<PAGE>
Exhibit 2.1
STOCK PURCHASE AGREEMENT
by and among
Courier Corporation
as Buyer
and
Mrs. Blanche Cirker, individually, and
the Estate of Hayward Francis Cirker, by Blanche Cirker, executrix,
The Stockholders of Dover Publications, Inc., Transfolio Express, Inc. and
Dover Book Store, Inc.,
as Sellers
August 14, 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 1--DEFINITIONS............................................................................................1
SECTION 2--SALE AND TRANSFER OF SHARES; CLOSING...................................................................8
2.1 SHARES..........................................................................................8
2.2 PURCHASE PRICE..................................................................................8
2.3 CLOSING.........................................................................................9
2.4 CLOSING OBLIGATIONS.............................................................................9
2.5 ADJUSTMENTS....................................................................................11
SECTION 3--REPRESENTATIONS AND WARRANTIES OF SELLERS.............................................................12
3.1 ORGANIZATION AND GOOD STANDING.................................................................12
3.2 AUTHORITY; NO CONFLICT.........................................................................13
3.3 CAPITALIZATION.................................................................................14
3.4 FINANCIAL STATEMENTS...........................................................................15
3.5 BOOKS AND RECORDS..............................................................................15
3.6 TITLE TO PROPERTIES; ENCUMBRANCES..............................................................15
3.7 CONDITION AND SUFFICIENCY OF ASSETS............................................................16
3.8 ACCOUNTS RECEIVABLE............................................................................16
3.9 INVENTORY......................................................................................16
3.10 REAL PROPERTY..................................................................................17
3.11 TAXES..........................................................................................18
3.12 NO MATERIAL ADVERSE CHANGE.....................................................................19
3.13 EMPLOYEE BENEFITS..............................................................................19
3.14 COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL AUTHORIZATIONS................................22
3.15 LEGAL PROCEEDINGS; ORDERS......................................................................22
3.16 ABSENCE OF CERTAIN CHANGES AND EVENTS..........................................................23
3.17 CONTRACTS; NO DEFAULTS.........................................................................24
3.18 INSURANCE......................................................................................26
3.19 ENVIRONMENTAL MATTERS..........................................................................26
3.20 EMPLOYEES......................................................................................27
3.21 LABOR RELATIONS; COMPLIANCE....................................................................28
3.22 INTELLECTUAL PROPERTY..........................................................................28
3.23 CERTAIN PAYMENTS...............................................................................30
3.24 NO RELATED PERSON INDEBTEDNESS.................................................................30
3.25 RELATIONSHIPS WITH RELATED PERSONS.............................................................30
3.26 BROKERS OR FINDERS; ABSENCE OF OTHER AGREEMENTS................................................31
3.27 [INTENTIONALLY OMITTED]........................................................................31
3.28 YEAR 2000 ISSUES...............................................................................31
(ii)
<PAGE>
SECTION 4--REPRESENTATIONS AND WARRANTIES OF BUYER...............................................................31
4.1 ORGANIZATION AND GOOD STANDING.................................................................31
4.2 AUTHORITY; NO CONFLICT.........................................................................31
4.3 CERTAIN PROCEEDINGS............................................................................32
4.4 BROKERS OR FINDERS.............................................................................32
4.5 AVAILABILITY OF FUNDS..........................................................................32
SECTION 5--COVENANTS OF SELLERS..................................................................................32
5.1 ACCESS AND INVESTIGATION.......................................................................32
5.2 OPERATION OF THE BUSINESSES OF THE ACQUIRED COMPANIES..........................................33
5.3 NEGATIVE COVENANT..............................................................................33
5.4 REQUIRED APPROVALS.............................................................................33
5.5 NOTIFICATION...................................................................................33
5.6 PAYMENT OF INDEBTEDNESS BY RELATED PERSONS.....................................................34
5.7 NO NEGOTIATION.................................................................................34
5.8 BEST EFFORTS...................................................................................34
5.9 PUBLIC DISCLOSURE AND TRADING IN SECURITIES....................................................34
5.10 COOPERATION BY SELLERS.........................................................................35
5.11 CASH WITHDRAWALS...............................................................................35
5.12 CONSULTING SERVICES............................................................................35
5.13 NO DISCHARGE OF ESTATE.........................................................................36
SECTION 6--COVENANTS OF BUYER....................................................................................36
6.1 APPROVALS OF GOVERNMENTAL BODIES...............................................................36
6.2 BEST EFFORTS...................................................................................36
SECTION 7--CONDITIONS PRECEDENT TO BUYER'S OBLIGATION
TO CLOSE................................................................................................36
7.1 ACCURACY OF REPRESENTATIONS....................................................................37
7.2 SELLERS' PERFORMANCE...........................................................................37
7.3 CONSENTS.......................................................................................37
7.4 NO PROCEEDINGS.................................................................................37
7.5 NO CLAIM REGARDING STOCK OWNERSHIP OR SALE PROCEEDS............................................38
7.6 NO PROHIBITION.................................................................................38
SECTION 8--CONDITIONS PRECEDENT TO SELLERS' OBLIGATION TO CLOSE..................................................38
8.1 ACCURACY OF REPRESENTATIONS....................................................................38
8.2 BUYER'S PERFORMANCE............................................................................38
8.3 CONSENTS.......................................................................................39
8.4 NO INJUNCTION..................................................................................39
(iii)
<PAGE>
SECTION 9--TERMINATION...........................................................................................39
9.1 TERMINATION EVENTS.............................................................................39
9.2 EFFECT OF TERMINATION..........................................................................39
SECTION 10--INDEMNIFICATION; REMEDIES............................................................................40
10.1 SURVIVAL; RIGHT TO INDEMNIFICATION NOT AFFECTED BY KNOWLEDGE...................................40
10.2 INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLERS..............................................40
10.3 INDEMNIFICATION AND PAYMENT OF DAMAGES BY BUYER................................................41
10.4 TIME LIMITATIONS...............................................................................41
10.5 LIMITATIONS ON AMOUNT--SELLERS.................................................................42
10.6 LIMITATIONS ON AMOUNT--BUYER...................................................................42
10.7 PROCEDURE FOR INDEMNIFICATION--THIRD PARTY CLAIMS..............................................42
10.8 PROCEDURE FOR INDEMNIFICATION--OTHER CLAIMS....................................................43
10.9 COORDINATION WITH SECTION 12 (CERTAIN TAX MATTERS).............................................43
SECTION 11--GENERAL PROVISIONS...................................................................................43
11.1 EXPENSES.......................................................................................43
11.2 PUBLIC ANNOUNCEMENTS...........................................................................44
11.3 CONFIDENTIALITY................................................................................44
11.4 NOTICES........................................................................................44
11.5 JURISDICTION; SERVICE OF PROCESS...............................................................45
11.6 WAIVER.........................................................................................45
11.7 ENTIRE AGREEMENT AND MODIFICATION..............................................................46
11.8 DISCLOSURE LETTER..............................................................................46
11.9 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS.............................................46
11.10 SEVERABILITY...................................................................................46
11.11 SECTION HEADINGS, CONSTRUCTION.................................................................47
11.12 TIME OF ESSENCE................................................................................47
11.13 GOVERNING LAW..................................................................................47
11.14 COUNTERPARTS...................................................................................47
11.15 FURTHER ASSURANCES.............................................................................47
11.16 PERSONAL PROPERTY..............................................................................47
SECTION 12--CERTAIN TAX MATTERS..................................................................................48
12.1 SECTION 338(h)(10) ELECTIONS...................................................................48
12.2 TAX INDEMNIFICATION............................................................................49
12.3 PREPARATION OF TAX RETURNS.....................................................................50
12.4 CONTESTS.......................................................................................50
12.5 COOPERATION AND EXCHANGE OF INFORMATION........................................................51
12.6 CONVEYANCE TAXES...............................................................................52
12.7 TAX SHARING AGREEMENTS.........................................................................52
(iv)
<PAGE>
12.8 MISCELLANEOUS..................................................................................52
</TABLE>
(v)
<PAGE>
<TABLE>
<CAPTION>
EXHIBITS
<S> <C> <C>
Exhibit 2.4(a)(ii) - Form of Seller's Releases
Exhibit 2.4(a)(iv) - FIRPTA Certificate
Exhibit 2.4(a)(v) - List of Jurisdictions
Exhibit 2.4(a)(vii) - Form of Opinion of Weil, Gotshal & Manges LLP
Exhibit 2.4(a)(viii) - Form of Lease Agreements
Exhibit 2.4(a)(ix) - Form of Tenant's Release
Exhibit 2.4(b)(iii) - Form of Opinion of Goodwin, Procter & Hoar LLP
SCHEDULES
Schedule 4.2 - Exceptions to No Conflict Representation by Buyer; Consents
DISCLOSURE LETTER
Part 3.1 - Organization and Good Standing
Part 3.2 - Exceptions to No Conflict Representation; Consents
Part 3.3 - Exceptions to Capitalization
Part 3.4 - Financial Statements
Part 3.6(a) - May Fixed Asset Schedule
Part 3.6(b) - Fixed Assets Purchased and Sold Since May 11, 1998
Part 3.6(c) - Exceptions to Good and Marketable Title
Part 3.8 - Accounts Receivable
Part 3.9 - Inventory
Part 3.10 - Real and Personal Property
Part 3.11(a) - Tax Returns
Part 3.11(b) - Tax Claims
Part 3.11(c) - Income Tax Returns
Part 3.11(d) - Tax Sharing Agreements
Part 3.11(e) - S Corporation Status
Part 3.11(f) - Tax under Section 1374 of the IRC
Part 3.12 - Material Adverse Change
Part 3.13 - Employee Programs
Part 3.13(d) - Employee Programs subject to Title IV of ERISA, IRC Section
412 or ERISA Section 302
Part 3.13(h) - Employee Programs subject to Title IV of ERISA with Unfunded
Benefit Liabilities
Part 3.14(a) - Compliance with Legal Requirements
Part 3.14(b) - Governmental Authorizations
Part 3.15 - Legal Proceedings and Orders
Part 3.16 - Absence of Certain Changes and Events
Part 3.17(a) - Material Contracts
Part 3.17(b) - Rights of Sellers under Contracts
Part 3.17(c) - Exceptions to Valid and Binding Contracts
(vi)
<PAGE>
Part 3.18(a) - Insurance Policies
Part 3.18(b) - Insurance Claims
Part 3.19 - Environmental Matters
Part 3.20 - Retirement Benefits
Part 3.21 - Labor Relations
Part 3.22(a) - Intellectual Property
Part 3.22(b) - Foreign Countries in which Intellectual Property is Registered
Part 3.22(c) - Infringement of Intellectual Property
Part 3.22(d) - Other Persons with Rights to Intellectual Property
Part 3.22(e) - Claims to Intellectual Property
Part 3.22(f) - URL Registrations
Part 3.24 - Related Person Indebtedness
Part 3.25 - Relationships with Related Persons
Part 3.28 - Year 2000 Issues
Part 11.16(a) - Artwork Belonging to Sellers
Part 11.16(b) - Books Belonging to Sellers
Part 11.16(c) - Automobiles Belonging to Sellers
</TABLE>
(vii)
<PAGE>
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (the "Agreement") is entered into as of
the 14th day of August, 2000 by and among Courier Corporation, a Massachusetts
corporation ("Buyer") and Mrs. Blanche Cirker, individually ("Mrs. Cirker"), and
the Estate of Hayward Francis Cirker, by Blanche Cirker as executrix (the
"Estate" and together with Mrs. Cirker, the "Sellers"), the sole stockholders of
Dover Publications, Inc., a New York corporation ("Dover"), Transfolio Express,
Inc., a New York corporation ("Transfolio") and Dover Bookstore, Inc., a New
York corporation ("Dover Book Store").
RECITALS
WHEREAS, Sellers are the legal and beneficial owners of all of the
issued and outstanding shares of common stock, no par value per share, of Dover
(the "Dover Shares");
WHEREAS, Sellers are the legal and beneficial owners of all of the
issued and outstanding shares of common stock, par value $100 per share, of
Transfolio (the "Transfolio Shares");
WHEREAS, Sellers are the legal and beneficial owners of all of the
issued and outstanding shares of common stock, no par value per share, of Dover
Book Store (the "Dover Book Store Shares" and together with the Dover Shares and
Transfolio Shares, the "Shares"); and
WHEREAS, Sellers desire to sell, and Buyer desires to purchase, all of
the Shares for the consideration and on the terms set forth in this Agreement.
AGREEMENT
NOW THEREFORE, the parties, intending to be legally bound, agree as
follows:
SECTION 1--DEFINITIONS
For purposes of this Agreement, the following terms have the meanings
specified or referred to in this Section 1:
"ACCOUNTS RECEIVABLE"--as defined in Section 3.8.
"ACQUIRED COMPANIES"--Dover, Transfolio and Dover Book Store, collectively.
"AGREEMENT" --as defined in the first paragraph of this Agreement.
"BALANCE SHEET"--as defined in Section 3.4.
<PAGE>
"BALANCE SHEET SCHEDULES"--as defined in Section 3.4.
"BEST EFFORTS"--the reasonable efforts that a prudent Person desirous of
achieving a result would use in similar circumstances to ensure that such result
is achieved expeditiously.
"BREACH"--a "Breach" of a representation, warranty, covenant, obligation, or
other provision of this Agreement or any instrument delivered pursuant to this
Agreement will be deemed to have occurred if there is or has been any inaccuracy
in or breach of, or any failure to perform or comply with, such representation,
warranty, covenant, obligation, or other provision.
"BUYER"--as defined in the first paragraph of this Agreement.
"BUYER'S ADVISORS"--as defined in Section 5.1.
"CASH WITHDRAWALS"--any and all compensation and distributions made by an
Acquired Company to, or on behalf of, Sellers and any Related Person of Sellers,
including, without limitation, compensation and distributions made to any such
Person with respect to Taxes and indebtedness.
"CLOSING"--as defined in Section 2.3.
"CLOSING DATE"---as defined in Section 2.3.
"CONSENT"--any approval, consent, ratification, waiver, or other authorization
(including any Governmental Authorization).
"CONTEMPLATED TRANSACTIONS"--all of the transactions contemplated by this
Agreement and Sellers' Closing Documents, including:
(a) the sale of the Shares by Sellers to Buyer;
(b) the performance by Buyer and Sellers of their respective covenants and
obligations under this Agreement (including, without limitation, the delivery by
Sellers of the documents set forth in Section 2.4(a)) and Sellers' Closing
Documents; and
(c) Buyer's acquisition and ownership of the Shares.
"CONTEST"--as defined in Section 12.4.
"CONTRACT"--any agreement, contract, obligation, promise, or undertaking
(whether written or oral and whether express or implied) that is legally
binding.
"DAMAGES"-- any loss, liability, claim, damage, expense (including, without
limitation, costs of investigation and defense and reasonable attorneys' fees)
or diminution of value, whether or not involving a third-party claim, and,
solely for the purposes of Section 10, net of any insurance
<PAGE>
benefits actually received by a party being indemnified pursuant to Section
10 hereof (or any Related Person to such party) by reason of the
circumstances underlying the indemnification.
"DISCLOSURE LETTER"--the disclosure letter delivered by Sellers to Buyer
concurrently with the execution and delivery of this Agreement.
"DOVER" -- as defined in the first paragraph of this Agreement.
"DOVER BOOK STORE" -- as defined in the first paragraph of this Agreement.
"ENCUMBRANCE"--any charge, claim, community property interest, lien, option,
pledge, security interest or right of first refusal, including any restriction
on use, voting, transfer, receipt of income, or exercise of any other attribute
of ownership, but not liens securing (i) any Tax obligation and/or (ii)
obligations for materials and/or services, the payment of which is not, in
either case, due as of the date of this Agreement.
"ENVIRONMENT"--soil, land surface or subsurface strata, surface waters
(including navigable waters, ocean waters, streams, ponds, drainage basins, and
wetlands), groundwaters, drinking water supply, stream sediments, ambient air
(including indoor air), plant and animal life, and any other environmental
medium or natural resource.
"ENVIRONMENTAL LAW"--any Legal Requirement that relates to the Environment,
including but not limited to the Comprehensive Environmental Response
Compensation and Liability Act, the Resource Conservation and Recovery Act, the
Federal Water Pollution Control Act, the Safe Drinking Water Act, the Clean Air
Act, the Toxic Substances Control Act and analogous state laws.
"ERISA"--the Employee Retirement Income Security Act of 1974 or any successor
law, and regulations and rules issued pursuant to that Act or any successor law.
"ESTIMATED NET ADJUSTMENT" --as defined in Section 2.5.
"ESTIMATED PURCHASE PRICE" -- as defined in Section 2.2.
"ESTIMATED PURCHASE PRICE ADJUSTMENT"--as defined in Section 2.5(a).
"EXCHANGE ACT"--the Securities Exchange Act of 1934, as amended, or any
successor law, and regulations and rules issued pursuant to that Act or any
successor law.
