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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
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CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
October 31, 1997
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(Date of earliest event reported)
BIG FLOWER HOLDINGS, INC.
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(Exact name of registrant as specified in its charter)
Delaware 0-29474 13-397-1556
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(State of other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
3 East 54th Street
New York, New York 10022
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(Address of principal executive offices, including zip code)
(212) 521-1600
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(Registrant's telephone number, including area code)
BIG FLOWER PRESS HOLDINGS, INC.
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(Former name or former address, if changed since last report)
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Item 2. Acquisition or Disposition of Assets.
On October 31, 1997, Big Flower Holdings, Inc. ("Big Flower
Holdings"), a Delaware corporation, completed its acquisition (the "CJDS
Acquisition") of all of the capital stock of Columbine JDS Systems, Inc., a
Delaware corporation ("CJDS"), pursuant to a Stock Purchase Agreement, dated as
of September 19, 1997, among Big Flower Press Holdings, Inc., a Delaware
corporation and a wholly-owned subsidiary of Big Flower Holdings ("Big Flower
Press"), CJDS and the stockholders and option holders of CJDS, as amended by
the First Amendment, dated October 29, 1997, by and among Big Flower Holdings,
Big Flower Press, CJDS and the stockholders and option holders of CJDS (as so
amended, the "Stock Purchase Agreement"). The aggregate purchase price for the
CJDS Acquisition was approximately $74,958,000 in cash (subject to a
post-closing adjustment) and 770,924 shares of Big Flower Holdings common stock,
par value $.01 per share. The purchase price was established through
arm's-length negotiations between Big Flower Press and the stockholders of CJDS.
Big Flower Holdings obtained the funds necessary to finance the
CJDS Acquisition from borrowings under a Credit Agreement, dated June 12, 1997,
among Big Flower Press, the financial institutions from time to time a
party thereto, Bank of America NT & SA and The Industrial Bank of Japan
Limited, as Co-Agents, Credit Suisse First Boston, as Documentation Agent, and
Bankers Trust Company, as Administrative Agent.
The foregoing description of the CJDS Acquisition does not purport
to be complete and is qualified in its entirety by reference to the Stock
Purchase Agreement, a copy of which is attached as Exhibits 2.1 and 2.2 hereto
and is incorporated by reference herein in its entirety.
On November 3, 1997, Big Flower Holdings issued a press release, a
copy of which is attached as Exhibit 99.1 hereto and is incorporated by
reference herein in its entirety, announcing the consummation of the CJDS
Acquisition.
Item 7. Financial Statements, PRO FORMA Financial Information and Exhibits.
(a) Financial Statements of Business Acquired.
It is impracticable for Big Flower Holdings to provide the
financial statements required to be filed herewith at the time this report on
Form 8-K is filed. Big Flower Holdings expects to file the required financial
statements by means of an amendment to this Current Report on Form 8-K as soon
as practicable, and in any case not later than January 14, 1998.
(b) Pro Forma Financial Information.
It is impracticable for Big Flower Holdings to provide the pro
forma financial information required to be filed herewith at the time this
report on Form 8-K is filed. Big Flower Holdings expects to file the required
pro forma financial information by means of an amendment to this Current Report
on Form 8-K as soon as practicable, and in any case not later than January 14,
1998.
2
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(c) Exhibits.
2.1 Stock Purchase Agreement, dated as of September 19, 1997, among
Big Flower Press Holdings, Inc., Columbine JDS Systems, Inc. and
its stockholders and option holders (omitting schedules and
exhibits thereto, which will be furnished supplementally to the
Commission upon request).
2.2 First Amendment, dated as of October 29, 1997, by and among Big
Flower Press Holdings, Inc., Big Flower Holdings, Inc., Columbine
JDS Systems, Inc. and its stockholders and option holders
(omitting exhibits thereto, which will be furnished
supplementally to the Commission upon request).
99.1 Copy of press release issued by Big Flower Holdings, Inc. on
November 3, 1997.
3
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SIGNATURES
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 hereunder duly authorized.
BIG FLOWER HOLDINGS, INC.
Date: November 13, 1997 By: /s/ Irene B. Fisher
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Name: Irene B. Fisher
Title: Vice President
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EXHIBIT INDEX
2.1 Stock Purchase Agreement, dated as of September 19, 1997, among
Big Flower Press Holdings, Inc., Columbine JDS Systems, Inc. and
its stockholders and option holders (omitting schedules and
exhibits thereto, which will be furnished supplementally to the
Commission upon request).
2.2 First Amendment, dated as of October 29, 1997, by and among Big
Flower Press Holdings, Inc., Big Flower Holdings, Inc., Columbine
JDS Systems, Inc. and its stockholders and option holders
(omitting exhibits thereto, which will be furnished
supplementally to the Commission upon request).
99.1 Copy of press release issued by Big Flower Holdings, Inc. on
November 3, 1997.
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Exhibit 2.1
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STOCK PURCHASE AGREEMENT
among
BIG FLOWER PRESS HOLDINGS, INC.,
COLUMBINE JDS SYSTEMS, INC.,
COLUMBINE BIAS, LTD.,
WILLIAM S. COLE,
CATHERINE P. COLE,
CATHERINE P. COLE TRUST,
WAYNE M. RUTING,
DOUG ROTHER,
ROBERT HOWARD
and
OPTION HOLDERS
DATED SEPTEMBER 19, 1997
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TABLE OF CONTENTS
INTRODUCTION
ARTICLE I
DEFINITIONS
1.1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II
SALE AND TRANSFER OF SHARES AND OPTIONS; CLOSING
2.1. Shares and Options to be Transferred. . . . . . . . . . . . . . . . . 7
2.2. Purchase Price and Payment. . . . . . . . . . . . . . . . . . . . . . 7
2.3. Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND SELLERS
3.1. Organization and Good Standing . . . . . . . . . . . . . . . . . . .11
3.2. Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . .11
3.3. Capitalization of the Subsidiaries . . . . . . . . . . . . . . . . .11
3.4. Authority. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
3.5. No Conflicts; Consents . . . . . . . . . . . . . . . . . . . . . . .12
3.6. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . .12
3.7. Title to Properties; Encumbrances. . . . . . . . . . . . . . . . . .13
3.8. No Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . .13
3.9. Absence of Certain Changes or Events . . . . . . . . . . . . . . . .13
3.10. Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
3.11. Leases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
3.12. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . .15
3.13. Material Agreements . . . . . . . . . . . . . . . . . . . . . . . . .15
3.14. Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . .16
3.15. Intellectual Property Rights. . . . . . . . . . . . . . . . . . . . .16
3.16. Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
3.17. Employee Benefits Plans . . . . . . . . . . . . . . . . . . . . . . .19
3.18. Brokers and Finders . . . . . . . . . . . . . . . . . . . . . . . . .20
3.19. Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . .20
3.20. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
3.21. Compliance with Applicable Law. . . . . . . . . . . . . . . . . . . .21
3.22. Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
3.23. Customers and Suppliers . . . . . . . . . . . . . . . . . . . . . . .21
3.24. Transactions with Affiliates. . . . . . . . . . . . . . . . . . . . .21
3.25. Governmental Permits. . . . . . . . . . . . . . . . . . . . . . . . .22
3.26. Absence of Sensitive Payments . . . . . . . . . . . . . . . . . . . .22
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3.27. Prior Acquisitions. . . . . . . . . . . . . . . . . . . . . . . . . .22
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SHARE SELLERS
4.1. Title to Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . .22
4.2. Ownership of Options . . . . . . . . . . . . . . . . . . . . . . . . .22
4.3. Authority. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
4.4. Brokers and Finders. . . . . . . . . . . . . . . . . . . . . . . . . .23
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
5.1. Organization and Good Standing . . . . . . . . . . . . . . . . . . . .23
5.2. Authority. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23
5.3. No Conflicts; Consents . . . . . . . . . . . . . . . . . . . . . . . .23
5.4. Investment Intent. . . . . . . . . . . . . . . . . . . . . . . . . . .24
5.5. Buyer's Investigation. . . . . . . . . . . . . . . . . . . . . . . . .24
5.6. Brokers and Finders. . . . . . . . . . . . . . . . . . . . . . . . . .24
5.7. SEC Documents. . . . . . . . . . . . . . . . . . . . . . . . . . . . .24
5.8. Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . .24
5.9. Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25
ARTICLE VI
COVENANTS OF PARTIES PRIOR TO CLOSING
6.1. Due Diligence . . . . . . . . . . . . . . . . . . . . . . . . . . . .25
6.2. Operation of the Business of the Company. . . . . . . . . . . . . . .25
6.3. Required Approvals. . . . . . . . . . . . . . . . . . . . . . . . . .26
6.4. Reasonable Best Efforts . . . . . . . . . . . . . . . . . . . . . . .26
6.5. Disclosure Supplements. . . . . . . . . . . . . . . . . . . . . . . .26
6.6. Further Assurances. . . . . . . . . . . . . . . . . . . . . . . . . .26
6.7. No Solicitation by Seller . . . . . . . . . . . . . . . . . . . . . .26
6.8. Repayment of Loans, Advances, Notes, etc. . . . . . . . . . . . . . .27
6.9. Termination of Affiliate Agreements . . . . . . . . . . . . . . . . .27
6.10. Compliance with Laws and Contracts . . . . . . . . . . . . . . . . . .27
6.11. Broker's Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27
6.12. State Securities Laws Compliance . . . . . . . . . . . . . . . . . . .27
6.13. New York Stock Exchange. . . . . . . . . . . . . . . . . . . . . . . .27
6.14. Accruals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER
7.1. Accuracy of Representations.. . . . . . . . . . . . . . . . . . . . .27
7.2. Share Sellers' Performance. . . . . . . . . . . . . . . . . . . . . .28
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7.3. No Legal Bar. . . . . . . . . . . . . . . . . . . . . . . . . . . . .28
7.4. Consents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28
7.5. Material Adverse Effect . . . . . . . . . . . . . . . . . . . . . . .28
7.6. Repayment of Loans. . . . . . . . . . . . . . . . . . . . . . . . . .28
7.7. State Securities Laws . . . . . . . . . . . . . . . . . . . . . . . .28
7.8. Share Sellers' Deliveries . . . . . . . . . . . . . . . . . . . . . .28
ARTICLE VIII
CONDITIONS PRECEDENT TO OBLIGATIONS OF SHARE SELLERS AND OPTION HOLDERS
8.1. Accuracy of Representations . . . . . . . . . . . . . . . . . . . . .29
8.2. Buyer's Performance . . . . . . . . . . . . . . . . . . . . . . . . .30
8.3. Payment of Consideration. . . . . . . . . . . . . . . . . . . . . . .30
8.4. No Legal Bar. . . . . . . . . . . . . . . . . . . . . . . . . . . . .30
8.5. Consents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .30
8.6. State Securities Laws . . . . . . . . . . . . . . . . . . . . . . . .30
8.7. New York Stock Exchange . . . . . . . . . . . . . . . . . . . . . . .30
8.8. Buyers' Deliveries. . . . . . . . . . . . . . . . . . . . . . . . . .30
ARTICLE IX
ADDITIONAL AGREEMENTS
9.1. Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .30
9.2. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . .31
9.3. Termination of Stockholders' Agreement. . . . . . . . . . . . . . . .31
9.4. Assumed Options . . . . . . . . . . . . . . . . . . . . . . . . . . .31
9.5. Cancellation of Preferred Stock . . . . . . . . . . . . . . . . . . .32
9.6. Termination of Cole Escrow Agreement. . . . . . . . . . . . . . . . .32
9.7. Termination of Employment Agreements. . . . . . . . . . . . . . . . .32
9.8. Lock-Up Period. . . . . . . . . . . . . . . . . . . . . . . . . . . .32
9.9. Certain Transfer Restrictions.. . . . . . . . . . . . . . . . . . . .32
9.10. Orderly Disposition. . . . . . . . . . . . . . . . . . . . . . . . . .32
9.11. Shares Held in Escrow. . . . . . . . . . . . . . . . . . . . . . . . .33
ARTICLE X
TERMINATION
10.1. Termination Events . . . . . . . . . . . . . . . . . . . . . . . . . .33
10.2. Effect of Termination. . . . . . . . . . . . . . . . . . . . . . . . .33
ARTICLE XI
INDEMNIFICATION; REMEDIES
11.1. Indemnification and Payment of Damages by Sellers. . . . . . . . . . .34
11.2. Limitation of Remedies . . . . . . . . . . . . . . . . . . . . . . . .34
11.3. Tax Indemnification . . . . . . . . . . . . . . . . . . . . . . . . .36
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11.4. Indemnification and Payment of Damages by Buyer . . . . . . . . . . .37
11.5. Time Limitation . . . . . . . . . . . . . . . . . . . . . . . . . . .37
11.6. Limitations of Amount of Claims . . . . . . . . . . . . . . . . . . .37
11.7. Procedure for Indemnification -- Third Party Claims . . . . . . . . .37
ARTICLE XII
MISCELLANEOUS
12.1. Public Announcements . . . . . . . . . . . . . . . . . . . . . . . .38
12.2. Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . . . .39
12.3. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .39
12.4. Entire Agreement and Modification. . . . . . . . . . . . . . . . . .41
12.5. Assignments and Successors . . . . . . . . . . . . . . . . . . . . .41
12.6. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . .41
12.7. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .41
12.8. Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . .41
12.9. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . .41
12.10. Specific Performance. . . . . . . . . . . . . . . . . . . . . . . . .41
12.11. Consent to Jurisdiction and Service of Process. . . . . . . . . . . .42
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SCHEDULES
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Schedule 2.2(d)(i) Percentage Ownership of Preferred Stock
Schedule 2.2(d)(iv) Indemnification Percentage
Schedule 2.2(h) Per Diem Gross Payroll Amount
Schedule 3.2 Capitalization
Schedule 3.3 Subsidiaries
Schedule 3.5 Conflicts and Consents
Schedule 3.7 Encumbrances on Properties; Leases of Real Property
Schedule 3.8 Undisclosed Liabilities
Schedule 3.9 Absence of Certain Changes or Events
Schedule 3.10 Tax Matters
Schedule 3.11 Leases
Schedule 3.12 Legal Proceedings
Schedule 3.13 Material Agreements
Schedule 3.14 Environmental Matters
Schedule 3.15 Intellectual Property
Schedule 3.16 Employees
Schedule 3.17(a) Employee Benefit Plans: Pension Plans
Schedule 3.17(b) Employee Benefit Plans: Welfare Plans
Schedule 3.18 Arrangement with Broker
Schedule 3.19 Books and Records
Schedule 3.20 Insurance Policies
Schedule 3.23 Customers and Suppliers
Schedule 3.24(a)(i) Transactions with Affiliates
Schedule 3.24(a)(ii) Retained Affiliate Liabilities
Schedule 3.24(b) Payments to Affiliates
Schedule 6.2 Absence of Certain Changes or Events from the Date of
this Agreement to the Closing Time
Schedule 11.2(b) Tax Procedures
EXHIBITS
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Exhibit A Form of Escrow Agreement
Exhibit B Form of Officers' Certificate of Columbine JDS Systems,
Inc.
Exhibit C Form of Seller's Certificate
Exhibit D Form of Secretary's Certificate of Columbine JDS
Systems, Inc.
Exhibit E Form of Opinion of Akin, Gump, Strauss & Feld, L.L.P.
Exhibit F Form of Opinion of Vinson & Elkins, L.L.P.
Exhibit G Form of Opinion of Counsel to Catherine P. Cole Trust
Exhibit H Form of Investment Letter
Exhibit I Form of Representations Letter
Exhibit J Form of Officers' Certificate of Big Flower Press
Holdings, Inc.
Exhibit K Form of Secretary's Certificate of Big Flower Press
Holdings, Inc.
Exhibit L Form of Opinion of Howard, Darby & Levin
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STOCK PURCHASE AGREEMENT, dated September 19, 1997, by and
among Big Flower Press Holdings, Inc., a Delaware
corporation ("Buyer"), Columbine JDS Systems, Inc., a
Delaware corporation (the "Company"), Columbine BIAS, Ltd.,
a Texas limited partnership, William S. Cole, Catherine P.
Cole, Catherine P. Cole Trust, Wayne M. Ruting, Doug Rother
and Robert Howard (individually, a "Share Seller" and,
collectively, "Share Sellers"), and each of the optionees
THAT IS A SIGNATORY HERETO (THE "OPTION HOLDERS").
INTRODUCTION
A. Share Sellers own all of the outstanding shares of Common Stock
and Preferred Stock (the "Shares") of the Company.
B. Share Sellers desire to sell to Buyer, and Buyer desires to
purchase from Share Sellers, the Shares pursuant to the terms and conditions set
forth in this Agreement.
C. The Buyer desires to purchase or exchange, as the case may be,
the outstanding options (the "Options") for the issuance of shares of Common
Stock granted under the Company's 1995 Non-Statutory Stock Option Plan (the
"Stock Option Plan") pursuant to the terms and conditions set forth in this
Agreement.
NOW, THEREFORE, in consideration of the premises and respective mutual
agreements, covenants, representations and warranties contained herein, the
parties hereto, intending to be legally bound, agree as follows:
ARTICLE I
DEFINITIONS
1.1. DEFINITIONS. In this Agreement, the following terms have the
meanings specified or referred to in this Section 1.1 and shall be equally
applicable to both the singular and plural forms, as appropriate.
"AGREEMENT" means this Stock Purchase Agreement, as it may be amended
from time to time, including the schedules and exhibits hereto.
"APPROVED PLAN" has the meaning specified in Section 5.8.
"ACQUISITION TRANSACTION" has the meaning specified in Section 6.7.
"BOOKS AND RECORDS" has the meaning specified in Section 3.19.
"BROKER" means Donaldson, Lufkin & Jenrette Securities Corporation.
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"BUYER" has the meaning specified in the introductory paragraph of
this Agreement.
"BUYER ANCILLARY DOCUMENTS" means the Escrow Agreement and any and all
other instruments, documents and agreements executed and delivered by Buyer
pursuant to or in connection with this Agreement or any of the foregoing.
"BUYER CLASS B COMMON STOCK" has the meaning specified in Section
5.8(a).
"BUYER COMMON STOCK" has the meaning specified in Section 2.2(a).
"BUYER INDEMNIFIED PARTY" means Buyer, its affiliates and their
respective officers, directors, stockholders, employees, agents and
representatives.
"BUYER OPTIONS" has the meaning specified in Section 9.4.
"BUYER PREFERRED STOCK" has the meaning specified in Section 5.8(a).
"BUYER'S DAMAGES" has the meaning specified in Section 11.1.
"BUYER SEC DOCUMENTS" has the meaning specified in Section 5.7.
"BUYER SHARE PRICE" has the meaning specified in Section 2.2(a).
"CCSI STOCK EXCHANGE AGREEMENT" means that certain Stock Exchange
Agreement, dated as of February 3, 1995, among the Company, Columbine BIAS,,
Ltd., Columbine Cable Systems, Inc. and Wayne M. Ruting, as amended to the date
hereof.
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended.
"CERCLIS" means the Comprehensive Environmental Response Compensation
Liability Information System List.
"CLAIM NOTICE" has the meaning specified in Section 11.7(a).
"CLOSING" has the meaning specified in Section 2.3.
"CLOSING TIME" has the meaning specified in Section 2.3.
"COLE ESCROW AGREEMENT" means that certain Escrow Agreement dated as
of February 15, 1995 by and among the Company, Columbine BIAS, Ltd., William S.
Cole, Catherine P. Cole and Texas Commerce Bank, as escrow agent, as amended to
the date hereof.
"COMMON STOCK" means the Company's common stock, par value $0.01 per
share.
"COMPANY" has the meaning specified in the introductory paragraph of
this Agreement.
"COMPANY PROPERTY" has the meaning specified in Section 3.7(c).
