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Exhibit 2.2
STOCK PURCHASE AGREEMENT
BY AND AMONG
THE SHAREHOLDERS OF STREAMING MEDIA, INC.,
STREAMING MEDIA, INC.
AND
PENTON MEDIA, INC.
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STOCK PURCHASE AGREEMENT
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This STOCK PURCHASE AGREEMENT (this "Agreement") is made and entered into
as of September 27, 2000 by and among Penton Media, Inc., a Delaware corporation
(the "Buyer"), Streaming Media, Inc., a California corporation (the "Company"),
First Conferences, Ltd., a United Kingdom corporation ("FCL"), and Richard
Bowsher ("Bowsher") (each of FCL and Bowsher are referred to herein as a
"Shareholder" and collectively as the "Shareholders").
R E C I T A L S
The Shareholders own of record and beneficially all of the issued and
outstanding capital stock of the Company. The Shareholders desire to sell all
such issued and outstanding capital stock of the Company to the Buyer, and the
Buyer desires to acquire all of the outstanding capital stock of the Company
from the Shareholders pursuant to the terms of this Agreement (the "Purchase").
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable consideration,
the adequacy of which is hereby acknowledged, intending to be legally bound
hereby, the parties agree as follows:
A G R E E M E N T
ARTICLE 1
DEFINITIONS
As used in this Agreement, unless otherwise defined elsewhere herein or
unless the context otherwise requires, the following terms shall have the
following meanings:
"Adjusted Net Working Capital Balance" has the meaning specified in Section
2.7.2(a).
"Agreement" shall mean this Stock Purchase Agreement, all Schedules and
Exhibits hereto and all amendments, modifications, and supplements hereto.
"Balance Sheet" has the meaning specified in Section 3.4 hereof.
"Balance Sheet Date" has the meaning specified in Section 3.4 hereof.
"Basket" has the meaning specified in Section 7.2.2 hereof.
"Bonus Payment Date" has the meaning specified in Section 2.6 hereof.
"Bowsher" shall mean Richard Bowsher.
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"Business" shall mean the Company's business of providing Events, websites
and/or magazines concerned only with the industry involved in facilitating and
developing the streaming of video and audio over the internet.
"Buyer" shall mean Penton Media, Inc., a Delaware corporation.
"Buyer Indemnitee" has the meaning specified in Section 7.2.1 hereof.
"Cap" has the meaning set forth in Section 7.2.2 hereof.
"Closing Date" has the meaning specified in Section 2.2 hereof.
"Closing" has the meaning specified in Section 2.2 hereof.
"Code" shall mean the Internal Revenue Code of 1986, as amended and in
effect on the date hereof.
"Company" shall mean Streaming Media, Inc., a California corporation.
"Company Intellectual Property" has the meaning specified in Section
3.9.1(c) hereof.
"Company Registered Intellectual Property Rights" has the meaning specified
in Section 3.9.2 hereof.
"Confidentiality Agreement" has the meaning specified in Section 5.3
hereof.
"Contingent Payment" has the meaning specified in Section 2.3 hereof.
"Contingent Payment Period" has the meaning specified in Section 2.3
hereof.
"Cure Period" has the meaning specified in Section 9.1.2 hereof.
"EBITDA" has the meaning specified in Section 2.5.3 hereof.
"EBITDA Cap" has the meaning specified in Section 2.5.2 hereof.
"EBITDA Contingent Payment" has the meaning specified in Section 2.5.2
hereof.
"ERISA" has the meaning set forth in Section 3.12 hereof.
"Employee Plans" has the meaning specified in Section 3.12.1 hereof.
"Employee Reward Plan" has the meaning specified in Section 5.8.3 hereof.
"Encumbrance" shall mean any mortgage, claim, lien, pledge, option, charge,
security interest or other similar interest, easement, judgment or imperfection
of title of any nature whatsoever.
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"Escrow Agent" has the meaning specified in Section 2.4 hereof.
"Escrow Agreement" has the meaning specified in Section 2.4 hereof.
"Escrow Amount" has the meaning specified in Section 2.4 hereof.
"Escrow Fund" has the meaning specified in Section 7.3 hereof.
"Events" has the meaning specified in Section 5.10 hereof.
"Financial Statements" has the meaning specified in Section 3.4 hereof.
"GAAP" means United States generally accepted accounting principles
consistently applied, as in effect from time to time.
"HSR Act" has the meaning specified in Section 5.6 hereof.
"Indebtedness" of any Person means all obligations of such Person (i) for
borrowed money; (ii) evidenced by notes, bonds, debentures or similar
instruments; (iii) for the deferred purchase price of products, goods or
services (other than trade payables or accruals incurred in the ordinary course
of business); or (iv) in the nature of guarantees of any of the obligations
described in clauses (i) through (iii) above of any other Person.
"Indemnified Party" has the meaning specified in Section 7.5 hereof.
"Indemnifying Party" has the meaning specified in Section 7.5 hereof.
"IRS" shall mean Internal Revenue Service.
"Intellectual Property Rights" has the meaning specified in Section
3.9.1(b) hereof.
"Interest" has the meaning specified in Section 5.10 hereof.
"Knowledge" shall mean the actual knowledge of each of Company and the
Shareholders, their executive officers or the members of their boards of
directors, as the case may be. Where any representation or warranty made by the
Company contained in this Agreement is expressly qualified by reference to its
knowledge, such knowledge shall be deemed to exist if the matter is within the
actual knowledge of any of the Shareholders, the directors and/or the executive
officers of the Company, after having made due inquiry of the directors,
executive officers and supervisory employees of the Company and its
subsidiaries, if any, who would be expected to have knowledge of the matter.
"Losses" shall mean any and all actual losses, damages, deficiencies,
awards, assessments, amounts paid in good faith settlement, judgments, fines,
penalties, reasonable costs and expenses (including, without limitation,
reasonable legal fees); provided, however, that the amount of any such Losses
for the purposes of indemnification hereunder shall be determined net of (i) all
reserves reflected on the Balance Sheet and (ii) the sum of any amounts received
by the
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Indemnified Party with respect to such Loss under insurance policies, the
premiums for which were paid, or deemed to have been, by the Company prior to
the Closing Date.
"Maskworks" has the meaning specified in Section 3.9.1(b) hereof.
"Material Adverse Effect" shall mean any change or effect that would or
would reasonably be expected to materially and adversely affect the financial
condition, results of operations, prospects, assets or business of the
Shareholders or the Company and their subsidiaries taken as a whole, as the case
may be, excluding in all cases: (i) events or conditions generally affecting the
industry in which such Person and its subsidiaries operate or arising from
changes in general business or economic conditions; and (ii) any effect
resulting from any change in law or generally accepted accounting principles,
which generally affects entities such as such Person.
"Net Working Capital Amount" has the meaning specified in Section 2.7.1(a)
hereof.
"Net Working Capital Amount Balance" has the meaning specified in Section
2.7.1(b) hereof.
"Net Working Capital Statement" has the meaning specified in Section
2.7.1(a) hereof.
"Objection" has the meaning specified in Section 2.5.5 hereof.
"Overage" has the meaning specified in Section 2.7.2(d).
"Overlap Period" has the meaning specified in Section 8.1.2 hereof.
"Overlap Period Returns" has the meaning specified in Section 8.1.2 hereof.
"PTO" has the meaning specified in Section 3.9.2 hereof.
"Permitted Liens" has the meaning specified in Section 3.7.3 hereof.
"Person" shall mean any individual, corporation, partnership, joint
venture, limited liability company or other legal and/or corporate entity.
"Post-Closing Period" has the meaning specified in Section 8.4.2 hereof.
"Pre-Closing Period" has the meaning specified in Section 8.1.1 hereof.
"Pre-Closing Returns" has the meaning specified in Section 8.1.1 hereof.
"Purchase" has the meaning specified in the Recitals hereof.
"Purchase Price" has the meaning specified in Section 2.3 hereof.
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"Registered Intellectual Property" has the meaning specified in Section
3.9.1(d) hereof.
"Released Persons" has the meaning specified in Section 5.9 hereof.
"Restricted Business" has the meaning specified in Section 5.10 hereof.
"Reward Payment Amount" has the meaning specified in Section 2.6 hereof.
"Returns" shall mean any report, return, election, estimate, declaration,
information statement and other forms and documents (including all schedules,
exhibits and other attachments thereto) relating to, and required to be filed in
connection with, any Taxes (including estimated Taxes).
"Revenue Contingent Payment" has the meaning specified in Section 2.5.1
hereof.
"Revenue/EBITDA Determination" has the meaning specified in Section 2.5.5
hereof.
"Schedules" shall mean the Disclosure Schedule attached hereto and
incorporated herein by reference.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Senior Employee" has the meaning specified in Section 5.10 hereof.
"Shareholder" and "Shareholders" shall mean, individually and collectively,
as the case may be, First Conferences, Ltd. and Richard Bowsher.
"Shareholder Indemnitees" has the meaning specified in Section 7.4.1
hereof.
"Shares" shall mean the outstanding capital stock of the Company.
"Shortfall" has the meaning specified in Section 2.7.2(d) hereof.
"Tax" and "Taxes" shall mean all taxes, charges, fees, levies, or other
assessments, including, without limitation, income, profits, gains, gross
receipts, net worth, premium, value added, ad valorem, excise, real and personal
property, sales, use, stamp, transfer, license, payroll, franchise, Social
Security, unemployment and withholding taxes and all other taxes of any kind
whatsoever, together with any interest, penalties and additions thereto imposed
or required to be withheld by the United States or any state, local, or foreign
government or subdivision or agency thereof, including all amounts imposed as a
result of being a member of an affiliated or combined group.
"Tax Matter" has the meaning specified in Section 8.4.1 hereof.
"Tax Reserve" has the meaning specified in Section 8.1.2 hereof.
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"Technology" has the meaning specified in Section 3.9.1(a) hereof.
"Working Capital Assets" has the meaning specified in Section 2.7.1 hereof.
"Working Capital Liabilities" has the meaning specified in Section 2.7.1
hereof.
ARTICLE 2
SALE OF SHARES; PURCHASE PRICES
2.1 SALE OF SHARES. On the terms and conditions set forth herein, at the
Closing referred to below, each of the Shareholders severally shall sell,
transfer and deliver the Shares free of Encumbrances to the Buyer, and the Buyer
shall buy and accept all of the Shares for the consideration determined in
accordance with Sections 2.3, 2.4, 2.5, 2.6, 2.7 and 2.8 hereof.
2.2 CLOSING AND CLOSING DATE. Subject to the terms and conditions contained
herein, the closing (the "Closing") of the sale and purchase of the Shares
hereunder shall take place at the offices of Crosby, Heafey, Roach & May, Two
Embarcadero Center, Suite 2000, San Francisco, California on the later of (i)
the fifth business day following the satisfaction or waiver of all conditions to
the obligations of the parties to consummate the transactions contemplated
hereby set forth in Article 6 (other than conditions with respect to actions the
respective parties will take at the Closing itself) or (ii) September 29, 2000
(the "Closing Date"), or at such other place and time as the parties hereto may
agree, subject to Section 9.1.4 hereof. The Closing shall be deemed to have
occurred only at such time as all of the Shares have been purchased by the
Buyer.
2.3 PURCHASE PRICE. In full consideration for the transfer of the Shares,
but subject to the escrow procedures set forth in Section 2.4 and the Contingent
Payment procedures set forth in Section 2.5, the Buyer will deliver and pay to
the Shareholders a total purchase price of up to One Hundred Million
($100,000,000) in cash (the "Purchase Price"). The Purchase Price is payable as
follows: (i) the Buyer will pay to the Shareholders at the Closing the amount
equal to (x) Sixty-One Million Seven Hundred Fifty Thousand Dollars
($61,750,000) minus (y) the amount reserved under Section 2.6 hereof in cash by
wire transfer or delivery of other immediately available funds to an account
designated by the Shareholders to Buyer at least two days prior to the Closing;
(ii) the Buyer will deliver to the Escrow Agent Three Million Two Hundred Fifty
Thousand Dollars ($3,250,000) in cash to be held in pursuant to Section 2.4; and
(iii) on or before March 31 following the end of the calendar year 2001 (the
"Contingent Payment Period") and in accordance with the procedures set forth in
this Article 2, the Buyer will pay to the Shareholders or, at the Shareholders'
written direction, certain other Persons a contingent payment, if earned, in an
amount equal to the Revenue Contingent Payment plus the EBITDA Contingent
Payment (collectively, the "Contingent Payment"); provided, however, that the
total Contingent Payment shall not exceed Thirty-Five Million Dollars
($35,000,000). The Shareholders acknowledge that any payment made to a Person
other than the Shareholders pursuant to this Section 2.3 or Section 5.8 is in
complete satisfaction of the Buyer's obligations under this Section 2.3. The
purchase price shall be allocated between the Shareholders as set forth in
Schedule 2.3 hereto.
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2.4 ESCROW. The Buyer will deliver to Key Trust Company, N.A., a national
banking association (the "Escrow Agent"), into escrow, Three Million Two Hundred
Fifty Dollars ($3,250,000) (the "Escrow Amount"). The Escrow Amount will be held
by the Escrow Agent for a period of one year from the Closing pursuant to the
terms of an Escrow Agreement in substantially the form of Exhibit A attached
hereto (the "Escrow Agreement"). At the expiration of such period or at such
earlier time as is provided in the Escrow Agreement, the Escrow Agent will,
subject to the terms of the Escrow Agreement, deliver to the Shareholders, the
Escrow Amount less any Escrow Amount paid or owed to the Buyer pursuant to the
Escrow Agreement.
2.5 CONTINGENT PAYMENTS
2.5.1 The "Revenue Contingent Payment" is equal to the sum of (i) one
hundred twenty-five percent (125%) of the amount by which revenue generated by
the Business during the Contingent Payment Period exceeds Sixteen Million
Dollars ($16,000,000), up to revenue of Thirty-Seven Million One Hundred
Forty-Seven Thousand Dollars ($37,147,000); and (ii) one hundred fifty percent
(150%) of the amount by which revenue generated by the Business during the
Contingent Payment Period exceeds Thirty-Seven Million One Hundred Forty-Seven
Thousand Dollars ($37,147,000); provided, however, that the sum of the Revenue
Contingent Payment and the EBITDA Contingent Payment in excess of the EBITDA Cap
shall not exceed Thirty-One Million Seven Hundred Fifty Thousand Dollars
($31,750,000). The amount of any Revenue Contingent Payment earned will be
reduced by any amounts that are due to the Buyer pursuant to Sections 2.7, 2.8
or Article 7 hereof. Revenue, for purposes of this Article 2, will be determined
in accordance with GAAP on an accrual basis, consistently applied by the Buyer
from period to period.
