.1 above, as the case may
be.
(ix) "OMNICOM GROUP" shall mean Omnicom and its subsidiaries.
(x) "RETENTION BONUSES" shall mean the bonuses, not to exceed
$725,000 in each of calendar years 1998 and 1999, paid by the
Purchaser to Affected Employees in order to retain their services with
the Purchaser.
(xi) "RB1" shall mean the Retention Bonuses paid in respect of
calendar year 1998.
(xii) "RB2" shall mean the Retention Bonuses paid in respect of
calendar year 1999.
(xiii) "ARM'S LENGTH RATE" shall mean a cost for a particular service
that parties of equal bargaining power would reasonably be expected to
agree upon.
2.1.4 Accounting Procedures.
(i) As soon as practical after the Closing Date, the Purchaser
shall cause Arthur Andersen LLP, or another independent accounting
firm chosen by Omnicom and reasonably acceptable to the Parent (the
"ACCOUNTANTS"), to prepare an audited consolidated balance sheet of
the Companies as at the close of business on the Closing Date. Such
balance sheet shall be prepared in accordance with GAAP and in a
manner consistent with the Balance Sheet; provided, however, there
shall be included on such balance sheet only the acquired Assets and
the Assumed Liabilities, together with a statement setting forth the
Purchased Net Worth as at the close of business on the Closing Date
and all adjustments to the balance sheet required to make the
calculation of Purchased Net Worth (the "SPECIAL DETERMINATION"). If
the Parent does not agree that the Special Determination correctly
states the Purchased Net Worth, the Parent shall promptly (but not
later than 45 days after the delivery of the Special Determination)
give written notice to Omnicom of any exceptions thereto (in
reasonable detail describing the nature of the disagreement asserted).
If the Parent and Omnicom reconcile their differences, the Purchased
Net Worth calculation shall be adjusted accordingly and shall
thereupon become final and conclusive upon all of the parties hereto
and enforceable in a court of law. If the Parent and Omnicom are
unable to reconcile their differences in writing within 20 days after
written notice of exceptions is delivered to Omnicom, the items in
dispute shall be submitted to a mutually acceptable accounting firm
selected from among the six largest accounting
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firms in the United States in terms of gross revenues (the
"INDEPENDENT AUDITORS") for final determination, and the Purchased Net
Worth calculation shall be deemed adjusted in accordance with the
determination of the Independent Auditors and shall become 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 the Parent and Omnicom may agree) to resolve all items in
dispute. If the Parent does not give notice of any exception within
45 days after the delivery of the Purchased Net Worth calculation or
if the Parent gives written notification of its acceptance of the
Purchased Net Worth calculation prior to the end of such 45 day
period, the Purchased Net Worth calculation set forth in the Special
Determination shall thereupon become final and conclusive upon all the
parties hereto and enforceable in a court of law.
(ii) For the Stub Period and each calendar year during the period
January 1, 1998 through December 31, 2000, the Accountants shall
prepare a report containing an audited consolidated balance sheet of
the Purchaser and its subsidiaries, if any, and a related audited
consolidated statement of income of the Purchaser and its
subsidiaries, if any, for the period then ended, prepared in
accordance with GAAP, together with a statement based upon such report
setting forth for the period under examination the calculation of the
FIP, SIP, TIP or FP payment, as the case may be (including the
calculation of PBT, Revenues, Profit Margin and AM, and all other
adjustments required to be made to such audited financial statements
in order to make the calculations required under this Section 2.1 (the
"ANNUAL DETERMINATION"). A copy of each such Annual Determination
shall be delivered to the Parent not later than 120 days after the end
of the calendar year to which such Annual Determination relates.
(iii) If the Parent does not agree that any Annual Determination
correctly states the FIP, SIP, TIP or FP, as applicable, the Parent
shall promptly (but not later than 45 days after the delivery of such
Annual Determination) give written notice to Omnicom of any exceptions
thereto (in reasonable detail describing the nature of the
disagreement asserted). If the Parent and Omnicom reconcile their
differences, the Annual Determination shall be adjusted accordingly
and shall thereupon become final and conclusive upon all of the
parties hereto and enforceable in a court of law. If the Parent and
Omnicom are unable to reconcile their differences in writing within 20
days after written notice of exceptions is delivered to Omnicom, the
items in dispute shall be submitted to the Independent Auditors for
final determination, and the Annual Determination shall be deemed
adjusted in accordance with the determination of the Independent
Auditors and shall become 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 the Parent and Omnicom
may agree) to resolve all items in dispute. If the Parent does not
give notice of any exception within 45 days after the delivery of an
Annual Determination or if the Parent gives written notification of
his acceptance of
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an Annual Determination prior to the end of such 45 day period, such
Annual Determination shall thereupon become final and conclusive upon
all the parties hereto and enforceable in a court of law.
(iv) In the event the Independent Auditors are for any reason
unable or unwilling to perform the services required of it under this
Section, then Omnicom and the Parent agree to select another
accounting firm from among the six largest accounting firms in the
United States in terms of gross revenues to perform the services to be
performed under this Section 2.1.4 by the Independent Auditors. If
Omnicom and the Parent fail to select another accounting firm within 7
days after it is determined that the Independent Auditors will not
perform the services required, either Omnicom or the Parent may
request the American Arbitration Association in New York, New York to
appoint an independent firm of certified public accountants of
recognized national standing (which is not then performing services
for Omnicom, the Parent or any affiliate (as defined in Section 9.5
below) thereof) to perform the services required under this Section
2.1 by the Independent Auditors. For purposes of this Section 2.1 the
term "Independent Auditors" shall include such other accounting firm
chosen in accordance with this clause (iv).
(v) The fees and expenses of the Independent Auditors and any
arbitrator which is appointed as provided in clause (iv) above shall
be borne one-half by Omnicom and one-half by the Parent.
2.1.5 Examination of Books and Records. The books and records of
the Companies and the Purchaser shall be made available during normal business
hours upon reasonable advance notice at the principal office of the Purchaser,
to the parties, the Accountants and the Independent Auditors to the extent
required to determine the calculations required under this Section 2.1. The
Parent and Omnicom, as the case may be, shall make arrangements to make
available to Omnicom, the Parent and their representatives (including auditors)
any back-up materials generated by either of the Companies, the Purchaser or
the Accountants, as the case may be, with respect to any adjustments made by
them to the financial statements in the process of preparing the Special
Determination and/or the Annual Determination. In addition, the Parent, on the
one hand, and Omnicom, on the other hand, shall make available to the other
party and their representatives (including auditors) any back-up materials
generated by them (or either of the Companies or the Purchaser, as the case may
be) to support a position which is contrary to the position taken by the other
party.
SECTION 2.2 PAYMENT OF THE PURCHASE PRICE. Payment of the
Purchase Price shall be made, in cash, by the Purchaser to the Parent, on
behalf of the Companies, by direct wire transfer to the account of Parent,
Account No.: 848- 0000286, ABA Routing No.: 071000152.
SECTION 2.3 CLOSING. The Closing under this Agreement (the
"CLOSING") is taking place simultaneously with the execution and delivery of
this Agreement at 10:00 A.M. on
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September __, 1997, at the offices of Davis & Gilbert, 1740 Broadway, New York,
New York 10019. Such date is herein referred to as the "CLOSING DATE".
SECTION 2.4 FURTHER ASSURANCE; POST CLOSING COOPERATION. All
transactions at the Closing shall be deemed to have taken place simultaneously.
At the Closing, the Purchaser shall deliver to the Parent one or more written
instruments of assumption in such form as the Parent or its counsel shall
reasonably request to effect the assumption by the Purchaser as required by
this Agreement of all of the Assumed Liabilities. The Parent will, from time
to time, at the request of the Purchaser, whether at or after the Closing Date,
execute and deliver, or cause the execution and delivery by Sub, of such other
and further instruments of conveyance, assignment, transfer and consent as the
Purchaser or its counsel may reasonably require for the most effectual
conveyance and transfer of the Assets to the Purchaser, and the Parent will
assist the Purchaser in the collections and reduction to possession of the
Assets and the Business. Following the Closing, each party will afford the
other party, its counsel and its accountants, during normal business hours,
reasonable access to the books, records and other data relating to the Business
in its possession with respect to periods prior to the Closing and the right to
make copies and extracts therefrom, to the extent that such access may be
reasonably required by the requesting party in connection with (i) the
preparation of tax returns, (ii) the determination or enforcement of rights and
obligations under this Agreement, (iii) compliance with the requirements of any
Governmental or Regulatory Authority (as defined in Section 3.8.1), (iv) the
determination or enforcement of the rights and obligations of any Indemnified
Party or (v) in connection with any actual or threatened action or proceeding.
SECTION 2.5 THIRD-PARTY CONSENTS. Anything in this Agreement to
the contrary notwithstanding, in the event an assignment or purported
assignment to the Purchaser of any of the agreements, contracts or commitments
of either of the Companies (sometimes collectively referred to as a "CONTRACT"
or the "CONTRACTS"), or any claim, right or benefit arising thereunder or
resulting therefrom, without the consent of other parties thereto, would
constitute a breach thereof or would not result in the Purchaser receiving all
of the rights of such Company thereunder, such contract shall be deemed not to
have been assigned by such Company to the Purchaser. In those circumstances,
if requested by the Purchaser, after the Closing, the Parent and such Company
will use commercially reasonable best efforts to obtain any such consent;
provided, that neither the Parent nor either Company shall be required to make
any payment or grant any concession with respect to its business to obtain such
consent. If such consent is not obtained and is required to effectively assign
a contract to the Purchaser, the Parent and Sub will cooperate with the
Purchaser in any reasonable arrangement to provide the Purchaser with the full
claims, rights and benefits under any such contract, including enforcement at
the cost and for the benefit of the Purchaser of any and all rights of the
Parent or Sub, as the case may be, against a third party thereto arising out of
the breach or cancellation by such third party or otherwise, and any amount
received by the either of the Companies in respect thereof shall be held for
and paid over to the Purchaser.
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SECTION 2.6 GOOD FAITH NEGOTIATION. In the event that prior to
May 31, 2001, (i) Terence Graunke ceases to be Chief Executive Officer of the
Parent or (ii) there is a "change in control" of the Parent (as hereinafter
defined), as soon as practical after the occurrence of either such event (or if
possible, immediately prior to the occurrence of such event), Ominicom and the
Parent agree to negotiate in good faith with each other to agree upon a
one-time payment in full settlement of any additional Purchase Price Payments
under Section 2.1. In the event such agreement is reached, Omnicom and the
Parent agree to expeditiously execute and deliver such agreements as may be
necessary or advisable under the circumstances to effectuate such settlement.