"COMPANY INTELLECTUAL PROPERTY RIGHTS" has the meaning specified in
Section 3.15(a).
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"CONFIDENTIALITY AGREEMENT" means that certain Confidentiality
Agreement, dated May 20, 1997, by and among the Broker, the Company and the
Buyer, as amended from time to time.
"CORE SOFTWARE PRODUCTS" has the meaning specified in Section
3.15(f)(i).
"CSI STOCK EXCHANGE AGREEMENT" means that certain Stock Exchange
Agreement, dated as of February 3, 1995, among the Company, Columbine BIAS,,
Ltd., Columbine Systems, Inc., William S. Cole and Catherine P. Cole, as amended
to the date hereof.
"CURRENT BALANCE SHEET" has the meaning specified in Section 3.6.
"CURRENT FINANCIAL STATEMENTS" has the meaning specified in Section
3.6.
"DETERMINATION TIME" has the meaning specified in Section 2.2(h).
"EMPLOYEE CLAIMS" has the meaning specified in Section 11.2(a).
"ENCUMBRANCE" means any charge, claim, security interest, lien,
pledge, mortgage or restriction of any kind.
"ENVIRONMENTAL LAWS" means all applicable federal, state or local
statutes, laws, ordinances, codes, rules, regulations and guidelines (including
consent decrees and administrative orders) relating to public health and safety
and the protection of the environment.
"EQUIVALENT TRANSACTION" has the meaning specified in Section 9.10.
"ERISA" means the Employee Retirement Income Security Act of 1974 or
any successor law, and regulations and rules issued pursuant to that Act or any
successor law.
"ERISA AFFILIATE" means (i) any corporation which at any time on or
before the Closing Time is or was a member of the same controlled group of
corporations (within the meaning of section 414(b) of the Internal Revenue Code)
as the Company; (ii) any partnership, trade or business (whether or not
incorporated) which at any time on or before the Closing Time is or was under
common control (within meaning of section 414(c) of the Internal Revenue Code)
with the Company; and (iii) any entity which at any time on or before the
Closing Time is or was a member of the same affiliated service group (within the
meaning of section 414(m) of the Internal Revenue Code) as either the Company,
any corporation described in clause (i) or any partnership, trade or business
described in clause (ii).
"ESCROW ACCOUNT" means the escrow account established under the Escrow
Agreement to hold and administer the Escrow Amount.
"ESCROW AGENT" means the escrow agent under the Escrow Agreement.
"ESCROW AGREEMENT" means the Escrow Agreement to be entered into among
the Escrow Agent, Sellers and Buyer, substantially in the form of Exhibit A
attached hereto.
"ESCROW AMOUNT" has the meaning specified in Section 2.2(d).
"EXCESS CLAIMS" has the meaning specified in Section 11.2(a).
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"EXCHANGE ACT" has the meaning set forth in Section 5.7.
"EXCHANGED OPTIONS" has the meaning set forth in Section 2.2(a).
"FINAL PER OPTION PURCHASE PRICE" has the meaning set forth in Section
2.2(c).
"FINAL PER SHARE PURCHASE PRICE" has the meaning set forth in Section
2.2(c).
"FINANCIAL STATEMENTS" has the meaning set forth in Section 3.6.
"FRAUD CLAIMS" has the meaning set forth in Section 11.2.(a)
"FULLY DILUTED NUMBER" has the meaning set forth in Section 2.2(c).
"GOVERNMENTAL PERMITS" has the meaning set forth in Section 3.25.
"GOVERNMENTAL ENTITY" has the meaning set forth in Section 3.5(b).
"HAZARDOUS MATERIALS" means (a) any "hazardous substance" as defined
by CERCLA; (b) any "hazardous waste" or "petroleum," as defined by the Resource
Conservation and Recovery Act, as amended; (c) any petroleum product; (d) any
pollutant or contaminant or hazardous, dangerous or toxic chemical, material or
substance within the meaning of any other Environmental Law, as amended or
hereafter amended; or (e) any radioactive material, including any source,
special nuclear or by-product material as defined at 42 U.S.C. Section 2011 et
seq., as amended or hereafter amended.
"HSR ACT" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976 or any successor law, and regulations and rules issued pursuant to that Act
or any successor law.
"INDEMNIFICATION PERCENTAGE" has the meaning specified in Section
2.2(d).
"INDEMNIFIED PARTIES" has the meaning specified in Section 9.2.
"INDEMNITY NOTICE" has the meaning specified in Section 11.7(d).
"INTERNAL REVENUE CODE" means the Internal Revenue Code of 1986 or any
successor law, and regulations issued pursuant to the Internal Revenue Code or
any successor law.
"INVESTORS STOCKHOLDERS AGREEMENT" means that certain Investors
Stockholders Agreement dated as of February 15, 1995 by and among the Company,
Wayne M. Ruting, Doug Rother, William S. Cole, Catherine P. Cole and Columbine
BIAS, Ltd., as amended to the date hereof.
"JDS ASSET PURCHASE AGREEMENT" means that certain Asset Purchase
Agreement, dated January 23, 1995, by and among Jefferson-Pilot Data Services,
Inc., Jefferson-Pilot Corporation, and JDS Holding Corp., as amended to the date
hereof.
"KNOWLEDGE OF THE COMPANY" means the actual knowledge of Wayne M.
Ruting, Doug Rother, Jeffrey A. Nelson, Paul W. Hobby, William S. Cole,
Catherine Cole or Robert K. Utley, III or that which should have been known
after reasonable investigation by such individuals.
"LEASE" has the meaning specified in Section 3.7(c).
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"LEGAL REQUIREMENT" means any federal, state, local, municipal or
other administrative order, constitution, law, ordinance, principle of common
law, regulation, statute, or treaty.
"LOCK-UP PERIOD" has the meaning specified in Section 9.8.
"MANAGEMENT STOCKHOLDERS AGREEMENT" means that certain Management
Stockholders Agreement dated as of February 15, 1995 by and among the Company,
Wayne M. Ruting, Doug Rother, Columbine BIAS, Ltd. and any Person granted an
option, from time to time and at any time, under the Stock Option Plan, as
amended to the date hereof.
"MATERIAL ADVERSE EFFECT" means an event, violation or other matter
that would have a material adverse effect on the business, assets, liabilities,
operations, financial condition or prospects of the Company.
"MATERIAL AGREEMENT" means any written or oral agreement, contract,
understanding, commitment or other arrangement (a) that involves a present or
future obligation to deliver goods or services or pay monies of an amount or
value in excess of $100,000, excluding agreements that are terminable by the
Company or any Subsidiary without penalty or forfeiture upon not more than 60
days notice and licenses or other agreements entered into with customers of the
Company or any Subsidiary in the ordinary course of business or (b) pursuant to
which the Company, or to the Knowledge of the Company, any of the Company's
employees is a party or is bound which will restrict the Company's or such
employee's ability to do business in any geographic area or grant to any Person
exclusive or similar rights in any line of business or in any geographic area.
"MAXIMUM INDEMNIFIED AMOUNT" shall mean (i) the cash and shares of
Buyer Common Stock (valued at the Buyer Share Price) received by the Sellers in
exchange for their shares of Common Stock and Options plus (ii) the product of
the Option Spread and the number of Options exchanged by the Sellers pursuant to
Section 9.4.
"NET CASH" has the meaning specified in Section 2.2(a).
"OPTIONS" has the meaning specified in the Introduction to this
Agreement.
"OPTION HOLDERS" has the meaning specified in the introductory
paragraph of this Agreement.
"OPTION SPREAD" has the meaning specified in Section 2.2(a).
"OPTION SPREAD SHARES" has the meaning specified in Section 2.2(a).
"ORDER" means any writ, judgment, decree, injunction or similar order
or pronouncement of any Governmental Entity (in each such case whether
preliminary or final).
"PAYOFF AMOUNT" shall equal the aggregate amount of all payments made
by Buyer at the Closing Time to satisfy in full the Company's indebtedness for
borrowed money, including all accrued and unpaid interest, prepayment penalties
and any other fees and expenses relating thereto, in each case as of the Closing
Time, but excluding the undrawn principal amount of any letters of credit issued
on behalf of the Company or its Subsidiaries and in effect as of the Closing
Time..
"PENSION PLAN" has the meaning specified in Section 3.17(a).
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"PER SHARE PURCHASE PRICE" has the meaning specified in Section
2.2(a).
"PERSON" means any individual, corporation, general or limited
partnership, limited liability company, joint venture, estate, trust,
association, organization, labor union, or other entity.
"PLANS" has the meaning specified in Section 3.17(b).
"PREFERRED PURCHASE PRICE" has the meaning specified in Section
2.2(b).
"PREFERRED STOCK" means the Company's Series A Preferred Stock, par
value $0.01 per share.
"PRIOR ACQUISITION AGREEMENTS" means the CCSI Stock Exchange
Agreement, the CSI Stock Exchange Agreement and the JDS Asset Purchase
Agreement.
"PRIOR CLAIM" has the meaning specified in Section 11.2(c).
"PRIOR SELLERS" has the meaning specified in Section 11.2(c).
"PROCEEDING" means any action, cause of action, claim, suit,
proceeding, arbitration, mediation or other alternative dispute resolution
procedure, order, writ, injunction or decree.
"REMAINING CASH AMOUNT" has the meaning specified in Section 2.2(h).
"REVISED REMAINING CASH AMOUNT" has the meaning specified in Section
2.2(h).
"SALE TERMS" has the meaning specified in Section 9.10.
"SALES TAX CLAIMS" has the meaning specified in Section 11.1.
"SEC" has the meaning specified in Section 5.7.
"SECURITIES ACT" means the Securities Act of 1933, as amended, or any
successor law, and regulations and rules issued pursuant to that Act or any
successor law.
"SELLER'S ESCROW PERCENTAGE INTEREST" means, as of the time in
question, with respect to each Seller, that portion of the Escrow Amount that
would be distributed to such Seller in accordance with the Escrow Agreement if
the Escrow Agreement were terminated effective as of such time.
"SELLERS" means Columbine BIAS,, Ltd., William S. Cole, Catherine P.
Cole, Catherine P. Cole Trust, Wayne Ruting and Doug Rother.
"SELLERS ANCILLARY DOCUMENTS" means the Escrow Agreement and any and
all other instruments, documents and agreements executed and delivered by
Sellers pursuant to or in connection with this Agreement or any of the
foregoing.
"SELLERS' REPRESENTATIVE" means the Representative selected by the
Sellers pursuant to the Escrow Agreement.
"SELLING HOLDER" has the meaning specified in Section 9.10.
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"SHARES" has the meaning specified in the Introduction to this
Agreement.
"SHARE AND OPTION PURCHASE PRICE" has the meaning specified in Section
2.2(a).
"SHARE SELLERS" has the meaning specified in the introductory
paragraph of this Agreement.
"SOFTWARE PRODUCTS" has the meaning specified in Section 3.15(f).
"STOCK OPTION PLAN" has the meaning specified in the Introduction to
this Agreement.
"SUBSIDIARIES" means the subsidiaries of the Company listed on
SCHEDULE 3.3 attached hereto of which at least a majority of the securities or
other interests having by their terms voting power to elect a majority of the
board of directors with respect to such subsidiary is directly or indirectly
beneficially owned or controlled by the Company or by any one or more of its
subsidiaries.
"TAX CLAIMS" has the meaning specified in Section 11.2(a).
"TAX PROCEDURES" has the meaning specified in Section 11.2(b).
"TITLE CLAIMS" has the meaning specified in Section 11.2(a).
"TRANSFER" has the meaning specified in Section 9.8.
"WARN ACT" has the meaning specified in Section 3.16(c).
ARTICLE II
SALE AND TRANSFER OF SHARES AND OPTIONS; CLOSING
2.1. SHARES AND OPTIONS TO BE TRANSFERRED. Subject to the terms and
conditions of this Agreement, (i) Share Sellers shall sell and transfer to
Buyer, and Buyer shall purchase and accept from Share Sellers, all of Share
Sellers' right, title and interest in and to the Shares outstanding at the
Closing Time and (ii) the Option Holders shall sell and transfer or exchange, as
the case may be, their Options to Buyer and Buyer shall purchase and accept from
the Option Holders, all of their right, title and interest in and to such
Options outstanding at the Closing Time or exchange such Options in accordance
with the terms of this Agreement at the Closing Time.
2.2. PURCHASE PRICE AND PAYMENT. (a) The aggregate purchase price
for the Shares of Common Stock and the Options not exchanged pursuant to Section
9.4 (the "Share and Option Purchase Price") shall be:
(i) cash in the amount of $90,000,000, less the sum of (A)
the Preferred Purchase Price and (B) the Payoff Amount, subject to
adjustment in accordance with Section 2.2(h) below (such net amount in
cash, the "Net Cash"); and
(ii) A number of shares of common stock, par value $0.01 per
share, of Buyer ("Buyer Common Stock") equal to (A) 1,000,000 less (B) the
quotient resulting from dividing $1,000,000 by the Buyer Share Price,
rounded to the nearest whole number, PROVIDED that the number of shares of
Buyer Common Stock issuable at the Closing Time
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as part of the Share and Option Purchase Price shall be reduced by the
aggregate number of Option Spread Shares (as defined below).
If, after the date hereof and prior to the Closing, Buyer shall have declared a
stock split (including a reverse stock split) of Buyer Common Stock or a
dividend payable in Buyer Common Stock or cash or other assets of Buyer to
holders of Buyer Common Stock with respect to their Buyer Common Stock, then the
Share and Option Purchase Price shall be appropriately adjusted to reflect such
stock split or dividend or other distribution.
For purposes of this Agreement,
(i) "Option Spread Shares" shall mean a number of shares of
Buyer Common Stock (rounded to the nearest whole number) equal to the
product of (A) the number of outstanding Options at the Closing Time which
will be exchanged for Buyer Options pursuant to Section 9.4 (the "Exchanged
Options") times (B) the Option Spread divided by (C) the average of the per
share closing price (the "Buyer Share Price") of a share of Buyer Common
Stock on the NYSE Composite Tape for the 20 consecutive trading days
immediately prior to the Closing Time;
(ii) "Option Spread" shall mean the difference between (A)
the Per Share Purchase Price and (B) $31.81; and
(iii) "Per Share Purchase Price" shall mean the quotient
resulting from dividing (A) the sum of (x) Net Cash, (y) the product of the
number of shares of Buyer Common Stock to be issued in accordance with
Section 2.2(a)(ii) (without giving effect to the Option Spread Shares) and
the Buyer Share Price and (z) the product of $31.81 and the number of
Options outstanding at the Closing Time (prior to any exchange under
Section 9.4) by (B) the sum of (x) the number of shares of Common Stock
outstanding at the Closing Time and (y) the number of Options outstanding
at the Closing Time (prior to any exchange under Section 9.4).
(b) The aggregate purchase price for the Shares of Preferred Stock
(the "Preferred Purchase Price") shall be the product of (i) the number of
Shares of Preferred Stock outstanding as of the Closing Time and (ii) the sum of
(A) $1,000 plus (B) all accrued and unpaid dividends on the Shares of Preferred
Stock up to and including the Closing Time.
(c) The "Final Per Share Purchase Price" shall be equal to (i) an
amount of cash equal to the quotient resulting from dividing (A) the sum of (x)
Net Cash and (y) the product of $31.81 and the number of Options not exchanged
pursuant to Section 9.4 by (B) the sum of (x) the number of shares of Common
Stock outstanding at the Closing Time and (y) the number of Options outstanding
at the Closing Time which will not be exchanged under Section 9.4 (such sum
being referred to as the "Fully Diluted Number") and (ii) a number of shares of
Buyer Common Stock equal to the quotient resulting from dividing (A) the number
of shares of Buyer Common Stock calculated under Section 2.2(a)(ii) (after
reducing for the Option Spread Shares) by (B) the Fully Diluted Number. The
"Final Per Option Purchase Price" shall be equal to the Final Per Share Purchase
Price reduced by $31.81 from the cash component thereof.
(d) At Closing, payment of the Share and Option Purchase Price and
the Preferred Purchase Price shall be made as follows:
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(i) the Preferred Purchase Price shall be paid to the Share
Sellers in proportion to their ownership of Preferred Stock set forth on
SCHEDULE 2.2(D)(I);
(i) subject to any amounts to be withheld under applicable
income tax regulations, each Option Holder who does not elect to exchange
his, her or its Options pursuant to Section 9.4 shall be paid or delivered,
as applicable, an amount of cash equal to the cash portion of the Final Per
Option Purchase Price and an amount of shares of Buyer Common Stock equal
to the stock portion of the Final Per Option Purchase Price, in each case
multiplied by the number of Options held by such Option Holder at the
Closing Time;
(i) subject to (iv) below, each Share Seller shall be paid
or delivered, as applicable, at Closing an amount of cash equal to the cash
portion of the Final Per Share Purchase Price and the number of shares of
Buyer Common Stock equal to the stock portion of the Final Per Share
Purchase Price, in each case multiplied by the number of shares of Common
Stock held by such Share Seller at the Closing Time; and
(ii) notwithstanding the foregoing, a number of shares of
Buyer Common Stock (equal to the product of (i) the closest whole number to
the fraction, the numerator of which is $6,000,000 and the denominator of
which is the Buyer Share Price and (ii) the percentage applicable to the
particular Seller set forth in Schedule 2.2(d)(iv)) (the "Indemnification
Percentage") which would otherwise be delivered to each Seller, pursuant to
the foregoing provisions of this Section 2.2(d) shall instead be deposited
by Buyer with the Escrow Agent pursuant to the Escrow Agreement at Closing
(all of such shares of Buyer Common Stock being herein referred to as the
"Escrow Amount"); and
(iii) in lieu of any fractional shares of Buyer Common Stock
to which any Share Seller or Option Holder would otherwise be entitled
pursuant to Sections 2.2(d)(ii) and (iii), Buyer shall pay to such Share
Seller or Option Holder an amount of cash equal to the product of such
fractional share of Buyer Common Stock times the Buyer Share Price.
(e) The Escrow Amount shall be released to the Sellers or Buyer, as
appropriate, pursuant to the provisions of the Escrow Agreement.
(f) All cash payments under this Agreement shall be made by wire
transfers of lawful money of the United States of America in immediately
available funds to the accounts designated by each of the Share Sellers, Option
Holders and Buyer, as appropriate, without offset, deduction or counterclaim of
any kind.
(g) Notwithstanding the foregoing, under no circumstances shall (i)
the cash portion of the Share and Option Purchase Price exceed $90,000,000 plus
cash payments in lieu of fractional shares of Buyer Common Stock less the sum of
(A) the Preferred Purchase Price and (B) the Payoff Amount (subject to
adjustment in accordance with Section 2.2(h)) and (ii) the stock portion of the
Share and Option Purchase Price exceed the number of shares of Buyer Common
Stock to be issued in accordance with Section 2.2(a)(ii).