"FINAL DETERMINATION"--as defined in Section 2.5.
"GAAP"-- United States generally accepted accounting principles.
3
<PAGE>
"GOVERNMENTAL AUTHORIZATION"--any approval, consent, license, permit, waiver, or
other authorization issued, granted, given, or otherwise made available by or
under the authority of any Governmental Body or pursuant to any Legal
Requirement.
"GOVERNMENTAL BODY"--any:
(a) nation, state, county, city, town, village, district, or other jurisdiction
of any nature;
(b) federal, state, local, municipal, foreign, or other government;
(c) governmental or quasi-governmental authority of any nature (including any
governmental agency, branch, department, official, or entity and any court or
other tribunal);
(d) multi-national organization or body; or
(e) body entitled to exercise any administrative, executive, judicial,
legislative, police, regulatory, or taxing authority or power of any nature.
"HAZARDOUS MATERIALS"--any material, waste or substance that is listed, defined,
designated, or classified as, or otherwise determined to be, hazardous,
radioactive, or toxic or a pollutant or a contaminant under or pursuant to any
Environmental Law, including any mixture or solution thereof, and specifically
including asbestos and petroleum and all derivatives thereof and synthetic
substitutes therefor.
"HSR ACT"--the Hart-Scott-Rodino Antitrust Improvements Act of 1976 or any
successor law, and regulations and rules issued pursuant to that Act or any
successor law.
"INCOME TAX"--federal, state, local, or foreign income tax, including any
interest, penalty, or addition thereto.
"INCOME TAX RETURN"--any Tax Return relating to Income Taxes.
"IRC"--the Internal Revenue Code of 1986, as amended.
"IRS"--the United States Internal Revenue Service or any successor agency, and,
to the extent relevant, the United States Department of the Treasury.
"KNOWLEDGE OF BUYER" or "BUYER'S KNOWLEDGE"--Buyer will be deemed to have
"Knowledge" of a particular fact or other matter if James Conway or Robert Story
is actually aware of such fact or other matter.
"KNOWLEDGE OF SELLERS" or "SELLERS' KNOWLEDGE"--Sellers will be deemed to
have "Knowledge" of a particular fact or other matter if Blanche Cirker,
Clarence Strowbridge, Florence Leniston or Leo Boriss is actually aware of
such fact or other matter.
4
<PAGE>
"LEASE AGREEMENT"--as defined in Section 2.4(a)(viii).
"LEASED REAL PROPERTY"--as defined in Section 3.10(b).
"LEGAL REQUIREMENT"--any applicable federal, state, local, municipal, foreign,
international, multinational, or other administrative order, constitution, law,
ordinance, principle of common law, regulation, statute, or treaty.
"LESSOR" --as defined in Section 2.4(a)(ix).
"MATERIAL ADVERSE EFFECT"--means a material adverse effect on the business,
operations, results of operations, properties, assets or condition (financial or
otherwise) of an Acquired Company.
"OCCUPATIONAL SAFETY AND HEALTH LAW"--any Legal Requirement designed to provide
safe and healthy working conditions and to reduce occupational safety and health
hazards.
"ORDER"--any award, decision, injunction, judgment, order, ruling, or verdict
entered, issued, made, or rendered by any court, administrative agency, or other
Governmental Body or by any arbitrator.
"ORDINARY COURSE OF BUSINESS"--an action taken by a Person will be deemed to
have been taken in the "Ordinary Course of Business" only if such action is (i)
taken without any authorization by the board of directors (or by any Person or
group of Persons exercising similar authority), (ii) consistent with, and
similar in nature and magnitude to, the past practices of such Person and (iii)
taken in the normal and routine course of the day-to-day operations of such
Person.
"ORGANIZATIONAL DOCUMENTS"--the articles or certificate of incorporation and the
bylaws of a corporation and any amendments thereof.
"PERSON"--any individual, corporation (including any non-profit corporation),
general or limited partnership, limited liability company, limited liability
partnership, joint venture, estate, trust, association, organization, labor
union, or other entity or Governmental Body.
"PROCEEDING"--any action, arbitration, audit, hearing, investigation,
litigation, or suit (whether civil, criminal, administrative, investigative, or
informal) commenced, brought, conducted, or heard by or before, or otherwise
involving, any Governmental Body or arbitrator.
"PROPRIETARY RIGHTS"--as defined in Section 3.22.
"PROPRIETARY RIGHTS AGREEMENT"--as defined in Section 3.20.
"PUBLISHING CONTRACTS"--Contracts with authors relating to the purchase,
license, transfer or assignment of any rights associated with such authors'
works or intellectual property.
5
<PAGE>
"PURCHASE PRICE"--the Estimated Purchase Price as adjusted by Sections 2.5(e)
and 12.8(a).
"PURCHASE PRICE ADJUSTMENT"--the aggregate amount, if any, of unpaid federal,
state, local and foreign Taxes owed by the Acquired Companies for all periods
from January 1, 2000 to and through the Closing Date, including as a result of
making the Section 338(h)(10) Elections.
"RELATED PERSON"--with respect to a particular individual:
(a) each other member of such individual's Family;
(b) any Person that is directly or indirectly controlled by such individual or
one or more members of such individual's Family;
(c) any Person in which such individual or members of such individual's Family
hold (individually or in the aggregate) a Material Interest; and
(d) any Person with respect to which such individual or one or more members of
such individual's Family serves as a director, officer, partner, executor, or
trustee (or in a similar capacity).
With respect to a specified Person other than an individual:
(a) any Person that directly or indirectly controls, is directly or indirectly
controlled by, or is directly or indirectly under common control with such
specified Person;
(b) any Person that holds a Material Interest in such specified Person;
(c) each Person that serves as a director, officer, partner, executor, or
trustee of such specified Person (or in a similar capacity);
(d) any Person in which such specified Person holds a Material Interest;
(e) any Person with respect to which such specified Person serves as a general
partner or a trustee (or in a similar capacity); and
(f) any Related Person of any individual described in clause (b) or (c).
For purposes of this definition, (a) the "Family" of an individual includes (i)
the individual, (ii) the individual's spouse and former spouses, (iii) any other
natural person who is related to the individual or the individual's spouse
within the second degree, and (iv) any other natural person who resides with
such individual, and (b) "Material Interest" means direct or indirect beneficial
ownership (as defined in Rule 13d-3 under the Exchange Act) of voting securities
or other voting interests representing at least 10% of the outstanding voting
power of a Person or equity
6
<PAGE>
securities or other equity interests representing at least 10% of the
outstanding equity securities or equity interests in a Person.
"RELEASE"--any spilling, leaking, pumping, pouring, emptying, injecting,
disposing, emitting, discharging, depositing, escaping, leaching, or dumping
into the Environment, whether intentional or unintentional.
"REPRESENTATIVE"--with respect to a particular Person, any director, officer,
employee, agent, consultant, advisor, or other representative of such Person,
including legal counsel, accountants, and financial advisors.
"SECTION 338(h)(10) ELECTIONS"--as defined in Section 12.1.
"SECURITIES ACT"--the Securities Act of 1933, as amended, or any successor law,
and regulations and rules issued pursuant to that Act or any successor law.
"SELLERS"--as defined in the first paragraph of this Agreement.
"SELLERS' CLOSING DOCUMENTS"--as defined in Section 3.2(a).
"SELLERS' RELEASES"--as defined in Section 2.4.
"SHARES"--as defined in the Recitals of this Agreement.
"SUBSIDIARY" --with respect to any Person (the "Owner"), any corporation or
other Person of which securities or other interests having the power to elect a
majority of that corporation's or other Person's board of directors or similar
governing body, or otherwise having the power to direct the business and
policies of that corporation or other Person (other than securities or other
interests having such power only upon the happening of a contingency that has
not occurred) are held by the Owner or one or more of its Subsidiaries; when
used without reference to a particular Person, "Subsidiary" means a Subsidiary
of one of the Acquired Companies.
"TAX"--any tax (including, but not limited to, any income tax, capital gains
tax, value-added tax, sales or use tax, payroll tax, employment tax, franchise
tax, social security tax, unemployment tax, disability tax, property tax,
transfer tax, registration tax, alternative or add-on minimum tax, gift tax, or
estate tax), levy, assessment, tariff, duty (including any customs duty),
deficiency, or other fee, and any related charge or amount (including any fine,
penalty, interest, or addition to tax), imposed, assessed, or collected by or
under the authority of any Governmental Body or payable pursuant to any
tax-sharing agreement or any other Contract relating to the sharing or payment
of any such tax, levy, assessment, tariff, duty, deficiency, or fee.
"TAX RETURN"--any return (including any information return), report, statement,
schedule, notice, form, or other document or information filed with or submitted
to, or required to be filed with or submitted to, any Governmental Body in
connection with the determination, assessment,
7
<PAGE>
collection, or payment of any Tax or in connection with the administration,
implementation, or enforcement of or compliance with any Legal Requirement
relating to any Tax.
"THIRD PARTY LEASE" --as defined in Section 3.10(b)(iii).
"THREAT OF RELEASE"--a substantial likelihood of a Release that may require
action in order to prevent or mitigate damage to the Environment that may result
from such Release.
"THREATENED"--a claim, Proceeding, dispute, or other matter will be deemed to
have been "Threatened" if any demand or statement has been received (in
writing), or to the Knowledge of Sellers or Buyer (as the case may be) made, or
any notice has been received (in writing), or to the Knowledge of Sellers or
Buyer (as the case may be) given, that would lead a prudent Person to conclude
that such a claim, Proceeding, dispute, or other matter is likely to be
asserted, commenced, taken, or otherwise pursued in the future.
"TRANSFOLIO" -- as defined in the first paragraph of this Agreement.
"YEAR 2000 ISSUES"--the anticipated costs, problems and uncertainties associated
with the inability of certain computer applications to effectively handle data
including dates on and after January 1, 2000, as such inability affects the
business, operations, and financial condition of the Acquired Companies.
SECTION 2--SALE AND TRANSFER OF SHARES; CLOSING
2.1 SHARES
Subject to the terms and conditions of this Agreement, at the Closing,
each Seller shall deliver or cause to be delivered to Buyer certificates
representing all of the Shares owned by such Seller. Such stock certificates
shall be duly endorsed in blank for transfer or shall be presented with stock
powers duly executed in blank, with such signature guarantees and such other
documents as may be reasonably required by Buyer to effect a valid transfer of
such Shares by such Seller, free and clear of any and all Encumbrances.
8
<PAGE>
2.2 PURCHASE PRICE
In consideration of the sale by Sellers to Buyer of the Shares and in
reliance upon the representations and warranties of Sellers herein contained and
made at the Closing and subject to the satisfaction of all of the conditions
contained herein, Buyer agrees that on the Closing Date it will deliver to
Sellers the aggregate purchase price which is comprised of a cash payment equal
to thirty-nine million dollars ($39,000,000) less the Estimated Purchase Price
Adjustment (as defined in Section 2.5(a)) (the "Estimated Purchase Price"),
which payment shall be made by wire transfer of immediately available funds to
one or more accounts designated by Sellers. At least three business days prior
to the anticipated Closing Date, Buyer shall deliver to Sellers an allocation,
which allocation shall have been prepared in good faith, of the Estimated
Purchase Price among the Acquired Companies.
2.3 CLOSING
The purchase and sale provided for in this Agreement will take place at
the offices of Sellers' counsel, Weil, Gotshal & Manges, LLP, at 767 Fifth
Avenue, New York, New York 10153, at 10:00 a.m. (local time) (or such other time
and place as the parties may agree) on the later of (i) September 19, 2000 or
(ii) the date that is two business days following the termination of the
applicable waiting period under the HSR Act (the later of (i) and (ii), or such
other date as the parties may agree, is the "Closing Date"). The consummation of
the transactions contemplated by this Agreement is hereinafter referred to as
the "Closing". Subject to the provisions of Section 9, failure to consummate the
purchase and sale provided for in this Agreement on the date and time and at the
place determined pursuant to this Section 2.3 will not result in the termination
of this Agreement and will not relieve any party of any obligation under this
Agreement.
2.4 CLOSING OBLIGATIONS
At the Closing:
(a) Sellers will deliver to Buyer:
(i) certificates representing the Shares duly
endorsed in blank for transfer or presented with stock powers duly
executed in blank, with such signature guarantees and such other
documents as may be reasonably required by Buyer to effect a valid
transfer of the Shares;
(ii) releases in the form of EXHIBIT 2.4(a)(ii)
executed by each Seller, and by each Related Person of either Seller
who was on the payroll of any Acquired Company during 1998 or 1999 or
2000, of all claims which any of them have against either Acquired
Company (collectively, "Sellers' Releases");
9
<PAGE>
(iii) a certificate executed by each Seller
representing and warranting to Buyer that each of Sellers'
representations and warranties in this Agreement was accurate in all
material respects as of the date of this Agreement and is accurate in
all material respects as of the Closing Date as if made on the Closing
Date (giving full effect to any supplements to the Disclosure Letter
that were delivered by Sellers to Buyer prior to the Closing Date in
accordance with Section 5.5);
(iv) a "transferor's certificate of non-foreign
status" within the meaning of Section 1445(b)(2) of the IRC in the form
of EXHIBIT 2.4(a)(iv), executed by each Seller;
(v) certificates of good standing and foreign
qualification for each Acquired Company from each jurisdiction listed
on EXHIBIT 2.4(a)(v);
(vi) the resignations of any Related Person employed
by any Acquired Company, all of the directors of each Acquired Company
and of such officers of each Acquired Company as may be requested by
Buyer at least five days prior to the Closing, such resignations to be
effective at the Closing;
(vii) an opinion of Weil, Gotshal & Manges LLP, dated
as of the Closing Date, in the form of EXHIBIT 2.4(a)(vii);
(viii) a lease agreement, in the form of EXHIBIT
2.4(a)(viii), between Sellers (or their affiliates) as lessor and the
Buyer (or its designee) as lessee (the "Lease Agreement");
(ix) evidence of termination of all lease agreements
existing immediately prior to the Closing between any Seller or any
Related Person of any Seller or any of their respective affiliates
(collectively, "Lessors" and individually, a "Lessor"), on the one
hand, and any Acquired Company on the other hand, and releases in the
form of EXHIBIT 2.4(a)(ix) from each Lessor to the respective lessees
under such leases.
(x) consent and estoppel certificate executed on
behalf of Olmstead Properties, Inc., as landlord for office space at
180 Varick Street, New York, NY, dated as of a date not more than five
days prior to the Closing Date.
(xi) Organizational Documents of each Acquired
Company certified by (i) the Secretary of State of each of their
respective jurisdictions of incorporation, dated as of a date not more
than five (5) days prior to the Closing (in the case of the certificate
or articles of incorporation) and (ii) by the Secretary of the
respective Acquired Company (in the case of the bylaws), dated the
Closing Date;
(xii) the minute books, books of account and stock
record books and other records in existence of each of the Acquired
Companies;
10
<PAGE>
(xiii) a certificate executed by Sellers setting
forth the aggregate amount of Cash Withdrawals in each of 1997, 1998,
1999 and 2000 through the Closing Date, together with a supporting
schedule reasonably acceptable to Buyer indicating when each individual
Cash Withdrawal was made, the recipient of such Cash Withdrawal and the
nature of such Cash Withdrawal;
(xiv) written consent of Sellers (the "Gottbetter
Consent") to the consulting agreement dated as of August 3, 2000,
between Courier Corporation and Mr. Paul Gottbetter, the Sellers' and
Acquired Companies' accountant; and
(xv) such other documents as Buyer may reasonably
request.
(b) Buyer will deliver to Sellers:
(i) the Estimated Purchase Price;
(ii) the Lease Agreement;
(iii) an opinion of Goodwin, Procter & Hoar LLP,
dated as of the Closing Date, in the form of EXHIBIT 2.4(B)(III);
(iv) a certificate executed by Buyer to the effect
that, except as otherwise stated in such certificate, each of Buyer's
representations and warranties in this Agreement was accurate in all
material respects as of the date of this Agreement and is accurate in
all material respects as of the Closing Date as if made on the Closing
Date; and
(v) such other documents as Sellers may reasonably
request.
2.5 ADJUSTMENTS
(a) For purposes of this Agreement, the parties have agreed
that solely for purposes of the Closing, a good faith estimate of the Purchase
Price Adjustment is $196,729 (the "Estimated Purchase Price Adjustment").
(b) Within thirty (30) days after the filing of the Tax
Returns referred to in Section 12.3 hereof, Buyer shall deliver to Sellers
Buyer's proposed determination of (i) the Purchase Price Adjustment and (ii) the
amount, if any, by which Cash Withdrawals from the date of the Balance Sheet
through the Closing Date exceed the limitations set forth in Section 5.11 of
this Agreement (the sum of clauses (i) and (ii), the "Estimated Net
Adjustment").