A "change in control" of the Parent shall be deemed to have occurred if (i) a
Person or group of Persons (other than the Parent or an employee benefit plan
sponsored or maintained by the Parent) acquires 50% or more of the total
outstanding shares of voting stock of the Parent; (ii) a merger, consolidation,
reorganization, liquidation, dissolution or sale of all or substantially all
the assets of the Parent takes place, unless following any such transaction a
majority of the voting securities of the surviving company or acquiring company
will be owned, directly or indirectly, by all or substantially all of the
Persons who were stockholders of the Parent immediately prior to such
transaction; or (iii) individuals who, as of the date of this Agreement,
constitute the Parent's Board of Directors (the "INCUMBENT BOARD") cease for
any reason to constitute at least a majority of the Board, provided that any
individual becoming a director subsequent to the date hereof whose election, or
nomination for election by the Parent's stockholders, was approved by a vote of
at least a majority of the directors then comprising the Incumbent Board shall
be considered to be a member of the Incumbent Board. Notwithstanding anything
to the contrary herein, no change in control shall be deemed to have occurred
for purposes of this Agreement by virtue of any transaction which results in
Terence Graunke, or any group of Persons including Terence Graunke, acquiring,
directly or indirectly, 50% or more of the voting stock of the Parent or
owning, directly or indirectly, 50% or more of the voting securities of a
surviving or acquiring company referred to above.
ARTICLE III
REPRESENTATIONS OF THE PARENT AND SUB
The Parent and the Sub, jointly and severally, represent,
warrant and agree to and with the Purchaser, as follows:
SECTION 3. 1 EXECUTION AND VALIDITY OF AGREEMENT; EXISTENCE AND
GOOD STANDING. Each of the Companies has the full corporate power and authority
to enter into this Agreement and to perform its obligations hereunder. The
execution and delivery of this Agreement by each of the Companies and the
consummation by each of the Companies of the transactions contemplated hereby
have been duly authorized by all required corporate action on behalf of each of
the Companies and, if required, its stockholder(s). This Agreement has
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been duly and validly executed and delivered by each of the Companies and,
assuming due authorization, execution and delivery by Omnicom and the
Purchaser, constitute legal, valid and binding obligations of the Companies
enforceable against them in accordance with its terms. The Parent is duly
organized and validly existing under the laws of Delaware, and Sub is duly
organized and validly existing under the laws of Oregon, in each case with the
full corporate power and authority to own its property and to carry on its
business all as and in the places where such properties are now owned or
operated or such business is now being conducted. SCHEDULE 3.1 sets forth each
jurisdiction in which either of the Companies is qualified as a foreign
corporation to conduct the Business.
SECTION 3.2 SUBSIDIARIES AND INVESTMENTS. The Parent does not
own any capital stock or other equity or ownership or proprietary interest in
any Person that conducts the Business other than Sub and SRC and other than
Eagle River Production, Inc. which is currently an inactive subsidiary without
any assets currently utilized in connection with the Business. The Sub does
not own any capital stock or other equity ownership or proprietary rights in
any Person that conducts the Business.
SECTION 3.3 FINANCIAL STATEMENTS AND NO MATERIAL CHANGES.
SCHEDULE 3.3(A) sets forth the following: an unaudited consolidated balance
sheet of the Business as at June 30, 1997 (the "BALANCE SHEET") and the related
unaudited consolidated statement of income for the six months then ended, which
balance sheet only includes the category of Assets to be acquired by the
Purchaser and the category of Assumed Liabilities. Such financial statements
have been prepared in accordance with GAAP throughout the period indicated
except as set forth on SCHEDULE 3.3(B). The Balance Sheet fairly presents the
financial condition of the Business (based on the to be acquired Assets and
Assumed Liabilities) at the date thereof and reflects all claims against and
all debts and liabilities of the Business, fixed or contingent, as at the date
thereof, required to be shown thereon under GAAP, and the related consolidated
statement of income accurately presents the results of operations of the
Business for the period indicated. Except as set forth on SCHEDULE 3.21, since
June 30, 1997 (the "BALANCE SHEET DATE"), there has been no material adverse
change in the assets or liabilities, or in the business or condition, financial
or otherwise, or in the results of operations of the Companies, in respect of
the Business.
SECTION 3.4 BOOKS AND RECORDS. All accounts, books, ledgers and
official and other records material to the Business of the Companies maintained
by or on behalf of either of the Companies of whatsoever kind have been
properly and accurately kept and completed in all material respects, and there
are no material inaccuracies or discrepancies of any kind contained or
reflected therein. Except as set forth on SCHEDULE 3.4, neither of the
Companies 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) in respect of the Business which
(including all means of access thereto and therefrom) are not under the
exclusive ownership and possession of such Company.
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SECTION 3.5 TITLE TO PROPERTIES; ENCUMBRANCES. Each of the
Companies has good and valid title to, or enforceable leasehold interests in or
valid rights under contract to use, all the Assets, in each case free and clear
of all Liens, except for Liens set forth on SCHEDULE 3.5. The Tangible
Personal Property owned or otherwise contracted for by the Companies related to
the Business is in a state of good maintenance and repair (ordinary wear and
tear excepted) and is adequate and suitable for the purposes for which they are
presently being used. SCHEDULE 3.5 lists the Tangible Personal Property
(including furniture, fixtures, and equipment) which are part of the Assets.
SECTION 3.6 REAL PROPERTY.
3.6.1 Owned Real Property. Neither of the Companies owns a freehold
interest in any real property or any option or right of first refusal or first
offer to acquire real property related to the Business.
3.6.2 Leased Real Property. SCHEDULE 3.6.2 contains an accurate
and complete list of all Real Property Leases related to the Business to which
either of the Companies is a party (as lessee, lessor, sublessee or sublessor),
including without limitation leases which either of the Companies has subleased
or assigned to a third party and as to which either of the Companies remains
liable. Each Real Property Lease set forth on SCHEDULE 3.6.2 (or required to
be set forth on SCHEDULE 3.6.2) is valid, binding and in full force and effect;
all rents and additional rents and other sums, expenses and charges due to date
on each such lease have been paid; and the lessee has been in peaceable
possession since the commencement of the original term of such lease and no
waiver, indulgence or postponement of the lessee's obligations thereunder has
been granted by the lessor. There exists no default or event of default by
either of the Companies or to the knowledge of the Companies, by any other
party to such Real Property Lease; and there exists no occurrence, condition or
act (including the purchase of the Assets hereunder) 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 either of the Companies under
such Real Property Lease, and neither of the Companies has received or is in
possession of any outstanding claims of breach or indemnification or notice of
default or termination of any Real Property Lease. The Company which is a
party to the Real Estate Lease holds the leasehold estate on such lease, free
and clear of all Liens except as set forth in SCHEDULE 3.5. The real property
leased by the Companies related to the Business and covered by the Real
Property Leases is in a state of good maintenance and repair and is adequate
and suitable for the purposes for which it is presently being used, and to the
knowledge of the Companies, there are no material repair or restoration works
known by the Companies to be required in connection with any of the leased real
properties. Except as set forth on SCHEDULE 3.6.2, the Companies are in
physical possession and actual and exclusive occupancy of the whole of each of
its leased properties related to the Business. Neither of the Companies owes
any brokerage commission with respect to any such Real Property Leases.
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SECTION 3.7 CONTRACTS. SCHEDULE 3.7 hereto contains an accurate
and complete list of the following agreements to which either of the Companies
is a party in respect of the conduct of the Business: (a) all Plans, (b) any
personal property lease with a fixed annual rental of $25,000 or more, (c) any
agreement, contract or commitment relating to capital expenditures which
involve payments of $100,000 or more in any single transaction or series of
related transactions, (d) any agreement, contract or commitment relating to the
making of a loan or advance to or investment in, any other Person, (e) any
agreement, instrument or arrangement 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, (f) any management
service, employment, consulting or similar type of contract which is not
cancelable by the Company party thereto without penalty or other financial
obligation within 30 days, (g) any agreement, contract or commitment limiting
the freedom of the Company party thereto to engage in any line of business or
to compete with any other Person, including agreements limiting its ability to
take on competitive accounts after the termination thereof or limiting the
ability of its affiliates to take on competitive accounts during or after the
term thereof, but excluding standard exclusivity requirements in agreements
with clients which do not extend beyond the term thereof entered into in the
ordinary course of business, (h) any collective bargaining or union agreement,
(i) 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) that
would be binding on successors to the Business, (j) any licensing or franchise
agreement (other than license agreements for "off- the-shelf" third party
computer software not included within such Company's products or services), (k)
any agreement with a client required to be listed on SCHEDULE 3.15, (l) any
joint venture agreement involving a sharing of profits not covered by clauses
(a) through (k) above, and (m) any agreement, contract or commitment (not
covered by another subsection of this Section 3.7) which involves $100,000 or
more over the unexpired term thereof and is not cancelable by the Company which
is a party thereto without penalty or other financial obligation within 30
days; provided, however, that (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 on SCHEDULE 3.7. Each agreement, contract and
commitment of each of the Companies, including but not limited to those
required to be set forth on SCHEDULE 3.7, is in full force and effect, and
there exists no default or event of default by either of the Companies or to
the knowledge of the Companies, by any other party, or occurrence, condition,
or act (including the purchase of the Assets hereunder) 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 either of the
Companies, and neither of the Companies has received or is in possession of any
outstanding claim of breach or indemnification or notice of default or
termination of any such agreement, contract and commitment.
SECTION 3.8 NON-CONTRAVENTION; APPROVALS AND CONSENTS.
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3.8.1 Non-Contravention. The execution, delivery and performance
by each of the Companies of its obligations hereunder and the consummation by
the Companies of the transactions contemplated hereby, will not (a) violate,
conflict with or result in the breach of any provision of the certificate of
incorporation or by-laws (or other comparable corporate charter documents) of
such Company, or (b) result in the violation by either of the Companies of any
statute, law, rule, regulation or ordinance (collectively, "LAWS"), or any
judgment, decree, order, writ, permit or license (collectively, "ORDERS"), of
any court, tribunal, arbitrator, authority, agency, commission, official or
other instrumentality of the United States, any foreign country or any domestic
or foreign state, county, city or other political subdivision (a "GOVERNMENTAL
OR REGULATORY AUTHORITY"), applicable to either of the Companies or any of its
assets or properties, or (c) if the consents and notices set forth in SCHEDULE
3.8.2 are obtained, given or waived, conflict with, result in a violation or
breach of, constitute (with or without notice or lapse of time or both) a
default under, or (except for compliance with the HSR Act or as set forth on
SCHEDULE 3.8.2) require either of the Companies to obtain any consent, approval
or action of, make any filing with or give any notice to, or result in or give
to any Person any right of payment or reimbursement, termination, cancellation,
modification or acceleration of, or result in the creation or imposition of any
Lien upon any of the assets or properties of either of the Companies, under any
of the terms, conditions or provisions of any note, bond, mortgage, security
agreement, indenture, license, franchise, permit, concession, contract, lease
or other instrument, obligation or agreement of any kind (collectively,
"INSTRUMENTS") to which either of the Companies is a party or by which either
of the Companies or any of its assets or properties is bound.