(h) On the day immediately preceding the Closing, the Company shall
calculate the Remaining Cash Amount, Representatives of the Company shall
consult with the Seller's Representative and the Buyer and their respective
representatives in connection with making such calculation, shall provide the
Seller's Representative and the Buyer a statement setting forth in reasonable
detail the basis of such calculation and shall cause the Company's books and
records relating to such calculation to be made available to the Seller's
Representative, the Buyer and their
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respective representatives. The Seller's Representative and the Buyer shall use
their good faith efforts to resolve any disputes with respect to the
determination of the Remaining Cash Amount. The "Remaining Cash Amount" shall
be determined as of 6:00 p.m. (Denver, Colorado time) on the day immediately
preceding the Closing (the "Determination Time") and shall be equal to the sum
of (i) all cash and cash equivalents of the Company and its Subsidiaries as of
the Determination Time (including any negative cash balance) and (ii) (without
duplication) all cash, checks and wire transfers received by the Company or its
Subsidiaries but not yet deposited in the bank accounts of the Company or its
Subsidiaries as of the Determination Time, less the sum of (i) all checks and
other withdrawals drawn on or against the bank accounts of the Company and its
Subsidiaries which have not been honored by such banks as of the Determination
Time, (ii) the fees and expenses payable to the Broker and Akin, Gump, Strauss,
Hauer & Feld, L.L.P., to the extent not already paid, and (iii) to the extent
that the day immediately preceding the Closing is not a payroll date for the
Company, the unpaid gross payroll (including the employer portion of all payroll
taxes) for the employees of the Company and its Subsidiaries from the payroll
date immediately preceding the Closing through the day immediately preceding the
Closing, such amount in this subpart (iii) to be calculated by summing the
products of the per diem gross payroll amount (including the employer portion of
all payroll taxes) for each employee of the Company and its Subsidiaries (as set
forth in SCHEDULE 2.2(H)) and the number of days from such preceding payroll
date through the day immediately preceding the Closing. The Net Cash shall be
increased by the amount by which the Remaining Cash Amount exceeds $1 million
and shall be decreased by the amount by which the Remaining Cash Amount is less
than $1 million. Notwithstanding the foregoing, if, within 20 business days of
the Closing, the parties hereto determine that the Remaining Cash Amount was
incorrect, and such revised Remaining Cash Amount (the "Revised Remaining Cash
Amount") is in excess of the Remaining Cash Amount, Buyer shall pay to Share
Sellers and Option Holders an additional amount equal to such excess as
additional Net Cash (such amount to be paid in proportion to the number of
shares of Common Stock held by them immediately prior to Closing, calculated on
a fully diluted basis). If the Revised Remaining Cash Amount is less than the
Remaining Cash Amount, the Share Sellers and Option Holders will pay to Buyer,
as a partial refund of the Net Cash, an amount equal to such deficiency (the
liability of each Share Seller and Option Holder with respect to such amount to
be proportionate to the number of shares of Common Stock held by them
immediately prior to Closing, calculated on a fully diluted basis); PROVIDED
that the Buyer, at its sole discretion, may recover such amount from the Escrow
Amount and/or directly from each Share Seller and Option Holder.
2.3. CLOSING. The closing of the purchase and sale of the Shares
and Options provided for in this Agreement (the "Closing") shall occur at the
offices of Akin, Gump, Strauss, Hauer & Feld, L.L.P., 1700 Pacific Avenue, Suite
4100, Dallas, Texas 75201-4675, at 10:00 a.m. (Dallas time) on the second
business day after the conditions to Closing described in Articles VII and VIII
have been satisfied or waived in accordance with the terms hereof, or at such
other time and place as is mutually agreed upon by the parties. The time and
date on which the Closing is actually held is referred to herein as the "Closing
Time." At the Closing, each Share Seller shall deliver to Buyer the certificate
or certificates representing the Shares set forth opposite such Share Seller's
name on SCHEDULE 3.2 hereto, as modified by the last sentence of this Section
2.3, duly endorsed (or accompanied by duly executed stock powers), for transfer
to Buyer, and each Option not being exchanged for Buyer Options shall be
canceled and terminate. In exchange therefor, Buyer shall pay the Share and
Option Purchase Price and the Preferred Purchase Price in full and in the manner
described in Section 2.2. To the extent Options are exercised subsequent to the
date hereof and prior to Closing, the Company shall so notify Buyer. Any
optionee who exercises Options subsequent to the date hereof and prior to
Closing, and who is not, as of the date hereof, a Share Seller, shall
automatically become so with respect to the number of Shares so acquired, and
the individual Share Seller's obligations to sell Shares and/or Options
hereunder and the Buyer's obligations to purchase
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such Shares and/or Options, as well as SCHEDULE 3.2, shall be deemed
appropriately modified to reflect such exercises.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND SELLERS
The Company and Sellers, jointly and severally, hereby represent and
warrant to Buyer as follows:
3.1. ORGANIZATION AND GOOD STANDING.
(a) The Company and each of the Subsidiaries is a corporation duly
organized, validly existing, and in good standing under the laws of its
jurisdiction of incorporation. The Company and each of the Subsidiaries has the
corporate power and authority to conduct its business as it is presently being
conducted and to own or use its properties and assets. The Company and each of
the Subsidiaries is duly qualified to do business as a foreign corporation and
is in good standing under the laws of each state or other jurisdiction in which
either the ownership or use of the properties owned or used by it, or the nature
of the activities conducted by it, requires such qualification, except where the
failure to be so qualified would not have a Material Adverse Effect.
(b) True and correct copies of the corporate charter and bylaws of
each of the Company and the Subsidiaries, and all amendments thereto, have been
delivered to Buyer.
3.2. CAPITALIZATION. The authorized capital stock of the Company
consists solely of (i) 2,000,000 shares of Common Stock, of which 1,000,505
shares are issued and outstanding and 86,452 shares are reserved for issuance
upon exercise of options granted under the Stock Option Plan, and (ii) 5,000
shares of Series A preferred stock, par value $0.01 per share, of which 3,344
shares are issued and outstanding. All of the outstanding capital stock of the
Company is duly authorized, validly issued, fully paid and nonassessable. As of
the date hereof, except as set forth on SCHEDULE 3.2, there are no outstanding
options or other agreements of any nature relating to the issuance of any shares
of capital stock of the Company. SCHEDULE 3.2 sets forth a list of holders of
the Options and the number of Options held by each such holder.
3.3. CAPITALIZATION OF THE SUBSIDIARIES. Except as set forth in
SCHEDULE 3.3, the Company is the record and beneficial owner and holder of all
of the issued and outstanding capital stock of each of the Subsidiaries, in each
case free and clear of all Encumbrances. Except as set forth in SCHEDULE 3.3,
there are no outstanding options or other agreements of any nature relating to
the issuance of any shares of capital stock of any Subsidiary. Except as set
forth in SCHEDULE 3.3, the Company does not own any direct or indirect interest
in any corporation or business activity and the Company is not a participant in
any partnership or any joint venture with any third party.
3.4. AUTHORITY. The Company has the right, authority and capacity
to execute and deliver this Agreement and the Sellers Ancillary Documents to
which it is a party, and to perform its obligations under this Agreement and the
Sellers Ancillary Documents (to the extent that it is a party thereto). This
Agreement constitutes the legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms. Upon the
execution and delivery by the Company of the Sellers Ancillary Documents, to
which it is a party, the Sellers Ancillary Documents will constitute the legal,
valid and binding obligations of the Company, enforceable against the Company in
accordance with their respective terms (to the extent it is a party thereto).
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3.5. NO CONFLICTS; CONSENTS. (a) Neither the execution and
delivery of this Agreement by Sellers and the Company nor the consummation or
performance of any of the transactions contemplated hereby by Sellers and the
Company will (i) conflict with or violate any provision of the corporate charter
or bylaws of the Company or the Subsidiaries; (ii) violate, conflict with, or
result in any default, violation, breach or contravention of, or permit the
acceleration of the maturity of, or the creation or imposition of any lien
under, any Material Agreement, nor constitute such an event except as disclosed
on SCHEDULE 3.5 and except for violations, conflicts and other matters that will
not have a Material Adverse Effect and consents, approvals, orders,
authorizations, filings and permits, which the failure to obtain or make will
not have a Material Adverse Effect; or (iii) violate any statute, law, judgment,
decree, order, writ, injunction, rule or regulation of any court or governmental
authority to which the Company or the Subsidiaries may be subject.
(b) Except as disclosed on SCHEDULE 3.5 and except for filings,
permits, authorizations or approvals which the failure to make or obtain will
not have a Material Adverse Effect, there is no requirement applicable to
Sellers or the Company to make any filing with, or to obtain any permit,
authorization, consent or approval of, any court of competent jurisdiction,
regulatory authority or other public body, federal, state or local, domestic or
foreign (a "Governmental Entity") or any other Person in connection with the
execution, delivery, or performance of this Agreement or any Sellers Ancillary
Documents or as a condition to the lawful consummation by Sellers or the Company
of the transactions contemplated by this Agreement or any Seller Ancillary
Documents to which Sellers or the Company is a party.
(c) Except as set forth and described in SCHEDULE 3.5, no consent
is required to be obtained or notice provided under any Material Agreement as a
result of the execution of this Agreement or the consummation of the
transactions contemplated hereby.
(d) There is no Proceeding pending or, to the Knowledge of the
Company, threatened against the Company, any Seller or any of their respective
assets and properties that seeks to prevent the consummation of the transactions
contemplated herein or in any Sellers Ancillary Document.
3.6. FINANCIAL STATEMENTS. The Company has delivered to Buyer true
and complete copies of the following financial statements (collectively, the
"Financial Statements"): (a) audited consolidated balance sheet of the Company
and the Subsidiaries as at December 31, 1996, and the related consolidated
statements of operations, stockholders' equity, and cash flows for the period
then ended, together with the report thereon of KPMG Peat Marwick LLP,
independent certified public accountants and (b) the unaudited consolidated
balance sheet of the Company and the Subsidiaries as of August 31, 1997 (the
"Current Balance Sheet") and the related unaudited consolidated statements of
operations, stockholders' equity and cash flows for the period then ended
(together with the Current Balance Sheet, the "Current Financial Statements").
Each balance sheet included in the Financial Statements is true, complete and
correct and presents fairly in all material respects the financial position of
the Company and the Subsidiaries as of the respective date of such balance sheet
and each of the statements of operations, stockholders' equity and cash flows
included in the Financial Statements is true, complete and correct and presents
fairly in all material respects the results of operations and cash flows of the
Company and the Subsidiaries for the periods set forth therein, in each case in
accordance with generally accepted accounting principles (except for the absence
of footnotes in the Current Financial Statements), applied on a basis consistent
with the Company's past practices, except as otherwise noted therein, and in
each case have been prepared from, and are in accordance with, the Books and
Records of the Company regularly maintained by management and used to prepare
financial statements of the Company in accordance with the principles stated
therein. The Company has maintained its Books and Records in a manner
sufficient to permit the accurate preparation of financial
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statements in accordance with generally accepted accounting principles, applied
on a basis consistent with the Company's past practices.
3.7. TITLE TO PROPERTIES; ENCUMBRANCES. (a) The Company and the
Subsidiaries hold good title to, valid leasehold interests in, or adequate
licenses to use, all properties and assets necessary to conduct the business of
the Company and the Subsidiaries in the manner carried on by the Company and the
Subsidiaries on the date hereof, including, without limitation, the properties
and assets reflected in the Current Financial Statements (except for property
and assets sold or used since the date of the Current Financial Statements in
the ordinary course of business). All material properties and assets reflected
in the Current Financial Statements are free and clear of all Encumbrances,
except for Encumbrances (i) described on SCHEDULE 3.7, and (ii) that do not in
the aggregate have a Material Adverse Effect.
(b) Neither the Company nor any of its Subsidiaries own any real
property or (other than pursuant to any Lease) any interest therein.
(c) Each lease pursuant to which the Company or any of its
Subsidiaries leases, as lessee or sub-lessee, any real property or interest in
real property (each, a "Lease") and the use for which such property is being
employed is described on SCHEDULE 3.7 (each such parcel of real property,
together with any structures, improvements, fixtures, easements and other
rights, leased by the Company or any of its Subsidiaries, a "Company Property").
The Company or one of its Subsidiaries, as indicated (and except as set forth)
on SCHEDULE 3.7, has a good, valid and existing leasehold estate in each Company
Property, free and clear of all Encumbrances and other matters affecting such
leasehold title to or the use and occupancy of such Company Property.
(d) The Company has delivered to the Buyer a true, correct and
complete copy of each Lease, including all amendments, modifications and
supplements thereto. Each Lease is in full force and effect and constitutes the
valid and binding obligation of the Company or its Subsidiary, enforceable
against the Company or such Subsidiary in accordance with its terms. There
exists no default, or any event which upon the giving of notice or the passage
of time, or both, would give rise to any default, in the performance by the
Company or any of its Subsidiaries or, to the Knowledge of the Company, the
lessor thereunder, of any obligation under any Lease. Except as disclosed on
SCHEDULE 3.5, no consent from the lessor or any other Person under or with
respect to any Lease is required in connection with execution or delivery of
this Agreement or Sellers Ancillary Documents or the consummation of the
transactions contemplated hereby or thereby.
3.8. NO UNDISCLOSED LIABILITIES. Except as set forth in SCHEDULE
3.8, the Company and the Subsidiaries have no liabilities or obligations of any
nature (whether known or unknown and whether absolute, accrued, contingent, or
otherwise) except for (i) liabilities or obligations reflected or reserved
against in the Current Financial Statements, and (ii) current liabilities
incurred in the ordinary course of business consistent with past practice since
the date of the Current Financial Statements.
3.9. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except set forth in
SCHEDULE 3.9, since August 31, 1997, neither the Company nor any of the
Subsidiaries has:
(a) Made any change in its business or operations or in the manner
of conducting its business;
(b) Suffered any Material Adverse Effect and no fact or condition
exists or is contemplated or, to the Knowledge of the Company, threatened that
might reasonably be expected to
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cause a Material Adverse Effect, or suffered any material casualty loss (whether
insured) or condemnation or other taking adversely affecting the business;
(c) Entered into, adopted, amended or terminated any employment
contract or commitment (whether oral or written) or compensation arrangement or
employee benefit plan, or changed or committed to change (including, without
limitation, any change pursuant to any bonus, pension, profit-sharing or other
plan, commitment, policy or arrangement) the compensation payable or to become
payable to any of its officers, directors, employees, agents or consultants
(including the payment of any benefit not required by any employee benefit
plan), other than periodic changes in salary in the ordinary course of business
consistent with past practice, made any pension, retirement, profit-sharing,
bonus or other employee welfare or benefit payment or contribution, or entered
into any contract, agreement, commitment or arrangement to do any of the
foregoing;
(d) Declared, paid or made, or set aside for payment or making, any
dividend or other distribution in respect of its Common Stock or (except for
quarterly dividends payable on the Preferred Stock under the terms thereof in
effect on the date of this Agreement) other capital stock or securities, or
directly or indirectly redeemed, purchased or otherwise acquired any of its
Common Stock or other capital stock or securities or subdivided or in any way
reclassified or changed any of the terms or provisions of its Common Stock or
other capital stock or securities;
(e) Paid, loaned or advanced any amount to or in respect of, or
sold, transferred or leased any property or assets (real, personal or mixed,
tangible or intangible) to, or entered into or amended any transactions,
agreements or arrangements with or for the benefit of any Seller or any of their
respective affiliates, associates or family members or any of the Company's
officers or directors or any affiliate or associate of its officers or
directors, except for the reimbursement of reasonable business expenses of a
usual and customary nature;
(f) Made or proposed any change in any accounting or tax
principles, practices or methods, including, without limitation, its accounts
payable or accounts receivable practices and terms, except for such changes
which are both required by generally accepted accounting principles or a Legal
Requirement and set forth in SCHEDULE 3.9;
(g) Incurred any liability (whether absolute, accrued, contingent
or otherwise and whether due or to become due), except for current liabilities
reflected on the Current Balance Sheet or, thereafter, incurred in the ordinary
course of business consistent with past practice;
(h) Canceled or waived rights with respect to any debts owed to or
claims held by the Company (including the settlement of any claims or litigation
or other Proceeding);
(i) Accelerated or delayed collection of notes or accounts
receivable in advance of or beyond their regular due dates or the dates when the
same otherwise would have been collected;
(j) Terminated or amended or suffered the termination or amendment
of any contract pursuant to which the Company would receive from any Person or
pay to any Person more than $100,000 in any calendar year or disposed of or
permitted to lapse any item of Intellectual Property;
(k) Made any capital expenditures or commitments for additions to
property, plant or equipment constituting capital assets except as reflected on
the Current Financial Statements other than as set forth on SCHEDULE 3.9;
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(l) Amended its certificate of incorporation or bylaws;
(m) Settled or compromised any tax liability;
(n) Terminated or amended or failed to perform any of its
obligations or permitted any default to exist or caused any breach under any of
the Company policies of insurance set forth in SCHEDULE 3.20; or
(o) Agreed, whether in writing or otherwise, to take any action
described in this Section 3.9.
3.10. TAX MATTERS. Except as disclosed in SCHEDULE 3.10, the Company
and the Subsidiaries have duly filed or caused to be filed all tax returns that
are or were required to be filed by them on or before the Closing Time, and has
duly paid, or made provision for the payment of, all taxes and other charges due
from them on or before the Closing Time by federal, state or local taxing
authorities. There are no liens for taxes upon the assets of the Company except
for statutory liens for current taxes not yet due. The Company has not waived
any statute of limitations for, or agreed to any extension of time with respect
to, the assessment of taxes of the Company. Except as disclosed in SCHEDULE
3.10, neither the Company nor any Seller has received any notice of deficiency
or assessment from any federal, state, local or foreign taxing authority with
respect to liabilities for taxes of the Company which has not been fully paid or
finally settled, and there are no existing or prior facts, circumstances or
conditions that would form the basis for such a notice of deficiency or
assessment. The Company has not been a United States real property holding
corporation within the meaning of Section 897(c)(2) of the Internal Revenue Code
during the period specified in Section 897(c)(1)(A)(ii) of the Internal Revenue
Code. The Company is not a party to a tax sharing or tax indemnity agreement or
any other agreement of a similar nature that remains in effect. Except as
disclosed in SCHEDULE 3.10, the Company has withheld and paid all taxes required
to have been withheld and paid in connection with amounts paid or owing to any
employee, independent contractor, creditor, stockholder or other third party.
Notwithstanding the foregoing or any other representations or warranties
contained in this Article III, no representation or warranty is made to Buyer
concerning sales taxes.
3.11. LEASES. SCHEDULE 3.11 is a complete listing of all operating
and capitalized leases (which require payments in excess of $30,000 per lease
per annum) pursuant to which the Company and the Subsidiaries lease personal
property. All such leases are valid and in full force and effect.
3.12. LEGAL PROCEEDINGS. Except as disclosed in SCHEDULE 3.12, there
is no pending action, proceeding or investigation, or to the Knowledge of the
Company threatened, against the Company or any Subsidiary, nor to the Knowledge
of the Company is there any basis for any such action, proceeding or
investigation.
3.13. MATERIAL AGREEMENTS. Other than as disclosed in SCHEDULE 3.13,
neither the Company nor any Subsidiary is a party to any Material Agreement.
Each Material Agreement identified in SCHEDULE 3.13 is valid and in full force
and effect and constitutes the valid and binding obligation of the Company or
its Subsidiary, enforceable against the Company or such Subsidiary in accordance
with its terms. There exists no default, or any event which upon the giving of
notice or the passage of time, or both, would give rise to any default, in the
performance by the Company or any of its Subsidiaries or, to the Knowledge of
the Company, the third party thereunder, of any obligation under any Material
Agreements.
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3.14. ENVIRONMENTAL MATTERS. Except as set forth in SCHEDULE 3.14,
to the Knowledge of the Company:
(a) All properties owned or used by the Company and the
Subsidiaries have been operated in compliance with all Environmental Laws except
where the failure to be in compliance is not reasonably likely to have a
Material Adverse Effect. The Company and the Subsidiaries are not liable under
any Environmental Laws;
(b) The Company and the Subsidiaries have not received written
notification from any governmental authority with respect to existing violations
or liabilities relating to the Company or any Subsidiary under any Environmental
Laws; and
(c) Neither the Company nor any Subsidiary has directly transported
or directly arranged for the transportation of any Hazardous Material to any
location which is listed or proposed for listing on the National Priorities List
pursuant to CERCLA, on the CERCLIS or on any similar federal or state list or
which is the subject of any federal, state or local enforcement actions or other
investigations which may lead to claims against the Company or any Subsidiary of
the Company for any remedial work, damage to natural resources or personal
injury, including claims under CERCLA. There are no polychlorinated biphenyls
or friable asbestos present at any Company Property that, singly or in the
aggregate, have, or may reasonably be expected to have, a Material Adverse
Effect. No conditions exist at, on or under any Company Property which, with
the passage of time, or the giving of notice or both, would give rise to
liability under any Environmental Law which singly or in the aggregate have or
may reasonably be expected to have a Material Adverse Effect. No generation,
manufacture, storage, treatment, transportation or disposal of Hazardous
Material has occurred or is occurring on or from Company Property by the Company
or any Subsidiary (or any predecessor thereof) or, to the, Knowledge of the
Company, by any other Person, that singly or in the aggregate, has, or may
reasonably be expected to have, a Material Adverse Effect.