(c) Sellers and their Representatives shall have the right to
review all books, work papers and procedures used by Buyer and its
Representatives in calculating the Estimated
11
<PAGE>
Net Adjustment. Unless Sellers notify Buyer within thirty (30) days following
receipt of the Estimated Net Adjustment of any objections to the calculation
of the Estimated Net Adjustment, then the Estimated Net Adjustment shall
become final and binding upon the parties for purposes of this Section 2.5.
(d) If Sellers object to the Estimated Net Adjustment, Sellers
and Buyer agree to negotiate in good faith to resolve such objections. If
Sellers and Buyer are unable to resolve all objections within thirty days after
the delivery of Sellers' objections, the remaining disputed matters shall be
submitted to a nationally recognized independent accounting firm mutually agreed
upon by Buyer and Sellers to resolve such disputes (or, if Buyer and Sellers are
unable to agree upon a firm within five days following the end of the thirty-day
period, then Buyer and Sellers shall each select a firm and such firms shall
jointly select a third firm which shall solely resolve the disputed matters).
The decision of such accounting firm shall be final and binding on the parties
and Buyer and Sellers shall each bear one-half of the fees, costs and expenses
of such accounting firm.
(e) Within three days after the final calculation of the
Estimated Net Adjustment in accordance with subsection (c) or (d) above (the
"Final Determination"), (i) the excess, if any, of the Estimated Purchase Price
Adjustment over the Final Determination shall be paid by Buyer to Sellers by
wire transfer of immediately available funds to an account designated by Sellers
or (ii) the excess, if any, of the Final Determination over the Estimated
Purchase Price Adjustment shall be paid by Sellers to Buyer by wire transfer of
immediately available funds to an account designated by Buyer. Any amount paid
by Buyer to Sellers pursuant to clause (i) of the preceding sentence shall be
treated by the parties hereto as an increase of the Purchase Price for all
purposes, and any amount paid by Sellers to Buyer pursuant to clause (ii) of the
preceding sentence shall be treated by the parties hereto as a reduction of the
Purchase Price for all purposes.
12
<PAGE>
SECTION 3--REPRESENTATIONS AND WARRANTIES OF SELLERS
As a material inducement to Buyer to enter into this Agreement and
consummate the transactions contemplated hereby, each of Sellers jointly and
severally hereby make to Buyer the representations and warranties contained in
this Section 3. Sellers shall not have any right of indemnity or contribution
from the Acquired Companies with respect to the breach of any representation,
warranty or covenant under this Agreement.
3.1 ORGANIZATION AND GOOD STANDING
(a) Part 3.1 of the Disclosure Letter contains a complete and
accurate list for each Acquired Company of its name, its jurisdiction of
incorporation, other jurisdictions in which it is authorized to do business, and
its capitalization (including the identity of each stockholder and the number of
shares held by each). Each Acquired Company is a corporation duly organized,
validly existing, and in good standing under the laws of its jurisdiction of
incorporation, with full corporate power and authority to conduct its business
as it is now being conducted, to own or use the properties and assets that it
purports to own or use, and to perform all its obligations under its Contracts.
Each Acquired Company is duly qualified to do business as a foreign corporation
and is in good standing under the laws of each state or other jurisdiction in
which either the ownership or use of the properties owned or used by it, or the
nature of the activities conducted by it, requires such qualification, except
where the failure to be so qualified would not have a Material Adverse Effect.
(b) Sellers have delivered to Buyer copies of the
Organizational Documents of each Acquired Company, as currently in effect.
3.2 AUTHORITY; NO CONFLICT
(a) This Agreement constitutes the legal, valid, and binding
obligation of each Seller and each Acquired Company, enforceable against each
Seller and each Acquired Company in accordance with its terms. Upon the
execution and delivery by Sellers of the Lease Agreements and Sellers' Releases
(collectively, the "Sellers' Closing Documents"), Sellers' Closing Documents
will constitute the legal, valid, and binding obligations of each Seller,
enforceable against each Seller in accordance with their respective terms. Each
Seller and each Acquired Company has the full right, power, authority, and
capacity to execute and deliver this Agreement and Sellers' Closing Documents to
which they are a party, and to perform their respective obligations under this
Agreement and Sellers' Closing Documents.
(b) Except as set forth in Part 3.2 of the Disclosure Letter,
neither the execution and delivery of this Agreement nor the consummation or
performance of any of the Contemplated Transactions will, directly or indirectly
(with or without notice or lapse of time):
(i) contravene, conflict with, or result in a
violation of (A) any provision of the Organizational Documents of any
Acquired Company, or (B) any
13
<PAGE>
resolution adopted by the board of directors or the stockholders of
any Acquired Company;
(ii) contravene, conflict with, or result in a
violation of any Legal Requirement or any Order to which any Acquired
Company or Seller, or any of the assets owned or used by any Acquired
Company, may be subject;
(iii) contravene, conflict with, or result in a
violation of any of the terms or requirements of, or give any
Governmental Body the right to revoke, withdraw, suspend, cancel,
terminate, or modify, any Governmental Authorization that is held by
any Acquired Company or that otherwise relates to the business of, or
any of the assets owned or used by, any Acquired Company;
(iv) contravene, conflict with, or result in a
violation or breach of any provision of, or give any Person the right
to declare a default or exercise any remedy under, or to accelerate the
maturity or performance of, or to cancel, terminate, or modify, any
Material Contract; or
(v) result in the imposition or creation of any
Encumbrance upon or with respect to any of the assets owned or used by
any Acquired Company.
Except as set forth in Part 3.2 of the Disclosure Letter, neither Seller nor any
Acquired Company is or will be required to give any notice to or obtain any
Consent from any Person in connection with the execution and delivery of this
Agreement or any of Sellers' Closing Documents or the consummation or
performance of any of the Contemplated Transactions. Notwithstanding anything to
the contrary in the previous sentence, Sellers make no representation or
warranty with respect to the need to give any notice or to obtain any Consent
from any Person with respect to the Publishing Contracts as a result of the
execution and delivery of this Agreement or of any of Sellers' Closing Documents
or the consummation or performance of any of the Contemplated Transactions.
14
<PAGE>
3.3 CAPITALIZATION
(a) The authorized equity securities of Dover consist of 200
shares of common stock, no par value per share, of which 200 shares are issued
and outstanding and constitute the Dover Shares. Each Seller is and will be on
the Closing Date the record and beneficial owner and holder of the Dover Shares
set forth next to her or its name in Part 3.3 of the Disclosure Letter, free and
clear of all Encumbrances. With the exception of the Dover Shares (which are
owned by Sellers), all of the outstanding equity securities and other securities
of Dover are owned of record and beneficially by one or more of the Acquired
Companies, free and clear of all Encumbrances. No legend or other reference to
any purported Encumbrance appears upon any certificate representing equity
securities of Dover. All of the outstanding equity securities of Dover have been
duly authorized and validly issued and are fully paid and nonassessable. There
are no Contracts relating to the issuance, sale, or transfer of any equity
securities or other securities of Dover. Except as set forth in Part 3.3 of the
Disclosure Letter, none of the outstanding equity securities or other securities
of Dover was issued in violation of the Securities Act or any other Legal
Requirement. Dover neither owns nor has any Contract to acquire any equity
securities or other securities of any Person (other than Acquired Companies) or
any direct or indirect equity or ownership interest in any other business.
(b) The authorized equity securities of Transfolio consist of
200 shares of common stock, par value $100 per share, of which 80 shares are
issued and outstanding and constitute the Transfolio Shares. Each Seller is and
will be on the Closing Date the record and beneficial owner and holder of the
Transfolio Shares set forth next to her or its name in Part 3.3 of the
Disclosure Letter, free and clear of all Encumbrances. With the exception of the
Transfolio Shares (which are owned by Sellers), all of the outstanding equity
securities and other securities of Transfolio are owned of record and
beneficially by one or more of the Acquired Companies, free and clear of all
Encumbrances. No legend or other reference to any purported Encumbrance appears
upon any certificate representing equity securities of Transfolio. All of the
outstanding equity securities of Transfolio have been duly authorized and
validly issued and are fully paid and nonassessable. There are no Contracts
relating to the issuance, sale, or transfer of any equity securities or other
securities of Transfolio. Except as set forth in Part 3.3 of the Disclosure
Letter, none of the outstanding equity securities or other securities of
Transfolio was issued in violation of the Securities Act or any other Legal
Requirement. Transfolio neither owns nor has any Contract to acquire any equity
securities or other securities of any Person (other than Acquired Companies) or
any direct or indirect equity or ownership interest in any other business.
(c) The authorized equity securities of Dover Book Store
consist of 200 shares of common stock, no par value per share, of which 20
shares are issued and outstanding and constitute the Dover Book Store Shares.
Each Seller is and will be on the Closing Date the record and beneficial owner
and holder of the Dover Book Store Shares set forth next to her or its name in
Part 3.3 of the Disclosure Letter, free and clear of all Encumbrances. With the
exception of the Dover Book Store Shares (which are owned by Sellers), all of
the outstanding equity securities and other securities of Dover Book Store are
owned of record and beneficially by one
15
<PAGE>
or more of the Acquired Companies, free and clear of all Encumbrances. No
legend or other reference to any purported Encumbrance appears upon any
certificate representing equity securities of Dover Book Store. All of the
outstanding equity securities of Dover Book Store have been duly authorized
and validly issued and are fully paid and nonassessable. There are no
Contracts relating to the issuance, sale, or transfer of any equity
securities or other securities of Dover Book Store. Except as set forth in
Part 3.3 of the Disclosure Letter, none of the outstanding equity securities
or other securities of Dover Book Store was issued in violation of the
Securities Act or any other Legal Requirement. Dover Book Store neither owns
nor has any Contract to acquire any equity securities or other securities of
any Person (other than Acquired Companies) or any direct or indirect equity
or ownership interest in any other business.
3.4 FINANCIAL STATEMENTS
Sellers have delivered to Buyer an unaudited balance sheet of each of
the Acquired Companies as at April 30, 2000 prepared in accordance with GAAP
(except with regards to inventory) (collectively, the "Balance Sheet") and the
related schedules which list details of each asset and liability category on the
Balance Sheet as well as a schedule of operating leases of each of the Acquired
Companies as of April 30, 2000 (collectively, the "Balance Sheet Schedules"). A
true and correct copy of the Balance Sheet and Balance Sheet Schedules are
attached hereto as Part 3.4 of the Disclosure Letter. Such Balance Sheet and
Balance Sheet Schedules fairly present in all material respects the assets,
liabilities and operating leases of each of the Acquired Companies as of April
30, 2000, all in accordance with GAAP (except with respect to inventory).
3.5 BOOKS AND RECORDS
Buyer has been provided access to all existing books of account, minute
books, stock record books, and other records of the Acquired Companies. At the
Closing, all of those books and records will be in the possession of the
Acquired Companies.
3.6 TITLE TO PROPERTIES; ENCUMBRANCES
(a) Attached as Part 3.6(a) of the Disclosure Letter is a
schedule of all of those assets consisting of personal property (including,
without limitation, machinery, equipment, hardware and software) owned by the
Acquired Companies as of May 11, 1998 having an individual fair market value of
in excess of $2,000 (the "May Fixed Asset Schedule").
(b) Part 3.6(b) of the Disclosure Letter lists (i) all assets
consisting of personal property (including, without limitation, machinery,
equipment, hardware and software) purchased or otherwise acquired by the
Acquired Companies from May 11, 1998 through the date hereof and (ii) all assets
consisting of personal property (including, without limitation, machinery,
equipment, hardware and software) sold, or otherwise retired or disposed of,
from May 11, 1998 through the date hereof, in each case having an individual
fair market value in excess of $2,000.
16
<PAGE>
(c) Except as set forth in Part 3.6(c) of the Disclosure
Letter, the Acquired Companies currently have, and shall have as of the Closing
Date, good and marketable title to all of their respective material assets
(whether real, personal or mixed and whether tangible or intangible) and such
assets are, and shall be on the Closing Date, owned free and clear of all
Encumbrances. Solely for purposes of this Section 3.6(c), the term "material"
means the incurrence by, imposition upon, or attachment against, any Acquired
Company or its assets, of aggregate liabilities with respect to the
representations or warranties to which the concept of material is being applied
in excess of $25,000.
3.7 CONDITION AND SUFFICIENCY OF ASSETS
(a) The assets of the Acquired Companies consisting of
personal property (including, without limitation, machinery, equipment,
hardware, software, book plates, electronic files and other reproductive media)
are, taken as a whole, in substantially good operating condition, reasonable
wear and tear excepted, free from defects except for such minor defects as do
not interfere with the continued use thereof in the conduct of normal
operations.
(b) To Sellers' Knowledge, the buildings, plants, structures,
and equipment of the Acquired Companies are structurally sound, are in good
operating condition and repair, and are adequate for the uses to which they are
being put, and none of such buildings, plants, structures, or equipment is in
need of maintenance or repairs except for ordinary, routine maintenance and
repairs that are not material in nature or cost. To Sellers' Knowledge, the
buildings, plants, structures, and equipment of the Acquired Companies are
sufficient for the continued conduct of the Acquired Companies' businesses after
the Closing in substantially the same manner as conducted prior to the Closing.
3.8 ACCOUNTS RECEIVABLE
All accounts receivable of the Acquired Companies as of August 11, 2000
or on the accounting records of the Acquired Companies as of the Closing Date
(collectively, the "Accounts Receivable") represent or will represent valid
obligations arising from sales actually made or services actually performed in
the Ordinary Course of Business. There is no contest, claim, or right of
set-off, other than returns in the Ordinary Course of Business, under any
Contract with any obligor of an Accounts Receivable relating to the amount or
validity of such Accounts Receivable in excess of $10,000 in the aggregate. Part
3.8 of the Disclosure Letter contains a complete and accurate list of all
Accounts Receivable of the Acquired Companies as of August 11, 2000, which list
sets forth the aging of such Accounts Receivable.
17
<PAGE>
3.9 INVENTORY
Part 3.9 of the Disclosure Letter contains a complete and accurate list
of all inventory of the Acquired Companies as of the date of July 31, 2000,
which list sets forth the item number, description, quantity and unit of measure
of the raw material and finished goods inventory. The Acquired Companies have
title to all inventory listed in Part 3.9 of the Disclosure Letter free and
clear of all Encumbrances.
3.10 REAL PROPERTY
(a) OWNED REAL PROPERTY. The Acquired Companies
do not own any real property.
(b) LEASED REAL PROPERTY. All of the real
property leased by the Acquired Companies, as tenant or lessee, is identified on
Part 3.10 to the Disclosure Letter (collectively referred to herein as the
"Leased Real Property"). Sellers hereby make the following representations and
warranties (except as set forth in Part 3.10 to the Disclosure Letter) with
respect to the Leased Real Property:
(i) The Acquired Companies hold a valid
and enforceable leasehold interest in the Leased Real Property, which leasehold
interest is not subject to any mortgage, pledge, lien, conditional sale
agreement, security agreement, Encumbrance or other charge except for liens for
Taxes not yet due and payable and such imperfections of title and Encumbrances,
if any, which are not material in character, amount or extent, and which do not
detract from the value, or interfere with the present or proposed use of the
property subject thereto or affected thereby;
(ii) To the Seller's knowledge, there are no
material defects in the physical condition of any material improvements
constituting a part of the Leased Real Property, including, without limitation,
structural elements, mechanical systems, roofs or parking and loading areas, and
all of such material improvements are in good operating condition and repair,
have been well maintained and are free from material infestation by rodents or
insects;
(iii) The copy of the lease (and amendments
thereto) for the portion of the Leased Real Property which is leased from any
Person other than a Lessor (as defined in Section 2.4(a)(ix), (the "Third Party
Lease") delivered by Sellers to Buyer is complete, accurate, true and correct;
(iv) The Third Party Lease is in full force
and effect and has not been modified, amended, or altered, in writing or
otherwise;
(v) All material obligations of the landlord
or lessor under the Third Party Lease which have accrued have been performed,
and to the best of the knowledge of Sellers, no landlord or lessor is in
material default under the Third Party Lease; and
18
<PAGE>
(vi) All material obligations of the
Acquired Companies under the Third Party Lease which have accrued have been
performed, and no Acquired Company is in default under the Third Party Lease,
and, to the Knowledge of the Sellers, no circumstance presently exists which,
with notice or the passage of time, or both, would give rise to a default
under the Third Party Lease by any of the Acquired Companies.
(c) None of the operations or assets of the
Acquired Companies are conducted or located on any real property other than the
Leased Real Property. Except for the real property subject to the Third Party
Lease, the Sellers directly own all of the Leased Real Property.
