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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 2, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to ______________
Commission File No. 1-2267
THE MEAD CORPORATION
(Exact name of registrant as specified in its charter)
Ohio 31-0535759
(State of Incorporation) (I.R.S. Employer Identification No.)
MEAD WORLD HEADQUARTERS
COURTHOUSE PLAZA NORTHEAST
DAYTON, OHIO 45463
(Address of principal executive offices)
Registrant's telephone number, including area code: 513-495-6323
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No .
--- ---
The number of Common Shares outstanding at October 2, 1994 was 59,493,094.
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THE MEAD CORPORATION AND CONSOLIDATED SUBSIDIARIES
--------------------------------------------------
QUARTERLY PERIOD ENDED OCTOBER 2, 1994
--------------------------------------
PART I - FINANCIAL INFORMATION
------------------------------
ITEM 1. FINANCIAL STATEMENTS
--------------------
THE MEAD CORPORATION AND CONSOLIDATED SUBSIDIARIES
- --------------------------------------------------
<TABLE>
<CAPTION>
BALANCE SHEETS
- --------------
(All dollar amounts in millions)
October 2, Dec. 31,
1994 1993
---------- ---------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 19.1 $ 9.3
Accounts receivable 626.3 489.3
Inventories 382.4 439.4
Other current assets 73.1 71.9
--------- ---------
Total current assets 1,100.9 1,009.9
Investments and other assets:
Investees 88.9 65.1
Other assets 408.5 390.5
--------- ---------
497.4 455.6
Property, plant and equipment 4,251.9 4,043.3
Less accumulated depreciation and
amortization (1,922.7) (1,803.7)
--------- ---------
2,329.2 2,239.6
Net assets of Electronic Publishing segment 362.6 361.1
--------- ---------
Total assets $ 4,290.1 $ 4,066.2
========= =========
LIABILITIES AND SHAREOWNERS' EQUITY
- -----------------------------------
Current liabilities:
Notes payable $ 76.1 $
Accounts payable 311.1 326.4
Accrued liabilities 317.7 296.8
Current maturities of long-term debt 11.8 6.4
--------- ---------
Total current liabilities 716.7 629.6
Long-term debt 1,356.0 1,360.0
Commitments and contingent liabilities
Deferred items 537.8 498.6
Shareowners' equity:
Common shares 177.4 176.5
Additional paid-in capital 36.9 26.3
Foreign currency translation adjustment (2.1) (7.7)
Net unrealized gain on securities 4.9 9.1
Retained earnings 1,462.5 1,373.8
--------- ---------
1,679.6 1,578.0
--------- ---------
Total liabilities and
shareowners' equity $ 4,290.1 $ 4,066.2
========= =========
</TABLE>
See notes to financial statements
2
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THE MEAD CORPORATION AND CONSOLIDATED SUBSIDIARIES
- --------------------------------------------------
STATEMENTS OF EARNINGS
- ----------------------
(All amounts in millions, except per share amounts)
<TABLE>
<CAPTION>
Third Quarter Ended Three Quarters Ended
--------------------- ----------------------
Oct. 2, Oct. 3, Oct. 2, Oct. 3,
1994 1993 1994 1993
---------- --------- ---------- ----------
<S> <C> <C> <C> <C>
Net sales $1,208.2 $1,120.9 $3,381.7 $3,257.2
Cost of products sold 1,006.6 945.7 2,813.3 2,720.9
-------- -------- -------- --------
Gross profit 201.6 175.2 568.4 536.3
Selling, administrative and
research expenses 126.9 116.3 379.9 347.5
-------- -------- -------- --------
Earnings from operations 74.7 58.9 188.5 188.8
Other revenues (expenses) - net 2.9 1.1 .4 6.3
Interest and debt expense (27.7) (23.2) (77.6) (70.9)
-------- -------- -------- --------
Earnings before income taxes 49.9 36.8 111.3 124.2
Income taxes 20.0 21.0 44.5 54.2
-------- -------- -------- --------
Earnings before equity in net
earnings of investees 29.9 15.8 66.8 70.0
Equity in net earnings of investees 11.7 3.3 35.4 13.7
-------- -------- -------- --------
Earnings from continuing operations 41.6 19.1 102.2 83.7
Discontinued operations 11.6 10.9 31.0 19.1
-------- -------- -------- --------
Net earnings $ 53.2 $ 30.0 $ 133.2 $ 102.8
======== ======== ======== ========
Per common and common equivalent
share:
Earnings from continuing operations $ .68 $ .32 $ 1.70 $ 1.41
Discontinued operations .19 .18 .50 .31
-------- -------- -------- --------
Net earnings $ .87 $ .50 $ 2.20 $ 1.72
======== ======== ======== ========
Cash dividends per common share $ .25 $ .25 $ .75 $ .75
======== ======== ======== ========
Average common and common equivalent
shares outstanding (millions) 62.7 59.7 62.5 62.2
======== ======== ======== ========
</TABLE>
See notes to financial statements
3
<PAGE>
THE MEAD CORPORATION AND CONSOLIDATED SUBSIDIARIES