3.15. INTELLECTUAL PROPERTY RIGHTS.
(a) The Company and the Subsidiaries are the exclusive owners of
all right, title and interest in and to each of the following that are in any
material respect used or licensed in the business of the Company and the
Subsidiaries as currently conducted:
(i) Except as set forth on Schedule 3.15(a)(i) hereto, all computer
programs and databases and their associated system and user documentation which
are licensed by the Company or the Subsidiaries to third parties (the "Software
Products"), including by way of example and not limitation, those listed on
Schedule 3.15(f)(i) and (ii) hereto;
(ii) all copyrights and copyright registrations owned by the Company
or the Subsidiaries, including without limitation those applicable to the
computer programs and databases and their associated system and user
documentation described in subparagraph (i), all copyrights and copyright
registrations for the Software Products being listed on Schedule 3.15(a)(ii)
hereto;
(iii) all patents and patent applications, to the extent they exist,
owned by the Company or the Subsidiaries, including without limitation those
applicable to the computer programs and databases described in subparagraph (i),
all patents and patent applications owned by the Company being listed on
Schedule 3.15(a)(iii) hereto;
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(iv) all trademarks, service marks and trade names, and the
applications to register any of them in federal, state, or foreign
jurisdictions, including by way of example and not limitation those applicable
to the computer programs and databases described in subparagraph (i), all
trademarks, service marks and trade names, and the applications to register any
of them owned by the Company being listed on Schedule 3.15(a)(iv) hereto; and
(v) except for such trade secrets as may be contained in the third
party software programs listed on Schedule 3.15(a)(i) hereto, all trade secrets
and other proprietary rights, including without limitation those applicable to
any of the computer programs and databases described in subparagraph (i). The
representations included in this Section 3.15(v) shall not be deemed to include
any representation that the Company or the Subsidiaries are the owners of any
trade secrets or other proprietary rights which are used in the operation of the
business of the Company or the Subsidiaries as currently conducted but which
have been licensed or otherwise lawfully obtained from third parties.
The items referred to in subparagraphs (i) through (v) of this Section
3.15(a), subject to the exclusions to ownership expressly set forth therein, are
hereinafter referred to collectively as the "Company Intellectual Property
Rights."
(b) Schedule 3.15(b) sets forth as of the date hereof a list of all
material license agreements between the Company or the Subsidiaries and third
parties under which the Company or the Subsidiaries, as applicable, are granted
rights to the use, reproduction, distribution, manufacture, sale or licensing of
items embodying the patent, copyright, trade secret, trademark or other
proprietary rights of such third parties; provided, however, that Schedule
3.15(b) does not set forth any such license agreement which would not have a
Material Adverse Effect on the business, assets, liabilities, operations,
financial condition, or prospects of the Company or the Subsidiaries by virtue
of its breach, violation, invalidity, unenforceability or other defect. Neither
the Company nor any of its Subsidiaries is, or as a result of the execution and
delivery of this Agreement or the performance of its obligations hereunder will
be, in violation or lose any rights pursuant to any material license agreement
described in Schedule 3.15(b).
(c) Except for licenses granted in the ordinary course of business
to purchasers or licensees of the Company's or the Subsidiaries' products or
services, Schedule 3.15(c) sets forth a list of all Material Agreements under
which the Company or the Subsidiaries have granted rights to third parties under
Company Intellectual Property Rights, including without limitation any rights
granted to third parties to use any of the computer programs, databases and
their associated system and user documentation listed in Schedule 3.15(c). All
such rights granted have been and are non-exclusive.
(d) As of the date hereof, no claims with respect to the Company
Intellectual Property Rights have been asserted or, to the Knowledge of the
Company or the Share Sellers, are threatened by any Person, nor does the
Company, any Subsidiary or any Share Seller know of any valid grounds for any
bona fide claims against the use by the Company or any Subsidiary of any Company
Intellectual Property Rights. All granted and issued patents listed on Schedule
3.15(a)(iii), all trademarks, trade names and service marks and all applications
to register the same listed in Schedule 3.15(a)(iv) to the Knowledge of the
Company, and all copyrights and copyright registrations listed in Schedule
3.15(a)(ii) are valid, enforceable and subsisting. To the Knowledge of the
Company and the Share Sellers, as of the date hereof, there has not been and
there is not any material unauthorized use, infringement or misappropriation of
any of the Company Intellectual Property Rights by any third party, employee or
former employee of the Company or any of the Subsidiaries.
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(e) No Company Intellectual Property Rights are subject to any
Order restricting in any manner the use or licensing thereof by the Company or
any Subsidiary. Neither the Company nor any Subsidiary has entered into any
agreement to indemnify any other Person against any charge of infringement of
any third party intellectual property rights, except infringement indemnities
agreed to in the ordinary course and included as part of the Company's or any
Subsidiaries' contracts for the license or sale of their respective products or
services. Neither the Company nor any Subsidiary has entered into any agreement
granting any third party the right to bring infringement actions, or otherwise
to enforce rights with respect to any Company Intellectual Property Rights. The
Company and the Subsidiaries have the exclusive right to file, prosecute and
maintain all applications and registrations with respect to the Company
Intellectual Property Rights owned by the Company.
(f) (i) Each of the Software Products set forth on Schedule
3.15(a)(ii) hereto is the most recent version of such Software Product. Each of
the Software Products set forth on Schedule 3.15(f)(i) hereto (the "Core
Software Products") conforms substantially to the functional and operational
specifications set forth in the respective user manuals and other documentation
for such Core Software Product. The Company and the Subsidiaries own and have
possession of all such technical documentation, software tools (including by way
of example and not limitation, all source code, compilers, system documentation,
statements of principles of operation and schematics, as applicable) for each of
such Core Software Products as may be necessary and sufficient for the continued
effective use, further development, and maintenance of the latest version of
each such Core Software Product, including by way of example and not limitation,
all such items as may be necessary to bring such Core Software Products into
conformity with any issues which may arise as a result of the so-called "Year
2000" problem. The current status of such conformity is set forth in brackets
immediately following the name and version number of each such Core Software
Product on Schedule 3.15(f)(i).
(ii) Schedule 3.15(f)(ii) sets forth a list of those Software
Products with respect to which the Company and the Subsidiaries do not have the
information necessary to make the representations and warranties made in Section
3.15(f)(i) with respect to the Core Software Products. They therefore do not
make such representations and warranties with respect to the Software Products
listed on Schedule 3.15(f)(ii). However, the Company and the Subsidiaries do
represent and warrant that their revenues from the Software Products listed in
Schedule 3.15(f)(ii) did not in the aggregate exceed ten percent (10%) of the
Company's licensing revenue in their most recent fiscal year.
3.16. EMPLOYEES. (a) SCHEDULE 3.16 contains a complete and accurate
list of the following information for each employee of the Company and the
Subsidiaries as of the date noted on such schedule: name; job title; date of
employment; and current compensation paid or payable. Neither the Company nor
the Subsidiaries have made any agreements or entered into any arrangements with
any employees or independent contractors that would have the effect of depriving
the Company and the Subsidiaries of their services after the Closing. There are
no employment or severance agreements with employees of the Company and the
Subsidiaries except as set forth on SCHEDULE 3.13.
(b) To the Knowledge of the Company, there is, and within the last
five years has been, no representation of the employees of the Company by any
labor organization and there are no union organizing activities among the
employees of the Company. The Company has not received a petition or demand
from any union and, to the Knowledge of the Company, there does not exist any
question concerning representation with respect to its employees. The Company
believes that its relations with the employees are good. SCHEDULE 3.16 sets
forth all personnel policies, rules or procedures (whether written or oral)
applicable to employees of the Company, and the Company has
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delivered to Buyer complete and accurate copies of all such written policies,
rules or procedures plus summaries of all oral policies, rules or procedures.
(c) Since the enactment of the Worker Adjustment and Retraining
Notification Act of 1988 (the "WARN Act"), the Company has not effectuated or
experienced (i) a "plant closing" (as defined in the WARN Act) affecting any
site of employment or one or more facilities or operating units within any site
of employment or facility used by the Company; or (ii) a "mass layoff" (as
defined in the WARN Act) affecting any site of employment or facility used by
the Company, nor has the Company been affected by any transaction or engaged in
layoffs or employment terminations sufficient in number to trigger application
of any similar state or local law. None of the Company's employees has suffered
an "employment loss" (as defined in the WARN Act) at any time within 30 days
prior to the Closing Time.
3.17. EMPLOYEE BENEFITS PLANS. (a) Neither the Company nor any
ERISA Affiliate maintains any multi-employer plan or single-employer plan, as
defined in Paragraphs (3) and (15), respectively, of Section 4001(a) of ERISA,
for employees of the Company or an ERISA Affiliate. SCHEDULE 3.17(A) contains a
complete and accurate list of all pension plans, as defined in Section 3(2) of
ERISA to which the Company or any of its Subsidiaries is or has ever been
required to contribute (each a "Pension Plan"). Each Pension Plan intended to
be qualified, as defined in Section 401(a) of the Internal Revenue Code, is and
has been determined by the Internal Revenue Service to be so qualified and no
circumstance exists that might cause such Pension Plan to cease being so
qualified.
(b) Set forth in SCHEDULE 3.17(B) is a true and complete list of
each welfare plan as defined in Section 3(1) of ERISA maintained by the Company
or any of its Subsidiaries. Such welfare plans together with the Pension Plans
are collectively referred to as "Plans."
(c) With respect to each of the Plans, (i) there is no pending, or,
to the Knowledge of the Company, anticipated or threatened claim (other than any
routine claim for benefits), (ii) all contributions and premiums due have been
made on a timely basis, and all contributions and premiums paid by the Company
or any of its Subsidiaries are deductible. Each of the Plans (i) has been
administered in accordance with its terms and (ii) complies in form, and has
been administered in accordance, with all laws, including, where applicable, the
requirements of ERISA and the Internal Revenue Code. No "prohibited
transaction" described in Section 406 of ERISA or Section 4975 of the Internal
Revenue Code has occurred with respect to any of the Plans. The Company and
each of its Subsidiaries has complied with the health care requirements of Part
6 of Title 1 of ERISA. Neither the Company nor any of its Subsidiaries has any
obligation to provide medical, health, death or other benefits to its prior
employees or any other person other than while an employee of the Company except
as specifically required by Part 6 of Title 1 of ERISA and except as set forth
in the employment agreements listed in SCHEDULE 3.17(A) OR 3.17(B). Except as
set forth in Schedule 6.2, the consummation of the transactions contemplated by
this Agreement will not (i) entitle any individual to severance pay or (ii)
accelerate the time of payment or vesting, or increase the amount, of any
compensation due to any such individual.
(d) Share Sellers have delivered to Buyer with respect to each of
the Plans true, correct and complete copies of (A) all Plan documents and
amendments thereto, trust agreements and amendments thereto and insurance and
annuity contracts and policies, (B) the current summary plan description, if
required by ERISA, (C) the annual report filed with the Internal Revenue Service
for the most recently completed three Plan years for which such reports have
been filed, and, with respect to any Pension Plan that is described in Section
401(k) of the Internal Revenue Code, copies of tests and reports with respect to
the most recently completed three Plan years evidencing such Pension Plan's
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compliance with the non-discrimination rules applicable to such Plan under
Sections 401(k) and, if applicable, 401(m) of the Internal Revenue Code and the
regulations thereunder, (D) the most recent determination letter issued by the
Internal Revenue Service, if any, and (E) all correspondence with the Internal
Revenue Service and the Department of Labor concerning any audit, investigation
or controversy.
3.18. BROKERS AND FINDERS. Except for arrangements with the Broker
set forth in SCHEDULE 3.18, neither the Company, the Subsidiaries nor their
respective representatives and agents have incurred any obligation or liability,
contingent or otherwise, for brokerage or finders' fees or agents' commissions
or other similar payments in connection with this Agreement. All amounts payable
to the Broker will be the sole responsibility of Sellers; PROVIDED, that the
Company may pay all amounts payable to the Broker prior to Closing. Sellers
will indemnify and hold Buyer harmless from any such obligation or liability
alleged to be due by or through the Company or any Subsidiary as a result of the
action of the Company or any Subsidiary or any of their respective
representatives or agents that are not paid by the Company prior to Closing.
3.19. BOOKS AND RECORDS. The minute books and other similar records
of the Company made available to Buyer prior to the execution of this Agreement
contain a true, correct and complete record of all action taken at all meetings
and by all written consents in lieu of meetings of the stockholders, the board
of directors and committees of the board of directors of the Company. The stock
transfer ledger and other similar records of the Company made available to Buyer
prior to the execution of this Agreement accurately reflect all record transfers
prior to the execution of this Agreement in the capital stock of the Company.
Except as set forth in SCHEDULE 3.19, no Books and Records of the Company have
been recorded, stored, maintained, operated or are otherwise wholly or partly
dependent upon or held by any means (including any electronic, mechanical or
photographic process, whether computerized or not) which (including all means or
access thereto and therefrom) are not under the exclusive ownership and direct
control of the Company. "Books and Records" means all files, documents,
instruments, papers, books and records relating to the business or the condition
of the Company, including, without limitation, financial statements, tax returns
and letters from accountants, budgets, pricing guidelines, ledgers, journals,
deeds, title policies, minute books, stock certificates and books, corporate
seals, stock transfer ledgers, contracts, licenses, customer lists, computer
files and programs, retrieval programs, operating data and plans.
3.20. INSURANCE. Set forth in SCHEDULE 3.20 is a complete and
accurate list of all primary, excess and umbrella policies, bonds and other
forms of insurance currently owned or held by or on behalf of and/or providing
insurance coverage to the Company and the Subsidiaries, their business,
properties and assets and its directors, officers, salespersons, agents or
employees, including the following information for each such policy: type(s) of
insurance coverage provided; name of insurer; effective and expiration date;
policy number; per occurrence and annual aggregate deductibles or self-insured
retention; annual premium and any other fees for the procurement of such
insurance; per occurrence and annual aggregate limits of liability and the
extent, if any, to which the limits of liability have been exhausted. All
policies set forth in SCHEDULE 3.20 are in full force and effect and shall
remain in full force and effect through the Closing Time and thereafter shall
remain in full force and effect without assignment by the Company, consent of
the insurer or other action by the Company, Buyer or the insurer, until its
expiration date or the date of cancellation or termination by Buyer or the
Company. With respect to all policies, all premiums currently payable or
previously due have been paid, and no notice of cancellation or termination has
been received by the Company or any Seller with respect to any such policy. All
such policies are sufficient for compliance with all Legal Requirements and of
all contracts to which the Company and the Subsidiaries are a party or otherwise
bound and are valid, outstanding and, to the Knowledge of the Company,
collectible policies. Complete and accurate copies of all such policies and
related documentation have previously been provided to Buyer.
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3.21. COMPLIANCE WITH APPLICABLE LAW. The Company has for the past
five years complied in all material respects and is presently complying in all
material respects with all Legal Requirements, including, but not limited to,
the Federal Occupational Safety and Health Act and all Legal Requirements
relating to the safe conduct of business and environmental protection and
conservation, the Civil Rights Act of 1964 and any applicable health,
sanitation, fire, safety, labor, zoning and building laws and ordinances.
Neither the Company nor any Seller has received written notification of any
asserted present or past failure by the Company to so comply with Legal
Requirements and, to the Knowledge of the Company, there are no existing or
prior facts, circumstances or conditions that could form the basis for such
notification or assertion. The representations of this Section 3.21 are
intended to be in addition to and not as a qualification of Section 3.12 or any
other Section in this Article III.
3.22. DISCLOSURE. The representations and warranties by the Company
and Sellers in this Agreement and the statements contained in the schedules,
certificates, documents, exhibits and agreements referred to herein or otherwise
furnished or to be furnished by the Company and Sellers to Buyer pursuant to
this Agreement, the Sellers Ancillary Documents to which any Seller is a party,
and the transactions contemplated herein and therein do not and will not contain
any untrue statement of a material fact and do not and will not omit to state
any material fact necessary to make the statements herein or therein not
misleading.
3.23. CUSTOMERS AND SUPPLIERS. SCHEDULE 3.23 sets forth a true and
complete list of the names and addresses of the ten largest suppliers (and for
each such supplier the dollar volume and percentage of total purchases of
similar items from all suppliers of such item) of products and services to the
Company and the ten largest customers (and for each such customer the dollar
volume and percentage of total sales of the Company to all customers) of
products and services of the Company during the twelve months ended December 31,
1996, indicating any existing contractual arrangements for continued supply from
or to each such firm. Except as set forth in SCHEDULE 3.23, there exists no
actual or, to the Knowledge of the Company, threatened termination, cancellation
or limitation of, or any modification or change in, the business relationship of
the Company with any customer or group of customers which are listed in SCHEDULE
3.23 or which are otherwise material to the operations of the Company's
business, or with any supplier or group of suppliers which are listed in
SCHEDULE 3.23 or which are otherwise material to the operations of the Company's
business, and there exists no present condition or state of facts or
circumstances involving customers, suppliers or sales representatives (including
the consummation of the transactions contemplated in this Agreement) which would
reasonably be expected to have a Material Adverse Effect or prevent the conduct
of the Company's business after the consummation of the transactions
contemplated in this Agreement on substantially the same terms as the Company's
business has been conducted. The Company has delivered to Buyer copies of all
written contracts or other arrangements and written summaries of any oral
arrangements with the customers and suppliers listed in SCHEDULE 3.23.
3.24. TRANSACTIONS WITH AFFILIATES. (a) Except as set forth in
SCHEDULE 3.24(A)(I), the Company has no outstanding indebtedness, liabilities or
obligations for amounts owing to, or notes or accounts receivable from, or
leases, contracts or other commitments or arrangements with or for the benefit
of, any Seller, or their affiliates, associates or family members, or the
Company's directors, officers or employees or affiliates of any of the
foregoing. Except as set forth in SCHEDULE 3.24(A)(II), as of the Closing Time,
(i) all indebtedness, liabilities and obligations set forth in SCHEDULE
3.24(A)(I) shall have been repaid in cash and in full and (ii) all leases,
contracts or other commitments or arrangements set forth in SCHEDULE 3.24(A)(I)
shall have been terminated without continuing liability on the part of the
Company or Buyer, as successor to the Company.
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(b) Since August 31, 1997, except as set forth in SCHEDULE 3.24(B),
the Company has not made any payments, loans or advances of any kind or paid any
dividends or distributions of any kind to or for the benefit of any Seller or
their affiliates, associates or family members.
3.25. GOVERNMENTAL PERMITS. The Company owns, holds or possesses all
licenses, franchises, permits, privileges, immunities, approvals and other
authorizations from all Governmental Entities which are necessary to entitle it
to own or lease, operate and use its assets and to carry on and conduct the
business substantially as currently conducted (herein collectively called
"Governmental Permits"), except for such Governmental Permits as to which the
failure to so own, hold or possess would not have a Material Adverse Effect.