3.11 TAXES
(a) Except as set forth in Part 3.11(a) of the Disclosure
Letter, each Acquired Company has filed all material Tax Returns that it was
required to file. All such Tax Returns were correct and complete in all material
respects. All material Taxes owed and due as of the Closing by any Acquired
Company (whether or not shown on any Tax Return) have been paid. All Taxes owed,
but not yet due, have been properly accrued for on the books and records of the
Acquired Companies in accordance with, and to the extent required by, GAAP. No
Acquired Company is the beneficiary of any extension of time within which to
file any Tax Return.
(b) Except as set forth in Part 3.11(b) of the Disclosure
Letter, there is no material dispute or claim concerning any Tax liability of
any Acquired Company either (i) claimed or raised by any Governmental Body in
writing or (ii) to Sellers' Knowledge, based upon personal contact with any
agent of such Governmental Body.
(c) Part 3.11(c) of the Disclosure Letter lists all material
Income Tax Returns filed by or on behalf of each Acquired Company for taxable
periods ended on or after December 31, 1989, indicates any such Income Tax
Returns that have been audited, and indicates any such Income Tax Returns that
currently are the subject of audit. Sellers have delivered or made available to
Buyer correct and complete copies of all Income Tax Returns (as filed) listed in
Part 3.11(c) of the Disclosure Letter, written examination reports and
statements of deficiencies assessed against or agreed to by any Acquired Company
since December 31, 1989. Sellers have also delivered to Buyer, with respect to
each Acquired Company, correct and complete copies of IRS Form 2553, and similar
elections (if any) under state, local, and foreign law, and all documents
(including correspondence) with any Governmental Body relating thereto. No
Acquired Company has waived any statute of limitations in respect of Taxes or
agreed to any extension of time with respect to a Tax assessment or deficiency.
(d) Except as set forth in Part 3.11(d) of the Disclosure
Letter, no Acquired Company is a party to any tax allocation or sharing
Contract. No Acquired Company (A) has been a member of an affiliated group
filing a consolidated federal Income Tax Return (other than a group the common
parent of which was Dover) or (B) has any liability for the Taxes of any
19
<PAGE>
Person (other than any other Acquired Company) under Treasury Regulation
Section 1.1502-6 (or any similar provision of state, local, or foreign law),
as a transferee or successor, by Contract, or otherwise.
(e) Except as disclosed in Part 3.11(e) of the Disclosure
Letter, each Acquired Company (and any predecessor of each Acquired Company) has
been a validly electing S corporation within the meaning of Sections 1361 and
1362 of the IRC and under corresponding provisions, if any, of state, local, and
foreign law (for all jurisdictions in which each Acquired Company operated or
operates) at all times since (i) in the case Dover Publications, Inc., January
1, 1982, (ii) in the case of Transfolio Express, Inc., June 10, 1990 and (iii)
in the case of Dover Book Store, Inc., August 3, 1999.
(f) Except as disclosed in Part 3.11(f) of the Disclosure
Letter, none of the Acquired Companies will be liable for any Tax under Section
1374 of the IRC in connection with the deemed sale of its assets caused by the
Section 338(h)(10) Elections or under any similar provision of state, local, or
foreign law. None of the Acquired Companies has, in the past 10 years, acquired
assets from another corporation in a transaction in which the Acquired Company's
Tax basis for the acquired assets was determined, in whole or in part, by
reference to the Tax basis of the acquired assets (or any other property) in the
hands of the transferor.
(g) Each Acquired Company has filed all Income Tax Returns,
whether or not yet due, that it was required to file or will be required to file
for the taxable year ending December 31, 1999. Each Acquired Company has paid
all Income Taxes, whether or not yet due, owed for the taxable year ending
December 31, 1999 (whether or not shown on any Income Tax Return).
(h) Solely for purposes of this Section 3.11, the term
"material" means the incurrence by, imposition upon, or attachment against, any
Acquired Company or its assets, of aggregate liabilities with respect to the
representations or warranties to which the concept of material is being applied
in excess of $50,000.
3.12 NO MATERIAL ADVERSE CHANGE
Except as set forth in Part 3.12 of the Disclosure Letter, since April
30, 1999, there has not been any material adverse change in respect of the
Acquired Companies taken as a whole, and, to Sellers' Knowledge, no event has
occurred or circumstance exists that may reasonably be expected to result in
such a material adverse change.
20
<PAGE>
3.13 EMPLOYEE BENEFITS
(a) Part 3.13 of the Disclosure Letter sets forth a list of
every Employee Program (as defined below) that has been maintained (as such term
is further defined below) by any Acquired Company or an Affiliate (as defined
below) at any time during the three-year period ending on the date hereof.
Neither Acquired Company has amended or terminated any such Employee Program
since March 1999 except as set forth in Part 3.13 of the Disclosure Letter.
(b) Each Employee Program (other than any Multiemployer Plan)
which is maintained by an Acquired Company or an Affiliate and which is intended
to qualify under Section 401(a) or 501(c)(9) of the IRC has received a favorable
determination or approval letter from the IRS regarding its qualification under
such section and, to the Knowledge of Sellers, qualifies under the applicable
section of the IRC from the effective date of such Employee Program through and
including the date hereof (or, if earlier, the date that all of such Employee
Program's assets were distributed).
(c) Except for such failures to comply with any Legal
Requirement that would not have a Material Adverse Effect, there has not been
any failure of any party to comply with any Legal Requirement applicable with
respect to the Employee Programs (other than any Multiemployer Plans) that have
been maintained by any of the Acquired Companies or an Affiliate. No litigation
or Proceeding or other proceeding (other than those relating to routine claims
for benefits) is pending or, to the Knowledge of Sellers, Threatened with
respect to any such Employee Program (other than any Multiemployer Plans). All
payments and/or contributions required to have been made (under the provisions
of any Contracts or other governing documents or Legal Requirement) with respect
to all Employee Programs maintained by an Acquired Company or any Affiliate, for
all periods prior to the date hereof, have been timely made.
(d) Except as set forth in Part 3.13(d) of the Disclosure
Letter, none of such Employee Programs (i) is subject to Title IV of ERISA or
IRC Section 412 or ERISA Section 302, including, but not limited to, any
Multiemployer Plan, or (ii) has ever provided health care or life insurance
coverage to any employees after the last day of the month following their
retirement (other than as required by part 6 of subtitle B of Title I of ERISA).
(e) With respect to each Employee Program (other than any
Multiemployer Plans) maintained by any of the Acquired Companies or an Affiliate
within the three years preceding the date hereof, complete and correct copies of
the following documents (if applicable to such Employee Program) have previously
been delivered to Buyer: (i) all documents embodying or governing such Employee
Program, and any funding medium for the Employee Program (including, without
limitation, trust agreements) as they may have been amended to the date hereof;
(ii) the most recent IRS determination or approval letter with respect to such
Employee Program under IRC Section 401(a) or 501(c)(9), and any applications for
determination or approval subsequently filed with the IRS; (iii) the three (3)
most recently filed
21
<PAGE>
IRS Forms 5500, with all applicable schedules and accountants' opinions
attached thereto; (iv) the three (3) most recent actuarial valuation reports
completed with respect to such Employee Program; and (v) the summary plan
description for such Employee Program (or other descriptions of such Employee
Program provided to employees) and all modifications thereto. The Acquired
Companies have made available to Buyer (i) any insurance policy (including
any fiduciary liability insurance policy or fidelity bond) related to such
Employee Program; (ii) any registration statement or other filing made
pursuant to any federal or state securities law; and (iii) all correspondence
to and from any state or federal agency within the last six years with
respect to such Employee Program.
(f) To Seller's knowledge, no employee communications or
provision of any Employee Program document has limited the right of any of the
Acquired Companies or the Affiliate to amend, terminate or otherwise modify such
Employee Program.
(g) No Acquired Company has, or in the past has ever
maintained or contributed to, a Multiemployer Plan.
(h) No Acquired Company or any Affiliate has incurred any
liability under Title IV of ERISA which has not been paid in full prior to the
date hereof. There has been no "accumulated funding deficiency" (whether or not
waived) with respect to any Employee Program ever maintained by any of the
Acquired Companies or any Affiliate and subject to IRC Section 412 or ERISA
Section 302. With respect to any Employee Program maintained by any of the
Acquired Companies or any Affiliate and subject to Title IV of ERISA, there has
been no (nor will there be any as a result of the Contemplated Transactions) (i)
"reportable event," within the meaning of ERISA Section 4043 or the regulations
thereunder, for which the notice requirement is not waived by the regulations
thereunder, or (ii) event or condition which presents a material risk of a plan
termination or any other event that may cause any of the Acquired Companies or
any Affiliate to incur liability or have an Encumbrance imposed on its assets
under Title IV of ERISA. Except as described in Part 3.13(h) of the Disclosure
Letter, no Employee Program maintained by the Acquired Companies or any
Affiliate and subject to Title IV of ERISA (other than a Multiemployer Plan) has
any "unfunded benefit liabilities" within the meaning of ERISA Section
4001(a)(18), as of the date hereof.
(i) No Acquired Company nor any Affiliate has any material
liability, whether absolute or contingent, direct or indirect, including any
obligations under any Employee Program with respect to any misclassification of
a person as an employee or with respect to any employees treated as "benefits
ineligible" or "leased" from any employer.
22
<PAGE>
(j) For purposes of this Section 3.13:
(i) "Employee Program" means (A) all employee benefit
plans within the meaning of ERISA Section 3(3), whether or not subject
to ERISA, including, but not limited to, multiple employer welfare
arrangements (within the meaning of ERISA Section 3(40)) and plans to
which more than one unaffiliated employer contributes; (B) all stock
option plans, stock purchase plans, bonus or incentive award plans,
severance pay policies or agreements, deferred compensation agreements,
supplemental income arrangements, vacation plans, and all other
employee benefit plans, agreements, and arrangements described in IRC
Section 120, 125, 127, 129 or 137; and (C) all plans or arrangements
providing compensation to directors. In the case of an Employee Program
funded through a trust described in IRC Section 401(a) or an
organization described in IRC Section 501(c)(9), or any other funding
vehicle, each reference to such Employee Program shall include a
reference to such trust, organization or other vehicle.
(ii) An entity "maintains" an Employee Program if
such entity sponsors, contributes to, or provides (or has promised to
provide) benefits under such Employee Program, or has any obligation
(by Contract or under any Legal Requirement) to contribute to or
provide benefits under such Employee Program, or if such Employee
Program provides benefits to or otherwise covers employees of such
entity (or their spouses, dependents, or beneficiaries);
(iii) An entity is an "Affiliate" of an Acquired
Company for purposes of this Section 3.13 if it would have ever been
considered a single employer with an Acquired Company under ERISA
Section 4001(b) or part of the same "controlled group" as the Acquired
Company for purposes of ERISA Section 302(d)(8)(C); and
(iv) "Multiemployer Plan" means a (pension or
non-pension) employee benefit plan to which more than one employer
contributes and which is maintained pursuant to one or more collective
bargaining agreements.
3.14 COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL AUTHORIZATIONS
(a) Without in any way limiting the representations set forth
in Sections 3.19, 3.21, 3.22 and 3.23 relating to compliance with Legal
Requirements, except as set forth in Part 3.14(a) of the Disclosure Letter, (i)
each Acquired Company is currently in compliance and has heretofore complied in
all material respects with all Legal Requirements, except for such noncompliance
which would not have a Material Adverse Effect, and (ii) no Acquired Company has
received written notice from a Governmental Body of a violation or alleged
violation of any material Legal Requirement within the last three (3) years.
(b) Part 3.14(b) of the Disclosure Letter lists all material
Governmental Authorizations required from any Governmental Body in order for the
Acquired Companies to
23
<PAGE>
conduct their businesses as currently conducted. Except as set forth in Part
3.14(b) of the Disclosure Letter, each Acquired Company has obtained all
material Governmental Authorizations, which are valid and in full force and
effect, and is operating in compliance therewith, except for such noncompliance
which would not have a Material Adverse Effect. The Governmental Authorizations
include, but are not limited to, those required under federal, state or local
statutes, ordinances, orders, requirements, rules, regulations, or laws
pertaining to environmental protection, public health and safety, worker
health and safety, buildings, highways or zoning. To Sellers' Knowledge, no
further Governmental Authorizations are or will be required in order to
continue to conduct the business currently conducted by the Acquired Companies
subsequent to the Closing.
3.15 LEGAL PROCEEDINGS; ORDERS
(a) Except as set forth in Part 3.15 of the Disclosure Letter,
there is no litigation or governmental or administrative proceeding or
investigation pending or, to the Knowledge of Sellers, Threatened against any
Acquired Company or any Related Person thereof relating to the Acquired
Companies. To the Knowledge of Sellers, there has not occurred any event or
occurrence on the basis of which any material claim may be currently asserted.
(b) Except as disclosed in Part 3.15 of the Disclosure Letter,
no Acquired Company is subject to or bound by any written Order or consent
decree that may materially and adversely affect its properties, assets, business
or condition (financial or other).
3.16 ABSENCE OF CERTAIN CHANGES AND EVENTS
Except as set forth in Part 3.16 of the Disclosure Letter, since April
30, 1999, the Acquired Companies have conducted their businesses only in the
Ordinary Course of Business and there has not been any:
(a) change in any Acquired Company's authorized or issued
capital stock; grant of any stock option or right to purchase shares of capital
stock of any Acquired Company; issuance of any security convertible into such
capital stock; grant of any registration rights; purchase, redemption,
retirement, or other acquisition by any Acquired Company of any shares of any
such capital stock; or declaration or payment of any dividend or other
distribution or payment in respect of shares of capital stock;
(b) amendment to the Organizational Documents of any Acquired
Company;
(c) payment or increase by any Acquired Company of any
bonuses, salaries, or other compensation to any stockholder, director or, except
in the Ordinary Course of Business, officer or employee or entry into any
employment, severance, or similar Contract with any director, officer, or
employee;
24
<PAGE>
(d) adoption of, or increase in the payments to or benefits
under, any profit sharing, bonus, deferred compensation, savings, insurance,
pension, retirement, or other employee benefit plan for or with any employees of
any Acquired Company;
(e) damage to or destruction or loss of any asset or property
of any Acquired Company, whether or not covered by insurance, materially and
adversely affecting the properties, assets, business or financial condition of
the Acquired Companies, taken as a whole;
(f) entry into, termination of, or receipt of notice of
termination of (i) any license, distributorship, dealer, sales representative,
joint venture, credit, or similar agreement, or (ii) any Contract or transaction
involving a total remaining commitment by or to any Acquired Company of at least
$50,000.00;
(g) sale (other than sales of inventory in the Ordinary Course
of Business), lease, distribution (other than distributions of inventory in the
Ordinary Course of Business and cash withdrawals permitted under Section 5.11)
or other disposition of any asset or property of any Acquired Company having a
fair market value of in excess of $20,000, or mortgage, pledge, or imposition of
any Encumbrance on any material asset or property of any Acquired Company,
including, without limitation, the sale, lease, or other disposition of any of
the Proprietary Rights;
(h) cancellation or waiver of any claims or rights with a
value to any Acquired Company in excess of $50,000.00;
(i) material change in the accounting methods used by any
Acquired Company;
(j) agreement, whether oral or written, by any Acquired
Company to do any of the foregoing; or
(k) incurrence of any debt for borrowed money by or on behalf
of any Acquired Company.
3.17 CONTRACTS; NO DEFAULTS
(a) With the exception of Publishing Contracts, Part 3.17(a)
of the Disclosure Letter contains a complete and accurate list, and Sellers have
delivered to Buyer true and complete copies, of:
(i) each Contract that involves performance of
services or delivery of goods or materials by one or more Acquired
Companies of an amount or value in excess of $50,000.00;
(ii) each Contract that involves performance of
services or delivery of goods or materials to one or more Acquired
Companies of an amount or value in excess of $50,000.00;
25
<PAGE>
(iii) each Contract that was not entered into in the
Ordinary Course of Business and that involves expenditures or receipts
of one or more Acquired Companies in excess of $50,000.00;
(iv) each lease, rental or occupancy agreement,
license, installment and conditional sale agreement, and other Contract
affecting the ownership of, leasing of, title to, use of, or any
leasehold or other interest in, any real or personal property (except
personal property leases and installment and conditional sales
agreements having a value per item or aggregate payments of less than
$50,000.00) owned or used by an Acquired Company;
(v) each material licensing agreement or other
Contract with respect to Proprietary Rights of an Acquired Company,
including, without limitation, agreements with current or former
employees, consultants (software consultants and other), software and
hardware vendors or contractors regarding the appropriation or the
non-disclosure of any of the Proprietary Rights and agreements pursuant
to which any Person has been granted an ownership interest in or a
license to use Proprietary Rights of an Acquired Company;
(vi) each collective bargaining agreement and other
Contract that any Acquired Company has with any labor union or other
employee representative of a group of employees;
(vii) each joint venture, partnership, and other
Contract (however named) involving a sharing of profits, losses, costs,
or liabilities by any Acquired Company with any other Person;
(viii) each Contract containing covenants that
directly or indirectly purport to limit the freedom of any Acquired
Company or any Related Person of an Acquired Company to engage in any
line of business or to compete with any Person;
(ix) each Contract providing for annual payments in
excess of $50,000 by an Acquired Company to any Person or by any Person
to an Acquired Company (including, without limitation, all Contracts
that the Acquired Companies have with sales representatives) based on
sales, purchases, or profits, other than direct payments for goods;
(x) each power of attorney that is currently
effective and outstanding;
(xi) each Contract by an Acquired Company providing
for capital expenditures in excess of $50,000.00;
26
<PAGE>
(xii) each written warranty, guaranty, or other
similar undertaking with respect to contractual performance extended by
any Acquired Company other than in the Ordinary Course of Business;
(xiii) each Contract by an Acquired Company with
illustrators, artists and advisors with respect to the content and
subject matter of published books or books being considered for
publication providing for payments in excess of $7,500; and
(xiv) each amendment, supplement, and modification
(whether oral or written) in respect of any of the foregoing.