--------------------------------------------------
STATEMENTS OF CASH FLOWS
------------------------
(All dollar amounts in millions)
<TABLE>
<CAPTION>
Three Quarters
Ended
-----------------
Oct. 2, Oct. 3,
1994 1993
-------- -------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 133.2 $ 102.8
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation, amortization and depletion of
property, plant and equipment 138.3 164.6
Depreciation and amortization of other assets 26.8 23.0
Deferred income taxes 35.3 41.5
Investees-earnings and dividends (25.4) (5.7)
Discontinued operations (31.0) (19.1)
Other 11.8 (26.7)
Change in assets and liabilities:
Accounts receivable (133.5) (57.0)
Inventories 58.5 29.4
Other current assets (7.5) 11.0
Accounts payable and accrued liabilities .5 (77.8)
Cash provided by discontinued operations 19.8 8.2
------- -------
Net cash provided by operating activities 226.8 194.2
------- -------
Cash flows from investing activities:
Capital expenditures (217.9) (188.8)
Additions to equipment rented to others (37.4) (33.4)
Investments in and advances to investees (1.0) (.9)
Other (4.2) 5.1
------- -------
Net cash (used in) investing activities (260.5) (218.0)
------- -------
Cash flows from financing activities:
Additional borrowings 175.6 361.4
Payments on borrowings (175.2) (353.6)
Notes payable 76.1 42.5
Cash dividends paid (44.5) (44.2)
Common shares issued 11.5 13.7
------- -------
Net cash provided by financing activities 43.5 19.8
------- -------
Increase (decrease) in cash and cash equivalents 9.8 (4.0)
Cash and cash equivalents at beginning of year 9.3 18.4
------- -------
Cash and cash equivalents at end of period $ 19.1 $ 14.4
======= =======
</TABLE>
See notes to financial statements
4
<PAGE>
THE MEAD CORPORATION AND CONSOLIDATED SUBSIDIARIES
- --------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- -----------------------------
(All dollar amounts in millions, except per share amounts)
A - FINANCIAL STATEMENTS
The balance sheet at December 31, 1993 is condensed financial information taken
from the audited balance sheet. The interim financial statements are unaudited.
In the opinion of management, all adjustments (which consist only of normal
recurring adjustments) necessary to present fairly the financial position and
results of operations for the interim periods presented have been made.
B - ACCOUNTING POLICIES
On an interim basis, all costs subject to recurring year-end adjustments have
been estimated and allocated ratably to the quarters. Income taxes have been
provided based on the estimated tax rate for the respective years after
excluding infrequently occurring items whose specific tax effect is reported
during the same interim period as the related transaction.
C - INVENTORIES
The amount of inventories is (principally last-in, first-out method):
<TABLE>
<CAPTION>
Oct. 2, Dec. 31,
1994 1993
------- --------
<S> <C> <C>
Finished and semi-finished products $261.2 $295.5
Raw materials 57.4 79.4
Stores and supplies 63.8 64.5
------ ------
$382.4 $439.4
====== ======
</TABLE>
5
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D - INVESTEES
The summarized operating data for all investees is presented in the following
table:
<TABLE>
<CAPTION>
Third Quarter Ended Three Quarters Ended
------------------- --------------------
Oct. 2, Oct. 3, Oct. 2, Oct. 3,
1994 1993 1994 1993
------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenues $181.1 $141.0 $507.3 $416.8
====== ====== ====== ======
Gross profit $ 43.4 $ 17.3 $131.4 $ 65.8
====== ====== ====== ======
Net earnings $ 25.9 $ 8.1 $ 79.4 $ 35.4
====== ====== ====== ======
</TABLE>
E - ADDITIONAL INFORMATION ON CASH FLOWS
<TABLE>
<CAPTION>
Three Quarters Ended
--------------------
Oct. 2, Oct. 3,
1994 1993
--------- ---------
<S> <C> <C>
Cash paid for:
Interest $83.2 $81.5
===== =====
Income taxes $29.0 $26.2
===== =====
</TABLE>
F - LONG-TERM DEBT
Long-term debt at October 2, 1994, includes $245.5 of short-term borrowings
which have been classified as long-term debt since the company has the intent to
consummate these transactions on a long-term basis and has the ability to do so
under the existing $550 million bank credit agreement. After reduction for
these financings, the company has unused lines of credit of $304.5.
G - CHANGE IN ACCOUNTING ESTIMATE
Effective January 1, 1994, the depreciable lives of certain paper mill equipment
were changed to 20 years from 16 years to more closely reflect the current
service lives of the assets. The effect of the change was to increase net
earnings by $6.5 ($.10 per share) in the third quarter of 1994 and $19.5 ($.31
per share) for the three quarters of 1994.