3.26. ABSENCE OF SENSITIVE PAYMENTS. To the Knowledge of the Company,
the Company has not made or maintained (i) any contributions, payments or gifts
of its funds or property to any governmental official, employee or agent where
either the payment or the purpose of such contribution, payment or gift was or
is illegal under the laws of the United States or any state thereof, or any
other jurisdiction (foreign or domestic); or (ii) any contribution, or
reimbursement of any political gift or contribution made by any other person, to
candidates for public office, whether federal, state, local or foreign, where
such contributions by the Company were or would be a violation of applicable
law.
3.27. PRIOR ACQUISITIONS. The consummation of the transactions
contemplated by the CCSI Stock Exchange Agreement, CSI Stock Exchange Agreement
and the JDS Asset Purchase Agreement conformed in all material respects to the
descriptions contained in the letters to the Federal Trade Commission dated
December 2, 1994 and December 15, 1994, copies of which have been provided to
the Buyer.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SHARE SELLERS AND OPTION HOLDERS
Each of the Share Sellers and Option Holders hereby represents and
warrants to Buyer with respect to itself, and not with respect to any other
Share Seller or Option Holders, as follows:
4.1. TITLE TO SHARES. Each of the Share Sellers is and, immediately
prior to the Closing, will be the record and beneficial owner and holder of the
number of Shares set forth opposite such Share Seller's name on SCHEDULE 3.2
hereto, as well as any additional Shares acquired subsequent to the date hereof
as a result of the exercise of Options, in each case, free and clear of all
Encumbrances except as set forth in SCHEDULE 3.2 hereto.
4.2. OWNERSHIP OF OPTIONS. Each of the Option Holders is and,
immediately prior to the Closing, will be the owner of the number of Options set
forth opposite such Option Holder's name on SCHEDULE 3.2 hereto, except for
Options that are exercised subsequent to the date hereof, in each case, free and
clear of all Encumbrances except as set forth in SCHEDULE 3.2 hereto, and, to
the extent that Options are exercised subsequent to the date hereof, each Share
Seller that exercised Options will be the record and beneficial owner and holder
of the Shares acquired upon the exercise of such Options, free and clear of all
Encumbrances except as set forth in SCHEDULE 3.2 hereto.
4.3. AUTHORITY. Each of the Sellers has the right, authority and
capacity to execute and deliver this Agreement and Sellers Ancillary Documents,
to which it is a party, and to perform its obligations under this Agreement and
Sellers Ancillary Documents (to the extent it is party thereto).
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This Agreement constitutes the legal, valid and binding obligation of Sellers,
enforceable against Sellers in accordance with its terms. Upon the execution
and delivery by Sellers of Sellers Ancillary Documents, to which it is a party,
Sellers Ancillary Documents will constitute the legal, valid and binding
obligations of Sellers, enforceable against Sellers in accordance with their
respective terms.
4.4. BROKERS AND FINDERS. None of Sellers have incurred any
obligation or liability, contingent or otherwise, for brokerage or finders' fees
or agents' commissions or other similar payments in connection with this
Agreement.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to the Company, Sellers and
Columbine BIAS, Ltd., as attorney-in-fact of the Option Holders, as follows:
5.1. ORGANIZATION AND GOOD STANDING. Buyer is a corporation duly
organized, validly existing, and in good standing under the laws of the state of
its incorporation.
5.2. AUTHORITY. Buyer has the full right, power and authority to
execute and deliver this Agreement and the Buyer Ancillary Documents and to
perform its obligations under this Agreement and the Buyer Ancillary Documents.
This Agreement constitutes the legal, valid and binding obligation of Buyer,
enforceable against Buyer in accordance with its terms. Upon the execution and
delivery by Buyer of the Buyer Ancillary Documents, to which it is a party, the
Buyer Ancillary Documents will constitute the legal, valid and binding
obligations of Buyer, enforceable against Buyer in accordance with their
respective terms.
5.3. NO CONFLICTS; CONSENTS. (a) Neither the execution and delivery
of this Agreement by Buyer nor the consummation or performance of any of the
transactions contemplated hereby by Buyer will (i) conflict with or violate any
provision of the corporate charter or bylaws of Buyer; (ii) violate, conflict
with, nor result in any default, violation, breach or contravention of, nor
permit the acceleration of the maturity of, or the creation or imposition of any
lien under, any material indenture, contract, agreement, lease or instrument to
which Buyer is a party or by which Buyer is bound, nor constitute such an event,
except for approvals required under the HSR Act and except for violations,
conflicts and other matters that will not have a material adverse effect on the
business, assets, liabilities, operations, financial condition or prospects of
Buyer and consents, approvals, orders, authorizations, filings and permits,
which the failure to obtain or make will not have a material adverse effect on
the business, assets, liabilities, operations, financial condition or prospects
of Buyer; or (iii) violate any statute, law, judgment, decree, order, writ,
injunction, rule or regulation of any court or governmental authority to which
Buyer may be subject.
(b) Except for approvals required under the HSR Act, there is no
requirement applicable to Buyer to make any filing with, or to obtain any
permit, authorization, consent or approval of any Governmental Entity or any
other Person in connection with the execution, delivery, or performance of this
Agreement or any Buyer Ancillary Document or as a condition to the lawful
consummation by Buyer of the transactions contemplated by this Agreement or any
Buyer Ancillary Document.
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(c) There is no Proceeding pending or, to the knowledge of Buyer,
threatened against Buyer that seeks to prevent the consummation of the
transactions contemplated herein or in any Buyer Ancillary Document.
5.4. INVESTMENT INTENT. Buyer is acquiring the Shares for its own
account and not with a view to their distribution within the meaning of Section
2(11) of the Securities Act. Buyer acknowledges that information made available
to it and its representatives, agents and affiliates concerning the business and
financial condition of the Company does not constitute additional
representations and warranties in connection with the transactions contemplated
by this Agreement, and Buyer is relying upon such information only to the extent
permitted under Section 5.5 of this Agreement.
5.5. BUYER'S INVESTIGATION. Buyer acknowledges that in entering
into this Agreement and in consummating the transactions contemplated herein,
Buyer is relying only upon its own investigation and analysis and the specific
representations and warranties set forth in this Agreement. No agent, officer,
director, employee, attorney, affiliate or representative of the Company, any
Subsidiary or any Share Seller has made, and Buyer is not relying upon, any
representation or warranty, express or implied, of any nature whatsoever with
respect to the matters contemplated by this Agreement, except for the specific
representations and warranties set forth in this Agreement.
5.6. BROKERS AND FINDERS. Buyer and its representatives and agents
have incurred no obligation or liability, contingent or otherwise, for brokerage
or finders' fees or agents' commissions or other similar payments in connection
with this Agreement. Buyer will indemnify and hold Share Sellers, Option
Holders, the Company and the Subsidiaries harmless from any such payment alleged
to be due by or through Buyer as a result of the action of Buyer or its
representatives or agents.
5.7. SEC DOCUMENTS. Buyer has filed all reports, forms and other
documents required to be filed under the Securities Act and the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), with the Securities and
Exchange Commission ("SEC") since December 31, 1995 (the "Buyer SEC Documents").
As of their respective dates, the Buyer SEC Documents complied in all material
respects with the requirements of the Securities Act and the Exchange Act, and
the rules and regulations of the SEC promulgated thereunder applicable to such
Buyer SEC Documents (including Rule 10b-5 under the Exchange Act and the
applicable accounting rules and regulations of the SEC). The consolidated
financial statements of Buyer included in the Buyer SEC Documents have been
prepared from, and are in accordance with, the books and records of Buyer and
comply, as to form, in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto, have been prepared in conformity with GAAP (except, in the case of
unaudited statements, as permitted by Form 10-Q of the SEC) applied on a
consistent basis during the periods involved and fairly present in all material
respects the consolidated financial position of Buyer and its consolidated
subsidiaries as of the dates thereof and the consolidated results of their
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal and recurring year-end audit adjustments not
material in scope or amount).
5.8. CAPITALIZATION. (a) The authorized capital stock of Buyer
consists of 50,000,000 shares of Buyer Common Stock; 761,308 shares of Class B
Common Stock, $0.01 par value ("Buyer Class B Common Stock"), and 10,000,000
shares of preferred stock ("Buyer Preferred Stock"). At the close of business
on September 16, 1997, (i) 18,484,696 shares of Buyer Common Stock, no shares of
Buyer Class B Common Stock and no shares of Buyer Preferred Stock were issued
and outstanding and (ii) 5,484,114 shares of Buyer Common Stock were reserved
for issuance under Buyer's Restated 1993 Stock Award and Incentive Plan, a copy
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of which has been previously provided to the Company and each of the Option
Holders (the "Approved Plan"), of which, options for 2,367,541 shares of Buyer
Common Stock have been granted and are outstanding and 61,423 options granted
under the Approved Plan have been exercised. Except as set forth above, at the
time of execution of this Agreement, no shares of capital stock or other voting
securities of Buyer are issued, reserved for issuance or outstanding. All
outstanding shares of capital stock of Buyer are, and all shares which may be
issued pursuant to this Agreement or pursuant to the exercise of Buyer Options
will be, when issued, duly authorized, validly issued, fully paid and
non-assessable and not subject to preemptive rights. Except as set forth above,
as of the date of this Agreement, there are no outstanding securities, options
or agreements to which Buyer or any of its subsidiaries is a party or by which
any of them is bound obligating Buyer or any of its subsidiaries to issue or
cause to be issued additional shares of capital stock of Buyer or of any of its
subsidiaries.
(b) The shares of Buyer Common Stock being issued as part of the
Share and Option Purchase Price have been duly authorized and, when issued in
connection with the consummation of the transactions contemplated by this
Agreement, will be validly issued, fully paid and non-assessable and free of
preemptive rights. None of the shares of Buyer Common Stock being issued as
part of the Share and Option Purchase Price will be subject to restrictions
imposed by any agreements entered into by Buyer prior to the Closing Time for
financing or otherwise, other than this Agreement.
5.9. DISCLOSURE. The representations and warranties by Buyer in
this Agreement and the statements contained in the Schedules, certificates,
documents, exhibits and agreements referred to herein or otherwise furnished or
to be furnished by Buyer pursuant to this Agreement, the Buyer Ancillary
Documents, and the transactions contemplated herein and therein do not and will
not contain any untrue statement of a material fact and do not and will not omit
to state any material fact necessary to make the statements herein or therein
not misleading.
ARTICLE VI
COVENANTS OF PARTIES PRIOR TO CLOSING
6.1. DUE DILIGENCE. Between the date of this Agreement and the
Closing Time, the Company and each Subsidiary shall afford Buyer and its
representatives reasonable access at reasonable times to all things related to
the assets, personnel and affairs of the Company and the Subsidiaries including,
without limitation, access to the Company's and the Subsidiaries' Books and
Records, properties, directors, officers, employees, agents and accounting and
legal representatives.
6.2. OPERATION OF THE BUSINESS OF THE COMPANY. Between the date of
this Agreement and the Closing Time, the Company and each Subsidiary shall, and
Sellers shall cause the Company and each Subsidiary to, be operated only in the
ordinary course of business consistent with past practice. The Company, the
Subsidiaries and Sellers shall use their reasonable best efforts to preserve
intact the present organization of the Company and each of the Subsidiaries;
keep available the services of the present officers and employees of the Company
and the Subsidiaries; preserve the Company's and each Subsidiary's goodwill and
relationships with customers, suppliers, licensors, licensees, contractors,
distributors, lenders and other Persons having significant business dealings
with the Company and each Subsidiary, as applicable; continue all current sales,
marketing and other promotional policies, programs and activities; maintain the
assets of the Company and the Subsidiaries in good repair, order and condition,
reasonable wear and tear excepted; and maintain the Company's and each
Subsidiary's insurance policies and risk management programs and in the event of
casualty,
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loss or damage to any assets of the Company or the Subsidiaries, repair or
replace such assets with assets of comparable quality, as the case may be.
Without limiting the generality of the foregoing, and except as otherwise
provided in SCHEDULE 6.2, from the date of this Agreement to the Closing Time,
without the prior written consent of Buyer, neither the Company, the
Subsidiaries nor Sellers shall take any action which would permit the Company or
any Subsidiary to and shall cause the Company and each Subsidiary not to allow
any state of affairs or action described in clauses (a) through (o) of Section
3.9.
6.3. REQUIRED APPROVALS. As promptly as practicable after the date
of this Agreement, Buyer and the Company will, and Sellers will cause the
Company to, make all filings required by Legal Requirements to be made by them
in order to consummate the transactions contemplated by this Agreement
(including all filings under the HSR Act). Between the date of this Agreement
and the Closing Time, Buyer and the Company will, and Sellers will cause the
Company to, cooperate with respect to all such filings.
6.4. REASONABLE BEST EFFORTS. Between the date of this Agreement
and the Closing Time, Buyer, the Company and Sellers shall each use good faith
and reasonable best efforts to cause the conditions set forth in Articles VII
and VIII to be satisfied.
6.5. DISCLOSURE SUPPLEMENTS. From time to time prior to the
Closing, Sellers and Buyer shall supplement or amend the Schedules with respect
to any matter hereafter arising or any information obtained after the date
hereof which, if existing, occurring or known at or prior to the date of this
Agreement, would have been required to be set forth or described in the
Schedules, or which is necessary to complete or correct any information in such
schedule or in any representation and warranty of Sellers or Buyer, as the case
may be, which has been rendered inaccurate thereby. For purposes of Articles
VII, VIII, X and XI hereof, any such supplement or amendment shall be
disregarded and given no effect; PROVIDED, HOWEVER, that with respect to Article
XI hereof, Sellers' liability relating to any such matters hereafter arising or
such information obtained after the date hereof shall not exceed $5,000,000 in
the aggregate. Sellers have delivered or made available to Buyer copies of all
documents set forth in the Schedules.
6.6. FURTHER ASSURANCES. Each Seller agrees that, from time to time
after the Closing, without additional consideration, each of them will execute
and deliver such further instruments, provide such materials and information and
take such other action as Buyer may reasonably request to make effective the
transactions contemplated in this Agreement and otherwise to fulfill the
obligations of Sellers under this Agreement and Sellers Ancillary Documents.
6.7. NO SOLICITATION BY SELLER. Each Seller shall, and shall cause
the Company to, immediately cease any existing discussions or negotiations with
any third parties conducted prior to the date hereof with respect to any merger,
business combination, sale of assets, sale of shares of capital stock (other
than sales permitted by this Agreement), or other securities or similar
transaction involving any third party and Sellers or the Company (an
"Acquisition Transaction"). Sellers shall, and Sellers shall ensure that the
Company and its directors and officers shall, use their best efforts to cause
the Company's employees or other affiliates not to, directly or indirectly,
encourage, solicit, participate in, facilitate or initiate discussions or
negotiations with, or provide any information to, any Person or group (other
than Buyer or its directors, officers, employees or other affiliates or
representatives) concerning any Acquisition Transaction or any discussions or
negotiations with respect thereto. Sellers shall immediately communicate to
Buyer any such inquiries or proposals regarding an Acquisition Transaction and
the terms thereof.
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6.8. REPAYMENT OF LOANS, ADVANCES, NOTES, ETC. Prior to the
Closing, except as set forth on Schedule 3.24(a)(ii), each Seller shall, and
shall cause their respective affiliates, associates and family members to, repay
to the Company in cash all amounts owed by such Persons to the Company. All
such amounts as of the date hereof are set forth in SCHEDULE 3.24(A)(I).
6.9. TERMINATION OF AFFILIATE AGREEMENTS. Prior to the Closing,
except as set forth on Schedule 3.24(a)(ii), each Seller shall, and shall cause
their respective affiliates, associates and family members to, terminate any and
all contracts or other commitments or arrangements between such Persons and the
Company without any further liability on the part of the Company. All such
contracts, commitments and arrangements as of the date hereof are set forth in
SCHEDULE 3.24(A)(I).
6.10. COMPLIANCE WITH LAWS AND CONTRACTS. Sellers shall, and shall
cause the Company to, comply, in all material respects, with all Legal
Requirements, Orders and contracts applicable to the business or the operations
of the Company, and promptly following receipt thereof give Buyer copies of any
notice received from any Governmental Entity or other Person alleging any
violation of any such Legal Requirement or Order or any Contract.
6.11. BROKER'S FEE. At the Closing Time, Sellers shall make, or
cause the Company to make, payment of all amounts (including, without
limitation, all fees and expenses) payable to the Broker, in full satisfaction
of the Company's obligations pursuant to the Letter Agreement, dated January 20,
1997, between the Broker and the Company.
6.12. STATE SECURITIES LAWS COMPLIANCE. Buyer shall take such action
as is required to be taken under any applicable state securities or "blue sky"
laws in connection with the issuance of such Buyer Common Stock.
6.13. NEW YORK STOCK EXCHANGE. Buyer shall use its reasonable best
efforts to have the Buyer Common Stock to be issued pursuant to this Agreement
approved for listing on the New York Stock Exchange, subject to official notice
of issuance.
6.14. ACCRUALS. As of the Closing Time, the Company will have
accrued $1.6 million for the payment of sales taxes as of the Closing Time.
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER
Buyer's obligation to complete the transactions provided herein shall
be subject to the satisfaction, at or prior to the Closing, of each of the
following conditions (any of which may be waived by Buyer, in whole or in part):
7.1. ACCURACY OF REPRESENTATIONS. Each of the representations and
warranties of Sellers and the Company in this Agreement that are qualified as to
materiality shall be true and correct in all respects and each of the
representations and warranties of Sellers and the Company in this Agreement that
are not so qualified shall be true and correct in all material respects as of
the Closing Time as if made on the Closing Time, without giving effect to any
supplements pursuant to Section 6.5.
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7.2. SHARE SELLERS' PERFORMANCE. Each of Share Sellers and the
Company shall have performed or complied in all material respects with each
covenant and obligation that he, she or it is required to perform or comply with
pursuant to this Agreement at or prior to the Closing.
7.3. NO LEGAL BAR. No injunction or order issued by a court of
competent jurisdiction that prohibits the consummation of the transactions
contemplated herein shall be in effect.
7.4. CONSENTS. The parties to this Agreement shall have received
all material approvals and consents as set forth on SCHEDULE 3.5.
7.5. MATERIAL ADVERSE EFFECT. The Company shall not have suffered an
event, violation or other matter that, considered together with all other
matters that would constitute exceptions to the representations and warranties
set forth in the Agreement but for the presence of "Material Adverse Effect" or
other materiality or similar qualifications in such representations and
warranties, would have a Material Adverse Effect;
7.6. REPAYMENT OF LOANS. The distributions, loans and accounts
receivable referred to in SCHEDULE 3.24(A)(I) (other than as listed in SCHEDULE
3.24(A)(II)) shall have been repaid to the Company in accordance with Section
6.8 and all affiliate arrangements listed in SCHEDULE 3.24(A)(I) (other than as
listed in SCHEDULE 3.24(A)(II)) shall have been terminated without continuing
liability or obligation on the part of the Company or Buyer, as successor to the
Company, in accordance with Section 6.9;
7.7. STATE SECURITIES LAWS. At the Closing Time, no stop order or
similar restraining order shall be threatened or entered by any state securities
administrator with respect to the transactions contemplated by this Agreement.