3.8.2 Approvals and Consents. Except (a) for the filing of a
pre-Merger notification report by the Parent under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, and the rules and regulations
thereunder (the "HSR ACT") and the receipt of clearance thereunder, and (b) as
disclosed on SCHEDULE 3.8.2, no consent, approval or action of, filing with or
notice to any Governmental or Regulatory Authority or other public or private
third Person is necessary or required under any of the terms, conditions or
provisions of any Law or Order of any Governmental or Regulatory Authority or
any Instrument to which either of the Companies is a party or by which its
assets or properties bound for the execution and delivery of this Agreement by
either of the Companies, the performance by either of the Companies of its
obligations hereunder or the consummation by the Companies of the transactions
contemplated hereby.
SECTION 3.9 LITIGATION. Except as set forth on SCHEDULE 3.9,
there is no action, suit, proceeding at law or in equity by any Person, or any
arbitration or any administrative or other proceeding by or before (or to the
knowledge of the Companies, any investigation by) any Governmental or
Regulatory Authority, pending or, to the knowledge of the Companies,
threatened, against either of the Companies with respect to this Agreement or
the transactions contemplated hereby, or against or affecting the Business
conducted by the Companies or the Assets; and to the knowledge of the Companies
no acts, facts, circumstances, events or
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conditions occurred or exist which are a basis for any such action, proceeding
or investigation. Schedule 3.9 also sets forth with respect to each pending or
threatened action, suit or proceeding listed thereon, the amount of damages
claimed by the plaintiff(s) therein. Neither of the Companies is subject to
any judgment, order or decree entered in any lawsuit or proceeding relating to
the Business or the Assets.
SECTION 3.10 TAXES. Except as set forth in SCHEDULE 3.10, each of the
Companies has in respect of the Business timely filed, or caused to be filed,
taking into account any valid extensions of due dates, completely and
accurately in all material respects, all federal, state, local and foreign tax
or information returns (including estimated tax returns) required under the
statutes, rules or regulations of such jurisdictions to be filed prior to
Closing by such Company. The term "TAXES" means taxes, duties, charges or
levies of any nature imposed by any taxing or other Governmental or Regulatory
Authority, including without limitation income, gains, capital gains, surtax,
capital, franchise, capital stock, value-added taxes, taxes required to be
deducted from payments made by the payor and accounted for to any tax
authority, employees' income withholding, back-up withholding, withholding on
payments to foreign Persons, social security, national insurance, unemployment,
worker's compensation, payroll, disability, real property, personal property,
sales, use, goods and services or other commodity taxes, business, occupancy,
excise, customs and import duties, transfer, stamp, and other taxes (including
interest, penalties or additions to tax in respect of the foregoing), and
includes all taxes payable by the Companies pursuant to Treasury Regulations
Section 1.1502-6 or any similar provision of state, local or foreign law. All
Taxes shown on said returns to be due and all additional assessments received
prior to the date hereof have been paid or are being contested in good faith,
in which case, such contested assessments are set forth on SCHEDULE 3.10.
Except as set forth in SCHEDULE 3.10, each of the Companies has in respect of
the Business collected all sales, use, goods and services or other commodity
Taxes required to be collected and remitted or will remit the same to the
appropriate taxing authority within the prescribed time periods. Except as set
forth on SCHEDULE 3.10, none of the federal, state or local tax returns either
of the Companies has been audited by the Internal Revenue Service or any other
Governmental or Regulatory Authority. Neither of the Companies is a party to
any tax allocation or tax sharing agreement nor does it have any contractual
obligation to indemnify any other Person with respect to Taxes. For United
States federal income tax purposes, SRC is treated as a corporation within the
meaning of Section 7701 of the Internal Revenue Code of 1986, as amended, and
the regulations thereunder. No election with respect to SRC has been filed
under Treasury Regulations Section 301.7701-3.
SECTION 3.11 LIABILITIES. Except as set forth in the Balance
Sheet neither of the Companies has any outstanding claims, liabilities or
indebtedness of any nature whatsoever in respect of the conduct of the Business
(collectively in this Section 3.11, "LIABILITIES"), whether accrued, absolute
or contingent, determined or undetermined, asserted or unasserted, and whether
due or to become due, other than (i) Liabilities specifically disclosed in any
Schedule hereto; (ii) Liabilities under contracts, purchase orders and other
agreements, arrangements and commitments of the type required to be disclosed
by the Companies on any
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Schedule and so disclosed or which because of the dollar amount or other
qualifications are not required to be listed on such Schedule; and (iii)
Liabilities incurred in the ordinary course of business of the Business and
consistent with past practice since the Balance Sheet Date not involving
borrowings by the Companies. SCHEDULE 3.7 sets forth a list of all current
arrangements of either of the Companies for borrowed money arising out of the
conduct of the Business and all outstanding balances with respect thereto.
Neither of the Companies is in default in respect of the terms or conditions of
any such borrowings.
SECTION 3.12 INSURANCE. SCHEDULE 3.12 is a schedule of all
insurance policies (including life insurance) or binders maintained by the
Company in respect of the Business. Neither of the Companies has received any
notice of cancellation or non-renewal of any such policy or binder. Except as
set forth on SCHEDULE 3.12, within the last two years neither of the Companies
has filed for any claims exceeding $50,000 against any of its insurance
policies.
SECTION 3.13 INTELLECTUAL PROPERTIES. SCHEDULE 3.13 hereto sets
forth a list of all Intellectual Property (as defined below) owned by either of
the Companies relating primarily to the Business and all agreements under which
any Person has granted a license to either of the Companies for any
Intellectual Property relating primarily to the Business (other than license
agreements for "off the shelf" third party computer software not included
within the products or services of the Companies). The Companies by ownership
or license has all right, title and interest in, or has the requisite
permission and authority to use, all Intellectual Property used by them
primarily in the conduct of the Business. Except as set forth on SCHEDULE
3.13, no claim of infringement or misappropriation of Intellectual Property is
pending or, to the knowledge of the Companies, threatened against either of the
Companies in respect of the Business and neither of the Companies in respect of
the Business is infringing or misappropriating any Intellectual Property of any
Person. Neither of the Companies has granted any license, franchise or permit
in effect on the date hereof to any Person to use any Intellectual Property
owned by it in respect of the Business. The term "INTELLECTUAL PROPERTY" means
patents and patent rights, trademarks and trademark rights, tradenames and
tradename rights, service marks and service mark rights, service names and
service name rights, copyright and copyright rights, trade secrets and trade
secret rights, rights of privacy and publicity, and other proprietary
intellectual property rights and all pending applications for and registrations
of any of the foregoing.
SECTION 3.14 COMPLIANCE WITH LAWS; LICENSES AND PERMITS.
3.14.1 Compliance. The Business is being, and has been, conducted by
the Companies in compliance with all applicable Laws and Orders, except in each
case (other than with respect to compliance with environmental Laws and Orders)
where the failure to so comply would not reasonably be expected to have a
Material Adverse Effect (as defined below), including without limitation, (a)
all Laws and Orders promulgated by the Federal Trade Commission or any other
Governmental or Regulatory Authority; (b) all environmental Laws and Orders;
and (c) all Laws and Orders relating to labor, civil rights, and occupational
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safety and health laws, worker's compensation, employment and wages, hours and
vacations, or pay equity. Neither of the Companies has been charged with, or,
to the knowledge of the Companies threatened with or under any investigation
with respect to, any charge concerning any violation of any Laws or Orders in
respect of the conduct of the Business or the Assets. For purposes of this
Agreement, "MATERIAL ADVERSE EFFECT" shall mean any material and adverse effect
on the financial condition, results of operations, assets, properties or
business of the Companies relating to the Business or the Purchaser, as
applicable.
3.14.2 Licenses. Each of the Companies has all Licenses required by
any Governmental or Regulatory Authority for the operation of the Business and
the use of the Assets as presently operated or used, except where the failure
to have such Licenses would not reasonably be expected to have a Material
Adverse Effect. All of the Licenses are in full force and effect and no action
or claim is pending, nor to the knowledge of the Companies is threatened, to
revoke or terminate any of such Licenses or declare any such License invalid in
any material respect.
SECTION 3.15 CLIENT RELATIONS. SCHEDULE 3.15 sets forth for the
Companies in respect of the Business conducted by the Companies: (a) the 20
largest clients (measured by billings) as at December 31, 1996 and the Balance
Sheet Date, and the billings from each such client and from all clients (in the
aggregate) for the twelve month and six month periods then ended and (b) the
clients projected to be the 20 largest clients (measured by billings) for the
Stub Period and calendar year 1998 based on the Parent's current profit plan,
together with the estimated billings for each such client and all clients (in
the aggregate) for such periods. The Companies do not warrant that the
estimated billings set forth on SCHEDULE 3.15 will prove to be accurate;
provided, however, the Companies do represent that they were made in good faith
and on a reasonable basis. No client of either of the Companies listed on
SCHEDULE 3.15 has advised any officer, office manager, or senior account
manager of the Companies or the Business that it is (x) terminating or
considering terminating the handling of its business in respect of the Business
by the Companies as a whole or in respect of any particular product, project or
service which generated billings in 1996 or is expected to generate billings in
1997 of $50,000 or more, or (y) planning to reduce its spending in 1997 or 1998
in respect of the Business with the Companies in any material manner.
SECTION 3.16 ACCOUNTS RECEIVABLE; WORK-IN-PROCESS; ACCOUNTS
PAYABLE. 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 each of the Companies as being due to such Company and
reflected on the Balance Sheet represent or will represent valid obligations
arising from sales actually made or services actually performed in the ordinary
course of business in the conduct of the Business and will be good and
collectible in full (less the amount of any provision, reserve or similar
adjustment therefor reflected on the Balance Sheet) in the ordinary course of
business, and none of such accounts receivable or other debts (or accounts
receivable arising from such work-in-process) is or will be subject to any
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counterclaim or set-off except to the extent of any such provision, reserve or
adjustment. There has been no change since the Balance Sheet Date in the
amount or aging of the work-in-process, accounts receivable, unbilled invoices,
or other debts due to the Companies, or the reserves with respect thereto, or
accounts payable of the Companies in respect of the conduct of the Business, in
each case other than in the ordinary course of business.
SECTION 3.17 EMPLOYMENT RELATIONS. (a) Neither of the Companies is
engaged in any unfair labor practice relating to the conduct of the Business;
(b) no unfair labor practice complaint against either of the Companies relating
to the conduct of the Business is pending before any Governmental or Regulatory
Authority; (c) there is no organized labor strike, dispute, slowdown or
stoppage relating to the conduct of the Business actually pending or to the
knowledge of the Companies threatened against or involving either of the
Companies (d) there are no labor unions relating to the conduct of Business
representing or, to the knowledge of the Companies, attempting to represent the
employees of the Companies; (e) no claim or grievance nor any arbitration
proceeding arising out of or under any collective bargaining agreement relating
to the conduct of the Business is pending and to the knowledge of the
Companies, no such claim or grievance has been threatened; (f) no collective
bargaining agreement relating to the conduct of the Business is currently being
negotiated by either of the Companies; and (g) neither of the Companies has
experienced any work stoppage or similar organized labor dispute during the
last three years relating to the conduct of the Business. There is no legal
action, suit, proceeding or claim pending or, to the knowledge of the
Companies, threatened between either of the Companies and any of its employees,
former employees, agents, former agents, job applicants or any association or
group of any of its employees, in each case relating to the Business, except as
set forth on SCHEDULE 3.9.