All Contracts required to be listed in Part 3.17(a) of the Disclosure Letter are
herein called the "Material Contracts."
(b) Except as set forth in Part 3.17(b) of the Disclosure
Letter:
(i) no Seller (and to the Knowledge of Sellers, any
Related Person of Sellers) has any rights nor may acquire any rights
under, and no Seller has any obligation or liability nor may become
subject to any obligation or liability under, any Contract that relates
to the business of, or any of the assets owned or used by, any Acquired
Company; and
(ii) to the Knowledge of Sellers, no officer,
director, agent or employee of any Acquired Company is bound by any
Contract that purports to limit the ability of such officer, director,
agent or employee to (A) engage in or continue any conduct, activity,
or practice relating to the business of any Acquired Company, or (B)
assign to any Acquired Company or to any other Person any rights to any
invention, improvement, or discovery.
(c) Except as set forth in Part 3.17(c) of the Disclosure
Letter, all Material Contracts to which an Acquired Company is a party or by
which an Acquired Company is obligated are valid and are in full force and
effect and constitute legal, valid and binding obligations of the Acquired
Company and, to the Knowledge of Sellers, the other parties thereto, enforceable
in accordance with their respective terms. Neither the Acquired Companies nor,
to the Knowledge of Sellers, any other party to any Material Contract of an
Acquired Company, is in material default in complying with any provisions
thereof. To the Knowledge of Sellers, there are no existing conditions, events
or facts that, with notice, lapse of time or both would constitute a material
default under a Material Contract by an Acquired Company or by any other party
thereto. To the Knowledge of Sellers, no notice or threat of or basis for the
termination, expiration or modification of any Material Contracts within one
year from the date hereof exists (other than normal expiration in accordance
with their respective terms).
(d) There are no renegotiations of, attempts to renegotiate,
or outstanding rights to renegotiate any material amounts paid or payable to any
Acquired Company under
27
<PAGE>
current or completed Material Contracts with any Person and, to the Knowledge
of Sellers, no such Person has made written demand for such renegotiation.
3.18 INSURANCE
(a) Part 3.18(a) of the Disclosure Letter sets forth a list of
insurance policies (including information on the premiums payable in connection
therewith and the scope and amounts of the coverage provided thereunder)
maintained by each of the Acquired Companies. Said insurance policies and
arrangements are in full force and effect, all premiums with respect thereto are
currently paid, and each Acquired Company is in compliance in all material
respects with the terms of their respective policies. To the Knowledge of
Sellers, there is no claim by any Acquired Company pending under any such
policies as to which coverage has been questioned, denied or disputed by the
insurer. Each such insurance policy shall continue to be in full force and
effect at the Closing.
(b) Except as set forth in Part 3.18(b) of the Disclosure
Letter, there has not been during the current policy year and each of the three
(3) preceding policy years any claim under an insurance policy for an amount in
excess of $50,000.00.
3.19 ENVIRONMENTAL MATTERS
Except as set forth in Part 3.19 of the Disclosure Letter:
(a) (i) The Acquired Companies and the real properties and
facilities and operations thereof are in material compliance with all applicable
Environmental Laws and the Acquired Companies have not generated, manufactured,
refined, treated, stored, handled, transported, disposed, produced, processed or
recycled any Hazardous Material, except in material compliance with all
applicable Environmental Laws; (ii) to the Knowledge of Sellers, no Hazardous
Material has ever been Released or Threatened to be Released at any site
presently or formerly owned, operated, leased, or used by any Acquired Company,
or has ever come to be located in the Environment at any such site at
concentrations or in amounts in excess of applicable regulatory permits, limits
or standards, as a result of which such Acquired Company has incurred, or is
reasonably likely to incur, material liability under Environmental Laws; (iii)
no lien has ever been imposed by any Governmental Body which is currently in
effect on any property, facility, machinery, or equipment owned, operated,
leased, or used by the Acquired Companies in connection with the presence of any
Hazardous Material; and (iv) there are no underground storage tanks at any site
owned, operated, leased, or used by any Acquired Company and over which such
Acquired Company has control, and, to the Knowledge of Sellers, all underground
storage tanks that have at any time existed at any such site have been removed
in material compliance with all Environmental Laws or are in current compliance
with all Environmental Laws. Notwithstanding anything to the contrary contained
herein, the Acquired Companies make no representation and shall not be liable to
or subject to indemnify the Buyer with respect to any Hazardous Material
generated, manufactured, refined, treated, stored,
28
<PAGE>
handled, transported, disposed, produced or recycled after the Closing, nor
with respect to any Release or Threat of Release of Hazardous Materials which
initially occurs after the Closing.
(b) To the Knowledge of Sellers, the Acquired Companies do not
have any material liability under any Environmental Law.
(c) The Acquired Companies have never (i) entered into or been
subject to or Threatened with any Order or consent decree relating to the
Environment or (ii) received any written request for information, notice, demand
letter, administrative inquiry, or formal or informal complaint or claim from
any Person with respect to any environmental matter or the enforcement of any
Environmental Law, which such matter has not been fully resolved (including any
applicable audit periods) with the relevant Person(s) (including relevant
regulatory authorities) as of the date hereof.
(c) The Acquired Companies have made available to Buyer copies
of all environmental reports in the possession, custody or control of the
Acquired Companies concerning any environmental matter relevant to the Acquired
Companies, whether generated by the Acquired Companies, or others, including,
without limitation, environmental audits, environmental risk assessments, site
assessments, documentation regarding off-site disposal of Hazardous Materials,
spill control plans, and reports, correspondence, permits, licenses, approvals,
consents, and other authorizations related to environmental matters issued by
any Governmental Body.
3.20 EMPLOYEES
(a) To the Knowledge of Sellers, no employee or director of
any Acquired Company is a party to, or is otherwise bound by, any agreement or
arrangement, including any confidentiality, noncompetition, or Proprietary
Rights agreement, between such employee or director and any other Person
("Proprietary Rights Agreement") that in any way materially and adversely
affects or will affect (i) the performance of his duties as an employee or
director of the Acquired Companies, or (ii) the ability of any Acquired Company
to conduct its business, including any Proprietary Rights Agreement with either
Seller or the Acquired Companies by any such employee or director.
(b) Part 3.20 of the Disclosure Letter contains a complete and
accurate list of the following information for each retired employee or director
of the Acquired Companies, or their dependents, receiving benefits or scheduled
to receive benefits in the future: name, pension benefit, pension option
election, retiree medical insurance coverage, retiree life insurance coverage,
and other benefits.
29
<PAGE>
3.21 LABOR RELATIONS; COMPLIANCE
Except as set forth in Part 3.21 of the Disclosure Letter, to the
Knowledge of Sellers each Acquired Company is in compliance in all material
respects with all applicable Legal Requirements respecting labor, employment,
fair employment practices, terms and conditions of employment, and wages and
hours. Except as set forth in Part 3.21 of the Disclosure Letter, to the
Knowledge of Sellers, there are no charges of employment discrimination,
wrongful termination, sexual harassment, breaches of express or implied
employment arrangements, or unfair labor practices, nor are there any strikes,
slowdowns, stoppages of work, or any other concerted interference with normal
operations existing, pending or, to the Knowledge of Sellers, Threatened
against an Acquired Company. There are no grievances, complaints or charges
that have been filed against an Acquired Company under any dispute resolution
procedure (including, but not limited to, any proceedings under any dispute
resolution procedure under any collective bargaining agreement) that could
have a Material Adverse Effect and no claim therefor has been asserted. Except
as set forth in Part 3.21 of the Disclosure Letter, no collective bargaining
agreements are in effect or are currently being or, to the Knowledge of
Sellers, are about to be negotiated by any Acquired Company. Sellers have not
received notice of any changes with respect to (including, without limitation,
resignation of) the senior management or key supervisory personnel of the
Acquired Companies, except that Mrs. Cirker and Leo Boriss will resign as of
the Closing.
3.22 INTELLECTUAL PROPERTY
(a) (i) All patents, patent applications, trade names,
trademarks, trademark registration applications and all other proprietary
rights (other than Publishing Contracts, copyrights and copyright registration
applications), owned by or licensed to an Acquired Company or used or to be
used by an Acquired Company in its business as presently conducted or
contemplated are listed in Part 3.22(a) of the Disclosure Letter and (ii) all
Publishing Contracts, copyrights and copyright registration applications owned
by or licensed to an Acquired Company or used or to be used by an Acquired
Company in its business as presently conducted or contemplated have been
provided or made available to Buyer or its Representatives (the items
described in clauses (i) and (ii), the "Proprietary Rights"). Except as set
forth in Part 3.22(a) of the Disclosure Letter or to the extent in the public
domain, each Acquired Company has the exclusive ownership or exclusive license
to use all material Proprietary Rights used or to be used by it in its
business as presently conducted or contemplated free and clear of any
Encumbrances, and such use of the Proprietary Rights does not require the
Consent of any other Person and the same are freely transferable (except as
otherwise provided by law).
(b) All of the patents, registered copyrights and trademarks
of the Acquired Companies and all of the patent applications, trademark
registration applications and copyright registration applications of the
Acquired Companies have been duly registered in, filed in or issued by the
United States Patent and Trademark Office, the United States Register of
Copyrights or the corresponding offices of other countries identified in Part
3.22(b) of the Disclosure Letter and, except as set forth in Part 3.22(b) of
the Disclosure Letter, have been
30
<PAGE>
properly maintained and renewed in all material respects in accordance with
all applicable Legal Requirements in the United States and each such country.
(c) Except for the Publishing Contracts and as set forth in
Part 3.22(c) of the Disclosure Letter, neither the present activities nor the
products of the Acquired Companies infringe in any material respect any
patents, trade names, trademarks or other proprietary rights of others.
(d) Except for the Publishing Contracts and as set forth in
Part 3.22(d) of the Disclosure Letter, (i) no other Person has an interest in
or right or license to use, or the right to license others to use, any of said
Proprietary Rights, (ii) there are no claims or demands of any other Person
pertaining thereto and no proceedings have been instituted, or are pending or,
to the Knowledge of Sellers, Threatened, which challenge the rights of the
Acquired Companies in respect thereof, and to the Knowledge of Sellers, there
is no basis for any such claims or demands, (iii) none of the Proprietary
Rights listed in Part 3.22(a) of the Disclosure Letter is subject to any
outstanding Order or, to the Knowledge of Sellers, is being infringed by
others, (iv) no proceeding charging an Acquired Company with infringement of
any adversely held patent, trade name, trademark or copyright has been filed
or, to the Knowledge of Sellers, is Threatened to be filed, and (v) to the
Knowledge of Sellers, there exist no unexpired patent or patent application
which includes claims that could have a Material Adverse Effect.
(e) Except for the Publishing Contracts and as set forth in
Part 3.22(e) of the Disclosure Letter, the Acquired Companies have the right
to use, free and clear of any claims or rights of others, all trade secrets,
inventions, customer lists and manufacturing and secret processes required for
or incident to the manufacture or marketing of all products formerly or
presently sold, manufactured, licensed, under development or produced by it,
including products licensed from others. Any material payments required to be
made by an Acquired Company for the use of such trade secrets, inventions,
customer lists and manufacturing and secret processes are described in Part
3.22(e) of the Disclosure Letter. Except for the Publishing Contracts and as
set forth in Part 3.22(e) of the Disclosure Letter, the Acquired Companies are
not using or in any way making use of any confidential information or trade
secrets of any third party, including, without limitation, a former employer
of any present or past employee of an Acquired Company or of any of the
predecessors of an Acquired Company.
(f) All of the domain name registrations on the World Wide
Web held by any of the Acquired Companies are set forth in Part 3.22(f) of the
Disclosure Letter. Each such registration is, as of the Closing Date, in full
force and effect, is owned by one of the Acquired Companies and has not been
assigned, licensed or transferred to any other party. Except as set forth on
Part 3.22(f) of the Disclosure Letter, there are no Contracts, whether written
or oral, for development of a web site for any Acquired Company (including a
web site for the URL www.DoverPublications.com).
31
<PAGE>
3.23 CERTAIN PAYMENTS
Since December 31, 1995, no Acquired Company or director, officer,
agent, or employee of any Acquired Company, or any other Person associated
with or acting for or on behalf of any Acquired Company, has, in material
violation of a Legal Requirement, directly or indirectly (a) made any
contribution, gift, bribe, rebate, payoff, influence payment, kickback, or
other payment to any Person, private or public, regardless of form, whether in
money, property, or services (i) to obtain favorable treatment in securing
business, (ii) to pay for favorable treatment for business secured, (iii) to
obtain special concessions or for special concessions already obtained, for or
in respect of any Acquired Company or any Related Person of an Acquired
Company, or (b) established or maintained any fund or asset that has not been
recorded in the books and records of the Acquired Companies.
3.24 NO RELATED PERSON INDEBTEDNESS
Except as set forth in Part 3.24 of the Disclosure Letter, no
Acquired Company has (i) any accounts or loans receivable from any Related
Person or (ii) any accounts payable, loans payable or other liability to a
Related Person.
3.25 RELATIONSHIPS WITH RELATED PERSONS
Except as set forth in Part 3.25 of the Disclosure Letter, no Seller
or any Related Person of Sellers or of any Acquired Company has, or since
December 31, 1995 has had, any interest in any property (whether real,
personal, or mixed and whether tangible or intangible) used in or pertaining
to the Acquired Companies' businesses. No Seller or, to the Knowledge of
Sellers, any Related Person of Sellers or of any Acquired Company is a record
or beneficial owner of, or since December 31, 1995 has owned (of record or as
a beneficial owner), an equity interest or any other financial or profit
interest in a Person that has (i) had business dealings or a material
financial interest in any transaction with any Acquired Company or (ii)
engaged in competition with any Acquired Company with respect to any line of
the products or services of such Acquired Company (a "Competing Business") in
any market presently served by such Acquired Company. Except as set forth in
Part 3.25 of the Disclosure Letter, no Seller or, to the Knowledge of Sellers,
any Related Person of Sellers or of any Acquired Company is a party to any
Contract with, or has any claim or right against, any Acquired Company.
3.26 BROKERS OR FINDERS; ABSENCE OF OTHER AGREEMENTS
Neither Seller nor their agents has incurred any obligation or
liability, contingent or otherwise, for brokerage or finders' fees or agents'
commissions or other similar payment in connection with this Agreement.
Neither Seller nor any Acquired Company is a party to or bound by any letter
of intent or other agreement with any Person other than Buyer with respect to
the sale of any Acquired Company, any capital stock of any Acquired Company,
or all or any material portion of the assets of any Acquired Company.
32
<PAGE>
3.27 [INTENTIONALLY OMITTED]
3.28 YEAR 2000 ISSUES
Each Acquired Company has made a commercially reasonable assessment
of the Year 2000 Issues based upon ordinary business practices generally
applicable to the publishing industry and has a realistic and achievable
program for remediating the Year 2000 Issues on a timely basis. Except as set
forth in Part 3.28 of the Disclosure Letter, as of the date hereof, Year 2000
Issues have not had a Material Adverse Effect, and Sellers do not reasonably
anticipate that Year 2000 Issues will have a Material Adverse Effect on the
businesses of the Acquired Companies following the Closing.
SECTION 4--REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Sellers as follows:
4.1 ORGANIZATION AND GOOD STANDING
Buyer is a corporation duly organized, validly existing, and in good
standing under the laws of The Commonwealth of Massachusetts.
4.2 AUTHORITY; NO CONFLICT
(a) This Agreement constitutes the legal, valid, and binding
obligation of Buyer, enforceable against Buyer in accordance with its terms.
Upon the execution and delivery by Buyer or its designees of the Lease
Agreements (collectively, the "Buyer's Closing Documents"), the Buyer's
Closing Documents will constitute legal, valid, and binding obligations,
enforceable against Buyer or its designees in accordance with their respective
terms. Buyer has the full right, power, and authority to execute and deliver
this Agreement and the Buyer's Closing Documents and to perform its
obligations under this Agreement and the Buyer's Closing Documents.