7.8. SHARE SELLERS' DELIVERIES. The Company and/or Share Sellers
shall have delivered or caused to be delivered to the Buyer each of the
following items:
(a) Certificates, dated the Closing Time, from (i) the Company,
duly executed by the Chief Executive Officer and the Chief Financial Officer of
the Company and (ii) each Seller, duly executed by each Seller, in each case,
substantially in the form attached hereto as Exhibits B and C, respectively, and
a certificate, dated the Closing Time and executed by the Secretary or an
Assistant Secretary of the Company, substantially in the form and to the effect
of Exhibit D;
(b) (i) stock certificates representing all of the Shares, in
genuine and unaltered form accompanied by stock powers duly executed in blank
and (ii) any other documents that are necessary to transfer to Buyer good and
valid title in and to the Shares, with any necessary transfer tax stamps affixed
or accompanied by evidence satisfactory to Buyer that all requisite stock
transfer taxes have been paid;
(c) A counterpart or counterparts of the Escrow Agreement, duly
executed by each Seller;
(d) Resignations of such of the directors and officers of the
Company and the Subsidiaries as may be requested by the Buyer;
(e) The Books and Records of the Company and the Subsidiaries,
including without limitation the stock books, stock ledgers, minute books and
corporate seals of the Company and the Subsidiaries (to be held at the principal
executive offices of the Company);
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(f) (i) A copy of the articles of incorporation (or other
comparable corporate charter documents), including all amendments, of the
Company and each of the Subsidiaries certified by the appropriate governmental
official, (ii) certificates from the Secretary of State or other appropriate
official to the effect that the Company is in good standing or subsisting in
such jurisdiction, listing all charter documents of the Company on file and
attesting to its payment of all franchise or similar taxes, and (iii) a
certificate from the Secretary of State or other appropriate official in each
jurisdiction in which the Company is qualified or admitted to do business to the
effect that the Company is duly qualified or admitted and in good standing in
such jurisdiction;
(g) An opinion of Akin, Gump, Strauss, Hauer & Feld, L.L.P.,
counsel to the Company, in the form attached as Exhibit E and otherwise in form
and substance satisfactory to the Buyer;
(h) An opinion of Vinson & Elkins, L.L.P., counsel to Columbine
BIAS,, Ltd., in the form attached as Exhibit F and otherwise in form and
substance satisfactory to Buyer;
(i) An opinion of counsel to Catherine P. Cole Trust reasonably
satisfactory to Buyer, in the form attached as Exhibit G and otherwise in form
and substance satisfying to the Buyer;
(j) For all indebtedness, a payoff letter (or such other evidence
of termination of the Company's obligations) from the relevant lender as to the
satisfaction in full of such indebtedness (or other termination of the Company's
obligations), in form and in substance satisfactory to Buyer and confirming that
such indebtedness may be prepaid (or otherwise terminated) in accordance with
its terms without any prepayment or other penalties or other consideration
except as set forth in such letter;
(k) Investment Letters, in substantially the form of Exhibit H,
duly executed and delivered by each Share Seller;
(l) Representations Letter, in substantially the form of Exhibit I,
duly executed and delivered by Columbine BIAS, Ltd.; and
(m) Such other documents and certificates duly executed as may be
required to be delivered by Share Sellers or the Company pursuant to the terms
of this Agreement or as may be reasonably requested by Buyer prior to the
Closing Time.
ARTICLE VIII
CONDITIONS PRECEDENT TO OBLIGATIONS OF SHARE SELLERS AND OPTION HOLDERS
Each Share Seller's and Option Holder's obligation to complete the
transactions provided herein shall be subject to the satisfaction, at or prior
to the Closing, of each of the following conditions (any of which may be waived
by Share Sellers and Option Holders, in whole or in part):
8.1. ACCURACY OF REPRESENTATIONS. Each of the representations and
warranties of Buyer in this Agreement that are qualified by materiality shall be
true and correct in all respects and each of the representations and warranties
of Buyer in this Agreement that are not so qualified shall be true and correct
in all material respects as of the Closing Time as if made on the Closing Time.
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8.2. BUYER'S PERFORMANCE. The Buyer shall have performed or
complied in all material respects with each covenant and obligation that it is
required to perform or comply with pursuant to this Agreement at or prior to the
Closing.
8.3. PAYMENT OF CONSIDERATION. Each Share Seller and each Option
Holder that does not elect to exchange Options shall have received the
consideration set forth in Section 2.2 for such Shares and Options, and each
Option Holder that does elect to exchange Options shall receive the Buyer
Options set forth in Section 9.4.
8.4. NO LEGAL BAR. No injunction or order issued by a court of
competent jurisdiction that prohibits the consummation of the transactions
contemplated herein shall be in effect.
8.5. CONSENTS. The parties to this Agreement shall have received
all material approvals and consents as set forth on SCHEDULE 5.3.
8.6. STATE SECURITIES LAWS. At the Closing Time, no stop order or
similar restraining order shall be threatened or entered by any state securities
administrator with respect to the transactions contemplated by this Agreement.
8.7. NEW YORK STOCK EXCHANGE. The Buyer Common Stock to be issued
pursuant to this Agreement shall have been approved for listing on the New York
Stock Exchange, subject to official notice of issuance.
8.8. BUYER'S DELIVERIES. The Buyer shall have delivered or caused
to be delivered to Share Sellers and Option Holders each of the following items:
(a) Certificates, dated the Closing Time, from the Buyer, duly
executed by the Chief Executive Officer and the Chief Financial Officer of the
Buyer, and a certificate, dated the Closing Time and executed by the Secretary
or an Assistant Secretary of the Buyer, substantially in the form and to the
effect of Exhibits J and K, respectively;
(b) (i) stock certificates representing all of the shares of Buyer
Common Stock to be delivered to Share Sellers and Option Holders pursuant to
Section 2.2, in genuine and unaltered form accompanied by stock powers duly
executed in blank and (ii) any other documents that are necessary to transfer to
Share Sellers and Option Holders good and valid title in and to the shares of
Buyer Common Stock, with any necessary transfer tax stamps affixed or
accompanied by evidence satisfactory to Share Seller that all requisite stock
transfer taxes have been paid;
(c) A counterpart of the Escrow Agreement, duly executed by the
Buyer; and
(d) Opinion of Howard, Darby & Levin in the form attached as
Exhibit L and otherwise in form and substance satisfactory to Share Sellers.
ARTICLE IX
ADDITIONAL AGREEMENTS
9.1. EXPENSES. Except as set forth in Section 10.2, each party to
this Agreement will bear its respective expenses incurred in connection with the
preparation, execution, and performance of this Agreement and the transactions
contemplated herein, including all fees and
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expenses of agents, representatives, counsel, and accountants, whether or not
the transactions contemplated hereby are consummated; PROVIDED, HOWEVER, that
the Company may pay all fees and expenses of Akin, Gump, Strauss, Hauer & Feld,
L.L.P. prior to Closing; PROVIDED that to the extent such fees and expenses are
not paid by the Company prior to the Closing, such fees and expenses shall be
borne by Sellers.
9.2. INDEMNIFICATION. Buyer shall indemnify each of the present and
former officers, directors, employees and agents of the Company and the
Subsidiaries (the "Indemnified Parties") with respect to his or her service in
any such capacity or service at the request of the Company or any of the
Subsidiaries as a director, officer, employee or agent of the Company, any
Subsidiary, or any other corporation, partnership, joint venture, trust or other
enterprise in regard to any matter, including the transactions contemplated
hereby, occurring at or prior to the Closing to the fullest extent permitted by
law, the Company's certificate of incorporation and its bylaws or
indemnification agreements, or the organizational documents of such Subsidiary,
in each case as in effect as of the date of this Agreement. The Company shall
not, and Buyer shall not permit the Company to, amend such indemnification
provisions (except as required by applicable law) if the amendments effected
thereby would diminish the Indemnified Parties' rights of indemnification.
9.3. TERMINATION OF STOCKHOLDERS' AGREEMENT. Each of the Share
Sellers and Option Holders hereby agrees and consents that the Investors
Stockholders Agreement and the Management Stockholders Agreement, to the extent
that each is a party thereto, shall be terminated at Closing, and no provision
of the Investors Stockholders Agreement or the Management Stockholders Agreement
shall survive the Closing or be of any force or effect after the Closing.
9.4. ASSUMED OPTIONS. (a) In the event that Buyer is notified on or
before the earlier to occur of (i) October 15, 1997 and (ii) three business days
prior to the Closing, that any or all of the Option Holders elect to have their
Options exchanged for stock options ("Buyer Options") to purchase from Buyer
shares of Buyer Common Stock, Buyer shall take all necessary actions to exchange
the Options held by such Option Holder for Buyer Options. As a result of such
exchange, each Option Holder shall receive for each Option, that amount of Buyer
Options in which the excess of the (x) Buyer Share Price over the (y) exercise
price of such Buyer Option shall equal the Option Spread, all in accordance with
Section 424(a) of the Internal Revenue Code and the regulations promulgated
thereunder, without regard to whether the Option qualifies as an incentive stock
option within the meaning of Section 422 of the Internal Revenue Code.
(b) The provisions of Section 9.4(a) may be amended as reasonably
required so that the exchange of Options thereunder complies with the
requirements of Section 424(a) of the Internal Revenue Code and the regulations
promulgated thereunder. After the Closing Time, Buyer will deliver to each
holder of an Option a document evidencing the foregoing exchange by the Buyer.
Buyer will take all corporate and other action necessary to reserve and make
available sufficient shares of Buyer Common Stock for issuance upon the exercise
of the Buyer Options.
(c) As promptly as reasonably practicable after the completion of
the exchange of Options for Buyer Options pursuant to this Section 9.4, Buyer
shall amend its current Registration Statement on Form S-8 (Registration No.
333-2152) to register, or shall file a new Registration Statement on Form S-8
(or any successor or other appropriate forms) with respect to, the shares of
Buyer Common Stock subject to the Buyer Options issued pursuant to this Section
9.4 and shall use reasonable efforts to maintain the effectiveness of such
registration statement or registration statements (and maintain the current
status of the prospectus or prospectuses relating thereto) for so long as such
Buyer Options remain outstanding.
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9.5. CANCELLATION OF PREFERRED STOCK. As an inducement to cause the
other Sellers to enter into this Agreement and effect the transaction
contemplated hereby, William S. Cole and Catherine P. Cole hereby agree that,
immediately prior to the Closing, each of them will transfer (for no
consideration paid by the Company) certificates representing 500 shares of
Preferred Stock to the Company for cancellation. Upon receipt of such 1000
shares of Preferred Stock, the Company shall cancel the certificates
representing such shares of Preferred Stock and shall pay to each of William S.
Cole and Catherine P. Cole their respective amount of any accrued and unpaid
dividends with respect to the shares of Preferred Stock transferred to the
Company pursuant to this Section 9.5.
9.6. TERMINATION OF COLE ESCROW AGREEMENT. The Company, William S.
Cole and Catherine P. Cole hereby agree that, as of the Closing Time and without
any action on the part of such parties, the Cole Escrow Agreement and the
related Security and Pledge Agreement, dated February 15, 1995, shall
automatically terminate and all funds and securities held in escrow thereunder
shall be released to William S. Cole and Catherine P. Cole in accordance with
the Cole Escrow Agreement.
9.7. TERMINATION OF EMPLOYMENT AGREEMENTS. Paul W. Hobby, William
S. Cole and Catherine P. Cole hereby agree that as of the Closing Time and
without any further action on the part of such parties, the respective
employment agreements between each of them and the Company, dated February 15,
1995, shall automatically terminate and the Company shall have no further
obligations thereunder other than the payment of compensation thereunder through
the Closing Time.
9.8. LOCK-UP PERIOD. Each Share Seller and Option Holder hereby
agrees that it will not, during the period commencing on the date of the Closing
and ending one year from the date of the Closing (the "Lock-Up Period"), sell,
assign, transfer or otherwise dispose of ("Transfer") any of the shares of Buyer
Common Stock it receives pursuant to this Agreement, including such shares held
in the Escrow Account.
9.9. CERTAIN TRANSFER RESTRICTIONS. Columbine BIAS, Ltd. hereby
agrees that during the period from the date that is one year from the date of
the Closing until the date that is two years from the date of the Closing,
Columbine BIAS, Ltd. (a)(i) shall not Transfer any of the shares of Buyer Common
Stock received by it pursuant to this Agreement except for cash equal to the
then fair market value thereof, and (ii) all of the proceeds of any such
Transfer (net of any income taxes payable by the partners of Columbine BIAS,
Ltd. as a result of such Transfer) shall be held by Columbine BIAS, Ltd. and not
distributed to its partners; (b) shall maintain its existence; (c) shall not
incur any obligations, assume any liabilities or in any way encumber the shares
of Buyer Common Stock received by it pursuant to this Agreement (or the proceeds
of any Transfer thereof); and (d) shall not engage in any business other than
that which is necessary to comply with this Section 9.9 and its obligations
under this Agreement. Any Transfer of Buyer Common Stock pursuant to clause (a)
of this Section 9.9 shall be subject to the provisions of Section 9.10.
9.10. ORDERLY DISPOSITION. Sellers agree that, after the Lock-Up
Period and until the date that is two years from the date of the Closing, any
Transfer of the Buyer Common Stock (including such shares held in the Escrow
Account) held by any of them will be effected in an orderly manner that will not
have an adverse effect on the market value of the Buyer Common Stock. During
such period, prior to effecting any Transfer of the Buyer Common Stock held by
any Share Seller, the Share Seller that desires to sell some or all of the
shares of Buyer Common Stock held by it (a "Selling Holder") shall so notify
Buyer, which notice shall include the number of shares sought to be sold, the
proposed manner of sale and the price at which the shares of Buyer Common Stock
are proposed to be sold (the "Sale Terms"). Buyer shall have the right, within
two business days of its receipt of the notice setting forth the Sale Terms, to
arrange a sale (an "Equivalent Transaction") on behalf of the Selling Holder,
the terms of which are no less
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favorable to the Selling Holder than the Sale Terms. If the Buyer shall have
notified the Selling Holder of its having arranged an Equivalent Transaction,
the Selling Holder shall Transfer the shares of Buyer Common Stock specified in
the Sale Terms pursuant to the Equivalent Transaction arranged by Buyer. If
Buyer shall fail to arrange an Equivalent Transaction within the period
specified in this Section 9.10 or shall have notified the Selling Holder that no
Equivalent Transaction will be arranged, then the Selling Holder shall be
permitted to effect a Transfer of Buyer Common Stock pursuant to the Sale Terms.
9.11. SHARES HELD IN ESCROW. Each of the Sellers agree that during
the period from the date that is one year from the date of the Closing until the
date that is two years from the date of the Closing, it will not Transfer any of
the shares of Buyer Common Stock held in the Escrow Account except for cash
equal to the then fair market value thereof and all of the proceeds of any such
Transfer shall be held in the Escrow Account pursuant to the terms of the Escrow
Agreement.
ARTICLE X
TERMINATION
10.1. TERMINATION EVENTS. This Agreement may, by notice given prior
to or at the Closing, be terminated:
(a) by either Buyer or Sellers if a material breach of any
provision of this Agreement has been committed by the other party or its
affiliate and such breach has not been waived; provided, however, that such
termination shall not be effective unless and until the nonbreaching party has
given written notice to the breaching party of such breach and of its intention
to terminate this Agreement in accordance with the provisions hereof and the
breaching party fails to cure, or cause to be cured, such breach within five (5)
calendar days following receipt of such notice;
(b) by mutual consent of Buyer and Sellers;
(c) by either Buyer or Sellers if the Closing has not occurred
(other than through the failure of any party seeking to terminate this Agreement
or its affiliate to comply fully with its obligations under this Agreement) on
or before November 17, 1997, or such later date as the parties may agree upon;
or
(d) by either Buyer or Sellers if a court of competent jurisdiction
or governmental, regulatory or administrative agency or commission shall have
issued an order, decree or ruling or taken any other action permanently
restraining, enjoining or otherwise prohibiting the transactions contemplated by
this Agreement and such order, decree, ruling or other action shall have become
final and nonappealable (provided, however, that the right to terminate this
Agreement pursuant to this clause (d) shall not be available to any party until
such party has used all reasonable efforts to remove such order, decree or
ruling).
10.2. EFFECT OF TERMINATION. If this Agreement is terminated
pursuant to Section 10.1, all further rights and obligations of the parties
under this Agreement will terminate, except that the rights and obligations in
Sections 9.1, 10.2, 11.2 and 12.2 will survive. The parties acknowledge that,
prior to Closing, the sole and exclusive remedy of any party to this Agreement
with respect to a breach of a representation or warranty contained herein shall
be the right to terminate this Agreement in accordance with and subject to the
provisions of this Article X; provided, however, that a termination of this
Agreement shall not relieve any party hereto from any liability for damages
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incurred as a result of a breach by such party of its covenants hereunder
occurring prior to such termination. Each party hereby covenants never to
institute, directly or indirectly, any action or proceeding of any kind against
any other party hereto based on or arising out of, or in any manner related to,
the breach of a representation or warranty contained herein if this Agreement is
terminated pursuant to Section 10.1(b), (c) and (d). In the event this
Agreement is terminated by Buyer or Sellers pursuant to Section 10.1(a), the
breaching party shall promptly assume and pay, or reimburse the nonbreaching
party or parties for, all fees and expenses incurred by such nonbreaching party
or parties (including the fees and expenses of legal counsel, accountants and
consultants) in connection with the execution of this Agreement and the
consummation of the transactions contemplated hereby; PROVIDED, HOWEVER, that
the fees and expenses to be paid by the breaching party pursuant to this Section
10.2 shall not exceed $250,000 in the aggregate.
ARTICLE XI
INDEMNIFICATION; REMEDIES
11.1. INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLERS. Subject to
the limitations set forth in this Article XI, Sellers, jointly and severally,
subject to a limited right of collection against each Seller as set forth in
Section 11.2(a), shall indemnify and hold harmless each Buyer Indemnified Party
for all losses, liabilities, claims, damages and reasonable expenses, including
reasonable attorneys' fees (collectively, the "Buyer's Damages") arising from or
in connection with (i) sales tax obligations or liabilities of the Company
relating to periods prior to the Closing Time, to the extent related Buyer's
Damages (without taking into account any tax benefit related thereto) exceed
$1.6 million plus the amounts accrued on the Company's and its Subsidiaries'
Books and Records as of the Closing for current sales tax obligations ("Sales
Tax Claims"), (ii) any breach of any representation or warranty made by the
Company or Share Sellers pursuant to this Agreement, (iii) any breach by any
Seller or the Company of any covenant or obligation of such Seller or the
Company in this Agreement; PROVIDED, HOWEVER, that each Share Seller shall
severally indemnify and hold harmless each Buyer Indemnified Party for Buyer's
Damages arising from or in connection with a breach of such Share Seller's
representations and warranties contained in Sections 4.1 and 4.2. Any claim for
indemnity pursuant to this Section 11.1 shall be limited as described in Section
11.2.