SECTION 3.18 EMPLOYEE BENEFIT MATTERS.
3.18.1 List of Plans. SCHEDULE 3.7 to this Agreement 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, and whether or not subject to
any of the provisions of ERISA, which are maintained, contributed to or
sponsored by either of the Companies for the benefit of any Business Employee
(each item listed on SCHEDULE 3.7 being referred to herein individually, as a
"PLAN" and collectively, as the "PLANS"). The Parent has delivered to the
Purchaser a complete and accurate copy of the most recently received Internal
Revenue Service determination letter for each Plan, if applicable. Except as
set forth on SCHEDULE 3.18.1, neither of the Companies has made any commitment,
whether legally enforceable or not, (i) to create or cause to exist any other
employee benefit plan, program or arrangement applicable to the Business, or
(ii) to modify, change or terminate any Plan.
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3.18.2 Severance. Except as set forth on SCHEDULE 3.18.2, none of
the Plans, or any employment agreement or other contract to which a Company is
a party or bound and which relates to the Business, provides for the payment of
or obligates such Company to pay separation, severance, termination or
similar-type benefits to any Person or obligates such Company to pay
separation, severance, termination or similar-type benefits solely as a result
of any transaction contemplated by this Agreement.
3.18.3 Multi-Employer Plans. Except as set forth on SCHEDULE 3.18.3,
neither of the Companies nor any ERISA Affiliate (as herein defined) has
maintained, contributed to or participated in respect of the Business 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 in respect of the Business any obligations or liabilities, including
withdrawal or successor liabilities, regarding any such plan. As used herein,
the term "ERISA AFFILIATE" means any Person that, together with the Parent, is
considered a "single employer" pursuant to Section 4001(b) of ERISA.
3.18.4 Welfare Benefit Plans. SCHEDULE 3.7 sets forth a complete and
accurate list of each Plan which provides or promises retiree medical,
disability or life insurance benefits to any current or former employee,
officer or director of either of the Companies relating to the conduct of the
Business. Except as set forth on SCHEDULE 3.18.4, the Companies have expressly
reserved the right, in all Plan documents relating to welfare benefits provided
to employees, former employees, officers, directors and other participants and
beneficiaries related to the Business, to amend, modify or terminate at any
time the Plans which provide for welfare benefits.
3.18.5 Administrative Compliance. Each Plan is now and has been
operated in all material respects in accordance with the requirements of all
applicable Laws, including, without limitation, ERISA and the Code, and the
regulations and authorities published thereunder. Each of the Companies has
performed all material obligations required to be performed by it under, is not
in any respect in default under or in violation of, and the Companies have no
knowledge of any default or violation by any party to, any Plan. Except as set
forth on SCHEDULE 3.9, no legal action, suit, audit, investigation or claim is
pending or to the knowledge of the Companies is threatened, with respect to any
Plan (other than claims for benefits in the ordinary course), and to the
knowledge of the Companies, 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 Plans required to be made to employees, participants,
beneficiaries, alternate payees and any Governmental or Regulatory Authority
have been timely made or an extension has been timely obtained.
3.18.6 Tax-Qualification. Each Plan which is intended to be
qualified under Section 401(a) of the Internal Revenue Code of 1986, as amended
(the "CODE") has received a favorable determination letter from the Internal
Revenue Service that it is so qualified and
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each trust established in connection with any 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 to the knowledge of the Companies, 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 Plan or the exempt status of any such trust.
3.18.7 Funding; Excise Taxes. Except as set forth on SCHEDULE
3.18.7, there has been no prohibited transaction (within the meaning of Section
406 of ERISA or Section 4975 of the Code) with respect to any Plan subject to
ERISA, which could result in a material liability to the Company or any
liability to the Purchaser. The Company has not incurred any material 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 to the knowledge of the Companies, no
fact, event or condition exists which could give rise to any such liability or
to any liability to the Purchaser arising therefrom. Neither of the Companies
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") arising in the ordinary course),
including, without limitation, any liability in connection with the termination
of any employee benefit plan subject to Title IV of ERISA (a "TITLE IV PLAN");
and, to the knowledge of the Companies, no fact, event or condition exists
which could give rise to any such liability. Except as set forth on SCHEDULE
3.18.7, no complete or partial termination has occurred within the five years
preceding the date hereof with respect to any Plan maintained by either of the
Companies or any ERISA Affiliate, and no reportable event (within the meaning
of Section 4043 of ERISA), notice of which has not been waived by the PBGC, has
occurred or is expected to occur with respect to any Plan maintained by either
of the Companies or any ERISA Affiliate. No Title IV Plan maintained by either
of the Companies 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 plan year of such Plan.
None of the assets of the Companies 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 of the Companies nor any ERISA Affiliate has been required to post any
security under Section 307 of ERISA or Section 401(a) (29) of the Code relating
to any Plan; and, to the knowledge of the Companies, no fact or event exists
which could give rise to any such Lien or requirement to post any such
security. As of the Closing Date, no Plan which is a Title IV Plan will have
an "unfunded benefit liability" (within the meaning of Section 4001(a)(18) of
ERISA).
3.18.8 Tax Deductions. All contributions, premiums or payments
required to be made, paid or accrued with respect to any 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 and no
such deduction has been challenged or disallowed by any government entity and,
to the knowledge of the Companies, no fact or event exists which could give
rise to any such challenge or disallowance.
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SECTION 3.19 INTERESTS IN CUSTOMERS, SUPPLIERS, ETC. Except as
set forth on SCHEDULE 3.19, (x) neither of the Companies or any affiliate
thereof, nor (y) to the knowledge of the Companies (without making any special
inquiry of the Related Group, as hereinafter defined), any officer, director,
or employee of either of the Companies, any parent, brother, sister, child or
spouse of any such officer, director or employee (collectively, the "RELATED
GROUP"), or any Person controlled by anyone in the Related Group:
(i) owns, directly or indirectly, any interest in (excepting for
ownership, directly or indirectly, for investment purposes, of less
than 1/4 of 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 Business;
(ii) owns, directly or indirectly, in whole or in part, any
tangible or intangible property (including, but not limited to
Intellectual Property), that the Companies use in the conduct of the
Business 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, either of the Companies, in respect of the
Business, 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 3.20 COMPENSATION OF EMPLOYEES. SCHEDULE 3.20 is an
accurate and complete list showing the names and positions of all Business
Employees, 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 1996 and 1997, and the material fringe benefits of such
employees not generally available to all Affected Employees of the Company.
Neither of the Companies has, because of past practices or previous commitments
with respect to the Business Employees, established any rights on the part of
any of its Business Employees to additional compensation with respect to any
period after the Closing Date (other than wage increases in the ordinary course
of business). The present severance and vacation policy of the Companies in
respect of the Business is set forth on SCHEDULE 3.20.
SECTION 3.21 NO CHANGES SINCE THE BALANCE SHEET DATE. Since the
Balance Sheet Date except as specifically stated on SCHEDULE 3.21, neither of
the Companies has (i) incurred any liability or obligation of any nature
(whether accrued, absolute, contingent or otherwise) arising out of the conduct
of the Business, except in the ordinary course of business, (ii) permitted any
of the Assets to be subjected to any Lien, (iii) sold, transferred or otherwise
disposed of any of the Assets except in the ordinary course of business, (iv)
made any capital
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expenditure or commitment therefor relating to the Business which individually
exceeded $25,000 or in the aggregate exceeded $300,000, (v) increased or
prepaid its indebtedness for borrowed money arising out of the conduct of the
Business, except current borrowings under credit lines listed on SCHEDULE 3.7
or made any loan to any Person arising out of the conduct of the Business other
than to any Affected Employee for normal travel and expense advances, (vi)
written down the value of any Work-in-Process, or written off as uncollectible
any notes or accounts receivable arising out of the conduct of the Business,
except write-downs and write-offs in the ordinary course of business, none of
which individually or in the aggregate, is material to the Business (vii)
granted any increase in the rate of wages, salaries, bonuses or other
remuneration of any employee who, whether as a result of such increase or prior
thereto, receives aggregate compensation from the Companies at an annual rate
of $100,000 or more, or except in the ordinary course of business to any other
employee, (viii) entered into an employment or exclusive consultant agreement
with any Business Employee which is not cancelable without penalty or other
financial obligation within 30 days, (ix) canceled or waived any claims or
rights of material value arising out of the conduct of the Business, (x) made
any change in any method of accounting policies or procedures related to the
Business, (xi) otherwise conducted the Business or entered into any transaction
relating to the Business, except in the usual and ordinary manner and in the
ordinary course of conducting the Business, (xii) amended or terminated any
agreement which is material to the Business, (xiii) renewed, extended or
modified any Real Property Lease or except in the ordinary course of business,
any lease of personal property, relating to the Business (xiv) adopted, amended
or terminated any Plan, or (xv) agreed, whether or not in writing, to do any of
the actions set forth in any of the above clauses.
SECTION 3.22 CORPORATE CONTROLS. Neither of the Companies, nor,
to the knowledge of the Companies, any officer, authorized agent, employee or
any other Person while acting on behalf of the Companies, has, directly or
indirectly, in respect of the Business: 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; made any false or fictitious entry on its
books or records; made any bribe, rebate, payoff, influence payment, kickback,
or other unlawful payment, or other payment of a similar or comparable nature,
to any Person 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
of the Companies has in respect of the Business participated in any illegal
boycott or other similar illegal practices affecting any of its actual or
potential customers.
SECTION 3.23 PREPAYMENT FOR SERVICES. Except as disclosed on
SCHEDULE 3.23, neither of the Companies has prior to the Closing Date received
any payments as of August
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31, 1997 from any of its clients with respect to any services to be rendered by
the Purchaser after such date.
SECTION 3.24 BROKERS. Except for Piper Jaffray & Co. (the fees
and expenses of which shall be payable by the Parent), no broker, finder, agent
or similar intermediary has acted on behalf of the Companies, or any affiliate
thereof, in connection with this Agreement or the transactions contemplated
hereby, and no brokerage commissions, finder's fees or similar fees or
commissions are payable by the Companies, or any affiliate thereof, in
connection therewith based on any agreement, arrangement or understanding with
any of them.
SECTION 3.25 COPIES OF DOCUMENTS. The Parent has made available
to Omnicom and its advisers, true, complete and correct copies of all documents
referred to in this Article III or in any Schedule. Summaries of all material
oral contracts contained in SCHEDULE 3.7 are complete and accurate in all
material respects.