2.5.2 The "EBITDA Contingent Payment" is equal to forty percent (40%)
of the amount by which EBITDA of the Business during the Contingent Payment
Period exceeds Six Million Dollars ($6,000,000); provided, however, that the
total EBITDA Contingent Payment shall be no greater than Three Million Two
Hundred Fifty Thousand Dollars ($3,250,000) (the "EBITDA Cap"). In the event
that the calculation of EBITDA following the Contingent Payment Period would
result in an aggregate payment in excess of the EBITDA Cap, such excess shall be
paid to the Shareholders to the extent provided in Section 2.5.1 hereof. The
amount of any EBITDA Contingent Payment earned will be reduced by any amounts
that are due to the Buyer pursuant to Sections 2.7, 2.8 or Article 7.
2.5.3 "EBITDA" means for any fiscal period, the sum of net income
determined in accordance with GAAP on an accrual basis, consistently applied by
the Buyer from period to period, plus, to the extent deducted in computing net
income, interest expense, income tax expense, all depreciation and, without
duplication, all amortization, plus or minus, as the case may be, other unusual
or infrequent income or expense items, whether unrelated to the operation of the
Business or incurred in the usual and ordinary course of the operation of the
Business. The EBITDA of the Business will be determined initially by Buyer.
Notwithstanding the foregoing, the calculation of EBITDA of the Business for
purposes of this subsection will not include allocations of the Buyer's general
corporate overhead costs except as provided herein, but will include (x)
operating expenses directly related to the Business including, without
limitation, (i) retirement and welfare plan contribution costs for employees
involved in management and operation of the Business; (ii) casualty and
liability insurance premiums
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allocable to operation of the Business; (iii) employee costs for personnel whose
work is principally related to operation of the Business; and (iv) other charges
incurred by the Buyer in the ordinary course of business of operating the
Business that may differ in amount, nature and type from those previously
incurred by the Shareholders in operating the Business; (y) general and
administrative expenses directly related to the Business; and (z) indirect
services, including accounting and services currently performed by third party
vendors (other than those of the type set forth in (x) and (y) above), to the
extent such costs and expenses do not exceed the Shareholders current cost for
such services. Without limiting the generality of the foregoing, EBITDA of the
Business will account for any cost savings realized as a result of the Business
being operated by the Buyer, including by using services provided by the Buyer.
2.5.4 If additional working capital is required to expand the Business,
advances by the Buyer for such purposes will bear interest at the average
borrowing rate from time to time of the Buyer. Such interest charge will be
deducted in determining net income. The revenue and EBITDA contributed to the
Business from acquisitions occurring after the Closing will not be counted when
calculating the Revenue Contingent Payment or the EBITDA Contingent Payment.
2.5.5 The Buyer shall provide its initial determination of revenue and
EBITDA of the Business for the Contingent Payment Period to the Shareholders
within 75 days of the end of the Contingent Payment Period (the "Revenue/EBITDA
Determination"). Unless the Shareholders, within five business days after
receipt of the Revenue/EBITDA Determination, notify the Buyer that it objects to
the computation of revenue and/or EBITDA as set forth in the Revenue/EBITDA
Determination, the EBITDA Determination will be binding upon the parties for the
Contingent Payment Period. If the Shareholders objects to the Buyer's
calculation of revenue and/or EBITDA as set forth in the Revenue/EBITDA
Determination, not later than five business days following delivery to the
Shareholders of the Revenue/EBITDA Determination, the Shareholders shall notify
the Buyer in writing of such objection (the "Objection"). The Objection must
specify (a) the amount of the proposed adjustment to revenue and/or EBITDA as
set forth in the Revenue/EBITDA Determination; (b) the item(s) to which such
Objection relates; and (c) the facts and circumstances supporting the Objection.
During the ten business-day period following the delivery to the Buyer of any
Objection, the Buyer and the Shareholders will discuss the Shareholders'
proposals in the Objection and endeavor in good faith to reach agreement upon
appropriate adjustments to the Revenue/EBITDA Determination. If the Buyer and
the Shareholders are unable to agree upon the revenue and/or the EBITDA for the
Contingent Payment Period during such 10 business-day period, then Buyer and
Seller will jointly engage a mutually acceptable, independent accounting firm to
resolve the dispute. If the Shareholders and the Buyer are unable to mutually
agree on such an accounting firm within ten calendar days, an accounting firm
will be selected by lot from among the "Big 5" after eliminating any Big 5 firms
representing any of the Shareholders, the Buyer or the Company. The parties
shall cause said firm to resolve any disputed items as soon as practicable and
the determination of that firm shall be final and binding. Said firm will make
its determination in accordance with GAAP, based solely upon the presentations
by the Shareholders and the Buyer and only with respect to the differences
submitted by the Shareholders and the Buyer. The determination by said firm may
not be for an amount that is outside of the range of the Shareholders' or the
Buyer's disagreement or consider items that are not in dispute. Any payment(s)
due shall be made within five (5) business days after the determination is
final. The
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costs and expenses incurred in connection with a determination by the selected
firm shall be allocated by that firm, in its discretion, in proportion to the
relative success of the parties as to the dispute.
2.5.6 The Shareholders acknowledge that the Buyer will own and control
the Business and that, after the Closing, Buyer may operate the Business in such
manner as it determines to be in its best interest; provided, however, that the
Buyer shall use its reasonable best efforts to maximize revenue and EBITDA of
the Business and in the event of any combinations or assimilations of the
Business with or into the Buyer, the Buyer will impose commercially reasonable
controls so as to accurately track revenues and EBITDA for the calculation of
the Revenue/EBITDA Determination. In particular, in the event that a
Streamingmedia.com event or pavilion is included within, co-located or merged
with an existing Penton show (e.g. Internet World tradeshow), the revenue and
EBITDA generated from the Streamingmedia pavilion or event will be credited to
the respective earnout calculations. In addition, during calendar year 2001, if
any existing Penton website uses or adopts the Streamingmedia.com website
software, any revenue resulting from the use of the website software will be
credited to the revenue earnout calculation.
2.6 EMPLOYEE REWARD PAYMENTS. Two Million One Hundred Forty-Nine Thousand
Nine Hundred Eighty and 75/100 Dollars ($2,149,980.75) of the Purchase Price
shall be reserved to secure payments under the Employee Reward Plan described in
Section 5.8 (the "Reward Payment Amount").
2.7 NET WORKING CAPITAL AMOUNT ADJUSTMENT
2.7.1 WORKING CAPITAL STATEMENTS
(a) No later than one (1) day prior to the scheduled Closing
Date, the Company shall prepare and deliver to the Buyer a net working capital
statement for the Company as of the close of business at the end of the last
fiscal month immediately preceding the Closing Date (the "Net Working Capital
Statement"). The Net Working Capital Statement shall be reasonably acceptable to
the Buyer and estimate the Working Capital Assets, the Working Capital
Liabilities and the Net Working Capital Amount of the Company as of the close of
business at the end of the last full fiscal month immediately preceding the
Closing Date. For purposes hereof, "Working Capital Assets" shall mean the
current assets of the Company determined in a manner consistent with the
policies and principles historically used in connection with the preparation of
the Financial Statements described in Section 3.4, provided that prepaid
expenses included in the calculation under Section 2.9 shall not be considered
current assets hereunder; "Working Capital Liabilities" shall mean the current
liabilities of the Company determined in a manner consistent with the policies
and principles historically used in connection with the preparation of the
Financial Statements described in Section 3.4, provided that deferred revenues
included in the calculation under Section 2.9 shall not be considered current
liabilities hereunder; and "Net Working Capital Amount" shall mean the excess
(or deficiency) of Working Capital Assets over Working Capital Liabilities as of
the close of business at the end of the last fiscal month immediately preceding
the Closing Date as such amount shall be adjusted pursuant to Section 2.7.2,
provided that Net Working Capital Amount shall be reduced by the amount of
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any dividend or other distribution to Shareholders payable after the end of the
last fiscal month and prior to Closing.
(b) Upon the final determination of the Net Working Capital
Amount, if the Net Working Capital Amount is greater than the amount calculated
pursuant to Section 2.9 hereof, then the Purchase Price shall be increased on a
dollar-for-dollar basis by such excess amount. If the Net Working Capital Amount
is less than the amount calculated pursuant to Section 2.9 hereof, then the
Purchase Price shall be decreased on a dollar-for-dollar basis by such
deficiency (such excess or deficiency referred to as the "Net Working Capital
Amount Balance").
2.7.2 NET WORKING CAPITAL AMOUNT; POST-CLOSING ADJUSTMENT
(a) As soon as practicable (and in no event later than ninety
(90) days after the Closing Date), the Buyer shall make a final determination of
(i) the Net Working Capital Amount as of the close of business on the Closing
Date, (ii) the amount required to be retained under Section 2.9 as of the
Closing Date, and (iii) the Purchase Price adjustment that would have occurred
under Section 2.7.1(b) if such final numbers determined hereunder had been used
(the "Adjusted Net Working Capital Balance"), and deliver such determination to
the Shareholders.
(b) To the extent that the Adjusted Net Working Capital Balance
is greater than the Net Working Capital Amount Balance determined under Section
2.7.1(a) ("Overage"), the Buyer shall contribute to the Escrow Amount cash in
the amount of the Overage. To the extent that the Adjusted Net Working Capital
Balance is less than the Net Working Capital Amount Balance determined under
Section 2.7.1(a) ("Shortfall"), the Shareholders and the Buyer shall instruct
the Escrow Agent to distribute the amount of the Shortfall to the Buyer out of
the Escrow Amount.
2.7.3 DISPUTES. The Buyer and the Shareholders shall consult and
resolve in good faith any dispute that may arise concerning the Net Working
Capital Statement, Net Working Capital Amount and the amount of any post closing
adjustment pursuant to this Section 2.7. In the event the Buyer and the
Shareholders are unable to resolve any such dispute, then the dispute shall be
referred to an accounting firm and resolved in the manner similar to that
described in Section 2.5.5 hereof.
2.8 PAYMENT OF INDEBTEDNESS. On or prior to the Closing Date, the
Shareholders shall pay or cause the Company to repay the aggregate outstanding
balance, as of the Closing Date, of all Indebtedness of the Company set forth on
Schedule 2.8. The Shareholders may authorize and direct that the Buyer pay, by
wire transfer, such Indebtedness on behalf of the Company; provided that all
such amounts paid by the Buyer shall reduce the Purchase Price on a
dollar-for-dollar basis.
2.9 WORKING CAPITAL. Company will leave, at Closing, working capital in an
amount equal to prepayments received (deferred revenues) by Company related to
trade shows occurring after the Closing less prepaid direct expenses related to
trade shows occurring after the Closing.
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ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF COMPANY
Except as otherwise set forth on the Schedules, the Company hereby
represents and warrants to the Buyer as follows:
3.1 ORGANIZATION OF THE COMPANY
3.1.1 The Company is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of California with the
requisite corporate power and authority to own, lease and operate its properties
and to carry on its business as now being conducted therein. Except as set forth
on Schedule 3.1, the Company does not own, directly or indirectly, any capital
stock or other equity securities of any Person or have any direct or indirect
equity or ownership interest in any Person.
3.1.2 True and complete copies of the Articles of Incorporation and
Bylaws of the Company as in effect on the date hereof have been furnished to the
Buyer or were made available for inspection by the Buyer prior to the date
hereof.
3.2 POWER AND AUTHORITY. FCL and the Company have all the requisite
corporate power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. Bowsher has all the requisite power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated hereby by the Company and
FCL have been duly authorized by requisite corporate action and no other acts or
other proceedings on the part of FCL and/or the Company are necessary to
authorize this Agreement or the transactions contemplated hereby. This Agreement
has been duly executed by Bowsher, FCL and the Company and constitutes the
legal, valid and binding obligation of each of Bowsher, FCL and the Company,
enforceable against each of Bowsher, FCL and the Company in accordance with its
terms, except as enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights in general, or by general principles of equity. Except as set
forth in this Section 3.2 neither the consummation of the transactions
contemplated hereby nor compliance with any of the provisions hereof by the
Company or the Shareholders will (i) violate or conflict with any provision of
the Articles of Incorporation or Bylaws of the Company or FCL; (ii) violate or
conflict with, or result in a breach of any provision of, or constitute a
default (or an event which, with notice or lapse of time or both, would
constitute a default) under, or result in the termination of, or accelerate the
performance required by, or result in the creation of any Encumbrance upon any
of the assets of the Company under, any of the terms, conditions or provisions
of any note, bond, mortgage, indenture, deed of trust, license, lease, sublease,
option, agreement or other instrument or obligation to which the Company is a
party, or by which any of them or any of their respective assets may be bound or
affected; or (iii) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to the Company or the Shareholders or any of the Company's
assets except, in the case of clauses (ii) and (iii) above, for such conflicts,
breaches or defaults (A) that would not have a Material Adverse Effect or
materially and adversely affect the consummation of the transactions
contemplated hereby, (B) as to which
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requisite waivers or consents shall have been obtained by the Closing Date or
the receipt of which shall have been waived by the Buyer in writing or (C) that
may result from actions taken by the Company or the Shareholders at the written
request of the Buyer in connection with the transactions contemplated hereby.
Except as set forth on Schedule 3.2, no consent or approval by, notice to or
registration with any Person or governmental authority is required on the part
of the Company or the Shareholders prior to the Closing in connection with the
execution and delivery of this Agreement or the consummation of the transactions
contemplated hereby.
3.3 CAPITALIZATION. The authorized, issued and outstanding capital of the
Company is as set forth on Schedule 3.3. The Shares constitute all of the
outstanding shares of capital stock of the Company and have been duly authorized
and are validly issued, fully paid and nonassessable and have not been issued in
violation of the preemptive or similar rights of any shareholder of the Company
arising by operation of the Articles of Incorporation or Bylaws of the Company.
As set forth on Schedule 3.3, each Shareholder (i) is the record and beneficial
owner of all of the outstanding Shares set forth opposite his or its name; (ii)
has full power, right and authority, and any approval required by law, to make
and enter into this Agreement and the transactions contemplated hereby and to
sell, assign, transfer and deliver the Shares set forth opposite his or its name
to the Buyer; and (iii) has good and marketable title to the Shares set forth
opposite his or its name free and clear of all Encumbrances. Upon the
consummation of the transaction contemplated by this Agreement in accordance
with the terms hereof, the Buyer shall acquire good and marketable title to the
Shares, free and clear of all Encumbrances. Except as set forth on Schedule 3.3,
there is no existing option, warrant, call, commitment or other agreement to
which the Company or the Shareholders are a party requiring, and there are no
convertible securities of the Company outstanding which upon conversion would
require, the issuance of any additional shares of capital stock or other
securities convertible into shares of capital stock of the Company.