11.2. LIMITATION OF REMEDIES. (a) Notwithstanding any other
provision of this Agreement or any other agreement, instrument or document, the
liability of all Sellers, as a group, for all claims made in connection with
this Agreement and the transactions contemplated herein, including, without
limitation, claims made pursuant to Section 11.1 (but excluding claims arising
out of breaches of the representations and warranties contained in Section 3.10
and pursuant to Section 11.3 ("Tax Claims"), claims arising out of breaches of
the representations and warranties contained in Sections 3.16 and 3.17
("Employee Claims"), fraud (as interpreted under the law of the State of
Delaware) committed by the Company or any Seller in connection with the
transactions contemplated by this Agreement ("Fraud Claims") and claims arising
out of breaches of the representations and warranties contained in Sections
3.15, 4.1 and 4.2 ("Title Claims")), shall not exceed, in the aggregate, the
Escrow Amount, and any such liabilities shall only be satisfied from, and only
to the extent of, the available funds in the Escrow Account; PROVIDED that, on
and after 24 months after the Closing Time and before 36 months after the
Closing Time, Sellers shall be liable for Sales Tax Claims, in the aggregate, up
to an amount equal to that portion of the Escrow Amount released to the Sellers
as of termination of the Escrow Agreement or subsequent thereto upon the
cancellation (in whole or in part) of any Certificates of Instruction (as
defined in the Escrow Agreement); PROVIDED, FURTHER, that the liability of each
Seller with respect to each such Sales Tax Claim shall not exceed the lesser of
(i) such Seller's
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Indemnification Percentage of such liability and (ii) the portion of the Escrow
Amount released (at the termination of the Escrow Agreement or subsequent
thereto) to such Seller. The liability of all Sellers, as a group, for all Tax
Claims, Employee Claims, Fraud Claims and Title Claims (collectively, the
"Excess Claims") shall not exceed the Maximum Indemnified Amount less any
amounts distributed to Buyer under the Escrow Agreement or paid to Buyer by
Sellers with respect to indemnification obligations under Section 11.1 for
matters other than Excess Claims, and the liability of each Seller with respect
to all Excess Claims shall not exceed such Seller's Indemnification Percentage
of the Maximum Indemnified Amount less any amounts distributed to Buyer under
the Escrow Agreement or paid by Sellers to Buyer with respect to indemnification
obligations under Section 11.1 for matters other than Excess Claims; PROVIDED,
that the liability of each Seller with respect to any Excess Claim shall not
exceed such Seller's Indemnification Percentage of the liability with respect to
such claim. With respect to Title Claims for the breach by a Seller of its
representations and warranties contained in Section 4.1 or 4.2, such Seller's
obligation to indemnify Buyer Indemnified Parties shall be several and shall be
limited to such Seller's Indemnification Percentage of the Maximum Indemnified
Amount and any such indemnification obligation may be satisfied from the Escrow
Amount only to the extent of such Seller's Escrow Percentage Interest. Except
as set forth in this Section 11.2, under no circumstances shall Buyer assert, or
any Seller have, any liability in connection with this Agreement and the
transactions contemplated herein for amounts other than the Escrow Amount. Each
of Buyer and the Sellers acknowledge that the sole and exclusive remedies
available to it for any claim or claims relating to this Agreement and the
transactions contemplated herein (other than Excess Claims) are (i) the right to
terminate this Agreement pursuant to Section 10.1 and recover certain fees and
expenses as set forth in Section 10.2 and (ii) the right to seek damages
pursuant to, and as limited by, Article XI.
(b) The Buyer agrees, and agrees to cause the Company, to follow
the procedures (the "Tax Procedures") set forth in SCHEDULE 11.2(B) hereto with
respect to responding to any asserted sales tax obligations or liabilities of
the Company relating to periods prior to the Closing Time ("Asserted Sales Tax
Claims"). Subsequent to an assessment for taxes with respect to an Asserted
Sales Tax Claim becoming final and not subject to further appeal (either as a
result of the Company pursuing an appeal of the assessment or negotiating a
settlement thereof, in either case in accordance with the Tax Procedures), the
Company will attempt to collect the amounts subject to such assessment from the
Company's customers in accordance with the Tax Procedures. Buyer's Damages with
respect to such assessment shall be reduced by the amounts collected from the
Company's customers prior to 120 days after the later to occur of (i) such
assessment becoming final and not subject to further appeal and (ii) the Company
sending letters to its customers requesting payment of such taxes in accordance
with the Tax Procedures; PROVIDED that to the extent the Company, prior to three
(3) years after the Closing Time, collects any such payment from its customers
(and such payments are expressly made in respect of Asserted Sales Tax Claims),
Buyer shall, to the extent it has received indemnification (in the form of cash
or Buyer Common Stock) from Sellers for such Asserted Sales Tax Claims,
distribute such money to the Sellers. To the extent Buyer does not follow the
Tax Procedures or the procedures set forth in the foregoing provisions of this
Section 11.2(b) in all material respects and such failure results in Buyer's
Damages, the Sellers will have no obligation to indemnify Buyer Indemnified
Parties with respect to such Buyer's Damages.
(c) To the extent Buyer's Damages under this Agreement arise from
or in connection with a claim for which the Company or any of its Subsidiaries
is entitled to indemnification under the JDS Asset Purchase Agreement ("Prior
Claim") by the seller and/or its affiliates under such agreement (collectively,
the "Prior Sellers") and Buyer or the Company shall receive indemnification from
Sellers for such Buyer's Damages pursuant to this Article XI, Buyer
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shall, within 10 days of receiving indemnification from Sellers, provide Sellers
with written notice of its election either to (A) pursue such Prior Claim
against Prior Sellers or (B) assign the indemnification right under the JDS
Asset Purchase Agreement (which right shall be limited to the specific claim at
issue) to Sellers. In the event that Buyer elects to pursue such claim pursuant
to (A) above, Buyer agrees that it will cause the Company and its Subsidiaries
to use reasonable best efforts to pursue its indemnification rights subject to
the terms and conditions and limitations of the JDS Asset Purchase Agreement to
the maximum extent permitted thereunder and further agrees that it will not
effect any settlement or compromise with the Prior Sellers without the written
consent of the Seller's Representative (which consent shall not be unreasonably
withheld or delayed) unless as a result of such settlement or compromise the
Company or its Subsidiaries will collect the amount previously paid to Buyer
with respect to such claim; and the Sellers further agree to reimburse the
Buyer, out of available funds in the Escrow Account, all of the Buyer's and the
Company's out-of-pocket costs and expenses (including reasonable fees) in
connection with pursuing such indemnification claims under the JDS Asset
Purchase Agreement. In the event that the Company or its Subsidiaries receives
indemnification pursuant to the JDS Asset Purchase Agreement, the Buyer shall
cause the Sellers to be reimbursed for the indemnification previously provided
to Buyer with respect to such claim. In the event that Buyer elects to assign
such indemnification right pursuant to (B) above, Sellers agree that they will
use their reasonable best efforts to pursue such indemnification rights subject
to the terms and conditions and limitations of the JDS Asset Purchase Agreement
to the maximum extent permitted thereunder and further agrees that it will not
effect any settlement or compromise with the Prior Sellers without the written
consent of the Buyer (which consent shall not be unreasonably withheld or
delayed) unless as a result of such settlement or compromise the Sellers will
collect the amount previously paid to Buyer with respect to such claim. In the
event that Sellers recover from Prior Sellers an amount which is greater than
the amounts paid by Sellers to Buyer with respect to such claim (together with
the reasonable costs and expenses incurred by Sellers in pursuing the Prior
Claim), the excess if any shall be promptly paid to Buyer by Sellers.
Notwithstanding any other provisions of this Article XI, for the avoidance of
doubt, the parties agree that Seller's obligation to indemnify Buyer under this
Agreement shall be separate and independent of any rights that the Company, any
of its Subsidiaries, Buyer or any Seller may have under the JDS Asset Purchase
Agreement. The Sellers hereby authorize Seller's Representative to take all
such actions (including without limitation, execution of documents, agreements
and releases) necessary or desirable, as determined by Seller's Representative,
to pursue any such Prior Claim assigned to the Sellers.
11.3. TAX INDEMNIFICATION. (a) Subject to the limitations contained
in Sections 11.2, 11.5 and 11.6, each Seller shall, subject to a limited right
of collection against each Seller as set forth in Section 11.2(a), be jointly
and severally, liable for and shall indemnify Buyer and the Company for the
excess of (i) taxes (other than any (A) sales taxes, (B) taxes of the Company
resulting from any action of the Buyer taken after the Closing Time for a
taxable year or period that ends on or before the Closing Time and (C) taxes
arising from an election under Section 338 of the Internal Revenue Code) of the
Company paid by the Company after the Closing Time, for any taxable year or
period that ends on or before the Closing Time and, with respect to any taxable
year or period beginning before and ending after the Closing Time, the portion
of such taxable year ending on and including the Closing Time over (ii) the
amounts accrued as "Accrued Income Tax Liability" as of the Closing Time on the
Company's consolidated balance sheet as of the Closing Time, which amount shall
be accrued by the Company in the ordinary course of business in accordance with
past practice.
(b) Notwithstanding any other provision of this Agreement
(including, without limitation, Section 11.4) Buyer and the Company shall be
liable for and indemnify Sellers for the taxes of the Company for any taxable
year or period that begins after the Closing Time and, with respect to any
taxable year or period beginning before and ending after the Closing Time, the
portion of the
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taxable year beginning at the Closing Time, PROVIDED, HOWEVER, that any taxes
arising from any election by Buyer under Section 338 of the Internal Revenue
Code shall be the sole responsibility of the Buyer and Company.
(c) For purposes of paragraphs (a) and (b), whenever it is
necessary to determine the liability for taxes of the Company for a portion of a
taxable year that begins before and ends after the Closing Time, the
determination of such taxes for the portion of the year or period ending on, and
the portion of the year or period beginning after, the Closing Time shall be
determined by assuming that the Company had a taxable year or period which ended
at the close of business on the Closing Time, except that exemptions, allowances
or deductions that are calculated on an annual basis, such as the deduction for
depreciation, shall be apportioned based on the number of days in the year
elapsed to and including the Closing Time.
(d) Any payment by Sellers or the Buyer under this Section 11.3
will be treated for tax purposes as an adjustment to the purchase price.
(e) Buyer will, as to any taxes in respect of which the Sellers
have agreed to indemnify Buyer, promptly inform Sellers of, and permit the
participation of Sellers in, any investigation, audit or other proceeding by or
with the Internal Revenue Service or any other taxing authority empowered to
administer or enforce such a tax and will not consent to the settlement or final
determination in such proceeding without the reasonable prior written consent of
Sellers.
11.4. INDEMNIFICATION AND PAYMENT OF DAMAGES BY BUYER. Buyer shall
indemnify and hold harmless Sellers for all losses, liabilities, claims, damages
and reasonable expenses (including reasonable attorneys' fees) arising from or
in connection with (i) any breach of any representation or warranty made by
Buyer in this Agreement, or (ii) any breach by Buyer of any covenant or
obligation of Buyer in this Agreement.
11.5. TIME LIMITATION. Notwithstanding anything in this Agreement to
the contrary, Sellers will have no liability (for indemnification or otherwise)
with respect to any representation or warranty or covenant or obligation to be
performed and complied with or any other matter of any kind unless on or before
24 months after the Closing Time or, in the case of a Tax Claim, Title Claim
(other than a Claim arising out of Section 3.15) or Fraud Claim, on or before
the expiration of the applicable statute of limitation, or, in the case of a
Sales Tax Claim, on or before 36 months after the Closing Time, Sellers receive
written notice from Buyer of a claim, specifying the factual basis of that claim
in reasonable detail and the amount of liability therefor.
11.6. LIMITATIONS OF AMOUNT OF CLAIMS. Other than with respect to Tax
Claims, Fraud Claims and Title Claims, Sellers will have no liability (for
indemnification or otherwise) with respect to the matters described in Section
11.1 until the total of all Buyer's Damages with respect to such matters exceeds
$250,000, and then only for the amount by which such Buyer's Damages exceed
$250,000, subject to the limitations contained in Section 11.2.
11.7. PROCEDURE FOR INDEMNIFICATION -- THIRD PARTY CLAIMS.
(a) Promptly after receipt by an indemnified party under Section
11.1, 11.3 or 11.4 of notice of the commencement of any proceeding against it,
such indemnified party will, if a claim is to be made with respect to such
proceeding against an indemnifying party, give notice (the "Claim Notice") to
the indemnifying party of the commencement of such claim, but the failure to
notify or delay in notifying the indemnifying party will not relieve the
indemnifying party of any liability that it may have to any indemnified party,
subject to Section 11.5 or except to the extent that the
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indemnifying party demonstrates that the defense of such action is prejudiced by
the indemnifying party's failure to give or delay in giving such notice.
(b) If any proceeding referred to in Section 11.7(a) is brought
against an indemnified party and it timely gives notice to the indemnifying
party of the commencement of such proceeding, the indemnifying party will be
entitled to participate in such proceeding and, to the extent that it wishes
(unless the indemnifying party is also a party to such proceeding and the
indemnifying party's counsel is prohibited under applicable rules of
professional responsibility from representing the interests of both parties in
such defense), to assume the defense of such proceeding with counsel chosen by
the indemnifying party and reasonably satisfactory to the indemnified party and,
after notice from the indemnifying party to the indemnified party of its
election to assume the defense of such proceeding, the indemnifying party will
not, as long as it diligently conducts such defense, be liable to the
indemnified party under this Article XI for any fees of other counsel or any
other expenses with respect to the defense of such proceeding, in each case
subsequently incurred by the indemnified party in connection with the defense of
such proceeding, other than reasonable costs of investigation. If the
indemnifying party assumes the defense of a proceeding, no indemnification
payment shall be due until the matter giving rise to the indemnity claim is
resolved. Notwithstanding the foregoing, neither party shall pay, settle or
compromise any claim or proceeding without the prior written approval of the
other party, which approval shall not be unreasonably withheld; provided, that
the indemnifying party may pay, settle or compromise any such claim or
proceeding without the consent of the indemnified party if such payment,
settlement or compromise requires solely the payment of money and is solely the
liability of the indemnifying party.
(c) Notwithstanding the foregoing, if an indemnified party
determines in good faith that there is a reasonable probability that a
proceeding may adversely affect it or its affiliates other than as a result of
monetary damages for which it would be entitled to indemnification under this
Agreement, it being understood that any proceeding involving or relating to the
Company Intellectual Property Rights would be reasonably likely to so adversely
affect the Buyer,, the indemnified party may, by notice to the indemnifying
party, assume the exclusive right to defend, compromise, or settle such
proceeding, but the indemnifying party will not be bound by any determination of
a proceeding so defended or any compromise or settlement effected without its
consent (which may not be unreasonably withheld).
(d) Procedure for Indemnification -- Other Claims. A claim for
indemnification for any matter not involving a third-party claim may be asserted
by written notice (the "Indemnity Notice") to the party from whom
indemnification is sought subject to the limitations otherwise contained in this
Article XI.
ARTICLE XII
MISCELLANEOUS
12.1. PUBLIC ANNOUNCEMENTS. The Company and Buyer shall consult with
each other in connection with, and shall endeavor to agree upon the content and
timing of, any press releases or other public statements with respect to the
transactions contemplated hereby and in making any filing with any federal or
state governmental or regulatory agency. The parties hereto shall not issue any
such press release or make any such public statement or filing prior to such
consultation, except as may be required by law. In the event the parties are
unable to agree on a public statement or announcement and either the Company,
Sellers or the Buyer determines after consultation with their respective
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counsel that such statement or announcement is required by law or otherwise
appropriate, then the Company, Sellers or Buyer, as the case may be, may issue
such statement or announcement.
12.2. CONFIDENTIALITY. In connection with this Agreement and the
transaction contemplated herein, Buyer has obtained and may continue to obtain
confidential and proprietary information regarding the Company. Buyer
acknowledges that it is a party to the Confidentiality Agreement, and any
information obtained by it in connection with this Agreement and the transaction
contemplated herein is subject to the Confidentiality Agreement, which shall
survive the execution or termination of this Agreement and shall remain
unaffected hereby, except that the Confidentiality Agreement shall terminate at
the Closing Time.
12.3. NOTICES. All notices, consents, waivers, and other
communications under this Agreement must be in writing and will be deemed to
have been duly given (i) when delivered by hand (with written confirmation of
receipt), (ii) if a telecopier number is listed below, when sent by telecopier
(with written confirmation of receipt), provided that a copy is mailed by
registered mail, return receipt requested, or (iii) when received by the
addressee, if sent by a nationally recognized overnight delivery service
(receipt requested) or by registered or certified mail, postage prepaid, return
receipt requested, in each case to the appropriate addresses and telecopier
numbers, if any, set forth below (or to such other addresses and telecopier
numbers as a party may designate by notice to the other parties):
If to the Company:
Columbine JDS Systems, Inc.
1707 Cole Blvd.
Golden, Colorado 80401
Attention: Chief Executive Officer
Telephone: (303) 237-4000
Telecopy: (303) 274-1455
with a copy to:
Columbine BIAS,, Ltd.
2131 San Felipe
Houston, Texas 77019
Attention: Paul W. Hobby
Telephone: (713) 521-2626
Telecopy: (713) 521-3950
and
Columbine BIAS, Ltd.
First Southwest-CB, Ltd.
8144 Walnut Hill Lane, Suite 550
Dallas, Texas 75231
Attention: Robert K. Utley, III
Telephone: (214) 739-8141
Telecopy: (214) 373-8369
and
-39-
<PAGE>
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
1700 Pacific Avenue, Suite 4100
Dallas, Texas 75201
Attention: Michael E. Dillard, P.C.
Telephone: (214) 969-2876
Telecopy: (214) 969-4343
If to Buyer:
Big Flower Press Holdings, Inc.
3 East 54th Street
New York, NY 10022
Attention: General Counsel
Telephone: (212) 521-1600
Telecopy: (212) 223-4074
with a copy to:
Howard, Darby & Levin
1330 Avenue of the Americas
New York, New York 10019
Attention: Thomas J. Kuhn, Esq.
Telephone: (212) 841-1000
Telecopy: (212) 841-1010
If to Sellers:
Columbine BIAS, Ltd.
c/o Paul W. Hobby
H & C Communications
2131 San Felipe
Houston, TX 77019
Telephone: (713) 521-2626
and
Columbine BIAS, Ltd.
First Southwest-CB, Ltd.
8144 Walnut Hill Lane, Suite 550
Dallas, Texas 75231
Attention: Robert K. Utley, III
Telephone: (214) 739-8141
Telecopy: (214) 373-8369
William S. Cole
1118 Race St.
Denver, Colorado 80206
-40-
<PAGE>
Catherine P. Cole or Catherine P. Cole Trust
1520 S. University
Denver, Colorado 80201
Wayne M. Ruting
852 Willobe Way
Golden, Colorado 80401
Doug Rother
16491 W. Ellsworth Ave.
Golden, Colorado 80401
12.4. ENTIRE AGREEMENT AND MODIFICATION. This Agreement and the
agreements contemplated herein supersede all prior agreements between the
parties with respect to its subject matter (other than the Confidentiality
Agreement) and constitutes a complete and exclusive statement of the terms of
the agreement between the parties with respect to its subject matter. This
Agreement may not be amended except by a written agreement executed by the party
to be charged with the amendment.
12.5. ASSIGNMENTS AND SUCCESSORS. Buyer shall not be allowed to
assign or otherwise transfer this Agreement, by operation of law or otherwise,
without the express written consent of Sellers; provided that the Buyer may
assign its rights hereunder to any direct or indirect wholly-owned subsidiary of
the Buyer at any time without the consent of Sellers; and provided, further that
if this Agreement is assigned, Buyer shall remain obligated hereunder. Subject
to the preceding sentence, this Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective successors and permitted
assigns.
12.6. SEVERABILITY. If any provision of this Agreement is held
invalid or unenforceable by any court of competent jurisdiction, the other
provisions of this Agreement will remain in full force and effect. Any provision
of this Agreement held invalid or unenforceable only in part or degree will
remain in full force and effect to the extent not held invalid or unenforceable.
12.7. HEADINGS. The headings of sections contained in this Agreement
are for convenience only and shall not be deemed to control or affect the
meaning or construction of any provision of this Agreement.
12.8. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware other than the
conflict of laws rules thereof.
12.9. COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall be deemed to be an original, and all of which
together shall constitute one and the same instrument.
12.10. SPECIFIC PERFORMANCE. The parties hereto agree that if any of
the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached, irreparable damage would occur, no
adequate remedy at law would exist and damages would be difficult to determine,
and that the parties shall be entitled to specific performance of the terms
hereof, in addition to any other remedy at law or equity.
-41-
<PAGE>
12.11. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. Sellers and
the Buyer each hereby irrevocably submit to the exclusive jurisdiction of any
Delaware state or federal court in respect of any suit, action or proceeding
arising out of or relating to this Agreement, and irrevocably accepts for itself
and in respect of its property, generally and unconditionally, jurisdiction of
the aforesaid courts. Sellers and the Buyer each irrevocably waives, to the
fullest extent such party may effectively do so under applicable law, trial by
jury and any objection that such party may now or hereafter have to the laying
of venue of any such suit, action or proceeding brought in any such court and
any claim that any such suit, action or Proceeding brought in any such court has
been brought in an inconvenient forum.