ARTICLE IV
REPRESENTATIONS OF OMNICOM AND THE PURCHASER
Omnicom and the Purchaser jointly and severally represent, warrant and
agree to and with the Companies as follows:
SECTION 4.1 EXISTENCE AND GOOD STANDING. Omnicom is a
corporation duly organized, validly existing and in good standing under the
laws of the State of New York with full corporate power and authority to own
its property and to conduct its business all as and in the places where such
properties are now owned or operated or such business is now being conducted.
The Purchaser is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware with full corporate power and
authority to own its property and to carry on its business all as and in the
places where such properties are now owned or operated or such business is now
being conducted.
SECTION 4.2 EXECUTION AND VALIDITY OF AGREEMENTS Each of
Omnicom and the Purchaser has the full corporate power and authority to make,
execute, deliver and perform this Agreement and the transactions contemplated
hereby. The execution and delivery of this Agreement by each of Omnicom and
the Purchaser and the consummation of the transactions contemplated hereby have
been duly authorized by all required corporate action on behalf of Omnicom and
the Purchaser. This Agreement has been duly and validly executed and delivered
by Omnicom and the Purchaser and, assuming due authorization, execution and
delivery by the Companies, constitutes legal, valid and binding obligation of
Omnicom and the Purchaser, enforceable against them in accordance with its
terms.
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SECTION 4.3 NON-CONTRAVENTION; APPROVALS AND CONSENTS.
4.3.1 Non-Contravention. The execution, delivery and performance by
each of Omnicom and the Purchaser of its obligations hereunder and the
consummation of the transactions contemplated hereby, will not (a) violate,
conflict with or result in the breach of any provision of the certificate of
incorporation or by-laws of Omnicom or the Purchaser, or (b) result in the
violation by Omnicom or the Purchaser of any Laws or Orders of any Governmental
or Regulatory Authority, applicable to Omnicom or the Purchaser or any of its
assets or properties, or (c) if the consents and notices set forth on SCHEDULE
4.3.2 are obtained, given or waived, conflict with, result in a violation or
breach of, constitute (with or without notice or lapse of time or both) a
default under, or (except for compliance with the HSR Act or as set forth on
SCHEDULE 4.3.2) require Omnicom or the Purchaser to obtain any consent,
approval or action of, make any filing with or give any notice to, or result in
or give to any Person any right of payment or reimbursement, termination,
cancellation, modification or acceleration of, or result in the creation or
imposition of any Lien upon any of the assets or properties of Omnicom or the
Purchaser, under any of the terms, conditions or provisions of any Instruments
to which Omnicom or the Purchaser is a party or by which Omnicom or the
Purchaser or any of its assets or properties are bound.
4.3.2 Approvals and Consents. Except (a) for the filing of a
pre-merger notification report by Omnicom under the HSR Act and the receipt of
clearance thereunder and (b) as disclosed on SCHEDULE 4.3.2, no consent,
approval or action of, filing with or notice to any Governmental or Regulatory
Authority or other public or private third Person is necessary or required
under any of the terms, conditions or provisions of any Law or Order of any
Governmental or Regulatory Authority or any Instrument to which Omnicom or the
Purchaser is a party or by which Omnicom or the Purchaser or any of their
assets or properties is bound for the execution and delivery of this Agreement
by Omnicom and the Purchaser, the performance by Omnicom and the Purchaser of
their respective obligations hereunder or the consummation of the transactions
contemplated hereby.
SECTION 4.4 BROKERS. No broker, finder, agent or similar
intermediary has acted on behalf of Omnicom, the Purchaser or any of their
affiliates in connection with this Agreement or the transactions contemplated
hereby, and no brokerage commissions, finders' fees or similar fees or
commissions are payable by Omnicom, the Purchaser or any of their affiliates in
connection therewith based on any agreement, arrangement or understanding with
any of them.
SECTION 4.5 LITIGATION. There is no action, suit, proceeding at
law or in equity by any Person, or any arbitration or any administrative or
other proceeding by or before (or to the knowledge of Omnicom, any
investigation by) any Governmental or Regulatory Authority, pending or, to the
knowledge of Omnicom, threatened, against either Omnicom or the Purchaser with
respect to this Agreement or the transactions contemplated hereby.
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SECTION 4.6 NO PRIOR ACTIVITIES. . The Purchaser has been
organized solely for the purpose of entering into this Agreement and acquiring
the Assets and Assumed Liabilities as contemplated by this Agreement, and prior
to the date hereof, has conducted no operations and has not incurred any
liabilities except relating to its organization.
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ARTICLE V
ACTIONS AT CLOSING BY THE COMPANIES
Simultaneously herewith:
SECTION 5.1 REQUIRED APPROVALS, NOTICES AND CONSENTS. Except as
otherwise waived below, the Companies shall have obtained or given, at no
expense to Omnicom or the Purchaser, and there shall not have been withdrawn or
modified any notices, consents, approvals or other actions listed on SCHEDULES
3.8.2 hereof (including without limitation, obtaining all consents, approvals
and/or waivers required under the contracts listed on SCHEDULE 5.1 in order to
permit the consummation of the transactions contemplated by this Agreement
without causing or resulting in a default, event of default, acceleration event
or termination event under any of such documents and without entitling any
party to any of such documents to exercise any other right or remedy adverse to
the interests of the Purchaser or such Company thereunder). Notwithstanding the
foregoing, the Purchaser and Omnicom have waived any requirement that (i) the
Companies obtain consent from any client to transfer its business and related
agency/client contract to the Purchaser or (ii) ATT transfer the Personal
Property Leases leased under Parent's Master Capital Lease with ATT to the
Purchaser (it being agreed that after the Closing, the Parent shall use its
best efforts in assisting the Purchaser in obtaining such consent). Each such
consent or approval shall be in form satisfactory to counsel for Omnicom and
the Purchaser. In addition, all terminations or expirations imposed by any
Governmental or Regulatory Authority on either of the Companies necessary for
the consummation of the transactions, contemplated by this Agreement, including
under the HSR Act, occurred.
SECTION 5.2 ASSUMED EMPLOYMENT AGREEMENTS. The Employment
Agreements listed on SCHEDULE 5.2 shall have been assigned to the Purchaser
pursuant to an Assignment and Assumption Agreement acceptable to the Purchaser.
SECTION 5.3 NON-COMPETITION AGREEMENT. The Companies are
entering into a Non-Competition Agreement with Omnicom and the Purchaser, in
the form of EXHIBIT A hereto.
SECTION 5.4 CERTIFIED RESOLUTIONS. Each of the Companies are
delivering to Omnicom and the Purchaser a copy of the resolutions of its Board
of Directors, and stockholder(s) (if required), authorizing the execution,
delivery and performance of this Agreement and the transactions contemplated
hereby, certified to by an officer of such Company.
SECTION 5.5 OPINION OF COUNSEL. The Purchaser shall have
received the opinions of Sidley & Austin, special counsel to the Companies, and
Fred McCallister, Esq., General Counsel
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of the Companies, each dated the Closing Date, in the forms of EXHIBITS B-1 and
B-2 hereto, respectively.
SECTION 5.6 PROCEEDINGS. All proceedings to be taken in
connection with the transactions contemplated by this Agreement and all
documents incident thereto were reasonably satisfactory in form and substance
to Omnicom and its counsel, and Omnicom received copies of all such documents
and other evidences as it or its counsel reasonably requested in order to
effectuate the consummation of such transactions and the taking of all
proceedings in connection therewith.
ARTICLE VI
ACTIONS AT CLOSING BY OMNICOM AND THE PURCHASER
Simultaneously herewith:
SECTION 6.1 REQUIRED APPROVALS, NOTICES AND CONSENTS. Omnicom
and the Purchaser shall have obtained or given, at no expense to the Companies,
and there shall not have been withdrawn or modified any notices, consents,
approvals or other actions listed on SCHEDULE 4.3.2 hereof. Each such consent
or approval shall be in form reasonably satisfactory to counsel for the Parent.
In addition, all terminations or expirations imposed by any Governmental or
Regulatory Authority on Omnicom or the Purchaser necessary for the consummation
of the transactions contemplated by this Agreement, including the HSR Act,
occurred.
SECTION 6.2 CERTIFIED RESOLUTIONS. Each of Omnicom and the
Purchaser is delivering to the Companies a copy of the resolutions of its Board
of Directors authorizing the execution, delivery and performance of this
Agreement and the transactions contemplated hereby, certified to by one of its
officers.
SECTION 6.3 OPINION OF COUNSEL. The Companies shall have
received the opinion of Davis & Gilbert, counsel to Omnicom and the Purchaser,
dated the Closing Date, in the form of EXHIBIT C hereto.
SECTION 6.4 LICENSE AGREEMENT. The Purchaser shall have entered
into a License Agreement with the Parent in a form acceptable to the Purchaser
and the Parent.
SECTION 6.5 ASSUMED EMPLOYMENT AGREEMENTS. The Purchaser shall
have assumed the Assumed Employment Agreement pursuant to an Assignment and
Assumption Agreement acceptable to the Purchaser.
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SECTION 6.6 PROCEEDINGS. All proceedings to be taken in
connection with the transactions contemplated by this Agreement, and all
documents incident thereto, were reasonably satisfactory in form and substance
to the Parent and its counsel and the Parent received copies of all such
documents and other evidences as it or its counsel reasonably requested in
order to effectuate the consummation of such transaction and the taking of all
proceedings in connection therewith.
ARTICLE VII
OTHER AGREEMENTS
SECTION 7.1 ALLOCATION OF PURCHASE PRICE. The Companies and the
Purchaser agree that the Purchase Price shall be allocated to and deemed paid
for the Assets as provided in this Section 7.1 (the "PURCHASE PRICE
ALLOCATION"). The parties agree that it is their intent that the Assets (other
than goodwill) be purchased for their book value and that any amount paid
hereunder that is in excess of the book value of the Assets be attributable to
goodwill, going concern value and similar intangible assets. Out of the
Closing Payment and the Assumed Liabilities (to the extent that such Assumed
Liabilities are treated as consideration for federal income tax purposes), an
amount equal to the book value of the Assets (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 Closing Payment and the Assumed Liabilities shall
be allocated to and deemed paid for the goodwill, going concern value and
similar intangible assets of the Business. Each of the FIP, SIP, TIP and FP
shall be deemed allocated to and paid for the goodwill, going concern value and
similar intangible assets of the Business. The book value of any asset shall
be its book value as set forth in the Special Determination after it has become
final and conclusive. The Companies and the Purchaser 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 the Purchaser's and the Companies'
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. The Companies
and the Purchaser shall cooperate with each other to prepare the Forms 8594 in
the manner required by this Section 7.1. Parent, Sub, and the Purchaser shall
each deliver to the other a copy of the Form 8594 it files with its respective
federal income tax return.