3.4 FINANCIAL STATEMENTS. Copies of the unaudited balance sheets of the
Company as of the years ending March 31, 1999 and 2000, and the related
statements of income for each of the two fiscal years ending March 31, 1999 and
2000 have been delivered to the Buyer. In addition, an unaudited balance sheet
(the "Balance Sheet") as of July 31, 2000 (the Balance Sheet Date"), and the
related statement of income for the period ended July 31, 2000, have been
delivered to the Buyer. Such financial statements, together with the notes
thereto (collectively, "Financial Statements"), present fairly, in all material
respects, the financial position of the Company and the results of its
operations as of the respective dates and for the respective periods indicated
and have been prepared by the management of the Company, in accordance with
consistently applied accounting principles, including that (i) revenues from
tradeshows/conferences are recognized in the month such events are held and,
accordingly, that cash received on account of tradeshows/conferences to be held
in the future are recorded as a deferred liability on the balance sheet, and
(ii) direct expenses, commissions and promotional costs of
tradeshows/conferences are deferred to the month the event ends except for
payroll costs and any indirect expenses, such as office supplies, which are
expensed in the month incurred.
3.5 UNDISCLOSED LIABILITIES. Except (i) as and to the extent reflected or
adequately reserved against in the Balance Sheet; (ii) liabilities which have
been incurred since the Balance Sheet Date in the ordinary course of business
consistent with past practice; (iii) liabilities arising under contracts or
arrangements of the Company which are identified on the Schedules attached
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<PAGE> 14
hereto; and (iv) as set forth on Schedule 3.5, there are no liabilities or
obligations, secured or unsecured (whether absolute, accrued, contingent or
otherwise), matured or unmatured that would have or result in a Material Adverse
Effect.
3.6 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since the Balance Sheet Date, the
Company has conducted its business in the ordinary course and in a manner
consistent with past practice and except as set forth in Schedule 3.6 there have
not been any changes that would have or result in a Material Adverse Effect. In
addition, and without limiting the foregoing, except as set forth on Schedule
3.6 or otherwise permitted or contemplated by the terms of this Agreement, the
Company has not, since the Balance Sheet Date:
3.6.1 experienced any material damage, destruction or loss to or of any
of its tangible assets which are necessary to the conduct of its Business;
3.6.2 except as may be required under existing agreements or in the
ordinary course of business consistent with past practice, made or agreed to
make any material increase in the compensation of any executive officer,
director or employee;
3.6.3 conducted its operations or sold, purchased or transferred any
material assets in excess of Two Hundred Fifty Thousand Dollars ($250,000) in
the aggregate, other than in the ordinary course;
3.6.4 except in the ordinary course of business consistent with past
practice, paid (or committed to pay) any management fee or made (or committed to
make) any loan or distribution of its property or assets to shareholders of the
Company, or declared, paid or set aside for payment of any dividend or
distribution with respect to the Shares, or purchased or redeemed (or committed
to purchase or redeem) any of the Shares;
3.6.5 written down or cancelled any material debt or waived or released
any material right or claim, except for cancellations, waivers and releases in
the ordinary course of business and consistent with past practice;
3.6.6 suffered any judgment with respect to, or made any settlement of,
any claim, suit, action or proceeding which would have or result in a Material
Adverse Effect;
3.6.7 effected any material change in accounting practices and
procedures;
3.6.8 amended its Articles of Incorporation or Bylaws;
3.6.9 issued any capital stock or any option, warrant or right relating
thereto or any securities convertible into or exchangeable for any shares of
capital stock;
3.6.10 adopted or amended any employee benefit plan or collective
bargaining agreement, except as may be required by law;
3.6.11 incurred or assumed any liabilities, obligations or indebtedness
for borrowed money or guarantee any such liabilities, obligations or
indebtedness, other than (i) in the ordinary course of business pursuant to
credit facilities existing on the date of this Agreement
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or (ii) pursuant to credit facilities made available to the Company on terms and
conditions approved by the Buyer (which approval shall not be unreasonably
withheld or delayed);
3.6.12 permitted, allowed or suffered any of its material assets,
leases or lease property to be subject to any Encumbrance, other than Permitted
Liens;
3.6.13 paid, loaned or advanced any amount to, or sold, transferred or
leased any of its material assets to, or entered into any agreement or
arrangement with its shareholders, except for transactions in the ordinary
course of business consistent with past practice;
3.6.14 made any material change in any method of accounting or
accounting practice or policy;
3.6.15 acquired or agreed to acquire by merging or consolidating with,
or by purchasing a substantial portion of the assets of, or by any other manner,
any business or any corporation, partnership, association or other business
organization or division thereof or otherwise acquired or agreed to acquire any
assets (other than inventory) which are material to the Company taken together;
3.6.16 sold, leased or otherwise disposed of, or agreed to sell, lease
or otherwise dispose of, any of its assets which are material to the Company
taken together;
3.6.17 amended, revised, renewed or terminated any material contract,
lease, sublease, option or other agreement to which the Company may be a party,
except in the ordinary course of business consistent with past practice;
3.6.18 entered into any employment, labor, consulting or service
contract, except in the ordinary course of business consistent with past
practice;
3.6.19 initiated or settled any material litigation to which the
Company is a party; or
3.6.20 agreed or committed to do any of the foregoing.
3.7 TITLE
3.7.1 TITLE TO PERSONAL PROPERTY. Except as set forth in Schedule
3.7.1, the Company has good and marketable title to, or valid and enforceable
leasehold interests in, all tangible personal property used in the Business
(other than real property or interests in real property) reflected on the
Balance Sheet or thereafter acquired and necessary to the conduct of the
Business, except those since sold or otherwise disposed of in the ordinary
course of business consistent with past practice, in each case free and clear of
all Encumbrances except Permitted Liens. The assets and properties owned or
leased by the Company are, taken as a whole and in all material respects, in
good condition and repair (subject to normal wear and tear consistent with the
age of the assets and properties). Except as set forth in Schedule 3.7.1, the
Company owns or otherwise has the right to use all of the personal property now
used and material to the operation of the Business, which personal property
(together with the leased real property
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referenced on Schedule 3.7.2) constitutes all of the property necessary to
conduct the Business as it is presently being conducted.
3.7.2 TITLE TO REAL PROPERTY. Schedule 3.7.2 sets forth a true and
complete list as of the date of this Agreement of (i) all contracts or
agreements under which the Company is lessee, sublessee, or licensee of any real
property; (ii) all options or rights held or given by the Company and all
contractual obligations on the part of the Company to sell, purchase or acquire
any interest in real property; and (iii) any interest that the Company has in
real property. The Company has the right to quiet enjoyment of the real
properties leased by it as tenant for the full term of the lease thereof to the
extent provided in each such lease. Each lease or other contract or agreement
referred to in Schedule 3.7.2 is a legal, valid, binding and enforceable
obligation of the Company, except as enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to or
affecting creditors' rights generally and to general equity principles (whether
such enforceability is considered in a proceeding at law or in equity). All
leases, ground leases, subleases, licenses, options or other agreements of the
Company as set forth in Schedule 3.7.2 are in full force and effect as against
the Company and, to the Knowledge of the Company, against the other party, and
the Company is not in material default under any such leases, ground leases,
subleases, licenses, options or other agreements, and to the Knowledge of the
Company no condition exists which (with notice or lapse of time or both) would
constitute a material default thereunder. True and complete copies of all leases
or other material contracts or agreements listed on Schedule 3.7.2 (including
any amendments and renewal letters) have been furnished to the Buyer or were
made available for inspection by the Buyer prior to the date hereof.
3.7.3 PERMITTED LIENS. As used in this Agreement, "Permitted Liens"
shall mean (i) any Encumbrances disclosed on the Balance Sheet or on Schedule
3.7.3; (ii) Encumbrance for Taxes, assessments or charges of any governmental
authority which are not yet due and payable or which are being contested by the
Company in good faith; (iii) Encumbrance incurred in connection with workers'
compensation, unemployment insurance and other types of social security
benefits; (iv) mechanics', carriers', workmen's, repairmen's or other like liens
arising or incurred in the ordinary course of business; (v) Encumbrance arising
under original purchase price conditional sales contracts and equipment leases
with third parties entered into in the ordinary course of business; (vi) such
imperfections or irregularities of title, easements (including, without
limitation, reciprocal easement agreements and utility agreements), zoning
requirements, rights of way, covenants, consents, agreements, reservations,
encroachments, variances and other similar restrictions, charges or encumbrances
(whether or not recorded) that do not materially detract from the value or
interfere with the present use of the property or leased assets affected thereby
or otherwise materially impair the Business of the Company as presently
conducted; and (vii) extensions, renewals or replacements of any Encumbrance for
money borrowed by the Company identified on Schedule 3.7.3; provided, that the
amount of the obligations secured thereby is not increased in any material
respect and that any such extension, renewal or replacement is limited to the
property originally encumbered thereby.
3.8 MATERIAL CONTRACTS
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<PAGE> 17
3.8.1 Schedule 3.8.1 contains a complete list of the material
contracts, commitments and agreements to which the Company is a party or by
which any of its assets or properties of the Business are bound consisting of
the following:
(a) contracts or agreements with any officer or employee pursuant
to which such officers or employees are entitled to receive compensation on an
annual basis;
(b) collective bargaining or other labor or union contracts or
agreements (excluding any item required to be listed on Schedule 3.16);
(c) instruments relating to Indebtedness for borrowed money,
including any note, bond, deed of trust, mortgage, indenture or agreement to
borrow money;
(d) agreements or outstanding purchase orders relating to capital
expenditures;
(e) agreements relating to the future disposition or acquisition
of assets (excluding software) or any interest in any business enterprise;
(f) contracts or agreements which do not expire or are not
terminable without substantial cost or penalty at the option of the Company
within a 90-day period, excluding purchase orders made in the ordinary course of
business and contracts and other agreements disclosed pursuant to this
Agreement;
(g) contracts or agreements which limit the amount of
indebtedness that can be incurred by the Company or restrict the ability of the
Company to grant an Encumbrance on any of its properties or assets or which
restrict the ability of the Company to conduct business of any type or in any
location;
(h) manufacturer's representative, sale agency and distribution
contracts and agreements that (A) have a term of one year or more and are not
terminable by the Company on notice of six months or less without penalty, or
(B) are otherwise material;
(i) shareholder, voting trust or similar contracts and agreements
relating to the voting of shares or other equity or debt interests of the
Company;
(j) all of the leases, subleases, licenses and other agreements
relating to or constituting real property, each with a term of one year or more
and an annual payment obligation in excess of $50,000;
(k) joint venture agreements, partnership agreements and other
similar contracts and agreements involving a sharing of profits and expenses;
(l) contracts and agreements providing for future payments that
are conditioned, in whole or in part, on a change in control of the Company; and
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<PAGE> 18
(m) contracts and agreements that are material to the business,
operations, results of operations, condition (financial or otherwise), assets or
properties of the Company.
3.8.2 True and complete copies of the agreements set forth on Schedule
3.8.1 have been furnished to the Buyer or were made available for inspection by
the Buyer prior to the date hereof. All contracts set forth on Schedule 3.8.1
are in full force and effect, and except as set forth on Schedule 3.8.2, the
Company is not in material default under any of the contracts listed on Schedule
3.8.1 and, to the Knowledge of Company, no other party thereto is in material
default thereunder.
3.9 INTELLECTUAL PROPERTY
3.9.1 Definitions. For all purposes of this Agreement, the following
terms shall have the following respective meanings:
(a) "Technology" shall mean any or all of the following: (A)
works of authorship including, without limitation, computer programs, source
code and executable code, whether embodied in software, firmware or otherwise,
documentation, designs, files, net lists, records, data and mask works; (B)
inventions (whether or not patentable), improvements and technology; (C)
proprietary and confidential information, including technical data and customer
and supplier lists, trade secrets and know how; (D) databases, data compilations
and collections and technical data; (E) tools, methods and processes; and (F)
all instantiations of the foregoing in any form and embodied in any media.
(b) "Intellectual Property Rights" shall mean any or all of the
following and all rights in, arising out of, or associated therewith: (A) all
United States and foreign patents and utility models and applications therefor
and all reissues, divisions, re-examinations, renewals, extensions,
provisionals, continuations and continuations-in-part thereof and equivalent or
similar rights anywhere in the world in inventions and discoveries including
without limitation invention disclosures ("Patents"); (B) all trade secrets and
other rights in know-how and confidential or proprietary information; (C) all
copyrights, copyrights registrations and applications therefor and all other
rights corresponding thereto throughout the world ("Copyrights"); (D) all mask
works, mask work registrations and applications therefor, and any equivalent or
similar rights in semiconductor masks, layouts, architectures or topology
("Maskworks"); (E) all industrial designs and any registrations and applications
therefor throughout the world; (F) all rights in World Wide Web addresses,
domain names and sites and applications and registrations therefor; (G) all
trade dress, trade names, logos, common law trademarks and service marks,
trademark and service mark registrations and applications therefor and all
goodwill associated therewith throughout the world ("Trademarks"); and (H) any
similar, corresponding or equivalent rights to any of the foregoing anywhere in
the world.
(c) "Company Intellectual Property" shall mean any Technology and
Intellectual Property Rights including the Company Registered Intellectual
Property Rights (as defined below) that are owned (in whole or in part) by the
Company.
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(d) "Registered Intellectual Property Rights" shall mean all
United States, international and foreign: (A) Patents, to the extent issued or
the subject of pending patent applications (provisional or otherwise); (B)
registered Trademarks, applications to register Trademarks, including
intent-to-use applications, or other registrations or applications related to
Trademarks and World Wide Web domain name registrations; (C) Copyright
registrations and applications to register Copyrights; (D) Mask Work
registrations and applications to register Mask Works; and (E) any other
Technology that is the subject of an application, certificate, filing,
registration or other document issued by, filed with, or recorded by, any state,
government or other public or private legal authority at any time.
(e) Notwithstanding the foregoing, none of the foregoing
definitions includes "off the shelf" or otherwise widely distributed software
programs used internally by the Company and licensed by the Company on standard
or generally available terms.
3.9.2 Schedule 3.9.2 lists all Registered Intellectual Property Rights
owned by, filed in the name of, or applied for by, the Company (the "Company
Registered Intellectual Property Rights") and lists any proceedings or actions
before any court, tribunal (including the United States Patent and Trademark
Office (the "PTO") or equivalent authority anywhere in the world) related to any
of the Company Registered Intellectual Property Rights or Company Intellectual
Property which are material to the Company.
3.9.3 Except as set forth on Schedule 3.9.3, to the Knowledge of
Company, all necessary registration, maintenance and renewal fees in connection
with all Company Registered Intellectual Property Rights have been paid and all
necessary documents and certificates in connection with such Company Registered
Intellectual Property Rights have been filed with the relevant patent,
copyright, trademark or other authorities in the United States or foreign
jurisdictions, as the case may be, for the purposes of maintaining such Company
Registered Intellectual Property Rights. There are no actions that must be taken
by the Company within one hundred twenty (120) days of the Closing Date,
including the payment of any registration, maintenance or renewal fees or the
filing of any responses to PTO office actions, documents, applications or
certificates for the purposes of obtaining, maintaining, perfecting or
preserving or renewing any Registered Intellectual Property Rights which are
material to the Company.