(b) Except as set forth in SCHEDULE 4.2, neither the
execution and delivery of this Agreement by Buyer nor the consummation or
performance of any of the Contemplated Transactions by Buyer will give any
Person the right to prevent, delay, or otherwise interfere with any of the
Contemplated Transactions pursuant to:
(i) any provision of Buyer's Organizational
Documents;
(ii) any resolution adopted by the board of
directors or the stockholders of Buyer;
33
<PAGE>
(iii) any Legal Requirement or Order to which Buyer
may be subject; or
(iv) any Contract to which Buyer is a party or by
which Buyer may be bound.
Except as set forth in SCHEDULE 4.2, Buyer is not and will not be required to
obtain any Consent from any Person in connection with the execution and
delivery of this Agreement or the consummation or performance of any of the
Contemplated Transactions.
4.3 CERTAIN PROCEEDINGS
There is no pending Proceeding that has been commenced against Buyer
and that challenges, or may have the effect of preventing, delaying, making
illegal, or otherwise interfering with, any of the Contemplated Transactions.
To the Knowledge of Buyer, no such Proceeding has been Threatened.
4.4 BROKERS OR FINDERS
Neither Buyer nor its officers and agents have incurred any
obligation or liability, contingent or otherwise, for brokerage or finders'
fees or agents' commissions or other similar payment in connection with this
Agreement and Buyer will indemnify and hold Sellers harmless from any such
payment alleged to be due by or through Buyer as a result of the action of
Buyer or its officers or agents.
4.5 AVAILABILITY OF FUNDS
Buyer has available sufficient funds to enable it to pay the Purchase
Price and to consummate the Contemplated Transactions.
SECTION 5--COVENANTS OF SELLERS
5.1 ACCESS AND INVESTIGATION
34
<PAGE>
Between the date of this Agreement and the Closing Date, each Seller
will, and will cause each Acquired Company and its Representatives to, (a)
afford Buyer and its Representatives and prospective lenders and their
Representatives (collectively, "Buyer's Advisors") access at reasonable times
and in a manner that does not interfere with the business of the Acquired
Companies to each Acquired Company's personnel, properties, Contracts, books
and records, and other documents and data, (b) furnish Buyer and Buyer's
Advisors with copies of all such Contracts, books and records, and other
existing documents and data as Buyer may reasonably request and (c) furnish
Buyer and Buyer's Advisors with such additional financial, operating, and
other data and information as Buyer may reasonably request, including, without
limitation, monthly financial statements for each Acquired Company for periods
subsequent to the Balance Sheet.
5.2 OPERATION OF THE BUSINESSES OF THE ACQUIRED COMPANIES
Between the date of this Agreement and the Closing Date, each Seller
will, and will cause each Acquired Company to:
(a) conduct the business of such Acquired Company only in
the Ordinary Course of Business; and
(b) use their Best Efforts to preserve intact the current
business organization of such Acquired Company, keep available the services of
the current officers, employees, and agents of such Acquired Company, and
maintain the relations and good will with suppliers, customers, landlords,
creditors, employees, agents, and others having business relationships with
such Acquired Company.
5.3 NEGATIVE COVENANT
Except as otherwise expressly permitted by this Agreement, between
the date of this Agreement and the Closing Date, neither Seller will, nor will
cause any Acquired Company to, without the prior consent of Buyer, take any
affirmative action, or fail to take any reasonable action within their or its
control, as a result of which any of the changes or events listed in Section
3.16 is likely to occur.
5.4 REQUIRED APPROVALS
As promptly as practicable after the date of this Agreement, each
Seller will, and will cause each Acquired Company to, make all filings
required by Legal Requirements to be made by them in order to consummate the
Contemplated Transactions (including all filings under the HSR Act). Between
the date of this Agreement and the Closing Date, each Seller will, and will
cause each Acquired Company to, (a) cooperate with Buyer with respect to all
filings that Buyer elects to make or is required by Legal Requirements to make
in connection with the Contemplated Transactions, and (b) cooperate with Buyer
in obtaining all Consents identified in SCHEDULE 4.2.
35
<PAGE>
5.5 NOTIFICATION
Between the date of this Agreement and the Closing Date, each of
Buyer and Sellers will promptly notify the other parties hereto in writing if
such party obtains Knowledge of any fact or condition that causes or
constitutes a Breach of any of such party's representations and warranties as
of the date of this Agreement, or if such party becomes aware of the
occurrence after the date of this Agreement of any fact or condition that
would (except as expressly contemplated by this Agreement) cause or constitute
a Breach of any such representation or warranty had such representation or
warranty been made as of the time of occurrence or discovery of such fact or
condition. Should any such fact or condition require any change in the
Disclosure Letter if the Disclosure Letter were dated the date of the
occurrence or discovery of any such fact or condition, Sellers will promptly
deliver to Buyer a supplement to the Disclosure Letter specifying such change.
During the same period, each of Buyer and Sellers will promptly notify the
other parties hereto in writing of the occurrence of any Breach of any
covenant of such party in Section 5 or Section 6, as applicable, or of the
occurrence of any event that is reasonably likely to make the satisfaction of
the conditions in Section 7 impossible or unlikely.
5.6 PAYMENT OF INDEBTEDNESS BY RELATED PERSONS
Except as expressly provided in this Agreement, each Seller will
cause all indebtedness owed to an Acquired Company by either Seller or any
Related Person of either Seller to be paid in full prior to Closing. In
addition, subject to the limitations on Cash Withdrawals set forth in Section
5.11, each Seller will cause all indebtedness owed by an Acquired Company to
Sellers or any of their Related Persons to be paid, canceled or forgiven prior
to the Closing Date. Sellers shall provide evidence reasonably satisfactory to
Buyer of the foregoing at the Closing.
5.7 NO NEGOTIATION
Until such time, if any, as this Agreement is terminated pursuant to
Section 9, no Seller will, nor will cause any Acquired Company or any of their
Representatives to, directly or indirectly solicit, initiate, or encourage any
inquiries or proposals from, discuss or negotiate with, provide any non-public
information to, or consider the merits of any unsolicited inquiries or
proposals from, any Person (other than Buyer) relating to any transaction
involving the sale of the business or assets (other than in the Ordinary
Course of Business) of any Acquired Company, or any of the capital stock of
any Acquired Company, or any merger, consolidation, business combination, or
similar transaction involving any Acquired Company.
5.8 BEST EFFORTS
Between the date of this Agreement and the Closing Date, Sellers will
use their Best Efforts to cause the conditions in Sections 7 and 8 to be
satisfied.
36
<PAGE>
5.9 PUBLIC DISCLOSURE AND TRADING IN SECURITIES
None of Sellers, any Acquired Company or any of any Acquired
Company's Representatives shall disclose the fact that the parties are engaged
in discussions regarding the Contemplated Transactions, including, without
limitation, the identity of Buyer or any of its affiliates as a prospective
purchaser or any of the terms of the Contemplated Transactions or this
Agreement, except as may otherwise be required by Legal Requirements. Each
Seller acknowledges that Buyer is a public company and that the federal
securities laws prohibit trading in its securities on the basis of material
inside information; accordingly, each Seller undertakes to refrain from any
such trading and to take reasonable steps to prevent the Acquired Companies
and any of their Representatives from so doing.
5.10 COOPERATION BY SELLERS
Prior to the Closing, Sellers shall:
(a) allow Buyer to meet with and interview the employees of
the Acquired Companies during regular business hours; PROVIDED, HOWEVER, that
(x) nothing contained in this Agreement shall confer upon any employee of any
Acquired Company any right with respect to continuance of employment by the
applicable Acquired Company, nor shall anything herein interfere with the
right of Sellers, Buyer and the Acquired Companies to terminate the employment
of any of the employees of the Acquired Companies at any time, with or without
cause, or restrict Buyer or the Acquired Companies in the exercise of their
independent business judgment in modifying any of the terms and conditions of
the employment of the employees of the Acquired Companies and (y) no provision
of this Agreement shall create any third party beneficiary rights in any
employee of an Acquired Company, or any Related Persons thereof, with respect
to compensation, terms and conditions of employment and benefits; and
(b) cooperate with Buyer in the completion of a physical
count of all inventories of the Acquired Companies as soon as practical, but
not more than fourteen (14) days from the date of this Agreement.
5.11 CASH WITHDRAWALS
(a) Cash Withdrawals from all of the Acquired Companies from
the date of the Balance Sheet through the Closing Date shall not exceed
$437,000 per calendar month in the aggregate, pro rated for any fractional
calendar month.
(b) Between the date of this Agreement and the Closing Date,
Cash Withdrawals shall be made only in the Ordinary Course of Business of the
Acquired Companies (e.g., the Acquired Companies will not incur indebtedness,
will not accelerate the collection of accounts receivable and will not delay
the payment of liabilities in order to fund Cash Withdrawals).
37
<PAGE>
5.12 CONSULTING SERVICES
Mrs. Cirker agrees to perform such reasonable tasks and render such
advice with respect to the business conducted by the Acquired Companies as
Buyer shall request from time to time, including, without limitation,
cooperating with Buyer in its preparation of financial statements for the
Acquired Companies. From the Closing Date through December 31, 2000, Mrs.
Cirker will be available to work a total of two (2) days per week if and as
requested by Buyer. Buyer shall not ask Mrs. Cirker to work on Saturdays,
Sundays or any other day on which federal banks are closed for business. A
work day shall begin at 9:30 a.m. and end at 4:30 p.m. As consideration for
the consulting services to be performed pursuant to this Section by Mrs.
Cirker, Buyer agrees to pay Mrs. Cirker a cash payment in an amount equal to
$800 per day (pro rated for partial days) for each day that Mrs. Cirker
provides services to Buyer at its request. In addition, Buyer agrees to pay
the full health insurance premiums associated with Mrs. Cirker's continuation,
under the law known as COBRA, of the health insurance she currently receives
as an employee of the Acquired Companies from the date her employment with the
Acquired Companies ends (i.e. the Closing Date) until December 31, 2001. Mrs.
Cirker agrees to take whatever reasonable steps are necessary to elect COBRA
benefit continuation as of the Closing Date and will share with the Buyer any
pertinent information concerning her COBRA election and concerning the cost of
the health insurance premiums through December 31, 2001.
5.13 NO DISCHARGE OF ESTATE
The Estate agrees that it will not file or agree to any petition for
decree of final settlement for executrix's account or for a discharge of Mrs.
Cirker or executrix until the earlier of execution and delivery by Estate of
all documents related to the Section 338(h)(10) Election as the Buyer may
reasonably request and nine months after the Closing Date.
SECTION 6--COVENANTS OF BUYER
6.1 APPROVALS OF GOVERNMENTAL BODIES
As promptly as practicable after the date of this Agreement, Buyer
will, and will cause each of its Related Persons to, make all filings required
by Legal Requirements to be made by them, and to take such steps as are
required to obtain all necessary approvals, to consummate the Contemplated
Transactions (including all filings under the HSR Act). Between the date of
this Agreement and the Closing Date, Buyer will, and will cause each Related
Person to, cooperate with Sellers with respect to all filings that Sellers are
required by Legal Requirements to make in connection with the Contemplated
Transactions, and (ii) cooperate with Sellers in obtaining all Consents
identified in Part 3.2 of the Disclosure Letter; provided that this Agreement
will not require Buyer to dispose of or make any change in any portion of its
business or to incur any other burden to obtain a Governmental Authorization.
38
<PAGE>
6.2 BEST EFFORTS
Except as set forth in the proviso to Section 6.1, between the date
of this Agreement and the Closing Date, Buyer will use its Best Efforts to
cause the conditions in Sections 7 and 8 to be satisfied.
SECTION 7--CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE
Buyer's obligation to purchase the Shares and to take the other
actions required to be taken by Buyer at the Closing is subject to the
satisfaction, at or prior to the Closing, of each of the following conditions
(any of which may be waived by Buyer, in whole or in part):
7.1 ACCURACY OF REPRESENTATIONS
(a) All of Sellers' representations and warranties in this
Agreement (considered collectively), and each of these representations and
warranties (considered individually), must have been accurate in all material
respects as of the date of this Agreement, and must be accurate in all
material respects as of the Closing Date as if made on the Closing Date,
without giving effect to any supplement to the Disclosure Letter.
(b) Each of Sellers' representations and warranties in
Sections 3.3, 3.4, 3.11(e), 3.12 and 3.22(f) must have been accurate in all
respects as of the date of this Agreement, and must be accurate in all
respects as of the Closing Date as if made on the Closing Date, without giving
effect to any supplement to the Disclosure Letter.
7.2 SELLERS' PERFORMANCE
(a) All of the covenants and obligations that Sellers are
required to perform or to comply with pursuant to this Agreement at or prior
to the Closing (considered collectively), and each of these covenants and
obligations (considered individually), must have been duly performed and
complied with in all material respects.
(b) Each document required to be delivered pursuant to
Sections 2.4 and 3.4 must have been delivered, and each of the other covenants
and obligations in Sections 5.4, 5.7, 5.8, 5.9, 5.10 and 5.11 must have been
performed and complied with in all respects.
7.3 CONSENTS
Each of the Consents identified in Part 3.2 of the Disclosure Letter
(including, without limitation, approval under the HSR Act), and each Consent
identified in SCHEDULE 4.2, must have been obtained and must be in full force
and effect.
39
<PAGE>
7.4 NO PROCEEDINGS
Since the date of this Agreement, there must not have been commenced
or Threatened against Buyer, or against any Person affiliated with Buyer, any
Proceeding (a) involving any challenge to, or seeking damages or other relief
in connection with, any of the Contemplated Transactions, or (b) that may have
the effect of preventing, delaying, making illegal, or otherwise interfering
with any of the Contemplated Transactions.
7.5 NO CLAIM REGARDING STOCK OWNERSHIP OR SALE PROCEEDS
There must not have been made or Threatened by any Person any claim
asserting that such Person (a) is the holder or the beneficial owner of, or
has the right to acquire or to obtain beneficial ownership of, any stock of,
or any other voting, equity, or ownership interest in, any of the Acquired
Companies, or (b) is entitled to all or any portion of the Purchase Price
payable for the Shares.
7.6 NO PROHIBITION
Neither the consummation nor the performance of any of the
Contemplated Transactions will, directly or indirectly (with or without notice
or lapse of time), materially contravene, or conflict with, or result in a
material violation of, or cause Buyer or any Person affiliated with Buyer to
suffer any material adverse consequence under any Legal Requirement or
applicable Order.
SECTION 8--CONDITIONS PRECEDENT TO SELLERS' OBLIGATION TO
CLOSE
Sellers' obligation to sell the Shares and to take the other actions
required to be taken by Sellers at the Closing is subject to the satisfaction,
at or prior to the Closing, of each of the following conditions (any of which
may be waived by Sellers, in whole or in part):
8.1 ACCURACY OF REPRESENTATIONS
All of Buyer's representations and warranties in this Agreement
(considered collectively), and each of these representations and warranties
(considered individually), must have been accurate in all material respects as
of the date of this Agreement and must be accurate in all material respects as
of the Closing Date as if made on the Closing Date.
40
<PAGE>
8.2 BUYER'S PERFORMANCE
(a) All of the covenants and obligations that Buyer is
required to perform or to comply with pursuant to this Agreement at or prior
to the Closing (considered collectively), and each of these covenants and
obligations (considered individually), must have been performed and complied
with in all material respects.
(b) Buyer must have delivered each of the documents
required to be delivered by Buyer pursuant to Section 2.4(b) and must have
paid the Estimated Purchase Price pursuant to Section 2.4(b)(i).
8.3 CONSENTS
Each of the Consents identified in Part 3.2 of the Disclosure Letter
(including, without limitation, approval under the HSR Act), and each Consent
identified in Schedule 4.2, must have been obtained and must be in full force
and effect.
8.4 NO INJUNCTION
There must not be in effect any Legal Requirement or any injunction
or other Order that (a) prohibits any of the Contemplated Transactions and (b)
has been adopted or issued, or has otherwise become effective, since the date
of this Agreement.
SECTION 9--TERMINATION
9.1 TERMINATION EVENTS
This Agreement, by notice given prior to or at the Closing, may be
terminated:
(a) by either Buyer or Sellers if a material Breach of any
provision of this Agreement has been committed by the other party and such
Breach has not either been cured by the breaching party to the reasonable
satisfaction of the non-breaching party within ten (10) days after notice of
such Breach by the non-breaching party or been waived by the non-breaching
party;
(b) (i) by Buyer if any of the conditions in Article 7 has
not been satisfied as of or prior to the Closing Date, and Buyer has not
waived such condition on or before the Closing Date; or (ii) by Sellers if any
of the conditions in Article 8 has not been satisfied as of or prior to the
Closing Date and Sellers have not waived such condition on or before the
Closing Date;
(c) by mutual consent of Buyer and Sellers; or
41
<PAGE>
(d) by either Buyer or Sellers if the Closing has not
occurred (other than through the failure of any party seeking to terminate
this Agreement to comply fully with its obligations under this Agreement) on
or before October 31, 2000, or such later date as the parties may agree upon
in writing.