SECTION 7.2 CHANGE OF NAME. At the Closing, the Parent shall
execute appropriate documents to change its name to a name dissimilar to "Eagle
River Interactive" and file with the appropriate Governmental or Regulatory
Authority any necessary documents to effectuate such name change with the view
of effectuating such name change within 14 days after the Closing.
Notwithstanding anything contained in this Agreement to the contrary, although
the Company agrees to use its best efforts to cease using the "Eagle River
Interactive" name on
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the items specified below as soon as possible after the Closing, the Companies
shall have a royalty-free right to use the name "Eagle River Interactive" for a
period not to exceed 90 days after the Closing to the extent such name is
contained on letterhead, signage, business cards or other supplies of the
Companies existing as of the Closing Date.
SECTION 7.3 AGREEMENTS REGARDING BUSINESS EMPLOYEES AFTER CLOSING
7.3.1 Affected Employees. The Purchaser shall offer employment to
all the Business Employees of the Company effective as of the Closing Date.
The Business Employees who accept such employment (the "AFFECTED EMPLOYEES")
will be employed by the Purchaser with the same salaries and wages under which
such Affected Employees were employed by one of the Companies immediately prior
to the Closing Date, but nothing herein contained shall be deemed to create an
employment contract between the Purchaser and/or any of its affiliates and any
such Affected Employee. In addition, effective the Closing Date, the Purchaser
shall adopt the Companies' health and medical plan applicable to the Business
(the "ASSUMED MEDICAL PLAN") and accordingly, from and after the Closing Date
until otherwise determined by the senior management of the Purchaser and DAS,
the Purchaser shall provide the Affected Employees with the health and welfare
benefits provided under the Assumed Medical Plan. Notwithstanding anything
contained in the Agreement to the contrary, the Purchaser assumes no liability
or responsibility for health and medical coverage (through COBRA or otherwise)
of any Business Employee who is not an Affected Employee; such liability and
responsibility being solely that of the Companies. However, the Purchaser will
administer any claims made by such Business Employees. In its adoption of the
Medical Plan, Purchaser shall provide for the waiver under its welfare benefit
plans covering Affected Employees on and after the Closing Date of any
conditions to coverage with respect to pre-existing medical conditions.
However, any other benefit plans and programs to be instituted by the
Purchaser, may differ from those currently provided by the Companies to the
Affected Employees. Notwithstanding the foregoing, except for Linda Whelan and
Katherine Porter who shall become employees of the Purchaser on the Closing
Date, an offer of employment by the Purchaser to any individual who was a
Business Employee as of the Closing Date and who is receiving sick-leave or
short-term disability benefits under a Company sick-leave or short-term
disability program or who is on an approved leave of absence as of the Closing,
and who is entitled to reinstatement under applicable Federal or state law (a
"BUSINESS EMPLOYEE ON LEAVE"), shall be subject to the following conditions
(except to the extent that such conditions are not applicable to the reason for
such person's absence): (i) that such individual is released by his or her
physician to return to active employment; (ii) that such individual actually
returns to active employment immediately upon such release; and (iii) such
release is prior to such individual's becoming eligible for long-term
disability benefits under a Company long-term disability program; provided,
however, that the Purchaser shall have no obligation to offer any such
individual employment after six months following the Closing. A Business
Employee on Leave shall, subject to the foregoing and as otherwise provided in
respect of Linda Whelan and Katherine Porter, become an employee of Purchaser
on the date he or she begins active employment with Purchaser. The
participation of each Affected Employee in any Company employee
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benefit plans, programs, agreements or arrangements shall cease as of the later
of the Closing Date or the date such Affected Employee becomes an employee of
the Purchaser. Except to the extent that account balances under the Parent's
Plan (as defined in Section 7.3.3) are transferred to the Purchaser's Plan (as
defined in Section 7.3.3) in accordance with Section 7.3.3 and such account
balances (as adjusted for gains and losses) become payable under the
Purchaser's Plan and except for the obligations of the Purchaser on and after
the Closing under the Assumed Medical Plan, the Purchaser assumes no obligation
or liability with respect to any Company employee benefit plan, program,
agreement or arrangement. In the event any Business Employee shall be deemed
to have been terminated solely by reason of the consummation of this Agreement,
any liability for severance benefits shall be borne by the Companies. The
Affected Employees shall be subject to all rules, regulations, requirements and
policies applicable to all new hires of the Purchaser, and any such employees
who may be subsequently terminated will be entitled to severance benefits in
accordance with the policy of the Purchaser as then applicable, except to the
extent that written agreements with such employees that are assumed by the
Purchaser or subsequently entered into, provide otherwise.
7.3.2 Service Credit. The Purchaser shall recognize under its
employee benefit plans, programs, arrangements and policies in which an
Affected Employee will participate the service credited to the Affected
Employee as of the Closing Date to the extent recognized under a Company's
plans or continuity of service rules for purposes of any waiting period,
eligibility conditions, vesting and benefits accrued. The Purchaser shall
credit Affected Employees and their beneficiaries with any amounts paid under
any Company Plan prior to the Closing Date toward satisfaction of the
applicable deductible amounts and copayment minimums under the corresponding
welfare plans of the Purchaser, but only to the extent such payments would be
taken into account under the welfare plans maintained by a Company with respect
to similarly situated employees. Notwithstanding the foregoing, no past service
credit for service with the Company shall be given to any Affected Employee who
may in the future participate in the Omnicom Executive Salary Continuation
Plan.
7.3.3 Transfer of 401K Accounts. (a) As soon as practicable after
receipt by the Purchaser of the opinion or determination letter described in
subparagraph (b) below, the Parent shall cause the trustee of the Eagle River
Interactive, Inc., 401(K) Plan (the "PARENT'S PLAN") to transfer to the trust
forming a part of the Purchaser's Savings Plan (the "PURCHASER'S PLAN") cash
(or with respect to participant loans outstanding under the Parent's Plan as of
the Closing Date, if any, such loans and any promissory notes or other
documents evidencing such loans) in an amount equal to the account balances of
Affected Employees who are participants in the Parent's Plan determined as of a
valuation date (the "VALUATION DATE") that is not more than 30 days preceding
the date of transfer, increased by any contributions due for periods prior to
the Closing Date and reduced by any benefits paid during the period following
such Valuation Date to the date of transfer. Notwithstanding the foregoing,
the Purchaser and the Parent agree to mutually discuss in good faith the
possibility of transferring the assets of the Parent's Plan in kind. The
"PURCHASER'S SAVINGS PLAN" shall
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mean a defined contribution plan maintained by the Purchaser that is
tax-qualified under Section 401(a) of the Code.
(b) Within 60 days after the Closing Date, the Parent
shall either (A) provide the Purchaser with an opinion letter of counsel
acceptable to the Purchaser that the Parent's Plan and its related trust
satisfy the requirements for tax-qualification under Sections 401(a) and 401(k)
of the Code, or (B) deliver to the Purchaser a favorable determination letter
issued by the Internal Revenue Service that the Parent's Plan and its related
trust satisfy the requirements for tax-qualification under Sections 401(a) and
401(k) of the Code as of the later of such letter's effective date or the
Closing Date. No transfer described in subparagraph (a) above shall be made
unless the Parent provides the Purchaser with the opinion letter or
determination letter referred to in this subparagraph (b).
SECTION 7.4 SPECIAL BONUS PLAN. (a) Immediately after the
Closing, Omnicom shall cause the Purchaser to implement a special bonus plan
for the senior management of the Purchaser. For each period, commencing the
Stub Period and ending December 31, 2000, there shall be allocated to the
special bonus plan an amount (the "SPECIAL BONUS") equal to 10% of the FIP,
SIP, TIP, or FP calculation for such period, as the case may be, subject to
reduction as set forth in the next sentence; provided, however, such
calculation shall be made without the subtraction of the SBP or RB1 or RB2, as
the case may be, provided for in the applicable payment formula under clauses
(i) through (v) of Section 2.1.1 above. The Special Bonus as calculated in the
preceding sentence for calendar year 1998 shall be reduced by RB1; the Special
Bonus as calculated in the preceding sentence for calendar year 1999 shall be
reduced by the sum of RB2 and the amount, if any, by which RB1 exceeds the
Special Bonus for 1998 before reduction for RB1; and the Special Bonus for
calendar year 2000 as calculated in accordance with the preceding sentence
shall be reduced by the amount, if any, by which the sum of RB1 and RB2 exceeds
the Special Bonuses for 1998 and 1999 before reduction for RB1 and RB2. Each
period's Special Bonus shall be allocated among the senior management or the
former senior management of the Purchaser as determined by Terence M. Graunke,
after consultation with the President of DAS or his designee. Omnicom agrees
to cause the Purchaser to pay the full amount of the Special Bonus allocated to
any period. If the Special Bonus calculation for any period results in a
negative number, the Special Bonus for such period shall be zero.
(b) Notwithstanding anything contained in clause (a)
above, it is the intention of the parties that the sum of (x) the SBP for the
FP, (y) RB1 and (z) RB2, shall be equal to the higher of the sum of RB1 and RB2
or 10% of the FP before the subtraction of SBP, RB1 and RB2, and the parties
agree that this Section 7.4 shall be construed accordingly.
SECTION 7.5 OPERATION OF THE BUSINESS BY THE PURCHASER. Omnicom
and the Purchaser acknowledge that a portion of the Purchase Price is dependent
on the future operation by the Purchaser of the Business and that the Companies
are entering into this Agreement with an expectation and mutual understanding
with Omnicom and the Purchaser
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that, during any period during which the Purchase Price (or any portion
thereof) remains subject to calculation, the Purchaser will, and Omnicom will
cause the Purchaser to, conduct the business activities of the Purchaser in
good faith and in a reasonable commercial manner. Consistent with such
understanding, during any period that the Purchase Price (or any portion
thereof) remains subject to calculation, the Purchaser shall use commercially
reasonable efforts to (i) operate and carry on the business of the Purchaser
only in the ordinary course, (ii) keep and maintain the assets and properties
of the Purchaser in good operating condition and repair and (iii) preserve the
goodwill of clients, suppliers, licensors, employees and others having business
relations with the Purchaser. In addition to, and without limitation of the
foregoing, during any period that the Purchase Price (or any portion thereof)
remains subject to calculation, the Purchaser shall not, and Omnicom shall not
permit the Purchaser to, in each case without the prior express written
approval of Parent:
(a) sell, lease (as lessor), transfer or otherwise
dispose of (including any transfers from the Purchaser to Omnicom or
any of its affiliates) any material part of the assets or properties
of the Purchaser;
(b) institute profit sharing, bonus, incentive or other
cash compensation policies or plans materially different than those in
effect for the Affected Employees of the Companies on the Closing
Date;
(c) create or acquire any subsidiary or otherwise make an
acquisition of a material portion of the assets or capital stock of
any other entity;
(d) merge or consolidate with or into any other entity;
or
(e) distribute to Omnicom by way of management fees
and/or dividends more than 90% of the profit after taxes for each
calendar year falling within the period that the Purchase Price (or
any portion thereof) remains subject to calculation.