3.9.4 Company has no Knowledge of any facts or circumstances that would
render any Company Intellectual Property invalid or unenforceable. Without
limiting the foregoing, Company has no Knowledge of any facts or circumstances
that would constitute prior art, that would render any of the Company Registered
Intellectual Property Rights invalid or unenforceable, or would adversely effect
any pending application for any Company Registered Intellectual Property Right
and the Company has not misrepresented, or failed to disclose, any fact or
circumstances in any application for any Company Registered Intellectual
Property Right that is material to the Company that would constitute fraud or a
misrepresentation with respect to such application or that would otherwise
affect the validity or enforceability of any Company Registered Intellectual
Property Right which is material to the Company.
3.9.5 Except as set forth on Schedule 3.9.5, each item of Company
Intellectual Property is free and clear of any Liens except for non-exclusive
licenses granted in the ordinary course of business. Except as set forth on
Schedule 3.9.5, the Company is the exclusive owner
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or exclusive licensee of all Company Intellectual Property, including (i) all
Trademarks used in connection with the operation or conduct of the business of
the Company and (ii) all registered copyrights that are products of the Company
or which the Company otherwise purports to own.
3.9.6 Except as set forth in Schedule 3.9.6, to the extent that any
Technology used in the operation of the Company's business has been developed or
created by a third party for the Company, the Company has a written agreement
with such third party with respect thereto and the Company thereby either (i)
has obtained ownership of, and is the exclusive owner of, or (ii) has obtained a
license (sufficient for the conduct of its business as currently conducted and
as proposed to be conducted) to such third party's Intellectual Property Rights
in such Technology by operation of law or by valid assignment.
3.9.7 With the exception of "shrink-wrap" or similar widely-available
commercial end-user licenses, except as set forth in Schedule 3.9.7 all
Technology used in or necessary to the conduct of Company's business as
presently conducted was written and created solely by either (i) employees of
the Company acting within the scope of their employment or (ii) by third parties
who have assigned all of their rights, including Intellectual Property Rights
therein, to the Company, and to the Knowledge of Company, no third party owns or
has any rights to any of the Company Intellectual Property.
3.9.8 The Company has taken all commercially reasonable and customary
steps required to protect the Company's rights in confidential information and
trade secrets of the Company or provided by any other person to the Company,
except when public disclosure thereof has not impaired the value thereof.
3.9.9 Except as set forth in Schedule 3.9.9, the Company has not
transferred ownership of, or granted any exclusive license of or right to use,
or authorized the retention of any exclusive rights to use or joint ownership
of, any Technology or Intellectual Property Right that is or was Company
Intellectual Property, to any other person.
3.9.10 Other than inbound "shrink-wrap" and similar publicly available
commercial binary code end-user licenses and outbound "shrink-wrap" licenses in
the form set forth on Schedule 3.9.10, the contracts, licenses and agreements
listed on Schedule 3.9.10 list all material contracts, licenses and agreements
to which the Company is a party with respect to any Technology or Intellectual
Property Rights. Except as set forth in Schedule 3.9.10, the Company is not in
material breach of nor has the Company failed to perform in any material respect
under any of the foregoing contracts, licenses or agreements and, to the
Company's Knowledge, no other party to any such contract, license or agreement
is in breach thereof or has failed to perform thereunder.
3.9.11 Except as set forth in Schedule 3.9.11, there are no contracts,
licenses or agreements between the Company and any other person with respect to
Company Intellectual Property under which there is any dispute regarding the
scope of such agreement, or performance under such agreement, including with
respect to any payments to be made or received by the Company thereunder.
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3.9.12 Except as set forth in Schedule 3.9.12, to the Company's
Knowledge, the operation of the business of the Company as it currently is
conducted does not infringe or misappropriate any Intellectual Property Right of
any person or violate any right of any person relating to Intellectual Property
or constitute unfair competition or trade practices under the laws of any
jurisdiction, and the Company has not received notice from any person claiming
that such operation of the Company infringes or misappropriates any Intellectual
Property Right of any person or constitutes unfair competition or trade
practices under the laws of any jurisdiction (nor does the Company have
Knowledge of any basis therefor).
3.9.13 Except as set forth in Schedule 3.9.13, to the Company's
Knowledge, no person is infringing or misappropriating any Company Intellectual
Property Right.
3.9.14 No Company Intellectual Property or service of the Company is
subject to any proceeding or outstanding decree, order, judgment or settlement
agreement or stipulation that restricts in any manner the use, transfer or
licensing thereof by the Company or may affect the validity, use or
enforceability of such Company Intellectual Property.
3.9.15 Except as set forth in Schedule 3.9.15, neither this Agreement
nor the transactions contemplated by this Agreement will result in (i) the
Company granting to any third party any right to or with respect to any
Technology or Intellectual Property Right of the Company which is material to
the Company; or (ii) the Company being obligated to pay any royalties or other
amounts to any third party in excess of those payable by the Company prior to
the Closing.
3.10 LITIGATION. Except as set forth on Schedule 3.10, as of the date of
this Agreement, there are no actions, suits, claims, proceedings or
investigations pending or, to the Knowledge of Company, threatened against the
Company, nor any outstanding judgments, orders, writs, injunctions or decrees of
any court, governmental agency or arbitration tribunal against the Company,
which (i) would have a Material Adverse Effect; (ii) seek to prevent or
materially restrict or delay the consummation of the transactions contemplated
hereby; or (iii) would materially and adversely affect the ability of the
Company to consummate the transactions contemplated hereby.
3.11 COMPLIANCE WITH LAW; GOVERNMENTAL APPROVALS. Except as set forth on
Schedule 3.11, the Company is in compliance with all applicable statutes, laws,
ordinances, rules, orders and regulations of any governmental authority or
instrumentality, domestic or foreign, except where noncompliance would not have
a Material Adverse Effect and except that no representation or warranty is made
with respect to actions taken by the Company at the written request of the Buyer
in connection with the transactions contemplated hereby. Except as set forth on
Schedule 3.11, the Company has not received any communication (written or oral)
from a governmental authority that alleges that the Company is not in compliance
with any federal, state, local or foreign statutes, laws, ordinances, rules,
orders and regulations applicable to the Company, and there are no actions,
investigations or other legal or regulatory proceedings relating to state,
federal or local laws, including fraud and abuse, anti-kickback and false claims
pending or, to the Knowledge of Company, threatened against the Company, in any
such case which would have a Material Adverse Effect. The Company holds all
licenses, permits and authorizations necessary for the conduct of the Business
under and pursuant to all applicable
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statutes, laws, ordinances, rules and regulations of all federal, state, local
and foreign governmental bodies, agencies and subdivisions having jurisdiction
over it or over any part of its operations, except where the failure to hold
such licenses, permits and authorizations or to so comply would not have a
Material Adverse Effect. The Company has not received written notice of any
pending or threatened proceeding seeking to revoke or limit in any material
respect any such licenses, permits or authorizations.
3.12 EMPLOYEE BENEFIT PLANS
3.12.1 Schedule 3.12 contains a list of all "employee benefit plans"
(as defined in Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA")), and all other employee compensation and fringe
benefit plans or arrangements (including, without limitation, all bonus,
severance, salary continuation, deferred compensation, incentive and stock
compensation plans) maintained or contributed to by the Company for the benefit
of its employees (collectively, the "Employee Plans"). The Company has no
liability with respect to any plan, arrangement or practice of the type
described in the preceding sentence other than the Employee Plans.
3.12.2 Except as disclosed on Schedule 3.12, each Employee Plan has
been operated and administered in all material respects in compliance with its
terms and applicable requirements of ERISA and the Code.
3.12.3 Each Employee Plan intended to be qualified under Section
401(a) of the Code is so qualified and has heretofore been determined by the IRS
to be so qualified, and each trust created thereunder has heretofore been
determined by the IRS to be exempt from tax under the provisions of Section
501(a) of the Code, and nothing has occurred since the date of any such
determination that could reasonably be expected to give the IRS grounds to
revoke such determination.
3.12.4 There are no investigations or termination proceedings by any
governmental authority or other claims (except for routine claims for benefits),
suits or proceedings against or involving any Employee Plan, nor has there
occurred any nonexempt "prohibited transaction" (within the meaning of Section
4975 of the Code or Section 406 of ERISA) or breaches of any of the duties
imposed on "fiduciaries" (within the meaning of Section 3(21) of ERISA) with
respect to an Employee Plan, which would reasonably be expected to result in a
material tax or penalty.
3.12.5 No material liability under Title IV of ERISA has been incurred
by the Company that has not been satisfied, and to the Knowledge of Company, no
condition exists that presents a risk to the Company of incurring a material
liability under such Title. No Employee Plan is a "multiemployer plan," as
defined in Section 3(37) of ERISA or Section 414(f) of the Code, a "defined
benefit plan" as defined in Section 3(35) of the ERISA, a pension plan subject
to the funding standards of Section 302 of ERISA or Section 413 of the Code or a
"multiple employer plan" within the meaning of Section 210(a) of ERISA or
Section 413(c) of the Code.
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3.12.6 Except as disclosed on Schedule 3.12, all contributions to the
Employee Plans that were required to be made or accrued in accordance with those
Plans or any governmental law or regulation have been timely made or accrued.
3.12.7 With respect to each group health plan benefiting any current
or former employee of the Company, any of the Company's affiliates or any other
trade or business which, together with the Company, is treated as a single
employer under Section 414(t) of the Code, that is subject to Section 4980B of
the Code, the Company, any of the Company's affiliates and each other trade or
business which, together with the Company, is treated as a single employer under
Section 414(t) of the Code, have complied with (i) the continuation coverage
requirements of Section 4980B of the Code and Part 6 of Subtitle B of Title I of
ERISA, (ii) the Health Insurance Portability and Accountability Act of 1996 and
(iii) the Women's Health and Cancer Rights Act of 1998.
3.12.8 No Employee Plan is or at any time was funded through a
"welfare benefit fund" as defined in Section 419(e) of the Code, and no benefits
under any Employee Plan are or at any time have been provided through a
voluntary employees' beneficiary association (within the meaning of subsection
501(c)(9) of the Code) or a supplemental unemployment benefit plan (within the
meaning of Section 501(c)(17) of the Code).
3.12.9 The Company has reserved all rights necessary to amend or
terminate each of the Employee Plans without the consent of any other person.
3.12.10 No Employee Plan provides benefits to any individual who is
not a current or former employee of the Company, or the dependents or other
beneficiaries of any such current or former employee.
3.12.11 With respect to each Employee Plan, true and complete copies
of the following documents have been furnished to the Buyer or were made
available for inspection by the Buyer prior to the date hereof, to the extent in
each case that such documents exist: (i) current plan documents, plan
amendments, and any other documents that establish the existence of the plan or
arrangement, including any funding instruments; (ii) current summary plan
descriptions and summaries of material modifications, if any; (iii) the most
recent tax qualified determination letters, if any, received from (or
applications pending with) the IRS; (iv) the most recent Form 5500 Annual
Reports; and (v) any other documents, forms or other instruments relating to any
Employee Plan reasonably requested by the Buyer.
3.13 ENVIRONMENTAL MATTERS. To the Company's Knowledge, the Company is in
compliance in all material respects with all applicable environmental laws,
which compliance includes the possession by the Company of all permits and other
governmental authorizations required under applicable environmental laws
necessary to conduct the Business as currently conducted. The Company has not
received any notice or other communication (in writing or other express
communication to an authorized person of the Company), whether from a
governmental body, citizens group, employee or otherwise, that alleges that the
Company is not in compliance with any environmental law. To the Knowledge of
Company, no current or prior owner of any property leased or controlled by the
Company has received any notice or other communication (in writing or other
express communication to an authorized person of the
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Company), whether from a governmental body, citizens group, employee or
otherwise, that alleges that such current or prior owners or the Company is not
in compliance with any environmental law. All governmental authorizations
currently held by the Company pursuant to environmental laws are identified in
Schedule 3.13. To the Company's Knowledge, there has been no release or
discharge by the Company (or, to the Knowledge of Company, by any current or
prior owner of any property leased by the Company) of any materials of
environmental concern that would or would reasonably be expected to give rise to
an obligation by the Company to effect any environmental cleanup or remediation.
3.14 TAXES. Except as disclosed in Schedule 3.14:
3.14.1 The Company has timely filed all Returns required to be filed
on or before the Closing Date in accordance with all applicable law. All such
Returns correctly reflected in all material respects the facts regarding the
Company's income, business, assets, operations, activities, and status for Tax
purposes. No such Returns have been audited by a taxing authority.
3.14.2 The Company has timely paid all Taxes owed by the Company
(whether or not shown as due and payable on the Returns that have been filed)
and has timely withheld and paid all Taxes required to have been withheld and
paid by the Company in connection with amounts paid or owing to any employee,
independent contractor, or other third party.
3.14.3 There is no claim, audit, investigation, action, suit, or
proceeding now pending or, to the Knowledge of the Shareholders, threatened
against or with respect to the Company in connection with any Tax.
3.14.4 The Company has not granted any extension or waiver of the
statute of limitations period applicable to any Return, which period (after
giving effect to such extension or waiver) has not yet expired.
3.14.5 There are no liens for Taxes upon the Company's assets other
than liens for current Taxes not yet due for which adequate reserves have been
established.
3.14.6 The Company has never been a member of an affiliated,
consolidated, combined, or unitary group or participated in any other
arrangement whereby any income, revenues, receipts, gain, or loss was determined
or taken into account for Tax purposes with reference to or in conjunction with
any income, revenues, receipts, gain, loss, asset, or liability of any other
Person.
3.14.7 The Company is not a party to any contract under which any
individual could receive payments characterized as "excess parachute payments"
within the meaning of section 280G of the Code.
3.14.8 The Company does not own any interest in real property in any
jurisdiction in which a Tax is imposed on the transfer of a controlling interest
in a Person that owns an interest in real property.
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3.14.9 The Company has not been a United States real property holding
corporation within the meaning of Section 897(c)(2) of the Code during the
applicable period specified in Section 897(c)(1)(A)(ii) of the Code.
3.14.10 Neither the Company nor any Person acting on its behalf has
entered into any agreement or consent pursuant to Section 341(f) of the Code.
3.14.11 The Company will not be required to include any adjustment in
taxable income for any Post-Closing Period under Section 481(c) of the Code (or
any similar provision of the Tax laws of any jurisdiction) as a result of a
change in method of accounting for a Pre-Closing Period or pursuant to any
agreement entered into with any taxing authority with regard to the Company's
Tax liability for a Pre-Closing Period.
3.14.12 The Company is not liable for the Taxes of any other Person,
as a transferee or successor, by agreement, or otherwise.