9.2 EFFECT OF TERMINATION
Each party's right of termination under Section 9.1 is in addition to
any other rights it may have under this Agreement or otherwise, and the
exercise of a right of termination will not be an election of remedies. If
this Agreement is terminated pursuant to Section 9.1, all further obligations
of the parties under this Agreement will terminate, except that the
obligations in Sections 11.1 and 11.3 will survive; PROVIDED, HOWEVER, that if
this Agreement is terminated by a party because of the Breach of the Agreement
by the other party or because one or more of the conditions to the terminating
party's obligations under this Agreement is not satisfied as a result of the
other party's failure to comply with its obligations under this Agreement, the
terminating party's right to pursue all legal remedies will survive such
termination unimpaired.
SECTION 10--INDEMNIFICATION; REMEDIES
10.1 SURVIVAL; RIGHT TO INDEMNIFICATION NOT AFFECTED BY KNOWLEDGE
Subject to the provisions of Section 10.4 below, all representations,
warranties, covenants, and obligations in this Agreement, the Disclosure
Letter, the supplements to the Disclosure Letter, the certificate delivered
pursuant to Section 2.4(a)(iv), and any other certificate or document
delivered pursuant to this Agreement will survive the Closing. The right to
indemnification, payment of Damages or other remedy based on such
representations, warranties, covenants, and obligations will not be affected
by any investigation conducted with respect to, or any knowledge acquired (or
capable of being acquired) at any time, whether before or after the execution
and delivery of this Agreement or the Closing Date, with respect to the
accuracy or inaccuracy of or compliance with, any such representation,
warranty, covenant, or obligation. Unless otherwise agreed upon in writing by
the parties hereto, the waiver of any condition based on the accuracy of any
representation or warranty, or on the performance of or compliance with any
covenant or obligation, will not affect the right to indemnification, payment
of Damages, or other remedy based on such representations, warranties,
covenants, and obligations.
10.2 INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLERS
Sellers will jointly and severally indemnify and hold harmless Buyer
and its assignees and the Acquired Companies (collectively, the "Indemnified
Persons") for, and will pay to the Indemnified Persons the amount of any
Damages arising, directly or indirectly, from or in connection with:
42
<PAGE>
(a) any Breach of any representation or warranty made by
Sellers or the Acquired Companies in this Agreement (without giving effect to
any supplement to the Disclosure Letter), the Disclosure Letter, the
supplements to the Disclosure Letter, or any other certificate or document
delivered by Sellers or the Acquired Companies pursuant to this Agreement,
other than Section 3.11, Section 12 or otherwise relating to Taxes;
(b) any Breach by Sellers or the Acquired Companies of any
covenant or obligation of Sellers or the Acquired Companies in this Agreement,
other than Section 3.11, Section 12 or otherwise relating to Taxes; or
(c) any claim by any Person for brokerage or finder's fees
or commissions or similar payments based upon any agreement or understanding
alleged to have been made by any such Person with Sellers or any Acquired
Company (or any Person acting on their behalf) in connection with any of the
Contemplated Transactions.
The remedies provided in this Section 10.2 will be the exclusive
remedies that are available to Buyer or the other Indemnified Persons except
for fraud or injunctive relief provided, however, that the indemnity for Taxes
shall not be covered by this Section 10.2, but shall be governed exclusively
by Section 12 hereof.
10.3 INDEMNIFICATION AND PAYMENT OF DAMAGES BY BUYER
Buyer will indemnify and hold harmless Sellers, and will pay to
Sellers the amount of any Damages arising, directly or indirectly, from or in
connection with:
(a) any Breach of any representation or warranty made by
Buyer in this Agreement or in any certificate delivered by Buyer pursuant to
this Agreement;
(b) any Breach by Buyer of any covenant or obligation of
Buyer in this Agreement; or
(c) any claim by any Person for brokerage or finder's fees
or commissions or similar payments based upon any agreement or understanding
alleged to have been made by such Person with Buyer (or any Person acting on
its behalf) in connection with any of the Contemplated Transactions;
The remedies provided in this Section 10.3 will not be
exclusive of or limit any other remedies that may be available to Sellers.
43
<PAGE>
10.4 TIME LIMITATIONS
(a) If the Closing occurs, Sellers will have no liability
(for indemnification or otherwise) with respect to any representation or
warranty, other than those in Sections 3.3, 3.11, 3.13 and 3.19, or any
covenant or obligation to be performed and complied with prior to the Closing
Date, unless on or before December 31, 2001 Buyer notifies Sellers of a claim
specifying the factual basis of that claim in reasonable detail to the extent
then known by Buyer. A claim with respect to Section 3.3, 3.13 or 3.19, or,
except as set forth in Section 12 hereof, a claim for indemnification or
reimbursement not based upon any representation or warranty or any covenant or
obligation to be performed and complied with prior to the Closing Date, may
only be made on or before December 31, 2001.
(b) If the Closing occurs, Buyer will have no liability
(for indemnification or otherwise) with respect to any representation or
warranty, or covenant or obligation to be performed and complied with prior to
the Closing Date, unless on or before December 31, 2001 Sellers notify Buyer
of a claim specifying the factual basis of that claim in reasonable detail to
the extent then known by Sellers. A claim for indemnification or reimbursement
not based upon any representation or warranty or any covenant or obligation to
be performed and complied with prior to the Closing Date, may only be made on
or before December 31, 2001.
10.5 LIMITATIONS ON AMOUNT--SELLERS
Sellers will have no liability (for indemnification or otherwise)
with respect to the matters described in clauses (a) through (d) of Section
10.2 until the total of all Damages with respect to such matters exceeds
$500,000 and then only for the amount by which such Damages exceed $500,000.
This Section 10.5 will not apply to any claim for indemnification pursuant to
Section 12, including without limitation, for a Breach of Seller's
representations and warranties under Section 3.11.
10.6 LIMITATIONS ON AMOUNT--BUYER
Buyer will have no liability (for indemnification or otherwise) with
respect to the matters described in clauses (a) through (c) of Section 10.3
until the total of all Damages with respect to such matters exceeds $500,000,
and then only for the amount by which such Damages exceed $500,000.
44
<PAGE>
10.7 PROCEDURE FOR INDEMNIFICATION--THIRD PARTY CLAIMS
(a) Promptly after receipt by an indemnified party under
Section 10.2 or 10.3 of notice of the commencement of any Proceeding against
it, such indemnified party will, if a claim is to be made against an
indemnifying party under such Section, give notice to the indemnifying party
of the commencement of such claim, but the failure to notify the indemnifying
party will not relieve the indemnifying party of any liability that it may
have to any indemnified party, except to the extent that the indemnifying
party has been prejudiced by the indemnified party's failure to give such
notice.
(b) If any Proceeding referred to in Section 10.7(a) is
brought against an indemnified party and it gives notice to the indemnifying
party of the commencement of such Proceeding, the indemnifying party will,
unless the claim involves Taxes (which shall be governed solely by Section
12), be entitled to participate in such Proceeding and, to the extent that it
wishes (unless the indemnifying party is also a party to such Proceeding and
joint representation would be inappropriate, as determined by a court of
competent jurisdiction), to assume the defense of such Proceeding with counsel
reasonably satisfactory to the indemnified party and, after notice from the
indemnifying party to the indemnified party of its election to assume the
defense of such Proceeding, the indemnifying party will not, as long as it
diligently conducts such defense, be liable to the indemnified party under
this Section 10 for any fees of other counsel or any other expenses with
respect to the defense of such Proceeding, in each case incurred by the
indemnified party in connection with the defense of such Proceeding. If the
indemnifying party assumes the defense of a Proceeding, (1) no compromise or
settlement of such claims may be effected by the indemnifying party without
the indemnified party's consent unless (A) there is no finding or admission of
any violation of Legal Requirements or any violation of the rights of any
Person and no effect on any other claims that may be made against the
indemnified party and (B) the sole relief provided is monetary damages that
are paid in full by the indemnifying party; and (2) the indemnified party will
have no liability with respect to any compromise or settlement of such claims
effected without its prior written consent. Failure by the indemnifying party
to notify the indemnified party of its election to defend a Proceeding within
fifteen days after notice thereof shall have been given to the indemnifying
party shall be deemed a waiver by the indemnifying party of its right to
defend such Proceeding; provided, however, that the indemnifying party shall
not be deemed to have waived its right to contest and defend against any claim
of the indemnified party for indemnification hereunder based upon or arising
out of such Proceeding.
(c) Notwithstanding the foregoing, if an indemnified party
determines in good faith that there is a reasonable probability that a
Proceeding may adversely affect it or its affiliates other than as a result of
monetary damages for which it would be entitled to indemnification under this
Agreement, the indemnified party may, by notice to the indemnifying party,
assume the exclusive right to defend, compromise, or settle such Proceeding,
but the indemnifying party will not be bound by any compromise or settlement
effected without its prior written consent (which may not be unreasonably
withheld).
45
<PAGE>
(d) Each Seller hereby consents to the non-exclusive
jurisdiction of any court in which a third party Proceeding is brought against
any Indemnified Person for purposes of any claim that an Indemnified Person
may have under this Agreement with respect to such Proceeding or the matters
alleged therein, and agrees that process may be served on such Seller with
respect to such a claim anywhere in the world.
10.8 PROCEDURE FOR INDEMNIFICATION--OTHER CLAIMS
A claim for indemnification for any matter not involving a
third-party claim may be asserted by notice to the party from whom
indemnification is sought.
10.9 COORDINATION WITH SECTION 12 (CERTAIN TAX MATTERS)
Without otherwise limiting the rights of any party to this Agreement
under this Section 10, all claims for indemnification for Damages arising from
Tax matters are governed solely by the provisions of Section 12 of this
Agreement.
SECTION 11--GENERAL PROVISIONS
11.1 EXPENSES
Except as otherwise expressly provided in this Agreement, each party
to this Agreement will bear its respective expenses incurred in connection
with the preparation, execution, and performance of this Agreement and the
Contemplated Transactions, including all fees and expenses of agents,
representatives, counsel, and accountants. Buyer will pay the entire HSR Act
filing fee and, upon the Closing of the Contemplated Transactions, Buyer will
reimburse Sellers for up to $25,000.00 in the aggregate for Sellers'
documented legal and accounting fees to parties who are not Related Persons of
Sellers or the Acquired Companies incurred in connection with the Contemplated
Transactions. Sellers will cause the Acquired Companies not to incur any
out-of-pocket expenses in connection with this Agreement or the Contemplated
Transactions. In the event of termination of this Agreement, the obligation of
each party to pay its own expenses will be subject to any rights of such party
arising from a Breach of this Agreement by another party.
46
<PAGE>
11.2 PUBLIC ANNOUNCEMENTS
Buyer and Sellers will consult with one another prior to issuing any
public announcement or similar publicity with respect to this Agreement or the
Contemplated Transactions. Such announcement or publicity will be issued, if
at all, at such time and in such manner as Buyer determines. Unless consented
to by Buyer in advance or required by Legal Requirements, prior to the
Closing, Sellers shall, and shall cause the Acquired Companies to, keep this
Agreement strictly confidential and may not make any disclosure of this
Agreement to any Person. Sellers and Buyer will consult with each other
concerning the means by which the Acquired Companies' employees, customers,
and suppliers and others having dealings with the Acquired Companies will be
informed of the Contemplated Transactions, and Buyer will have the right to be
present for any such communication.
11.3 CONFIDENTIALITY
Between the date of this Agreement and the Closing Date, Buyer and
Sellers will maintain in confidence, and will cause the directors, officers,
employees, agents, and advisors of Buyer and the Acquired Companies to
maintain in confidence any written, oral, or other information obtained in
confidence from another party or an Acquired Company in connection with this
Agreement or the Contemplated Transactions, unless (a) such information is
already known to such party or to others not bound by a duty of
confidentiality or such information becomes publicly available through no
fault of such party, (b) the use of such information is necessary or
appropriate in making any filing or obtaining any Consent required for the
consummation of the Contemplated Transactions, or (c) the furnishing or use of
such information is required by any Proceeding or Legal Requirement.
If the Contemplated Transactions are not consummated, each party will
return or destroy as much of such written information as the other party may
reasonably request.
11.4 NOTICES
All notices, Consents, waivers, and other communications under this
Agreement must be in writing and will be deemed to have been duly given when
(a) delivered by hand (with written confirmation of receipt), (b) sent by
telecopier (with written confirmation of receipt), provided that a copy is
mailed by registered mail, return receipt requested, or (c) when received by
the addressee, if sent by a nationally recognized overnight delivery service
(receipt requested), in each case to the appropriate addresses or telecopier
numbers, as the case may be, set forth below (or to such other addresses or
telecopier numbers, as the case may be, as a party may designate by notice to
the other parties):
Sellers: Mrs. Blanche Cirker
199 Woodside Drive
Hewlett, NY 11557
47
<PAGE>
with a copy to: Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, NY 10153
Attention: Jeffrey J. Weinberg, Esq.
Facsimile No.: (212) 310-8007
Buyer: Courier Corporation
15 Wellman Avenue
North Chelmsford, MA 01863-1334
Attention: James F. Conway III, President and CEO
Facsimile No.: (978) 251-0482
with a copy to: Goodwin, Procter & Hoar LLP
Exchange Place
Boston, MA 02109
Attention: F. Beirne Lovely, Jr., P.C.
Facsimile No.: (617) 570-8150
11.5 JURISDICTION; SERVICE OF PROCESS
Any Proceeding seeking to enforce any provision of, or based on any
right arising out of, this Agreement shall be brought against any of the
parties in the courts of the State of New York, County of New York, or, if it
has or can acquire jurisdiction, in the United States District Court for the
Eastern District of New York, and each of the parties consents to the
jurisdiction of such courts (and of the appropriate appellate courts) in any
such action or proceeding and waives any objection to venue laid therein.
Process in any action or proceeding referred to in the preceding sentence may
be served on any party anywhere in the world.
11.6 WAIVER
The rights and remedies of the parties to this Agreement are
cumulative and not alternative. Neither the failure nor any delay by any party
in exercising any right, power, or privilege under this Agreement or the
documents referred to in this Agreement will operate as a waiver of such
right, power, or privilege, and no single or partial exercise of any such
right, power, or privilege will preclude any other or further exercise of such
right, power, or privilege or the exercise of any other right, power, or
privilege. To the maximum extent permitted by Legal Requirements, (a) no claim
or right arising out of this Agreement or the documents referred to in this
Agreement can be discharged by one party, in whole or in part, by a waiver or
renunciation of the claim or right unless in writing signed by the other
party; (b) no waiver that may be given by a party will be applicable except in
the specific instance for which it is given; and (c) no notice to or demand on
one party will be deemed to be a waiver of any obligation of such party or of
the right of the party giving such notice or demand to take further action
without notice or demand as provided in this Agreement or the documents
referred to in this Agreement.
48
<PAGE>
11.7 ENTIRE AGREEMENT AND MODIFICATION
This Agreement supersedes all prior agreements between the parties
with respect to its subject matter and constitutes (along with the documents
referred to in this Agreement) a complete and exclusive statement of the terms
of the agreement between the parties with respect to its subject matter. This
Agreement may not be amended except by a written agreement executed by the
party to be charged with the amendment.
11.8 DISCLOSURE LETTER
(a) The disclosures in the Disclosure Letter, and those in
any supplement thereto, must relate only to the representations and warranties
in the Section of the Agreement to which they expressly relate or to which
they are specifically cross-referenced and not to any other representation or
warranty in this Agreement.
(b) In the event of any inconsistency between the
statements in the body of this Agreement and those in the Disclosure Letter
(other than an exception expressly set forth as such in the Disclosure Letter
with respect to a specifically identified representation or warranty), the
statements in the body of this Agreement will control.
11.9 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS
No party may assign any of its rights under this Agreement without
the prior consent of the other parties, except that Buyer may assign any of
its rights under this Agreement to any one or more of its direct or indirect
Subsidiaries; provided, however, that no such assignment by Buyer will relieve
it of any of its obligations hereunder. Subject to the preceding sentence,
this Agreement will apply to, be binding in all respects upon, and inure to
the benefit of the heirs, successors, estates, executors and permitted assigns
of the parties. Nothing expressed or referred to in this Agreement will be
construed to give any Person other than the parties to this Agreement any
legal or equitable right, remedy, or claim under or with respect to this
Agreement or any provision of this Agreement. This Agreement and all of its
provisions and conditions are for the sole and exclusive benefit of the
parties to this Agreement and their heirs, successors and assigns.
11.10 SEVERABILITY
If any provision of this Agreement is held invalid or unenforceable
by any court of competent jurisdiction, the other provisions of this Agreement
will remain in full force and effect. Any provision of this Agreement held
invalid or unenforceable only in part or degree will remain in full force and
effect to the extent not held invalid or unenforceable.