SECTION 7.6 FINANCIAL STATEMENTS OF THE PURCHASER. As soon as
practicable (and in any event within 45 days) after the end of each fiscal
quarter of the Purchaser occurring between the Closing Date and the payment in
full of the Purchase Price, the Purchaser shall deliver to the Parent (a) a
balance sheet as at the last day of such fiscal quarter and (b) the quarterly
profit and loss statement (showing year-to-date actual performance and revised
budget forecast for the remainder of the year) it prepares for Omnicom in
accordance with Omnicom's budgeting procedures.
SECTION 7.7 SALES TAX. Notwithstanding anything contained in
this Agreement to the contrary, any sales taxes, use taxes, real property
transfer or gains taxes, documentary stamp taxes or similar taxes attributable
to the sale or transfer of the Assets to the Purchaser hereunder shall be borne
50% by the Purchaser and 50% by the Parent.
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SECTION 7.8 TRANSFER TAXES. The Purchaser and the Companies
shall comply with Section 14.15 of the New York State Tax Law relating to the
New York State Real Property Transfer Tax and Chapter 21, Title of the
Administrative Code of the City of New York relating to the New York City Real
Property Transfer Tax and any similar taxes of other applicable jurisdictions
(all such taxes collectively, the "TRANSFER TAXES"). For such purposes, the
parties hereto agree that the leasehold interests of the Companies have no
value and that no portion of the Purchase Price is allocable thereto. At the
Closing, the Parent shall deliver and cause to be filed all returns required to
be filed in connection with the Transfer Taxes. Any Transfer Taxes that are
payable shall be borne 50% by the Purchaser and 50% by the Parent as provided
in Section 7.7.
SECTION 7.9 GUARANTEES. Omnicom shall cause itself or one or
more of its affiliates to be substituted in all respects for the Parent,
effective as of the Closing, in respect of all obligations of the Parent under
each of the guaranties, letters of credit and letters of comfort listed on
SCHEDULE 7.9 (the "GUARANTIES"). If Omnicom is unable to effect such a
substitution with respect to any of the Guaranties after using commercially
reasonable efforts to do so, Omnicom shall obtain letters of credit, on terms
and from financial institutions reasonably satisfactory to the Parent, in favor
of the Parent with respect to the obligations covered by each of the Guaranties
for which Omnicom does not effect such substitution.
SECTION 7.10 TRANSITION SERVICES AGREEMENT.
7.10.1 Services by the Parent. The Parent agrees to use its best
efforts for a period of 60 days after Closing (or such shorter period upon
notification from the Purchaser) (the "SERVICE PERIOD") to provide the
Purchaser with the same accounting, financial and administrative services in
connection with the acquired Business that it provided to the Business prior to
the Closing. Such services shall be provided at no cost and shall be
coordinated through the Chief Financial Officer of DAS.
7.10.2 Services by the Purchaser. The Parent is currently engaged in
the development of brochureware designed specifically for electronic mail
systems for its various product lines (the "Development Project") for the
benefit of the Parent's continuing training business. The Purchaser agrees
that (i) provided the Purchaser's employees have available work time during
normal business hours, during the period that the Purchaser is obligated to
provide workspace and support under clause (iii) below, it will provide the
Parent (and its affiliates) such services (including use of the Affected
Employees) as shall be necessary for the Development Project to be completed to
the Parent's reasonable satisfaction, (ii) provided the Purchaser's employees
have available work time during normal business hours, during the Service
Period it will provide the Parent (and its affiliates) services to complete
certain projects as listed on SCHEDULE 7.10.2 (other than the Development
Project) which remained uncompleted at the Closing Date, and (iii) for a period
of one year after Closing it will provide access to, and appropriate workspace
and administrative support at, the Portland, Oregon office of the Business
(including access to and use of the audio studio at such location), for its
twelve
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employees to be retained as part of its continuing training business; provided,
however, except with respect to the use of the audio studio, if the Purchaser
needs such workspace for its own employees, it may upon 60 days notice to the
Parent terminate its obligations under the clause (iii). The Parent (and its
affiliates) shall have the right for the entire one-year period after Closing,
during normal business hours and upon reasonable advance notice to the
Purchaser, to use the audio studio when it is not being used by the Purchaser
and its affiliates. All such services, access, workspace, support and use
shall be provided by the Purchaser without charge or cost to the Parent or its
affiliates.
ARTICLE VIII
SURVIVAL; INDEMNITY
SECTION 8.1 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 Schedules, if any,
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 8.6.2 and 8.6.3 below, the respective representations,
warranties, covenants and agreements of the Companies, Omnicom and the
Purchaser contained in this Agreement shall survive the Closing; provided,
however, the representations and warranties contained in this Agreement shall
terminate on the second anniversary of the Closing Date.
SECTION 8.2 OBLIGATION OF THE COMPANIES TO INDEMNIFY. Subject to
the limitations contained in Sections 8.6.1 and 8.6.2, the Companies, hereby
agree, jointly and severally, to indemnify Omnicom, the Purchaser, their
affiliates, and their respective officers, directors and agents (individually a
"PURCHASER INDEMNIFIED PARTY" and collectively, the "PURCHASER INDEMNIFIED
PARTIES") against, and to protect, save and keep harmless the Purchaser
Indemnified Parties from, and to assume liability for, payments of all
liabilities (including liabilities for Taxes), obligations, losses, damages,
penalties, claims, actions, suits, judgments, settlements, 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"), to the extent the same are imposed on
or incurred by the Purchaser Indemnified Parties as a consequence of or in
connection with (i) any misrepresentation, inaccuracy or breach of any
representation or warranty contained in or made pursuant to Article III hereof,
(ii) any breach or failure by either of the Companies to comply with, perform
or discharge any obligation, agreement or covenant of either of the Companies
contained in or made pursuant to this Agreement, or (iii) the assertion by any
third Person of any claim or cause of action relating to any Retained
Liability. The term "LOSSES" as used herein is not limited to matters asserted
by third Persons against a Purchaser
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Indemnified Party or Companies Indemnified Party (as defined in Section 8.3
below) but includes Losses incurred or sustained by a Purchaser Indemnified
Party or Companies Indemnified Party, as the case may be, in the absence of
third party claims.
SECTION 8.3 OBLIGATION OF OMNICOM AND THE PURCHASER TO INDEMNIFY.
Subject to the limitations set forth in Section 8.6.3, Omnicom and the
Purchaser hereby agree, jointly and severally, to indemnify the Companies,
their affiliates, and their respective officers and directors and agents
(individually, a "COMPANIES INDEMNIFIED PARTY" and collectively, the "COMPANIES
INDEMNIFIED PARTIES") (the Purchaser Indemnified Parties and the Companies
Indemnified Parties, collectively, the "INDEMNIFIED PARTIES") against, and to
protect, save and keep harmless the Companies from and to assume liability for
any and all Losses that may be imposed on or incurred by the Companies as a
consequence of or in connection with (i) any misrepresentation, inaccuracy or
breach of any representation or warranty contained in or made pursuant to
Article IV hereof, (ii) any breach or failure by either Omnicom or the
Purchaser to comply with, perform or discharge any obligation, agreement or
covenant contained in or made pursuant to this Agreement (including payments of
the Purchase Price under Section 2.1 above), or (iii) the assertion by any
third Person of any claim or cause of action relating to any Assumed Liability.
SECTION 8.4 RIGHT OF OFFSET. Without limiting any other rights
or remedies available to it, Omnicom and the Purchaser shall be entitled,
subject to the limitations set forth in Section 8.6, to offset any claim for
indemnity made pursuant to Section 8.2, as to which notice has been given
pursuant to Section 8.5.1, against any payment of the Purchase Price due under
Section 2.1.1; provided, however, unless at the time one of the Basic Payments
is being paid Omnicom in good faith determines that the Final Payment will be
insufficient to cover all Losses of the Purchaser Indemnified Parties relating
to Asserted Liabilities (as defined in Section 8.5.1) that are then pending and
unsatisfied, the Purchaser and Omnicom agree that they will not use their right
of offset against such Basic Payment and shall wait until the Final Payment to
invoke their right of offset. However, if Omnicom in good faith makes such
determination, it may use its right of offset as provided in this Section 8.4
against such Basic Payment. If any such claims for indemnity are resolved in
favor of the Companies by mutual agreement or otherwise, or if the amount
withheld exceeds the amount ultimately payable to a Purchaser Indemnified Party
in respect of such claim, the Purchaser shall pay to the Parent the excess
amount withheld with respect to such claim together with interest thereon for
the period such amount has been withheld at a rate equal to the published prime
rate of interest of The Chase Manhattan Bank, N.A., plus one, in effect from
time to time during the relevant period.
SECTION 8.5 INDEMNIFICATION PROCEDURES.
8.5.1 Notice of Asserted Liability. The Indemnified Party shall
promptly give notice (the "CLAIMS NOTICE") to the party or parties required to
pay any amount in respect of Losses under Sections 8.2 or 8.3 (collectively,
the "INDEMNIFYING PARTY"), of any demand, claim or
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circumstances which in good faith it believes gives rise, or with the lapse of
time would or might give rise to a claim or the commencement (or threatened
commencement) of any action, proceeding or investigation that may result in any
Losses (an "ASSERTED LIABILITY") without regard to the limitations on
indemnification set forth in Section 8.6 below. The Claims Notice shall
describe the Asserted Liability in reasonable detail, and shall indicate the
amount (estimated, if necessary, and to the extent feasible) of the Losses that
have been or may be suffered by an Indemnified Party.