3.15 INSURANCE. Schedule 3.15 contains a complete list of all currently
effective insurance policies or binders of insurance or programs of
self-insurance which relate to the Company and/or assets and the properties
leased by the Company. True and complete copies of all such insurance policies
and binders have been furnished to the Buyer or were made available for
inspection by the Buyer prior to the date hereof. The coverage under each such
policy and binder is in full force and effect, and no notice of cancellation or
non-renewal has been received by the Company. To the Knowledge of Company, the
Company is not in default under any of such policies.
3.16 LABOR RELATIONS AND EMPLOYMENT. Except as set forth on Schedule 3.16,
(i) there is no labor strike, material labor dispute, slowdown, stoppage or
lockout pending, or to the Knowledge of Company, threatened against or affecting
the Company; (ii) to the Knowledge of Company, there are no union claims to
represent the employees of the Company, and there are no current union
organizing activities among the employees of the Company; and (iii) the Company
is not a party to or bound by any collective bargaining or similar agreement
with any labor organization, or work rules or practices agreed to with any labor
organization or employee association, applicable to employees of the Company.
True and complete copies of all written personnel policies, rules or procedures
applicable to employees of the Company have been furnished to the Buyer or were
made available for inspection by the Buyer on or prior to the date hereof.
3.17 BROKERS OR FINDERS. Except for The Jordan, Edmiston Group, Inc., no
broker, finder or investment banker is entitled to any fee or commission from
the Company or the Shareholders for services rendered on behalf of the Company
or the Shareholders in connection with the transactions contemplated by this
Agreement.
3.18 OFFICERS AND DIRECTORS. Schedule 3.18 sets forth a true, correct and
complete list of all of the officers and directors of the Company.
3.19 HSR ACT. The Company and all entities included within the Company do
not satisfy the "size-of-person" jurisdictional test for HSR Act reportability
under 15 U.S.C. Section 18(a).
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3.20 DISCLOSURE. This Agreement and each certificate or other instrument
required to be furnished by or on behalf of the Company or the Shareholders to
the Buyer pursuant hereto at or prior to the Closing, taken as a whole, do not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated herein or therein or necessary to make the statements
contained herein or therein, in light of the circumstances under which they were
made, not misleading.
3.21 DISCLAIMER OF OTHER REPRESENTATIONS AND WARRANTIES. Except as
expressly set forth in this Article 3 the Company does not make any
representation or warranty, express or implied, at law or in equity, in respect
of any of its assets, liabilities or operations, and any such other
representations or warranties are hereby expressly disclaimed.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER
Except as otherwise set forth on the Schedules, the Buyer hereby
represents and warrants to Company and the Shareholders as follows:
4.1 ORGANIZATION OF THE BUYER. The Buyer is a corporation duly
incorporated, validly existing and in good standing under the laws of the state
of Delaware with the requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as now being conducted
therein, and is duly qualified to do business as a foreign corporation in each
jurisdiction in which the failure to be so qualified would have a material
adverse effect on the validity of this Agreement or impair the ability of it to
consummate the transactions contemplated hereby.
4.2 POWER AND AUTHORITY
4.2.1 The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby by the Buyer have been, or
will be prior to Closing, duly authorized by requisite corporate action, and no
other acts or other proceedings on the part of the Buyer are necessary to
authorize this Agreement or the transactions contemplated hereby. This Agreement
has been duly executed by the Buyer and constitutes the legal, valid and binding
obligation of the Buyer, enforceable against the Buyer in accordance with its
terms, except as enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights in general, or by general principles of equity.
4.2.2 Neither the execution and delivery by the Buyer of this Agreement
nor the consummation of the transactions contemplated hereby nor compliance with
any of the provisions hereof by the Buyer will (i) violate or conflict with any
provision of the Certificate of Incorporation, as amended, or Bylaws, as
amended, of the Buyer or any of its subsidiaries; (ii) violate or conflict with,
or result in a breach of any provision of, or constitute a default (or an event
which, with notice or lapse of time or both, would constitute a default) under,
or result in the termination of, or accelerate the performance required by, or
result in the creation of any Encumbrance upon any of the assets of the Buyer or
any of its subsidiaries under, any of the
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terms, conditions or provisions of any note, bond, mortgage, indenture, deed of
trust, license, lease, sublease, option, agreement or other instrument or
obligation to which the Buyer or any of its subsidiaries is a party, or by which
it or any of its subsidiaries or any of the assets of the Buyer or any of its
subsidiaries may be bound or affected; or (iii) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to the Buyer or any
of its subsidiaries, or any of the assets of the Buyer or any of its
subsidiaries, except, in the case of clauses (ii) and (iii) above, for such
conflicts, breaches or defaults (A) that would not have a material adverse
effect on this Agreement or materially and adversely affect the consummation of
the transactions contemplated hereby, or (B) as to which requisite waivers or
consents either shall have been obtained by the Closing Date or shall have been
waived by the Shareholders and the Company in writing. Except as set forth on
Schedule 4.2, no consent or approval by, notice to or registration with any
Person or any governmental authority, other than the filing of a Notification
and Report Form with the Federal Trade Commission and the Department of Justice,
is required on the part of the Buyer prior to the Closing Date in connection
with the execution and delivery of this Agreement, or the consummation of the
transactions contemplated hereby.
4.3 FUNDING. The Buyer has cash available or has existing borrowing
facilities, which, together with its available cash, are sufficient to enable it
to consummate the transactions contemplated by this Agreement.
4.4 ACTIONS AND PROCEEDINGS. As of the date of this Agreement, there are
no actions, suits, claims, proceedings or investigations pending or, to the
knowledge of the Buyer, threatened against the Buyer, nor any outstanding
judgments, orders, writs, injunctions or decrees of any court, governmental
agency or arbitration tribunal against the Buyer or any of its subsidiaries,
which seek to prevent or materially restrict or delay the consummation of the
transactions contemplated hereby or would materially and adversely affect the
ability of the Buyer or any of its subsidiaries to consummate the transactions
contemplated hereby.
4.5 INVESTMENT REPRESENTATIONS; BUSINESS INVESTIGATION. The Buyer is
acquiring the Shares for its own account, for investment purposes only and not
with a view to the distribution of the Shares. The Buyer (i) has such knowledge,
sophistication and experience in business and financial matters that it is
capable of valuing an investment in the Shares; (ii) has conducted a full and
complete business and financial investigation of the Company and has had access
to and has examined to its satisfaction the Company's properties and other
assets, books, records, filings with governmental agencies and reports and other
materials relating to each Company; (iii) fully understands the nature, scope
and duration of the limitations on transfer applicable to the Shares; and (iv)
can bear the economic risk of an investment in the Shares and can afford a
complete loss of such investment.
4.6 DISCLOSURE. This Agreement and each certificate or other instrument
required to be furnished by or on behalf of the Buyer to the Company or the
Shareholders pursuant hereto at or prior to the Closing, taken as a whole, do
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated herein or therein or necessary to make the statements
contained herein or therein, in light of the circumstances under which they were
made, not misleading.
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4.7 DISCLAIMER OF OTHER REPRESENTATIONS AND WARRANTIES. Except for the
representations and warranties contained in this Article 4, the Buyer does not
make any other express or implied representation or warranty.
ARTICLE 5
CERTAIN UNDERSTANDINGS AND AGREEMENTS
5.1 CONDUCT OF BUSINESS. From the date of this Agreement to the Closing
Date, the Company and the Shareholders agree to (i) conduct the Company's
operations according to the Company's ordinary and usual course of business;
(ii) to use the Company's best efforts to preserve its business organization
intact; (iii) to keep available the services of the Company's officers and
employees; and (iv) and to maintain satisfactory relationships with suppliers,
customers and others having business relationships with the Company. Without
limiting the generality of the foregoing, the Company will not, and the
Shareholders will not let the Company, (without the prior written consent of the
Buyer, which consent shall not be unreasonably withheld) take, or cause to be
taken, any of the actions described in Section 3.6 of this Agreement.
5.2 EXCLUSIVE DEALING. During the period from the date of this Agreement to
the earlier of (i) the Closing Date or (ii) the termination of this Agreement in
accordance with its terms, none of the Shareholders, the Company, any of their
respective affiliates or representatives or any officer or director of the
Company shall take any action to, directly or indirectly, encourage, initiate,
solicit or engage in discussions or negotiations with, or provide any
information, including the existence of this Agreement and the status of the
transactions contemplated hereby, to any Person, other than the Buyer and its
affiliates and representatives, concerning any purchase of any capital stock of
the Company or substantially all of the assets of or any equity interest in, or
any merger, consolidation, business combination or similar transaction involving
the Company or Shareholders unless the disclosure of such information is
necessary in making any filings or obtaining any consents or approvals required
under this Agreement or for the consummation of the transactions contemplated
hereby. Each of the Shareholders and the Company shall immediately cease and
cause to be terminated any negotiations, discussions or activities, and shall
promptly notify the Buyer in the event any of them receives a written inquiry
from any Person indicating or suggesting any interest, concerning the purchase
of any capital stock of the Company or substantially all the assets of or any
equity interest in, or any merger, consolidation, business combination or
similar transaction involving the Company or any of the Shareholders.
5.3 PRE-CLOSING ACCESS TO PROPERTIES AND RECORDS; CONFIDENTIALITY. Between
the date hereof and the Closing Date, the Company agrees to give
authorized representatives of the Buyer, in such a manner as not to unduly
disrupt normal business activities, reasonable access to the premises,
properties, contracts, books, records and affairs of the Company and, with prior
notice and approval by Company, will cause the Company's officers and their
employees to furnish such financial, technical and operating data and other
information pertaining to the Company's business as the Buyer shall from time to
time reasonably request. The Buyer will hold in confidence all information
obtained as a result of such access or furnished by the Company in accordance
with the terms of the confidentiality agreement dated September 12,
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2000 between the Company, FCL and the Buyer (the "Confidentiality Agreement"),
and will use such information only for the purpose of considering the
transactions contemplated hereby, and if such transactions are not consummated
as contemplated herein, will promptly return all such information and all
information derived therefrom (including all copies thereof) to the Company in
accordance with the terms of such Confidentiality Agreement. The parties hereto
agree that it is impossible to measure in money the damages which will accrue by
reason of a breach by the Buyer of this Section 5.3, and, therefore, this
Section may be specifically enforced. The Buyer hereby waives the claim or
defense therein that any other party has an adequate remedy at law. The
Shareholders will, and will cause its representatives to, hold in confidence and
not use any confidential information that remains after the Closing in the
possession of the Shareholders concerning the Business of the Company sold to
the Buyer. The Shareholders will not release or disclose any such information to
any person other than the Buyer and its authorized representatives.
5.4 REASONABLE EFFORTS. Subject to the terms and conditions of this
Agreement, each party shall use all commercially reasonable efforts to take, or
cause to be taken, all actions necessary to consummate the transactions
contemplated by this Agreement. The parties shall cooperate with one another (i)
in determining whether any action by or in respect of, or filing with, any
governmental authority is required, or any actions, consents, approvals or
waivers are required to be obtained from Persons to any contracts; and (ii)
subject to the terms and conditions of this Agreement, in taking such actions or
making any such filings, furnishing information required in connection therewith
and seeking to obtain in a timely fashion any such actions, consents, approvals
or waivers.
5.5 RESIGNATIONS. On the Closing Date, the Company and/or the Shareholders
shall cause to be delivered to the Buyer duly signed resignations, effective
immediately after the Closing Date, of all directors and officers of the
Company.
5.6 POST-CLOSING PAYMENTS FROM FCL. Following the Closing, FCL agrees that
any monies it receives that are the property of the Company shall be remitted to
the Company according to the terms of that certain April 1, 2000, Letter
Agreement Between the Company and FCL, as amended on September 27, 2000.
5.7 USE OF NAME. At or prior to the Closing, the Company will change its
corporate name to something dissimilar to "First Conferences", and the Buyer and
the Company acknowledge and agree that (i) FCL may use the name "First
Conferences, Inc." and the World Wide Web domain names "fconline.com" and
"firstconferences.com"; (ii) the Buyer and the Company shall cease using and
will transfer ownership of the World Wide Web domain name "fconline.com" to FCL;
and (ii) neither the Buyer nor the Company shall, following the Closing, use the
name "First Conferences, Inc." or any other name, distinctive mark, style or
logo likely to be confused with that name or mark.
5.8 EMPLOYEE REWARD ARRANGEMENTS
5.8.1 The Buyer will honor all of the Company's obligations relating to
employment matters, including the Employee Reward Plan described in this Section
5.8. The Buyer intends to cause the Company to provide benefits to employees of
the Company that are
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substantially similar to those benefits the Buyer provides to other employees of
the Buyer, as in effect from time to time. The foregoing will not limit or
restrict the right of the Company to terminate the employment of such employees
or subsequently to modify the benefits or other terms of employment of such
employees, to the extent permitted by applicable law.
5.8.2 All service credited to each employee by the Company through the
Closing Date will be recognized by the Buyer after the Closing Date for purposes
of eligibility and vesting under any employee benefit plan provided by the
Company or the Buyer for the benefit of employees in which the employees of the
Company participate.
5.8.3 As of the Closing Date, the Buyer covenants and agrees that it
shall either directly assume or cause the Company to honor the employee reward
plan in the form attached hereto as Exhibit B (the "Employee Reward Plan") to
provide bonus payments equal to the Reward Payment Amount to all of the
employees of the Company as of the Closing Date who remain employed by the Buyer
or one of its subsidiaries as of any Bonus Payment Date. If any person is an
employee of the Company immediately prior to the Closing Date and is no longer
an employee of the Buyer or any of its subsidiaries on any Bonus Payment Date
(other than as a result of termination by the Buyer or the Company subsequent to
the Closing Date), such person shall receive no further bonus payments. The
Buyer shall provide the Company with monies necessary to fulfill the obligation
of the Company under the Employee Reward Plan or shall pay such amounts
directly, such monies and amounts not to exceed the Reward Payment Amount.
5.9 RELEASE. Each of the Shareholders, effective upon the Closing, hereby
fully, finally, and forever releases, discharges, and covenants not to sue and
otherwise agrees not to enforce any claim, cause of action, right, title, or
interest against, the Company and each director, officer, and affiliate of each
of the foregoing entities, and their respective successors and assigns
(collectively, the "Released Persons"), of, from, and with respect to any and
all claims, counterclaims, debts, covenants, agreements, obligations,
liabilities, actions, or demands of any kind or character, based upon any fact
or circumstance whether known or unknown, suspected or unsuspected, which
presently exists or has ever existed in the past, that each of the Shareholders
has or may have in any manner whatsoever either singly or jointly with others,
against any of the Released Persons.