49
<PAGE>
11.11 SECTION HEADINGS, CONSTRUCTION
The headings of Sections in this Agreement are provided for
convenience only and will not affect its construction or interpretation. All
references to "Section" or "Sections" refer to the corresponding Section or
Sections of this Agreement unless otherwise specifically indicated. All words
used in this Agreement will be construed to be of such gender or number as
the circumstances require. Unless otherwise expressly provided, the word
"including" does not limit the preceding words or terms.
11.12 TIME OF ESSENCE
With regard to all dates and time periods set forth or referred to
in this Agreement, time is of the essence.
11.13 GOVERNING LAW
This Agreement will be governed by the laws of the State of New York
without regard to conflicts of laws principles.
11.14 COUNTERPARTS
This Agreement may be executed in one or more counterparts, each of
which will be deemed to be an original copy of this Agreement and all of
which, when taken together, will be deemed to constitute one and the same
agreement.
11.15 FURTHER ASSURANCES
The parties agree (prior to and after the Closing) (a) to furnish
upon request to each other such further information, (b) to execute and
deliver to each other such other documents, and (c) to do such other acts and
things, all as the other party may reasonably request for the purpose of
carrying out the intent of this Agreement and the documents referred to in
this Agreement.
11.16 PERSONAL PROPERTY
The parties hereby agree that
(a) all artwork listed on Part 11.16(a) of the Disclosure
Letter,
(b) all books listed on Part 11.16(b) of the Disclosure
Letter, provided that in no event will the removal of such books from the
archives of the Acquired Companies adversely impact the publishing operations
of any Acquired Company as historically conducted, and
(c) the two (2) automobiles used by Blanche Cirker and
described on Part 11.16(c) of the Disclosure Letter,
50
<PAGE>
are the personal property of Sellers, and Buyer will not obtain any rights in
or to such assets by reason of the Contemplated Transactions or otherwise.
Sellers shall have until one (1) year following the Closing to remove from
the Leased Real Property the artwork and books referred to in clauses (a) and
(b), respectively.
SECTION 12--CERTAIN TAX MATTERS
12.1 SECTION 338(h)(10) ELECTIONS
(a) Sellers and Buyer shall make or cause to be made joint
elections with respect to the purchase of each of the Acquired Companies
under Section 338(h)(10) of the IRC and under any similar provisions of
state, local and foreign law (the "Section 338(h)(10) Elections"). With
respect to each Acquired Company, Buyer shall prepare and provide to Sellers
a draft of IRS Form 8023, required schedules thereto, and any similar state,
local and foreign forms, and such draft or drafts shall be subject to the
review and approval of Sellers, which shall not be withheld or delayed
unreasonably. Sellers shall have up to twenty (20) calendar days to review
such draft or drafts and comment thereon.
(b) In connection with the Section 338(h)(10) Elections and
as required by Section 12.1(a) hereof, Buyer shall in good faith prepare a
draft allocation of the purchase price of each Acquired Company in accordance
with Section 338(b) of the IRC and any applicable Treasury Regulations, and
such draft allocation shall be subject to the review and approval of Sellers,
which shall not be withheld or delayed unreasonably. Sellers shall have up to
twenty (20) calendar days to review such draft allocations and comment
thereon. For purposes of determining the allocation of basis among the assets
of each Acquired Company, Sellers and Buyer agree that asset values will be
based on an appraisal by Deloitte and Touche LLP, which appraisal will
recognize that: (i) the inventory of the Acquired Companies at Closing will
be valued using the same process that was used to value the inventory of the
Acquired Companies as of February 28, 1998, which, as of such date, was
$13,656,000, (ii) the Acquired Companies' property, plant and equipment will
be valued based on an appraisal report as of the Closing Date for the assets
identified in Section 3.6(a), subject to changes for assets purchased or
retired between May 11, 1998 and the Closing Date, (iii) pre-publication
costs will be valued using the same process as was used to value
pre-publication costs as at December 31, 1997 (approximately $3.5 million on
such date), and (iv) all other assets and liabilities will be valued in
accordance with GAAP. The allocation of the purchase price to each Acquired
Company under this Section 12.1(b) shall be consistent with Section 2.2. As
among Sellers and Buyer, each Acquired Company and their respective Related
Persons, the valuations of the assets listed in such allocation pursuant to
this Section 12.1(b) shall be conclusive and binding, subject to any final
IRS, other administrative or judicial determination to the contrary, and all
such Persons shall file all Tax Returns consistently with the foregoing.
51
<PAGE>
(c) In the case of any dispute between the parties with
respect to the items to be prepared and provided by Buyer pursuant to
Sections 12.1(a) or 12.1(b) hereof, the parties shall resolve such dispute in
accordance with the procedure set forth in Section 2.5(d) hereof.
(d) Notwithstanding any other provision in this Agreement
to the contrary, including Section 12.1(c), if Sellers shall not have
delivered to Buyer an IRS Form 8023 and any similar state, local, and foreign
forms, in each case fully executed by each Seller and capable of being filed
by Buyer without any further action by Sellers, within 180 calendar days from
the Closing Date, Buyer may, at its option prepare and deliver to Sellers an
IRS Form 8023, required schedules thereto, and any similar state, local and
foreign forms (collectively, the "Forms"). Sellers shall have up to twenty
(20) calendar days from the date of delivery to execute the Forms and deliver
the same to Buyer. Except as required by law, Buyer and each Seller shall
file all Tax Returns consistently with the Forms. In the event Buyer proceeds
under this Section 12.1.(d), Buyer shall pay to Sellers the difference
between the Sellers' Tax liability and the Sellers' Tax liability as it would
have been had this Agreement not contained this Section 12.1(d) (assuming
nonetheless that valid Section 338(h)(10) Elections had been made), plus (ii)
any increase in the Seller's Tax liability arising from payments under this
Section 12.1(d).
12.2 TAX INDEMNIFICATION
(a) From and after the Closing Date, Sellers agree to
jointly and severally indemnify Buyer, each Acquired Company and their
respective Related Persons against and hold them harmless from (x) all Taxes
on or with respect to the Acquired Companies with respect to any taxable
period or portion thereof that ends on or before the Closing Date, in either
case including, but not limited to, Taxes, if any, imposed on the Acquired
Companies with respect to any such taxable period or portion thereof as a
result of the Section 338(h)(10) Elections and any Taxes imposed on the
Acquired Companies with respect to any such taxable period or portion thereof
attributable to the Contemplated Transactions (other than (i) Taxes to the
extent taken into account in calculating the Final Determination, and (ii)
those Taxes subject to Section 12.6 or the portion of Taxes allocated to
Buyer pursuant to Section 12.2(d)) and (y) all Damages arising out of any
Breach of any representation, warranty or covenant in Section 3.11 or this
Section 12. For purposes of this Section 12.2(a), Taxes imposed as a result
of the Section 338(h)(10) Elections shall include Income Taxes and Taxes of a
similar nature imposed on gain recognized by virtue of the Section 338(h)(10)
Elections, but shall not include Taxes incurred in subsequent periods.
(b) On and after the Closing Date, Buyer shall indemnify
Sellers for that portion of any increase in Seller's Income Tax liability
resulting from an increased allocation of the purchase price to
pre-publication costs of the Acquired Companies which results in the
recognition by Sellers of more ordinary income and less capital gain than
would be the case in the absence of such reallocation and any such increase
in Income Tax liability shall be determined taking into account, among other
things, both the increased ordinary income and decreased capital gain;
PROVIDED, HOWEVER, such indemnity shall be limited to the increase in
Sellers' Income Tax liability which is attributable to the amount of purchase
price allocated to such pre-publication costs in excess of $7.0 million. Any
indemnification payment pursuant to
52
<PAGE>
the preceding sentence of this Section 12.2(b) shall be increased by an
amount equal to the increase in Income Tax incurred by Sellers as a result of
any payment pursuant to this Section 12.2(b) (including under this sentence).
(c) Payment by the indemnifying party of any amount due
under this Section 12 shall be made within three (3) days following written
notice by the indemnified party that payment of such amounts to the
appropriate Governmental Body or other Person is due, but in no case shall
such payment be paid more than five (5) business days prior to the date such
amount is due to such Governmental Body or other Person.
(d) For purposes of this Agreement, in the case of any Tax
that is imposed on a periodic basis and is payable for a period that begins
before the Closing Date and ends after the Closing Date, the portion of such
Taxes payable for the period ending on the Closing Date shall be (i) in the
case of any Tax other than a Tax based upon or measured by income, the amount
of such Tax for the entire period multiplied by a fraction, the numerator of
which is the number of days in the period ending on the Closing Date and the
denominator of which is the number of days in the entire period and (ii) in
the case of any Tax based upon or measured by income, the amount which would
be payable if the taxable year ended upon the Closing Date, unless another
method is prescribed by applicable Tax law. In the case of any Tax based upon
or measured by capital (including net worth or long-term debt) or
intangibles, any amount thereof required to be allocated under this Section
12.2(d) shall be computed by reference to the level of such items on the
Closing Date.
12.3 PREPARATION OF TAX RETURNS
Buyer shall prepare or cause to be prepared and shall file or cause
to be filed all Tax Returns for the Acquired Companies for all periods ending
on or prior to the Closing Date which are filed after the Closing Date. Buyer
shall permit Sellers at least thirty (30) days to review and comment on each
such Tax Return and Buyer shall make such revisions to such Tax Returns as
are reasonably requested by Sellers, unless such request is not consistent
with Section 12.1 or Buyer reasonably rejects any such request, in which case
any dispute will be resolved in accordance with the procedure set forth in
Section 2.5(d) hereof.
12.4 CONTESTS
(a) After the Closing, Buyer shall promptly notify Sellers,
and Sellers shall promptly notify Buyer, in writing of the commencement of
any Tax audit or administrative or judicial proceeding or of any demand or
claim which, if determined adversely to the taxpayer, could be grounds for
indemnification under, respectively, Section 12.2(a) or 12.2(b). Such notice
shall contain factual information (to the extent known) describing the
asserted Tax liability. If any party hereto fails to give prompt notice of an
asserted Tax liability as required by this Section 12.4, then (i) if the
party entitled to notice is precluded by the failure to give prompt notice
from contesting the asserted Tax liability in both the administrative and
judicial forums, then such party shall not have any obligation to indemnify
for any loss arising out of such
53
<PAGE>
asserted Tax liability, and (ii) if the party entitled to notice is not so
precluded from contesting but such failure to give prompt notice results in a
detriment to such party or to such party's ability to fully and properly
contest such asserted Tax liability, then any amount which such party is
otherwise required to pay pursuant to Section 12.2(a) or 12.2(b), as
applicable, with respect to any such liability shall be reduced by the amount
of such detriment.
(b) Sellers may elect to direct, through counsel of their
own choosing and at their own expense, any audit, claim for refund and
administrative or judicial proceeding involving any asserted liability (any
such audit, claim for refund or proceeding relating to an asserted Tax
liability is referred to herein as a "Contest") with respect to which
indemnity may be sought under Section 12.2(a); PROVIDED, HOWEVER, that
Sellers may not settle, compromise, or otherwise dispose of such Contest
without the prior written consent of Buyer, which consent shall not be
unreasonably withheld or delayed. If Sellers elect to direct a Contest, they
shall within 30 calendar days of receipt of the notice of asserted Tax
liability provided for in Section 12.4(a) notify Buyer of their intent to do
so, and Buyer shall cooperate and shall cause each Acquired Company or its
successor to cooperate, at the expense of Sellers, in each phase of such
Contest. If Sellers elect not to direct the Contest or fail to notify Buyer
of their election as herein provided, Buyer or the Acquired Companies, may,
in good faith, pay, compromise or contest such asserted liability, subject to
Sellers' consent, which shall not be withheld or delayed unreasonably;
provided, however, that any reasonable expense incurred by Buyer in
connection with such assumption of the direction of the Contest shall be
included as Damages subject to Section 12.2(a) hereof. If Sellers direct such
Contest as hereinabove provided, Buyer and each Acquired Company (and any
successor thereto) shall empower (by power of attorney or such other
documentation as may be appropriate) such representatives of Sellers as the
latter may designate to handle such Contest.
(c) Buyer may at its election and solely at its expense,
participate in, but not control, any Contest with respect to which indemnity
may be sought under Section 12.2(b). Sellers shall be required to consult
with Buyer only on those aspects of any such Contest with respect to which
Buyer would be liable for indemnification under Section 12.2(b). Sellers
shall regularly inform Buyer of the status of any such Contest and shall
provide Buyer with any documents, correspondence, or other material or
information as Buyer may reasonably request relating thereto. Sellers shall
obtain the consent of Buyer, which shall not be unreasonably withheld or
delayed, prior to taking any significant actions on any matter in such
Contest with respect to which Buyer could be liable for indemnification. Such
significant actions include but are not limited to the filing of a motion or
appeal, as well as a settlement, compromise, or other disposition of the
matter. Sellers shall at all times act in good faith in satisfying their
obligations under this Section 12.4(c).
54
<PAGE>
12.5 COOPERATION AND EXCHANGE OF INFORMATION
Sellers and Buyer will provide each other with such cooperation and
information, including access to the applicable records of the Acquired
Companies, as any of them reasonably may request of another in filing any Tax
Return, amended return or claim for refund, determining a liability for Taxes
or a right to a refund of Taxes or participating in or conducting any audit
or other proceeding in respect of Taxes. Such cooperation and information
shall include, but shall not be limited to, providing copies of relevant Tax
Returns or portions thereof, together with any existing accompanying
schedules and related work papers and documents relating to rulings or other
determinations by taxing authorities. Each party shall reasonably be
available or make its employees available on a mutually convenient basis to
provide explanations of any documents or information provided hereunder. Each
party will retain all Tax Returns, schedules and work papers and all material
records or other documents relating to Tax matters of each Acquired Company
for its taxable period first ending after the Closing Date and for all prior
taxable periods until the expiration of the statute of limitations of the
taxable periods to which such Tax Returns and other documents relate. Any
information obtained under this Section 12.5 shall be kept confidential,
except as may be otherwise necessary in connection with the filing of Tax
Returns or claims for refund or in conducting an audit or other proceeding.
12.6 CONVEYANCE TAXES
Each of Buyer on the one hand and Sellers on the other hand will
bear one-half of the liability for any sales, transfer, stamp, real property
transfer and similar Taxes incurred as a result of the Contemplated
Transactions provided for hereunder. Payments shall be made to the party
otherwise primarily liable for any such Tax when reasonably requested, and
such party shall timely pay such Tax when due. Without limiting any party's
rights to indemnification under any other section of this Agreement, Buyer
and Sellers agree to indemnify each other for all Damages attributed to a
Breach of this Section 12.6.
12.7 TAX SHARING AGREEMENTS
All Tax sharing agreements or similar agreements with respect to or
involving each Acquired Company shall be terminated as of the Closing Date
and, after the Closing Date, no Acquired Company shall be bound thereby or
have any rights or liabilities thereunder.
12.8 MISCELLANEOUS
(a) The parties agree to treat all payments made by one
party to the other party under this Section 12 as adjustments to the
Estimated Purchase Price for Tax purposes.
(b) This Section 12 shall be the sole provision governing
indemnification for Tax matters under this Agreement. Without limiting the
foregoing, none of the limitations on indemnification in Section 10 (either
with respect to the time during which a claim may be made
55
<PAGE>
or the amount of indemnification payable or the amount of any deductible or
otherwise) shall apply to this Section 12.
(c) For purposes of this Section 12, all references to
Sellers, Buyer and each Acquired Company include successors thereto,
including the heirs, estates and successors of Sellers.
(d) The representations, warranties, covenants and
agreements of the parties hereto contained in Section 3.11 and in this
Section 12 (and the Disclosure Letter, the supplements to the Disclosure
Letter, the certificate delivered pursuant to Section 2.4(a)(iii), and any
other certificate or document delivered pursuant to this Agreement to the
extent such documents relate to Section 3.11 and/or this Section 12) shall
survive the Closing and shall remain in full force and effect until 60 days
after the expiration of the relevant statutes of limitations with respect to
claims for Taxes that would be indemnifiable by Sellers, Buyer or any
Acquired Company under this Section 12 of this Agreement.
(e) Except as required by law, Buyer will not amend any Tax
Return filed by the Acquired Companies for periods ending on or prior to the
Closing.
56
<PAGE>
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first written above.
COURIER CORPORATION
By: /s/ James F. Conway III
-----------------------------------------
Name: James F. Conway III
Title: Chairman, President and
Chief Executive Officer
/s/ Blanche Cirker
--------------------------------------------
Mrs. Blanche Cirker, Individually
ESTATE OF HAYWARD FRANCIS CIRKER
By: /s/ Blanche Cirker
-----------------------------------------
Mrs. Blanche Cirker
Executrix