8.5.2 Defense of Asserted Liability. The Indemnifying Party may
elect to compromise, settle or defend, at its own expense and by its own
counsel (such counsel to be reasonably satisfactory to the Indemnified Party),
any Asserted Liability. If the Indemnifying Party elects to compromise, settle
or defend such Asserted Liability, it shall within 30 days (or sooner, if the
nature of the Asserted Liability so requires) notify the Indemnified Party in
writing of its intent to do so and the Indemnified Party shall cooperate, at
the request and expense of the Indemnifying Party, in the settlement or
compromise of, or defense against, such Asserted Liability. If the
Indemnifying Party elects not to compromise, settle or defend the Asserted
Liability, or fails to notify the Indemnified Party of its election as herein
provided, the Indemnified Party may pay, compromise, settle or defend such
Asserted Liability at the expense of the Indemnifying Party and the
Indemnifying Party shall be bound by the results obtained by the Indemnified
Party with respect to such third party claim. Notwithstanding the foregoing,
the Indemnifying Party may not settle or compromise any Asserted Liability
without the prior written consent of the Indemnified Party, which consent shall
not be unreasonably withheld or delayed. If an Indemnified Party refuses to
consent to a bona fide offer of settlement which provides solely for a monetary
payment and includes an unconditional release from all liability without future
obligation or prohibition on the part of the Indemnified Party, 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
expense of the Indemnified Party. However, in such event, the obligation of
the Indemnifying Party shall be limited to the amount of the offer of
settlement which the Indemnified Party refused to accept plus any previously
unreimbursed costs and expenses of the Indemnified Party incurred prior to the
date the Indemnifying Party notified the Indemnified Party of the offer of
settlement and in respect of which the Indemnified Party would otherwise be
entitled to indemnification hereunder. The Indemnified Party shall have the
right to employ its own counsel in any case with respect to an Asserted
Liability, but the fees and expenses of such counsel shall be at the expense of
such Indemnified Party unless (a) the employment of such counsel shall have
been authorized in writing by the Indemnifying Party in connection with the
defense of such action, (b) such Indemnifying Party shall not have, as provided
above, promptly employed counsel reasonably satisfactory to such Indemnified
Party to take charge of the defense of such action, or (c) such Indemnified
Party shall have reasonably concluded that there may be one or more legal
defenses available to it which are different from or additional to those
available to such Indemnifying Party, in any of which events such reasonable
fees and expenses shall be borne by the Indemnifying Party and the Indemnifying
Party shall not have the right to direct the defense of such action on behalf
of the Indemnified Party in respect of such different or additional defenses.
If the Indemnifying Party chooses to defend any claim, the Indemnified Party
shall make available to the Indemnifying Party
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any books, records or other documents within its control that are necessary or
appropriate for such defense. The parties hereto agree to cooperate fully with
one another in the defense, compromise or settlement of any Asserted Liability.
8.5.3 Control by Omnicom. All decisions and determinations to be
made by a Purchaser Indemnified Party under Article VIII shall be made by
Omnicom in the name of and on behalf of such other Purchaser Indemnified Party
and all such decisions and determinations shall be binding upon the parties
hereto and such Purchaser Indemnified Party.
SECTION 8.6 LIMITATIONS ON INDEMNIFICATION.
8.6.1 Indemnity Cushion. Neither of the Companies shall be
obligated to indemnify a Purchaser Indemnified Party for Losses arising out of
any of the matters referred to in clause (i) of Section 8.2 until such time as
claims, actions or other Asserted Liabilities with respect to Losses arising
out of any of the matters referred to in clause (i) of Section 8.2 shall exceed
$150,000 in the aggregate (in which case the Companies shall be liable for all
Losses only to the extent such Losses are in excess of $150,000); provided,
however, that this Section 8.6.1 shall not apply to Losses relating to a breach
of a representation or warranty contained in Section 3.25 and provided,
further, that the aggregate amount that the Companies shall be liable for any
and all Losses arising out of any of the matters referred to in clause (i) of
Section 8.2 shall not exceed the total Purchase Price.
8.6.2 Termination of Indemnification Obligations of the Companies.
The obligation of the Companies to indemnify under clause (i) of Section 8.2
hereof shall terminate on the second anniversary date of the Closing Date
except (i) as to matters as to which the Purchaser Indemnified Party has made a
claim for indemnification or given a Claims Notice under Section 8.5 hereof on
or prior to such date and, (ii) with respect to any claim for Losses pertaining
to a misrepresentation or a breach of representation of warranty under Sections
3.10 or 3.18 or any other Section of Article III of this Agreement relating to
Taxes. The obligation to indemnify referred to in:
(a) the preceding clause (i) shall survive the expiration of such
period until such claim for indemnification is finally resolved and
any obligations with respect thereto are fully satisfied; and
(b) the preceding clause (ii) shall terminate 60 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 Purchaser Indemnified Party has
made a claim for indemnification or given a Claims Notice under
Section 8.5 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.
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8.6.3 Termination of Indemnification Obligations of Omnicom and the
Purchaser. The obligation of Omnicom and the Purchaser to indemnify under
clause (i) of Section 8.3 hereof shall terminate on the second anniversary date
of the Closing Date except as to matters as to which either of the Companies
has made a claim for indemnification or given a Claims Notice under Section 8.5
hereof on or prior to such date, in which case the right to indemnification
with respect thereto shall survive the expiration of such period until such
claim for indemnification is finally resolved and any obligations with respect
thereto are fully satisfied.
8.6.4 Treatment. Any indemnity payments by an Indemnifying Party to
an Indemnified Party under this Article VIII shall be treated by the parties as
an adjustment to the Purchase Price.
8.6.5 Deductions; Exclusive Remedy. In calculating any Loss there
shall be deducted (i) any insurance recovery in respect thereof (and no right
of subrogation shall accrue hereunder to any insurer) and (ii) the amount of
any net actual reduction in Taxes payable by the Indemnified Party (or any of
its affiliates) upon its payment of Losses, determined at an assumed marginal
tax rate equal to the highest marginal tax rate then in effect for corporate
taxpayers in the relevant jurisdiction (after giving effect to the tax effect
of receipt of the indemnification payments). The parties hereto agree that,
from and after the Closing, except for a Claim based upon fraud, the sole and
exclusive remedy with respect to any Losses arising out of any matters referred
to in clause (i) of Section 8.2 or Section 8.3 shall be pursuant to the
provision of this Article VIII.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1 EXPENSES. The parties hereto shall pay all of their
own expenses relating to the transactions contemplated by this Agreement,
including, without limitation, the fees and expenses of their respective
counsel and financial advisers.
SECTION 9.2 GOVERNING LAW. The interpretation and construction
of this Agreement, and all matters relating hereto, shall be governed by the
laws of the State of New York without reference to its conflict of laws
provisions.
SECTION 9.3 "PERSON" DEFINED. "PERSON" shall mean and include an
individual, a company, a joint venture, a corporation (including any non-profit
corporation), an estate, an 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.
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SECTION 9.4 "KNOWLEDGE" DEFINED. Where any representation and
warranty contained in this Agreement is expressly qualified by reference to the
knowledge of the Companies or Omnicom, as the case may be, such term shall be
limited to the actual knowledge of the directors and officers of such party
(and in case of the Companies, also its general managers and key employees who
are neither officers nor directors).
SECTION 9.5 "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 9.6 CAPTIONS. The Article and Section captions used
herein are for reference purposes only, and shall not in any way affect the
meaning or interpretation of this Agreement.
SECTION 9.7 PUBLICITY. Subject to the provisions of the next
sentence, no party to this Agreement 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 the Parent and
Omnicom. Notwithstanding the foregoing, the foregoing provision shall not
apply to the extent that the Parent or Omnicom is required to make any
announcement relating to or arising out of this Agreement by virtue of the
federal securities laws of the United States or the rules and regulations
promulgated thereunder or other rules of the New York Stock Exchange or NASDAQ,
or any announcement by any party pursuant to applicable law or regulations.
SECTION 9.8 NOTICES. Unless otherwise provided herein, any
notice, request, instruction or other document to be given hereunder by any
party to any other party shall be in writing and shall be deemed to have been
given (a) upon personal delivery, if delivered by hand, (b) three days after
the date of deposit in the mails, postage prepaid, if mailed by certified or
registered mail, or (c) the next business day if sent by a prepaid overnight
courier service, and in each case at the respective addresses set forth below
or such other address as such party may have fixed by notice:
If to Omnicom and the Purchaser, addressed to:
Omnicom Group Inc.
437 Madison Avenue
New York, New York 10022
Attention: Secretary
with a copy to:
Davis & Gilbert
1740 Broadway
New York, New York 10019
Attention: Michael D. Ditzian, Esq.
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If to either of the Companies, addressed to:
Mastering Computers, Inc.
11,000 North Scottsdale Road - Suite 260
Scottsdale, Arizona 85254
Attention: Marc Pinto
with a copy to:
Sidley & Austin
One First National Plaza
Chicago, Illinois 60603
Attention: Larry A. Barden, Esq.
SECTION 9.9 PARTIES IN INTEREST. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and assigns.
SECTION 9.10 SEVERABILITY. In the event any provision of this
Agreement is found to be void and unenforceable by a court of competent
jurisdiction, the remaining provisions of this Agreement shall nevertheless be
binding upon the parties with the same effect as though the void or
unenforceable part had been severed and deleted.
SECTION 9.11 COUNTERPARTS. This Agreement may be executed in two
or more counterparts, all of which taken together shall constitute one
instrument.
SECTION 9.12 ENTIRE AGREEMENT. This Agreement, including the
other documents referred to herein and the Exhibits and Schedules hereto which
form a part hereof, contains the entire understanding of the parties hereto
with respect to the subject matter contained herein and therein. This
Agreement supersedes all prior agreements and understandings between the
parties with respect to such subject matter.
SECTION 9.13 AMENDMENTS. This Agreement may not be amended,
supplemented or modified orally, but only by an agreement in writing signed by
Omnicom, the Purchaser, and each of the Companies.
SECTION 9.14 THIRD PARTY BENEFICIARIES. Each party hereto
intends that this Agreement shall not benefit or create any right or cause of
action in or on behalf of any Person other than the parties hereto and their
respective successors and assigns as permitted under Section 9.9.
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SECTION 9.15 JURISDICTION. Any judicial proceeding brought against
any of the parties to this Agreement on any dispute arising out of this
Agreement shall be brought in the courts of the State of New York or Arizona or
in the United States District Court for the Southern District of New York or
the District of Arizona, and, by execution and delivery of this Agreement, each
of the parties to this Agreement accepts for itself the process in any action
or proceeding by the mailing of copies of such process to such party at its
address as set forth in Section 9.8, and irrevocably agrees to be bound by any
judgment rendered thereby in connection with this Agreement. Each party hereto
irrevocably waives to the fullest extent permitted by law any objection that it
may now or hereafter have to the laying of the venue of any judicial proceeding
brought in such courts and any claim that any such judicial proceeding has been
brought in an inconvenient forum. The foregoing consent to jurisdiction shall
not constitute general consent to service of process in the State of New York
or Arizona for any purpose except as provided above and shall not be deemed to
confer rights on any Person other than the respective parties to this
Agreement. EACH PARTY HERETO WAIVES TRIAL BY JURY IN ANY JUDICIAL PROCEEDING
UNDER THIS AGREEMENT.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement,
on the day and year first above written.
OMNICOM GROUP INC.
BY:
----------------------------------
NAME: BARRY J. WAGNER
TITLE: SECRETARY
EAGLE RIVER ACQUISITION INC.
BY:
----------------------------------
NAME: BARRY J. WAGNER
TITLE: SECRETARY
EAGLE RIVER INTERACTIVE, INC.
BY:
----------------------------------
NAME: MARC PINTO
TITLE: EXECUTIVE VICE PRESIDENT
CHIEF FINANCIAL OFFICER
GRAPHIC MEDIA, INC.
BY:
----------------------------------
NAME: MARC PINTO
TITLE: EXECUTIVE VICE PRESI
CHIEF FINANCIAL OFFICER
48