5.10 NON-COMPETITION AGREEMENT. Each Shareholder agrees that it and he will
not:
5.10.1 for a period of three years after Closing carry on or have an
Interest (as defined below) in a Restricted Business (as defined below) that
competes directly or indirectly with the Business actively carried on by the
Company as of the Closing Date;
5.10.2 for a period of three years after Closing induce, or attempt to
induce, any person who is, on the Closing Date, a Senior Employee (as defined
below) of the Company to leave the employment of the Company;
5.10.3 for a period of four years after Closing induce, or attempt to
induce, any supplier or customer of the Company as of the Closing Date to cease
to supply or to restrict or vary the terms of supply to the Company or cease to
continue the business relationship with the Company; or
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5.10.4 use or (so far as it lies within its power) allow to be used
(except by the Company) any trade or business name or distinctive mark, style or
logo used by the Company as of the Closing Date or any other name or mark likely
to be confused with that name or mark.
Notwithstanding the foregoing, either or both Shareholders may continue to
operate Events (as defined below) websites and/or magazines relating to Internet
Content, Digital Text, Digital Delivery and the Music Industry, Internet Service
Provision, IP Telephony, Mobile Commerce, and Mobile Content, and to develop
these products to reflect industry trends, except as may otherwise be restricted
by a Shareholder's employment agreement while in the Company's employ.
For purposes of this Section 5.10, the following terms shall have the following
meanings:
"Events" means conferences (multi or single stream), workshops,
seminars, tutorials, exhibitions, trade shows, social events or awards.
"Restricted Business" means the business of providing Events, websites
and/or magazines concerned only with the industry involved in facilitating and
developing the streaming of video and audio over the internet.
"Senior Employee" means an employee of the Company who earns in the
aggregate over $100,000 per annum and who performs a senior sales, marketing,
technical, or managerial role.
In addition, a Shareholder has an "Interest" in a business if it or he (i)
carries it on as principal or agent, (ii) has any financial interest in any
Person who is carrying on the business, or (ii) is a consultant or other agent
in, of or to any Person carrying on the business or any Person having any
financial interest in any Person carrying on the business, provided that any
financial interest of a Person in securities which are listed or traded on any
generally recognized market or exchange shall be disregarded if that person, the
Shareholder and any Person connected with it or them (the "Investors") are
together invested in securities which amount to less than 5% of the issued
securities of that class and which in all circumstances carry less than 5% of
the voting rights (if any) attaching to the issued securities of that class and
provided further that none of the Investors is involved in the management of the
business of the issuer of the securities or of any person connected with it
except by virtue of the exercise of any voting rights attaching to the
securities.
In the event that a court of competent jurisdiction determines that the
terms of this covenant are unreasonable in their scope or duration, the parties
agree that the covenant should be enforced to the maximum extent determined to
be reasonable by the court, but in no event shall the duration for Sections
5.10.1, 5.10.2 and 5.10.3 exceed the number of years set forth in said Sections,
or shall the scope of the terms of this Section 5.10 be expanded beyond that
already set forth in this Section 5.10.
5.11 DUE DILIGENCE INVESTIGATION
5.11.1 LACK OF INFORMATION. The parties hereby agree and acknowledge
that the Buyer has entered into this Agreement without the opportunity to have
conducted a full
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investigation of the condition (financial or otherwise), business, assets,
properties, operations or prospects of the Company or the Business, and without
the benefit of the information to be provided to the Buyer pursuant to Section
5.11.2 hereof. Accordingly, the Shareholders acknowledge that any obligation of
the Buyer to consummate the transactions contemplated by this Agreement is
subject to the completion to the reasonable satisfaction of the Buyer of the
procedures set forth in this Section 5.11.
5.11.2 ACCESS TO RECORDS AND PROPERTIES. Prior to the Closing, the
Buyer shall be entitled to conduct its normal financial, operational and legal
due diligence and other reasonable investigation of the Company pursuant to the
procedures set forth in Section 5.3 hereof.
5.11.3 RIGHT TO TERMINATE. If, as a result of its investigation, the
Buyer shall have determined in its sole and exclusive judgment that (i) there
has occurred or there exists any event, condition, practice or other matter
which has materially and adversely affected or which may materially and
adversely affect the condition (financial or otherwise), business, assets,
properties, operations or prospects of the Company or the Business (including
customers of the Business), or (ii) the consummation of the transactions
contemplated hereunder may result in a material adverse change in the Company's
relationship, or following the Closing the Buyer's relationship, with customers
of the Business, the Buyer shall have the right to terminate this Agreement
without further obligation hereunder (other than confidentiality, which
obligation shall continue beyond termination) by giving written notice to the
Shareholders.
ARTICLE 6
CONDITIONS TO THE PURCHASE
6.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY TO EFFECT THE PURCHASE. The
respective obligations of each party to this Agreement to effect the Purchase
shall be subject to the satisfaction at or prior to the Closing of the following
condition: No claim, action, temporary restraining order, preliminary or
permanent injunction, suit or other proceeding shall be pending or threatened by
any public authority or Person before any court, agency or administrative body
which would have the effect of making illegal, materially delaying or otherwise
restraining or prohibiting the transactions contemplated hereby or allowing any
material damages to be recovered or other material relief to be obtained as a
result of the transactions contemplated hereby or as a result of any agreement
entered into in connection with, or as a condition precedent to, the
consummation of the transactions contemplated hereby.
6.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF THE SHAREHOLDERS. The
obligations of the Shareholders to consummate the transactions contemplated by
this Agreement shall be subject to the satisfaction at or prior to the Closing
of each of the following conditions, any of which may be waived, in writing,
exclusively by the Shareholders:
6.2.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Buyer set forth in this Agreement (i) qualified as to
materiality shall be true and correct as written; and (ii) those not qualified
as to materiality shall be true and correct in all material respects, at and as
of the Closing Date (provided that in the cases of clauses (i) and (ii) any such
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representation and warranty made as of a specific date shall be true and correct
as of such specific date), except where the failure of such representation or
warranty to be true and correct has been remedied prior to the Closing. The
Shareholders shall have received a certificate signed by the president and the
chief financial officer of the Buyer, to such effect.
6.2.2 AGREEMENTS AND COVENANTS. The Buyer shall have performed or
complied in all material respects with all covenants, obligations and conditions
of this Agreement required to be performed or complied with by them on or prior
to the Closing Date, and the Shareholders shall have received a certificate to
such effect signed by a duly authorized officer of the Buyer.
6.2.3 LEGAL OPINION. The Shareholders shall have received a legal
opinion from Jones, Day, Reavis & Pogue, counsel to the Buyer, in substantially
the form attached hereto as Exhibit C.
6.2.4 SECRETARY'S CERTIFICATE. The Buyer shall have delivered to the
Shareholders a copy of (i) the text of the resolutions adopted by the Board of
Directors of the Buyer authorizing the execution, delivery and performance of
this Agreement and the consummation of all of the transactions contemplated by
this Agreement; and (ii) the Certificate of Incorporation and Bylaws of the
Buyer, along with certificates executed on behalf of the Buyer by such entity's
corporate secretary certifying to the Shareholders (A) that such copies are
true, correct and complete copies of such resolutions, Certificate of
Incorporation and Bylaws, respectively, and the such resolutions, Certificate of
Incorporation and Bylaws were duly adopted and have not been amended or
rescinded; and (B) the incumbency of the officers signing this Agreement and all
other agreements and instruments to be executed and delivered by the Buyer under
this Agreement.
6.3 ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF THE BUYER. The obligations
of the Buyer to consummate the transactions contemplated by this Agreement shall
be subject to the satisfaction at or prior to the Closing of each of the
following conditions, any of which may be waived, in writing, exclusively by the
Buyer:
6.3.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Company set forth in this Agreement (i) qualified as to
materiality shall be true and correct as written and (ii) those not qualified as
to materiality shall be true and correct in all material respects, at and as of
the Closing Date (provided that in the cases of clauses (i) and (ii) any such
representation and warranty made as of a specific date shall be true and correct
as of such specific date), except where the failure of such representation or
warranty to be true and correct has been remedied prior to the Closing. The
Buyer shall have received a certificate signed by the president and the chief
financial officer of Company to such effect.
6.3.2 AGREEMENTS AND COVENANTS. The Company and the Shareholders shall
have performed or complied in all material respects with all agreements and
covenants required by this Agreement to be performed or complied with by them on
or prior to the Closing Date, and the Buyer shall have received a certificate to
such effect signed by a duly authorized officer of the Company.
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6.3.3 LEGAL OPINION. The Buyer shall have received a legal opinion from
Crosby, Heafey, Roach & May Professional Corporation, legal counsel to the
Company and the Shareholders, in substantially the form attached hereto as
Exhibit D.
6.3.4 BOARD APPROVAL. The Buyer's Board of Directors shall have
approved the execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby.
6.3.5 SECRETARY'S CERTIFICATE. FCL and the Company shall each have
delivered to the Buyer a copy of (i) the text of the resolutions adopted by
their Boards of Directors authorizing the execution, delivery and performance of
this Agreement and the consummation of all of the transactions contemplated by
this Agreement and (ii) the Articles of Incorporation and Bylaws of each of
them, along with a certificate executed by their corporate secretaries
certifying to the Buyer (A) that such copies are true, correct and complete
copies of such resolutions, Articles of Incorporation and Bylaws, respectively,
and the such resolutions, Articles of Incorporation and Bylaws were duly adopted
and have not been amended or rescinded; and (B) the incumbency of the officers
signing this Agreement and all other agreements and instruments to be executed
and delivered by FCL under this Agreement.
6.3.6 DUE DILIGENCE. The Buyer shall have completed the investigations
described in Section 5.11.
6.3.7 OTHER DELIVERABLES. On the Closing Date, the Shareholders shall
deliver or cause the Company to deliver to the Buyer, in form reasonably
satisfactory to the Buyer, the following:
(a) Resignations (effective immediately after the Closing Date) of
each of the officers and directors of the Company.
(b) Certificates, duly endorsed in blank, representing all of the
outstanding shares of the Company.
(c) The original corporate record books and stock records of the
Company.
ARTICLE 7
NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION, ETC.
7.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All covenants and
agreements of the parties made in this Agreement or provided herein shall
survive the Closing Date to the extent expressly provided herein. All
representations and warranties of the parties made in this Agreement or as
provided herein shall be made as of the date hereof and shall survive the
Closing Date for a period of eighteen (18) months, notwithstanding any
investigation at any time made by or on behalf of the other party, except (i)
those representations and warranties made in Sections 3.12 (Employee Benefit
Plans) and 3.14 (Taxes) which representations and warranties and any related
claim or action shall survive the Closing until the day after 30 days following
the
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expiration of the applicable period of limitations on assessment (including,
without limitation, any extensions thereof); and (ii) those representations and
warranties made in Sections 3.2 (Power and Authority), 3.3 (Capitalization) and
3.17 (Brokers or Finders) hereof, which representations and warranties and any
related causes of action will survive the Closing forever.
7.2 THE SHAREHOLDERS AGREEMENT TO INDEMNIFY
7.2.1 Subject to the provisions of Section 7.3 of this Agreement, the
Shareholders shall severally (in proportion to their percentage ownership in the
Company as set forth on Schedule 2.3), and not jointly, indemnify and hold the
Buyer (the "Buyer Indemnitee") harmless from and against any and all Losses,
arising out of or resulting from (i) any breach in any respect by Company of the
representations and warranties qualified as to materiality contained in Article
3 hereof; (ii) any breach in any material respect by the Company of the
representations and warranties not qualified as to materiality contained in
Article 3 hereof; (iii) any breach by Company, unless waived by the Buyer
pursuant to Section 6.2 hereof, of any covenant or agreement of Company
contained in or arising out of this Agreement; (iv) any liability for Taxes as
provided in Article 8 hereof; (v) except for trade payables and accruals
incurred in the usual and ordinary course of business (other than Taxes), any
liability arising out of, relating to or in connection with the Company's or the
Shareholders' operation of the Business on or prior to the Closing Date; and
(vi) any and all actions, suits, proceedings, claims, demands, assessments and
judgments arising from the foregoing or incidental to the enforcement of such
indemnification.
7.2.2 Notwithstanding Section 7.2.1 herein, the Shareholders shall not
have any liability under Section 7.2.1 in respect of any claim for
indemnification until the aggregate amount of all Losses otherwise subject to
indemnification equals or exceeds one percent (1%) of the value of the Purchase
Price (the "Basket") (in which event the Shareholders will be obligated to
indemnify the Buyer, and the Buyer may assert its right to indemnification
hereunder to the full extent of all Losses, including Losses that are less than
the Basket); provided, however, that in no event shall the Shareholders'
aggregate liability exceed an amount equal to Twenty Million Dollars
($20,000,000) (the "Cap"). Neither the Basket nor the Cap will apply to any
claim made by the Buyer based on (i) fraud; (ii) the representations and
warranties contained in Sections 3.2 (Power and Authority), 3.3
(Capitalization), 3.14 (Taxes) and 3.17 (Brokers or Finders); (iii) the
Shareholders' obligations under Article 8 hereof for Taxes; and (iv) any breach
by Company, unless waived by the Buyer pursuant to Section 6.2 hereof, of any
covenant or agreement of Company contained in or arising out of this Agreement.
7.3 ESCROW ARRANGEMENT. At the Closing Date the Shareholders will be
deemed to have received and deposited with the Escrow Agent the Escrow Amount
without any act of any shareholder pursuant to the Escrow Agreement. At the
Closing Date, the Escrow Amount, without any act of any Shareholder, will be
deposited by the Buyer with Escrow Agent, such initial deposit, plus any
additional deposits to be made to constitute an escrow fund (the "Escrow Fund")
to be governed by the terms set forth in the Escrow Agreement. The portion of
the Escrow Amount contributed on behalf of each Shareholder shall be in
proportion to the aggregate Shares that such holder would otherwise be entitled
under Sections 2.3 and shall be in the respective amounts and percentages listed
on Schedule 2.6 opposite each of the Shareholder's name. If any Losses equal to
the Basket have been incurred, then any additional Losses for
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which the Buyer is entitled to indemnification pursuant to this Agreement shall
be satisfied by the Escrow Fund in accordance with the procedures set forth
herein and in the Escrow Agreement.
7.4 THE BUYER'S AGREEMENT TO INDEMNIFY
7.4.1 The Buyer agrees to defend, indemnify and hold the Shareholders
and their affiliates, heirs, successors or assigns (the "Shareholder
Indemnitees") harmless from and against any and all Losses, arising out of or
resulting from (i) any breach in any respect by the Buyer of the representations
and warranties qualified as to materiality contained in Article 4 hereof; (ii)
any breach in any material respect by the Buyer of the representations and
warranties not qualified as to materiality contained in Article 4 hereof; (iii)
any breach by the Buyer, unless deemed to be waived pursuant to Section 7.1
hereof, of any covenant or agreement of the Buyer contained in or arising out of
this Agreement; (iv) the business conducted or actions taken or omitted to be
taken by the Buyer or the Company after the Closing Date; (v) the Buyer's
obligations under Article 8 hereof; and (vi) any and all actions, suits,
proceedings, claims, demands, assessments and judgments arising from the
foregoing or incidental to the enforcement of such indemnification.