-42-
<PAGE>
IN WITNESS WHEREOF, the parties to this Agreement have caused this
Agreement to be executed as of the date first above written.
BUYER:
BIG FLOWER PRESS HOLDINGS, INC.
By: /s/ Mark Alan Anderson
---------------------------------------------
Name: Mark Alan Anderson
Title: Executive Vice President
THE COMPANY:
COLUMBINE JDS SYSTEMS, INC.
By: /s/ Paul W. Hobby
---------------------------------------------
Name: Paul W. Hobby
Title: Chairman
SHARE SELLERS:
COLUMBINE BIAS, LTD.
By: Columbine BIAS, Partners,
Its: General Partner
By: Hobby Media Services, Inc.
Its: General Partner
By: /s/ Paul W. Hobby
-------------------------------
Name: Paul W. Hobby
Title: Chairman
/s/ William S. Cole
--------------------------------------------------
WILLIAM S. COLE
/s/ Catherine P. Cole
--------------------------------------------------
CATHERINE P. COLE
/s/ Catherine P. Cole Trust
--------------------------------------------------
CATHERINE P. COLE TRUST
By: /s/ Catherine P. Cole , Trustee
--------------------------------------
<PAGE>
/s/ Wayne M. Ruting
--------------------------------------------------
WAYNE M. RUTING
/s/ Doug Rother
--------------------------------------------------
DOUG ROTHER
ROBERT HOWARD
By: Columbine BIAS, Ltd., as attorney-in-fact
By: Columbine BIAS, Partners,
Its: General Partner
By: Hobby Media Services, Inc.
Its: General Partner
By: /s/ Paul W. Hobby
-------------------------------
Name: Paul W. Hobby
Title: Chairman
OPTION HOLDERS,
as listed on Schedule 3.2 hereto
By: Columbine BIAS, Ltd., as attorney-in-fact
By: Columbine BIAS, Partners,
Its: General Partner
By: Hobby Media Services, Inc.
Its: General Partner
By: /s/ Paul W. Hobby
-------------------------------
Name: Paul W. Hobby
Title: Chairman
<PAGE>
Exhibit 2.2
FIRST AMENDMENT (the "Amendment"), dated as of October 29,
1997, by and among Big Flower Holdings, Inc., a Delaware
corporation ("Holdings"), Big Flower Press Holdings, Inc., a
Delaware corporation and a wholly-owned subsidiary of
Holdings ("Big Flower Press"), Columbine JDS Systems, Inc.,
a Delaware corporation (the "Company"), Columbine BIAS,
Ltd., a Texas limited partnership, William S. Cole,
Catherine P. Cole, Catherine P. Cole Trust, Wayne M. Ruting,
Doug Rother and Robert Howard (individually, a "Share
Seller" and, collectively, "Share Sellers"), and each of the
optionees that is a signatory hereto (the "Option Holders"),
to the Stock Purchase Agreement, dated September 19, 1997,
among Buyer, the Company, Share Sellers and Option Holders
(the "Original Agreement").
------------------------------------------------------------
INTRODUCTION
Big Flower Press, the Company, Share Sellers, Option Holders entered
into the Original Agreement relating to the sale to Big Flower Press (or its
permitted assigns) of all of the Common Stock and Preferred Stock of the Company
and the sale or exchange of all of the outstanding Options to purchase the
Common Stock.
The Original Agreement provided that a portion of the consideration to
be paid by Big Flower Press for the Common Stock and Options would be in the
form of shares of Buyer Common Stock, in amounts to be determined as set forth
in the Original Agreement.
The Original Agreement also provided that Option Holders who so
elected could exchange their Options for Buyer Options.
The Buyer, effective October 17, 1997, created a new holding company
structure pursuant to Section 251(g) of the Delaware General Corporation Law by
merging (the "Merger") Buyer with and into Big Flower Merger Co., a Delaware
corporation and, prior to such merger, a direct, wholly-owned subsidiary of
Holdings ("Mergeco"), with Buyer being the surviving corporation in the Merger.
As a result of the Merger, each share of Buyer Common Stock outstanding
immediately prior to the effective time of the Merger as of the date hereof
represents a like number of shares of Holdings Common Stock (as defined below),
all in accordance with the terms of the Agreement and Plan of Reorganization,
dated as of October 17, 1997, among Buyer, Holdings and Mergeco attached hereto
as Exhibit A. Accordingly, in connection with the Original Agreement, shares of
Holdings Common Stock will be issued and Holdings Options (as defined below)
will be granted in lieu of Buyer Common Stock and Buyer Options, respectively.
Big Flower Press desires to assign to Holdings, and Holdings desires
to assume from Big Flower Press, all of Big Flower Press's rights and
obligations under the Original Agreement.
The parties desire to amend the Original Agreement in certain respects
as hereinafter set forth.
<PAGE>
Capitalized terms used herein and not otherwise defined shall have the
respective meanings set forth in the Original Agreement. References to the
"Agreement" contained in the Original Agreement and this Amendment shall mean
the Original Agreement as amended by this Amendment.
In consideration of the mutual covenants and promises contained herein, and for
other good and valuable consideration, the parties agree as follows:
1. (a) Big Flower Press hereby assigns, transfers and sets off onto
Holdings, its successors and assigns all rights, benefits and privileges of Big
Flower Press as Buyer under the Original Agreement (the "Assignment"). Holdings
hereby accepts the Assignment, and assumes and agrees to perform, pay, discharge
and comply with all of the covenants, conditions, agreements, terms, obligations
and restrictions to be performed or complied with on the part of Big Flower
Press, as Buyer, under the Original Agreement (the "Assumption").
Notwithstanding this Assignment and Assumption, Big Flower Press is in no way
relieved of its obligations under the Original Agreement.
(b) The parties hereto agree to the Assignment and Assumption.
2. (a) Section 1.1 of the Original Agreement is hereby amended by
adding the following defined terms and the meanings specified below:
"HOLDINGS" means Big Flower Holdings, Inc., a Delaware corporation
"HOLDINGS COMMON STOCK" means the common stock, par value $0.01 per
share, of Holdings.
"HOLDINGS OPTIONS" means stock options to purchase from Holdings
shares of Holdings Common Stock.
"HOLDINGS PREFERRED STOCK" means the preferred stock, par value $0.01
per share, of Holdings.
"HOLDINGS SHARE PRICE" means the average of the per share closing
price of a share of Holdings Common Stock (or Buyer Common Stock with respect to
any trading day occurring prior to October 20, 1997), on the NYSE Composite Tape
for the 20 consecutive trading days immediately prior to the Closing Time.
(b) Section 1.1 of the Original Agreement is hereby amended by
amending and restating the definitions of "Buyer Common Stock" and "Buyer
Options" as follows:
"BUYER COMMON STOCK" means the common stock, par value $0.01 per
share, of Buyer.
"BUYER OPTIONS" means the stock options to purchase from Buyer shares
of Buyer Common Stock.
3. The parties hereby acknowledge and confirm that, except with
respect to Section 5.8(a) of the Original Agreement and except for the
definition of "Holdings Share Price," each reference in the Original Agreement
to "Buyer Common Stock," "Buyer Options" and "Buyer Share
2
<PAGE>
Price" shall hereby be amended to read "Holdings Common Stock," "Holdings
Options" and "Holdings Share Price," respectively.
4. Section 8.8 of the Original Agreement is amended by adding the
following:
"(e) Certificates, dated the Closing Time, from Holdings, duly
executed by the Chief Executive Officer and the Chief Financial Officer of
Holdings, and a certificate, dated the Closing Time and executed by the
Secretary or an Assistant Secretary of Holdings, substantially in the form and
to the effect of Exhibits M and N to this Agreement, respectively."
5. Section 9.4 of the Original Agreement is deleted in its entirety
and replacing therefor the following:
"9.4. ASSUMED OPTIONS. (a) In the event that Buyer is notified on
or before the earlier to occur of (i) October 24, 1997 and (ii) three business
days prior to the Closing, that any or all of the Option Holders elect to have
their Options exchanged for Holdings Options, Buyer and Holdings shall take all
necessary actions to cause the exchange of the Options held by such Option
Holder for Holdings Options. As a result of such exchange, each Option Holder
shall receive for each Option, that amount of Holdings Options in which the
excess of the (x) Holdings Share Price over the (y) exercise price of such
Holdings Option shall equal the Option Spread, all in accordance with Section
424(a) of the Internal Revenue Code and the regulations promulgated thereunder,
without regard to whether the Option qualifies as an incentive stock option
within the meaning of Section 422 of the Internal Revenue Code.
(b) The provisions of Section 9.4(a) may be amended as reasonably
required so that the exchange of Options thereunder complies with the
requirements of Section 424(a) of the Internal Revenue Code and the regulations
promulgated thereunder. After the Closing Time, Holdings will deliver to each
holder of an Option a document evidencing the foregoing exchange by Holdings.
Holdings will take all corporate and other action necessary to reserve and make
available sufficient shares of Holdings Common Stock for issuance upon the
exercise of the Holdings Options.
(c) As promptly as reasonably practicable after the completion of the
exchange of Options for Holdings Options pursuant to this Section 9.4, Holdings
shall file a new Registration Statement on Form S-8 (or any successor or other
appropriate forms) with respect to, the shares of Holdings Common Stock subject
to the Holdings Options issued pursuant to this Section 9.4 and shall use
reasonable efforts to maintain the effectiveness of such registration statement
or registration statements (and maintain the current status of the prospectus or
prospectuses relating thereto) for so long as such Holdings Options remain
outstanding."
6. Exhibit L to the Original Agreement is amended by deleting it in
its entirety and substituting therefor Exhibit D hereto. The Original Agreement
is amended by adding Exhibits M and N thereto, which Exhibits are attached to
this Agreement as Exhibits B and C, respectively.
7. Buyer hereby represents and warrants to the Company, Sellers and
Columbine BIAS, Ltd., as attorney-in-fact of the Option Holders, as follows:
(a) Holdings is a corporation duly organized, validly existing, and
in good standing under the laws of the state of its incorporation.
3
<PAGE>
(b) Holdings has the full right, power and authority to execute and
deliver this Agreement and to perform its obligations under this Agreement.
This Agreement constitutes the legal, valid and binding obligation of
Holdings, enforceable against Holdings in accordance with its terms.
(c) (i) Neither the execution and delivery of this Agreement by
Holdings nor the consummation or performance of any of the transactions
contemplated hereby by Holdings will (A) conflict with or violate any
provision of the corporate charter or bylaws of Holdings; (B) violate,
conflict with, nor result in any default, violation, breach or
contravention of, nor permit the acceleration of the maturity of, or the
creation or imposition of any lien under, any material indenture, contract,
agreement, lease or instrument to which Holdings is a party or by which
Holdings is bound, nor constitute such an event, except for approvals
required under the HSR Act and except for violations, conflicts and other
matters that will not have a material adverse effect on the business,
assets, liabilities, operations, financial condition or prospects of
Holdings and consents, approvals, orders, authorizations, filings and
permits, which the failure to obtain or make will not have a material
adverse effect on the business, assets, liabilities, operations, financial
condition or prospects of Holdings; or (C) violate any statute, law,
judgment, decree, order, writ, injunction, rule or regulation of any court
or governmental authority to which Holdings may be subject.
(ii) Except for approvals required under the HSR Act, there is no
requirement applicable to Holdings to make any filing with, or to obtain
any permit, authorization, consent or approval of any Governmental Entity
or any other Person in connection with the execution, delivery, or
performance of this Agreement or as a condition to the lawful consummation
by Holdings of the transactions contemplated by this Agreement.
(iii) There is no Proceeding pending or, to the knowledge of
Holdings, threatened against Holdings that seeks to prevent the
consummation of the transactions contemplated by the Agreement.
(d) (i) The authorized capital stock of Holdings consists of (A)
50,000,000 shares of Holdings Common Stock; of which, as of October 23,
1997, 18,506,736 shares were issued and outstanding; 4,478,463 shares were
reserved for issuance under Holdings' Restated 1993 Stock Award and
Incentive Plan, a copy of which has been previously provided to the Company
and each of the Option Holders (the "Holdings Approved Plan"), of which,
options for 2,483,031 shares of Holdings Common Stock have been granted and
are outstanding and 83,306 options granted under the Holdings Approved Plan
have been exercised and up to 21,668 shares of Holdings Common Stock were
reserved for issuance in exchange for shares of Scanforms, Inc. and no
shares were held in treasury and (B) 10,000,000 shares of Holdings
Preferred Stock, none of which is outstanding but of which 250,000 shares
have been designated as Series A Junior Preferred Stock. Except as set
forth above and except as required by this Agreement, at the time of
execution of this Amendment, no shares of capital stock or other voting
securities of Holdings are issued, reserved for issuance or outstanding.
All outstanding shares of capital stock of Holdings are, and all shares
which may be issued pursuant to this Agreement or pursuant to the exercise
of Holdings Options will be, when issued, duly authorized, validly issued,
fully paid and non-assessable and not subject to preemptive rights. Except
as set forth above, as of the date of this Amendment, except for
transactions contemplated by this Agreement and except for 270,206 shares
of Holdings Common Shares to be issued in connection with Holdings
acquisition of substantially all of the assets of Gamma One, Inc., there
are no outstanding securities, options or agreements to which Holdings or
any of its subsidiaries is a party or by which any of them is bound
4
<PAGE>
obligating Holdings or any of its subsidiaries to issue or cause to be
issued additional shares of capital stock of Holdings or of any of its
subsidiaries.
(ii) The shares of Holdings Common Stock being issued as part of the Share
and Option Purchase Price have been duly authorized and, when issued in
connection with the consummation of the transactions contemplated by this
Agreement, will be validly issued, fully paid and non-assessable and free
of preemptive rights. None of the shares of Holdings Common Stock being
issued as part of the Share and Option Purchase Price will be subject to
restrictions imposed by any agreements entered into by Holdings prior to
the Closing Time for financing or otherwise, other than this Agreement.
8. Holdings Common Stock is registered under the Exchange Act of
1934.
9. Buyer and Holdings hereby agree to take all such other actions as
are reasonably necessary to effect the issuance of Holdings Common Stock and
Holdings Options pursuant to this Agreement.
10. All provisions of the Agreement not specifically amended by this
Amendment shall remain in full force and effect.
11. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF DELAWARE OTHER THAN THE CONFLICT OF LAWS RULES
THEREOF.
12. This Amendment may be executed in multiple counterparts, each of
which shall be deemed to be an original, and all of which together shall
constitute one and the same instrument.
5
<PAGE>
IN WITNESS WHEREOF, the parties to this Amendment have caused this
Amendment to be executed as of the date first above written.
HOLDINGS:
BIG FLOWER HOLDINGS, INC.
By: /s/ Irene B. Fisher
------------------------------
Name: Irene B. Fisher
Title: Vice President
BUYER:
BIG FLOWER PRESS HOLDINGS, INC.
By: /s/ Irene B. Fisher
------------------------------
Name: Irene B. Fisher
Title: Vice President
THE COMPANY:
COLUMBINE JDS SYSTEMS, INC.
By: /s/ Paul W. Hobby
------------------------------
Name: Paul W. Hobby
Title: Chairman
S-1
<PAGE>
SHARE SELLERS:
COLUMBINE BIAS, LTD.
By: Columbine BIAS, Partners,
Its: General Partner
By: Hobby Media Services, Inc.
Its: General Partner
By: /s/ Paul W. Hobby
--------------------------
Name: Paul W. Hobby
Title: Chairman
/s/ William S. Cole
----------------------------------------
WILLIAM S. COLE
/s/ Catherine P. Cole
----------------------------------------
CATHERINE P. COLE
CATHERINE P. COLE TRUST*
By: /s/ Catherine P. Cole ,Trustee
---------------------------
/s/ Wayne M. Ruting
----------------------------------------
WAYNE M. RUTING
/s/ Doug Rother
----------------------------------------
DOUG ROTHER
*By: COLUMBINE BIAS, LTD., as attorney-in-fact
By: Columbine BIAS, Partners,
Its: General Partner
By: Hobby Media Services, Inc.
Its: General Partner
By: /s/ Paul W. Hobby
--------------------------
Name: Paul W. Hobby
Title: Chairman
S-2
<PAGE>
/s/ Robert Howard
----------------------------
ROBERT HOWARD
By: Columbine BIAS, Ltd., as
attorney-in-fact
By: Columbine BIAS, Partners,
Its: General Partner
By: Hobby Media Services, Inc.
Its: General Partner
By: /s/ Paul W. Hobby
-------------------------
Name: Paul W. Hobby
Title: Chairman
OPTION HOLDERS,
as listed on Schedule 3.2 to the
Original Agreement
By: Columbine BIAS, Ltd., as
attorney-in-fact
By: Columbine BIAS, Partners,
Its: General Partner
By: Hobby Media Services, Inc.
Its: General Partner
By: /s/ Paul W. Hobby
----------------------
Name: Paul W. Hobby
Title: Chairman
S-3
<PAGE>
Exhibit 99.1
Press Release
Big Flower Completes Acquisition of
Columbine JDS
New York City (November 3, 1997) - Big Flower Holdings, Inc. (NYSE: BGF)
announced today that it has completed the acquisition of Columbine JDS Systems,
Inc. Columbine, with 1996 revenues of approximately $60 million, is the leading
provider of computer-based systems that automatically manage the placement of
broadcast advertisements, programming material and sales information data for
television stations, radio stations, broadcast and cable networks, cable
operators and direct broadcast satellite services. The terms of the acquisition
were not disclosed.
"The addition of a large technologically-sophisticated business with strong
technical capabilities and a solid market position is a very important new
platform for Big Flower. Columbine makes us a central participant in the
dissemination of advertising messages through the broadcast media, and we
believe that this acquisition will provide us with significant opportunities to
expand our business in the electronic and broadcast media arena," said Edward T.
Reilly, Big Flower's President and Chief Executive Officer.
Columbine offers end-to-end automation systems to buyers and sellers of
electronic media advertising time. Its complex systems, which have evolved over
the past 20 years, track and time commercials, provide sales analysis and
proposals, offer master control automation and program management. Columbine is
introducing the Paradigm Integrated Broadcast System, a next-generation software
system which integrates and automates all information management activities and
day-to-day operations supporting international satellite distribution systems,
multiple system cable operations, single and multi-channel cable and broadcast
networks, and multi-channel local broadcast stations. Headquartered in Golden,
Colorado, Columbine operates four domestic and three international offices
servicing over 2,000 customers.
"Columbine, which manages large numbers of moving digital images, offers Big
Flower a synergistic set of technologies. The company is involved in server
technology, and in calling up that server technology from storage and playing it
on air. Those operations are similar to what we are doing at Laser Tech, our
premedia business, where we manage and archive large numbers of still digital
images," Mr. Reilly said.
Columbine is the third acquisition Big Flower has completed in the past several
weeks. Big Flower recently acquired Olwen Direct Mail, a full-service, UK-based
direct marketing company that is now an operation of Webcraft and RCPC, a
West-Coast based advertising insert producer which is being integrated into TC
Advertising.
<PAGE>
Big Flower Holdings, Inc. is a leading advertising and marketing services
company specializing in outsourced digital premedia and content management
services, computer-based systems management for the broadcast industry,
advertising insert programs, circulation-building newspaper products, highly
personalized direct mail products, commercial games and fragrance samplers. For
the twelve months ended September 30, 1997, the Company's pro forma revenues
were approximately $1.6 billion, including the acquisitions of Olwen, RCPC,
Columbine and Gamma One.
###
For more information, contact: Nancy S. Murray
Big Flower Holdings, Inc.
212.521.1606