7.4.2 Notwithstanding Section 7.4.1, the Buyer shall not have any
liability under Section 7.4.1 (i) in respect of any claim for indemnification
regarding any breach of any representation or warranty until the aggregate
amount of all Losses otherwise subject to indemnification equals or exceeds the
Basket (in which event the Buyer will be obligated to indemnify the
Shareholders, and the Shareholders may assert their rights to indemnification
hereunder to the full extent of all Losses, including Losses that are less than
the Basket); provided, however, that in no event shall the Buyer's aggregate
liability exceed an amount equal to the Cap. Neither the Basket nor Cap will
apply to any claim made by the Shareholders based on (i) fraud or (ii) the
Buyer's obligations under Article 8 hereof for Taxes.
7.5 THIRD PARTY CLAIMS. Promptly after the receipt by the Buyer Indemnitee
or the Shareholder Indemnitees of a notice of any claim, action, suit or
proceeding of any third party which is subject to indemnification hereunder,
such party (the "Indemnified Party") shall give written notice of such claim to
the party obligated to provide indemnification hereunder (the "Indemnifying
Party"), stating the nature and basis of such claim and the amount thereof, to
the extent known. Failure of the Indemnified Party to give such notice shall not
relieve the Indemnifying Party from any liability which it may have on account
of this indemnification or otherwise, except to the extent that the Indemnifying
Party is materially prejudiced thereby (except that the Indemnifying Party shall
not be liable for any expenses incurred during the period in which the
Indemnified Party failed to give such notice). The Indemnifying Party shall be
entitled to participate in the defense of and, if it so chooses, to assume the
defense of, or otherwise contest, such claim, action, suit or proceeding with
counsel selected by the Indemnifying Party and reasonably satisfactory to the
Indemnified Party. Upon the election by the Indemnifying Party to assume the
defense of, or otherwise contest, such claim, action, suit or proceeding, the
Indemnifying Party shall not be liable for any legal or other expenses
subsequently incurred by the Indemnified Party in connection with the defense
thereof, although the Indemnified Party shall have the right to participate in
the defense thereof and to employ counsel, at its own expense. Notwithstanding
the foregoing, the Indemnifying Party shall be
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liable for the reasonable fees and expenses of counsel employed by the
Indemnified Party, if and only to the extent that (i) the Indemnifying Party has
not employed counsel to assume the defense of such action within a reasonable
time after receiving notice of the commencement of the action, (ii) the
employment of counsel and the amount reimbursable therefor by the Indemnified
Party has been authorized in writing by the Indemnifying Party or (iii)
representation of the Indemnifying Party and the Indemnified Party by the same
counsel would, in the opinion of counsel retained by the Indemnifying Party,
constitute a conflict of interest (in which case the Indemnifying Party will not
have the right to direct the defense of such action on behalf of the Indemnified
Party). The parties shall use commercially reasonable efforts to minimize Losses
from claims by third parties and shall act in good faith in responding to,
defending against, settling or otherwise dealing with such claims,
notwithstanding any dispute as to liability as between the parties under this
Article 6. The parties shall also cooperate in any such defense, give each other
reasonable access to all information relevant thereto and use commercially
reasonable efforts to make employees and other representatives available on a
mutually convenient basis to provide additional information and explanation of
any material provided in connection therewith. Whether or not the Indemnifying
Party shall have assumed the defense, the Indemnifying Party shall not be
obligated to indemnify the other party hereunder for any settlement entered into
without the Indemnifying Party's prior written consent, which consent shall not
be unreasonably withheld or delayed.
7.6 SETOFF. If, after following the indemnification procedures set forth in
this Article 7, it has been determined that either party is entitled to an
indemnification payment from the other party, and the Indemnifying Party fails
to make such payment within five business days of such determination, in
addition to any and all other remedies under this Agreement or at law or in
equity, the Indemnified Party shall be entitled to recover any such
indemnification payment (whether or not such amount is liquidated or reduced to
judgment) by retaining and setting off such amounts against any amounts due or
to become due from the Indemnifying Party under this Agreement, the Escrow
Agreement or any Contingent Payment.
7.7 EXCLUSIVE REMEDY. The sole and exclusive remedy of a party to this
Agreement for any claim arising under this Agreement against another party
hereto shall be the indemnification provided in this Article 7 (and in Article 8
relating to Taxes and in Section 9.2 in the event of a termination), and each
party agrees that it will not pursue any other remedy, except that any such
party may seek specific performance or injunctive relief.
ARTICLE 8
TAX MATTERS
8.1 TAX RETURNS
8.1.1 TAX PERIODS ENDING ON OR BEFORE THE CLOSING DATE. The
Shareholders shall prepare and timely file all Returns ("Pre-Closing Returns")
with respect to the Company for all Tax periods that end on or before the
Closing Date ("Pre-Closing Periods") and shall pay all Taxes due for periods
covered by such Returns. The Shareholders shall provide to the Buyer drafts of
all Returns of the Company required to be prepared and filed by the Shareholders
under this Section 8.1.1 at least forty-five (45) days prior to the due date
(including extensions) for the filing of such Returns. At least fifteen (15)
days prior to the due date (including extensions) for the
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filing of such Returns, the Buyer shall notify the Shareholders of the existence
of any objection (specifying in reasonable detail the nature and basis of such
objection) the Buyer may have to any items set forth on such draft Returns.
8.1.2 OVERLAP PERIOD. The Buyer shall prepare and timely file all
Returns ("Overlap Period Returns") with respect to the Company for any Tax
period that begins before and ends after the Closing Date ("Overlap Period") and
shall pay all Taxes due for the periods covered by such Returns. The
Shareholders shall be economically responsible for all Taxes which relate to the
portion of the Overlap Period ending on and including the Closing Date, and the
Buyer shall be economically responsible for all Taxes which relate to the
portion of the Overlap Period commencing on the day after the Closing Date. For
purposes of this Section 8.1.2, the Taxes allocated to the respective portions
of the Overlap Period shall be (i) in the case of Taxes other than Taxes based
on or related to income or receipts and, other than Taxes in the nature of
sales, use, or other transfer taxes, a ratable portion of the Taxes for the
entire taxable period determined on a per diem basis, and (ii) in the case of
Taxes based on or related to income or receipts, the Taxes that would be payable
if a Tax period ended on and included the Closing Date and another Tax Period
began on the day after the Closing Date, based in each case on accounting
methods, elections and conventions that do not have the effect of distorting
income and expenses. Pursuant to Section 8.6, the Shareholders shall indemnify
the Buyer for the payment of all Taxes of the Company for which the Shareholders
are responsible hereunder to the extent not included as a Working Capital
Liability in the Net Working Capital Statement that is identified as relating
exclusively to unpaid Taxes (the "Tax Reserve"). The Company shall be liable
(and the Shareholders shall not be liable) for the payment of all Taxes for
which the Company is responsible and for which the Shareholders are responsible
under this Section 8.1.2 to the extent included in the Tax Reserve.
Notwithstanding anything to the contrary in the foregoing provisions of this
Section 8.1.2, any Taxes of the Company which are attributable to an election
under Section 338 of the Code or a sale or other disposition of Company assets
after the Closing, or which result specifically from the Purchase and are in the
nature of sales, use or other transfer taxes, shall be allocated to the portion
of the Overlap Period beginning on the day after the Closing Date and shall be
the responsibility of the Company (and not the Shareholders). The Buyer shall
provide to the Shareholders drafts of all Returns of the Company required to be
prepared and filed by the Buyer under this Section 8.1.2 at least forty-five
(45) days prior to the due date (including extensions) for the filing of such
Returns. At least fifteen (15) days prior to the due date (including extensions)
for the filing of such Returns, the Shareholders shall notify the Buyer of the
existence of any objection (specifying in reasonable detail the nature and basis
of such objection) the Shareholders may have to any item set forth on such draft
Returns.
8.1.3 DISPUTES. The Buyer and the Shareholders shall consult and
resolve in good faith any objection that either may have to the Returns. In the
event the Buyer and the Shareholders are unable to resolve an objection raised
pursuant to Section 8.1.1 or 8.1.2 herein, then the dispute shall be referred to
an accounting firm and resolved in the manner similar to that described in
Section 2.5.5.
8.2 REFUNDS; OVERPAYMENTS. Any refund of Taxes relating to the Company
received by the Company or the Buyer after the Closing Date and with respect to
either (i) a Pre-Closing Period; or (ii) any Overlap Period to the extent the
Shareholders effectively made
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payments under Section 8.1.2 hereof, shall be paid by the Buyer to the
Shareholders. In addition, for any Overlap Period, the Buyer shall pay to the
Shareholders the excess, if any, of (i) the amount of the Tax Reserve over (ii)
the amount for which the Shareholders are responsible under Section 8.1.2
hereof. Any payments under this Section 8.2 shall be made within ten (10)
business days after such refund is received by the Company or the Buyer, or
after Buyer's payment of Taxes for the Overlap Period, as the case may be.
8.3 COOPERATION, AUDITS. In connection with the preparation of Pre-Closing
Returns and Overlap Period Returns, audit examinations and any administrative or
judicial proceedings relating to such Returns, the Buyer and the Company, on the
one hand, and the Shareholders, on the other hand, shall reasonably cooperate
with each other by (without limiting the foregoing) furnishing or making
available during normal business hours records, personnel (as reasonably
required), books of account, powers of attorney or other materials necessary or
helpful for the preparation of such Returns, the conduct of audit examinations
or the defense of claims by Tax authorities as to the imposition of Taxes with
respect to such Returns.
8.4 CONTROVERSIES
8.4.1 The Buyer shall promptly notify the Shareholders in writing upon
receipt by the Buyer or any affiliate of the Buyer (including the Company after
the Closing Date) of written notice of any inquiries, claims, assessments,
audits or similar events with respect to Taxes relating to a Pre-Closing Period
or an Overlap Period for which the Shareholders may be liable for
indemnification under this Agreement (any such inquiry, claim, assessment, audit
or similar event, a "Tax Matter").
8.4.2 The Shareholders, at their sole expense, shall have the exclusive
authority to represent the interests of the Company with respect to any Tax
Matter before the Internal Revenue Service, any other taxing authority, any
other governmental agency or authority or any court and shall have the sole
right to extent or waive the statute of limitations with respect to a Tax Matter
and to control the defense, compromise or other resolution of any Tax Matter,
including responding to inquiries, filing Returns and settling audits; provided,
however, that the Shareholders shall not enter into any settlement of or
otherwise compromise any Tax Matter that affects or may affect the Tax liability
of the Buyer or the Company or any of its affiliates for any Tax period or
portion thereof beginning after the Closing Date (a "Post-Closing Period"),
including the portion of an Overlap Period that begins on the day after the
Closing Date (whether by, the imposition of income tax deficiencies, the
reduction of asset basis or cost adjustments, the lengthening of any
amortization or depreciation periods, the denial of amortization or depreciation
deductions, the reduction or loss of credit carryforwards or otherwise), without
the prior written consent of the Buyer, which consent shall not be unreasonably
withheld.
8.4.3 If the Shareholders so elect to assume the defense of any Tax
Matter:
(a) The Shareholders shall proceed to defend such Tax Matter in a
diligent manner with counsel reasonably satisfactory to the Buyer;
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(b) the Buyer shall make available to the Shareholders any
non-privileged documents and materials in the possession of the Buyer that may
be necessary to the defense of such Tax Matter;
(c) the Shareholders shall keep the Buyer informed of all material
developments and events relating to any such Tax Matter; and
(d) the Buyer shall have the right to participate (including by
retaining legal counsel) at the Buyer's expense, in the defense of such Tax
Matter.
8.4.4 If the Shareholders do not elect to assume the defense of any
such Tax Matter (or if, after initially assuming such defense, the Shareholders
fail to actively and diligently assume such defense), the Buyer may proceed with
the defense of such Tax Matter on its own. If the Buyer so proceeds with the
defense of any such Tax Matter on its own:
(a) all expenses relating to the defense of such Tax Matter shall
be borne and paid exclusively by the Shareholders;
(b) all the Shareholders shall make available to the Buyer any
documents and materials in the possession or control of any of the Shareholders
that may be necessary to the defense of such Tax Matter;
(c) the Buyer shall keep the Shareholders informed of all material
developments and events relating to such Tax Matter; and
(d) the Buyer shall have the right to settle, adjust or compromise
such Tax Matter with the consent of the Shareholders, which consent shall not be
unreasonably withheld.
8.4.5 Except as otherwise provided in this Section 8.4, the Buyer shall
have the sole right to control any audit or examination by any taxing authority,
initiate any claim for refund or amend any Return, and contest, resolve and
defend against any assessment for additional Taxes, notice of Tax deficiency or
other adjustment of Taxes of, or relating to, the income, assets or operations
of the Company for all taxable periods.
8.5 AMENDED RETURNS. None of the Shareholders shall file or cause to be
filed any amended Return without the prior written consent of the Buyer, which
consent shall not be unreasonably withheld. The Company shall not file any
amended Pre-Closing Return or Overlap Period Return without the prior written
consent of the Shareholders, which consent shall not be unreasonably withheld.
8.6 INDEMNIFICATION. The Shareholders shall severally (in proportion to
their percentage ownership in the Company as set forth on Schedule 2.3), and not
jointly, indemnify, defend and hold harmless on an after-tax basis the Buyer,
its affiliates (including, after the Closing Date, the Company) and the
successors to the foregoing (and their respective shareholders, officers,
directors, employees and agents) against (i) all Taxes (and all losses, costs,
claims and expenses, including reasonable attorneys' fees, related thereto)
resulting from, arising out of, or incurred with respect to, any claims that may
be asserted by any party based
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upon, attributable to, or resulting from the breach of any representation or
warranty made by the Company pursuant to Section 3.14 hereof as if such
representations or warranties were made as of the Closing Date, and (ii) all
Taxes (and all losses, costs, claims and expenses, including reasonable
attorneys' fees and expenses, related thereto) imposed on or asserted against
the properties, income or operations of the Company for all Pre-Closing Periods
and the portion of any Overlap Period that ends on the Closing Date; provided,
that the indemnification provided under the preceding clause (ii) shall not
apply to Taxes which are not in excess of the Tax Reserve. The Buyer shall
promptly give the Shareholders written notice of all Taxes, losses, costs,
claims and expenses which the Buyer has reasonably determined may give rise to a
right of indemnification under this Section 8.6, including a computation of the
amount of the required indemnification with sufficient detail and particularity
to enable the Shareholders to reasonably determine the amount of such required
indemnification. The Buyer agrees to indemnify, defend and hold harmless the
Shareholders against (i) all losses, costs, claims and expenses, including
reasonable attorneys' fees and expenses, resulting from, arising out of, or
incurred with respect to Taxes for all Post-Closing Periods, and (ii) all
losses, claims and expenses, resulting from, arising out of, or incurred with
respect to a breach of the Company's obligations pursuant to this Article 8.
8.7 ESCROW ACCOUNT. Unless the Escrow Agreement provides otherwise, the
Buyer and the Shareholders shall treat the Escrow Fund as a "contingent at
closing escrow" for purposes of the regulations promulgated under Section 468B
of the Code, the Buyer shall include any income earned on the Escrow Fund in the
Buyer's taxable income, the Buyer shall timely pay all Taxes on such income, and
the Buyer shall be promptly reimbursed from the Escrow Fund for the amount of
such Taxes (including, before the final disposition of the Escrow proceeds, a
reasonable estimate of any Taxes not yet due and payable by the Buyer with
respect to such income).
ARTICLE 9
TERMINATION
9.1 TERMINATION. This Agreement may be terminated at any time prior to the
Closing Date as follows, and in no other manner:
9.1.1 by mutual consent of the Buyer, the Company and each of the
Shareholders;
9.1.2 by the Buyer, the Company or the Shareholders (acting together)
if (i) any representation or warranty made herein for the benefit of such party
(or in any certificate, Schedule or document furnished to such party pursuant to
this Agreement) (A) qualified as to materiality is untrue in any respect or (B)
not qualified as to materiality is untrue in any material respect; or (ii) any
party shall have defaulted in any material respect in the performance of any
obligation under this Agreement; provided, however, that as a condition to the
right of a party to elect to terminate this Agreement pursuant to this Section
9.1.2, the party shall first provide prior written notice to the other parties
specifying in reasonable detail the nature of such untrue item or default, and
the other parties shall be entitled during the thirty (30) business day period
after receipt of such notice (such period, the "Cure Period") to take any
actions it may elect consistent
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with the terms of this Agreement such that such untrue item or default could
reasonably be expected to be corrected by the expiration of such Cure Period;
9.1.3 by either the Buyer or the Shareholders if any court of competent
jurisdiction or other governmental agency shall have issued an order, decree or
injunction or taken any other action permanently restraining, enjoining or
otherwise prohibiting the transactions contemplated by this Agreement and such
order, decree or injunction or other action shall have become final and
nonappealable;
9.1.4 by the Buyer, the Company or the Shareholders (acting together)
if the Closing has not occurred by October 31, 2000; provided, however, that the
parties may not terminate this Agreement pursuant to this Section 9.1.4 if the
Closing has not occurred by such date, by reason of the failure of any such
party to perform in all material respects any of its obligations under this
Agreement; or
9.1.5 by the Buyer pursuant to Section 5.11.3.
9.2 LIABILITY OF PARTIES. Upon termination pursuant Section 9.1.2 hereof
due to an intentional misrepresentation or intentional breach of warranty or an
intentional default, the party at fault shall reimburse the other parties for
all legal, investment banking, accounting, and other out-of-pocket expenses
reasonably incurred by it in connection with this Agreement and the transactions
contemplated hereby, and shall be liable for all other damages suffered by the
other parties. Upon any other termination, no party shall have any liability or
obligation under this Agreement (except to observe the confidentiality
obligations of such party), and each party shall bear the expenses incurred by
it.
ARTICLE 10
MISCELLANEOUS
10.1 NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing (including facsimile or similar writing) and shall
be given,
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If to the Buyer:
Penton Media, Inc.
1100 Superior Avenue
Cleveland, Ohio 44114
Facsimile: (216) 931-9891
Attention: Thomas L. Kemp, Chief Executive Officer
with copy to:
Jones, Day, Reavis & Pogue
901 Lakeside Avenue
Cleveland, Ohio 44114
Facsimile: (216) 579-0212
Attention: Christopher M. Kelly, Esq.
If to the Shareholders:
First Conferences, Ltd.
Black Lion House
45 Whitechapel Road,
London, E1 1DU, UK
Fax: 44 (0)20 73 75 75 11
Attention: Guy Grant
Richard Bowsher
191 Randall Street
San Francisco, California 94131
with a copy to:
Crosby, Heafey, Roach & May
Professional Corporation
Two Embarcadero Center, Suite 2000
San Francisco, California 94111
Facsimile: (415) 391-8269
Attention: Carl J. Stoney, Jr., Esq.
If to Company prior to Closing:
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128 10th Street, Top Floor
San Francisco, California 94103
Facsimile: (415) 934-6991
Attention: Richard Bowsher
with a copy to:
Crosby, Heafey, Roach & May
Professional Corporation
Two Embarcadero Center, Suite 2000
San Francisco, California 94111
Facsimile: (415) 391-8269
Attention: Carl J. Stoney, Jr., Esq.
or to such other address or facsimile number and with such other copies as such
party may hereafter specify for the purpose of notice to the other party. Each
such notice, request, demand or other communication shall be effective (i) if
given by facsimile, when such facsimile is transmitted to the facsimile number
specified in this Section and evidence of receipt is received or (ii) if given
by any other means, upon delivery or refusal of delivery at the address
specified in this Section.
10.2 ASSIGNABILITY; PARTIES IN INTEREST. This Agreement shall not be
assignable by any of the parties hereto. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors and permitted assigns. Except as specifically referred to herein,
this Agreement is for the sole and exclusive benefit of the parties to this
Agreement and their successors and assigns and nothing in this Agreement is
intended to confer, expressly or by implication, upon any other person any legal
or equitable rights, remedies or claims under or by reason of this Agreement.
10.3 GOVERNING LAW. This Agreement shall be governed by, and construed and
enforced in accordance with, the laws of the State of California, without giving
effect to principles of conflicts of laws.
10.4 COUNTERPARTS. This Agreement may be executed simultaneously in one or
more counterparts, each of which shall be deemed an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement shall become effective when each party shall have received a
counterpart signed by the other party.
10.5 PUBLICITY. Each of the parties agrees that it will not, nor will any
of its respective affiliates, issue or cause the publication of any press
release or other public announcement with respect to this Agreement or the
transactions contemplated hereby without the prior approval of the other
parties, except such disclosure as may be required by law or any listing or
trading agreement concerning its publicly-traded securities. If any such
disclosure is so required, such
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disclosure will not be made without a good faith effort to confer with the other
parties to this Agreement in advance of, and with respect to the substance of,
such disclosure.
10.6 COMPLETE AGREEMENT. This Agreement, the exhibits hereto and the
schedules and documents delivered pursuant hereto or referred to herein contain
the entire agreement between the parties hereto with respect to the transactions
contemplated herein and supersede all previous negotiations, commitments and
writings (other than the Confidentiality Agreement).
10.7 AMENDMENTS AND WAIVERS. The parties hereto may (i) extend the time for
the performance of any of the obligations or other acts of the parties hereto;
(ii) waive any inaccuracies in the representations and warranties contained in
this Agreement or in any or documents delivered pursuant hereto; (iii) waive
compliance with any of the covenants or agreements contained in this Agreement;
or (iv) amend this Agreement, if and only, in the case of an extension or
amendment, if such action is set forth in a written agreement signed by all
parties, or, in the case of a waiver, if such waiver is signed by the party
against whom the waiver is to be effective.
10.8 EXPENSES. Except as specifically provided in this Agreement, each
party shall bear the expenses incurred by it in connection with the transactions
contemplated by this Agreement. Without limiting the generality of the
foregoing, the Buyer shall be responsible for all fees incurred in connection
with any filing made pursuant to the HSR Act.
10.9 INTERPRETATION. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
10.10 SEVERABILITY. Any portion or provision of the Agreement which is
invalid, illegal or unenforceable in any jurisdiction shall, as to that
jurisdiction, be ineffective to the extent of such invalidity, illegality or
unenforceability, without affecting in any way the remaining portions or
provisions hereof in such jurisdiction or, to the extent permitted by law,
rendering that or any other portion or provision of the Agreement invalid,
illegal or unenforceable in any other jurisdiction.
10.11 FURTHER ASSURANCES. Each party hereto agrees to execute any and all
documents and to perform such other acts as may be necessary or expedient to
further the purposes of this Agreement and the transactions contemplated hereby.
10.12 DISPUTE RESOLUTION. Any dispute arising out of or in any way relating
to this Agreement shall be resolved in the City and County of San Francisco,
California by arbitration through JAMS/Endispute, Inc., before a retired judge
or justice of the California or federal courts. Such arbitration shall be
commenced upon the written request of any party, and shall be conducted on a
confidential basis. Without limiting any other powers of the arbitrator, the
arbitrator shall have the authority of a judge pro tem of the California
Superior Court, with the authority to issue any equitable orders, including any
ex parte orders, deemed necessary or appropriate under the circumstances.
Arbitration shall be conducted as a trial by the court applying the substantive
and procedural law of the State of California (without regard to its conflict of
law rules) with a written statement of decision, as provided under Section 632
of the Code of Civil Procedure. Judgment upon the arbitrator's award may be
entered in any court of
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competent jurisdiction. Both parties expressly submit and agree to the
jurisdiction and venue as provided herein. The parties shall share equally the
arbitrator's fees; however, the arbitrator may direct recovery of such costs by
the prevailing party. In any such arbitration, and in any legal action in
enforcement or appeal thereof, the prevailing party shall in the arbitrator's
discretion be entitled to an award of reasonable attorneys' fees, commensurate
with and in no event greater than the dollar amount of the order, award, or
judgment rendered, in addition to any other relief granted.
(Remainder of page intentionally left blank.)
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the date first above written.
THE COMPANY:
STREAMING MEDIA, INC, a California corporation
By____________________________________
Name:_________________________________
Title:__________________________________
THE SHAREHOLDERS:
FIRST CONFERENCES, LTD., a _________ corporation
By____________________________________
Name:_________________________________
Title:__________________________________
RICHARD BOWSHER
------------------------------------
THE BUYER:
PENTON MEDIA, INC., a Delaware corporation
By____________________________________
Name:_________________________________
Title:__________________________________
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<PAGE> 48
EXHIBIT A - ESCROW AGREEMENT
<PAGE> 49
EXHIBIT B - EMPLOYEE REWARD PLAN
<PAGE> 50
EXHIBIT C - FORM OF BUYER LEGAL OPINION
<PAGE> 51
EXHIBIT D - FORM OF COMPANY AND SHAREHOLDER LEGAL OPINION
<PAGE> 52
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
<S> <C> <C>
ARTICLE 1 DEFINITIONS 1
ARTICLE 2 SALE OF SHARES; PURCHASE PRICES 6
2.1 Sale of Shares 6
2.2 Closing and Closing Date 6
2.3 Purchase Price 6
2.4 Escrow 7
2.5 Contingent Payments 7
2.6 Employee Reward Payments 9
2.7 Net Working Capital Amount Adjustment 9
2.7.1 Working Capital Statements 9
2.7.2 Net Working Capital Amount; Post-Closing Adjustment 10
2.7.3 Disputes 10
2.8 Payment of Indebtedness 11
2.9 Working Capital 11
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF COMPANY 11
3.1 Organization of the Company 11
3.2 Power and Authority 11
3.3 Capitalization 12
3.4 Financial Statements 12
3.5 Undisclosed Liabilities 13
3.6 Absence of Certain Changes or Events 13
3.7 Title 15
3.7.1 Title to Personal Property 15
3.7.2 Title to Real Property 15
3.7.3 Permitted Liens 16
3.8 Material Contracts 16
3.9 Intellectual Property 17
3.9.1 Definitions 17
3.10 Litigation 21
</TABLE>
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TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
3.11 Compliance with Law; Governmental Approvals 21
3.12 Employee Benefit Plans 21
3.13 Environmental Matters 23
3.14 Taxes 23
3.15 Insurance 25
3.16 Labor Relations and Employment 25
3.17 Brokers or Finders 25
3.18 Officers and Directors 25
3.19 HSR Act 25
3.20 Disclosure 25
3.21 Disclaimer of Other Representations and Warranties 25
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF BUYER 26
4.1 Organization of the Buyer 26
4.2 Power and Authority 26
4.3 Funding 27
4.4 Actions and Proceedings 27
4.5 Investment Representations; Business Investigation 27
4.6 Disclosure 27
4.7 Disclaimer of Other Representations and Warranties 27
ARTICLE 5 CERTAIN UNDERSTANDINGS AND AGREEMENTS 27
5.1 Conduct of Business 27
5.2 Exclusive Dealing 28
5.3 Pre-Closing Access to Properties and Records; Confidentiality 28
5.4 Reasonable Efforts 29
5.5 Resignations 29
5.6 Post-Closing Payments from FCL 29
5.7 Use of Name 29
5.8 Employee Reward Arrangements 29
5.9 Release 30
</TABLE>
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<PAGE> 54
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
5.10 Non-Competition Agreement 30
5.11 Due Diligence Investigation 31
5.11.1 Lack of Information 31
5.11.2 Access to Records and Properties 32
5.11.3 Right to Terminate 32
ARTICLE 6 CONDITIONS TO THE PURCHASE 32
6.1 Conditions to Obligations of Each Party to Effect the Purchase 32
6.2 Additional Conditions to Obligations of the Shareholders 32
6.2.1 Representations and Warranties 32
6.2.2 Agreements and Covenants 33
6.2.3 Legal Opinion 33
6.2.4 Secretary's Certificate 33
6.3 Additional Conditions to the Obligations of the Buyer 33
6.3.1 Representations and Warranties 33
6.3.2 Agreements and Covenants 33
6.3.3 Legal Opinion 34
6.3.4 Board Approval 34
6.3.5 Secretary's Certificate 34
6.3.6 Due Diligence 34
6.3.7 Other Deliverables 34
ARTICLE 7 NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION, ETC. 34
7.1 Survival of Representations and Warranties 34
7.2 The Shareholders Agreement to Indemnify 35
7.3 Escrow Arrangement 35
7.4 The Buyer's Agreement to Indemnify 36
7.5 Third Party Claims 36
7.6 Setoff 37
7.7 Exclusive Remedy 37
ARTICLE 8 TAX MATTERS 38
</TABLE>
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TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
8.1 Tax Returns 38
8.1.1 Tax Periods Ending on or Before the Closing Date 38
8.1.2 Overlap Period 38
8.1.3 Disputes 39
8.2 Refunds; Overpayments 39
8.3 Cooperation, Audits 39
8.4 Controversies 39
8.5 Amended Returns 41
8.6 Indemnification 41
8.7 Escrow Account 41
Article 9 TERMINATION 42
9.1 Termination 42
9.2 Liability of Parties 42
Article 10 MISCELLANEOUS 43
10.1 Notices 43
10.2 Assignability; Parties in Interest 44
10.3 Governing Law 44
10.4 Counterparts 44
10.5 Publicity 45
10.6 Complete Agreement 45
10.7 Amendments and Waivers 45
10.8 Expenses 45
10.9 Interpretation 45
10.10 Severability 45
10.11 Further Assurances 45
10.12 Dispute Resolution 46
EXHIBITS
</TABLE>
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TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C>
Exhibit A - Escrow Agreement
Exhibit B - Employee Reward Plan
Exhibit C - Form of Buyer Legal Opinion
Exhibit D - Form of Company and Shareholder Legal Opinion
</TABLE>
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