6
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H - DISCONTINUED OPERATIONS
On October 4, 1994, the Company signed a definitive agreement to sell Mead Data
Central (MDC) to Reed Elsevier plc for $1.5 billion in cash. The sale is
expected to be completed by year end. As a result, MDC has been disclosed as a
discontinued operation and the financial statements for 1993 have been restated
to conform with the presentation used in 1994. Revenues of MDC for the third
quarter were $159.1 and $140.8 for 1994 and 1993, respectively, and revenues for
the three quarters were $489.4 and $403.5 for 1994 and 1993, respectively.
Income tax expense allocated to MDC was $8.9 and $8.3 for the third quarter of
1994 and 1993, respectively and $22.8 and $14.1 for the three quarters of 1994
and 1993, respectively.
7
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
---------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
RESULTS OF OPERATIONS
- ---------------------
On October 4, 1994, Mead signed a definitive agreement to sell Mead Data
Central, its online electronic publishing business, for $1.5 billion in cash.
The sale is expected to be completed by the end of 1994. As a result, the
financial statements of The Mead Corporation reflect Mead Data Central as a
discontinued operation.
Net Sales
- ---------
Net sales, for Mead's continuing operations, for the first three quarters of
1994 were $3.382 billion, a 4% increase over the same period of 1993. Third
quarter sales rose to $1.208 billion in 1994 compared to $1.121 billion in 1993.
Much of the improvement is due to volume increases in Mead's Packaging and
Paperboard segment and its Zellerbach distribution business. Selling prices for
many of Mead's products have been disappointing throughout 1994 but, recently,
demand has improved and markets have strengthened in several areas.
Operating Costs and Expenses
- ----------------------------
Gross profit as a percent of sales for the first three quarters of 1994 was
16.8% compared to 16.5% for the first three quarters of 1993. Gross profit for
the third quarter of 1994 was 16.7% compared to 15.6% for the same quarter of
1993. Improved operating performance and productivity improvements helped to
mitigate the effect of lower overall selling prices. Additionally, in the first
quarter of 1994, Mead lengthened the depreciable lives of certain paper mill
equipment to twenty years from sixteen years. Without the depreciation change
gross profit as a percent of sales would have been 15.8% for the third quarter
and 15.9% for the first three quarters of 1994.
Third quarter 1994 selling, administrative, and research expenses increased 9.1%
from the third quarter of 1993. For the first three quarters, these expenses
have increased 9.3% over 1993 levels. Most of the increase came from higher
sales-related expenses at Zellerbach and Mead Packaging and continuing
restructuring costs, most notably at Zellerbach.
Other Revenues
- --------------
Other revenues were $2.9 million for the third quarter of 1994 and $.4 million
for the first three quarters compared to $1.1 million and $6.3 million for the
comparable periods of 1993. In the first quarter of 1994, Mead incurred $12.1
million ($7.4 million after tax, or 12 cents per share) in losses relating to
adjustments to market of certain interest rate options, principally a one-time
loss on the close-out of a leveraged written option embedded in an interest rate
swap transaction with Bankers Trust Company.
Interest and Debt Expense
- -------------------------
Interest and debt expense was $27.7 million in the third quarter of 1994
compared to $23.2 million in the third quarter of 1993. Interest and debt
expense for the first three quarters of 1994 increased 9.4% to $77.6 million in
1994 from $70.9
8
<PAGE>
million in 1993. Higher interest rates and slightly higher debt levels in 1994
account for the increase.
Income Taxes
- ------------
The effective tax rate was 40.1% for the third quarter and 40.0% for the first
three quarters of 1994. In 1993, the effective tax rates were 57.1% and 43.6%
for the third quarter and first three quarters, respectively. Because of
federal tax legislation enacted in the third quarter of 1993, Mead revalued its
deferred tax liabilities and provided additional taxes on its income through the
end of the third quarter to reflect the higher corporate tax rate. The effect
of the deferred tax revaluation was a charge to earnings of $7.6 million ($.12
per share) in the third quarter of 1993.
Equity in Net Earnings of Investees
- -----------------------------------
Selling prices for wood products were strong throughout the third quarter of
1994. This, along with steadily improving demand and selling prices for pulp,
were the main reasons for the increase in third quarter earnings from investees
from $3.3 million in 1993 to $11.7 million in 1994. Year-to-date in 1994, wood
products prices, though erratic, have averaged significantly higher than 1993
levels. Consequently, equity in net earnings of investees for three quarters
was $35.4 million in 1994, more than twice the earnings of the same period of
1993. In British Columbia, Canada, where Mead's principal investee, Northwood
Forest Industries, Ltd., is located, labor negotiations are proceeding in the
pulp and sawmill industries. A tentative sawmill labor agreement was reached in
late September but requires a vote of the union membership. The union
representing pulp and paper mill employees has targeted another Canadian company
to establish pattern bargaining for those mills.
Earnings from Discontinued Operations
- -------------------------------------
This caption represents the earnings of Mead Data Central (MDC), Mead's
electronic publishing segment, which Mead has reached an agreement to sell to
Reed Elsevier plc. For the first three quarters of 1994, both sales and
earnings of MDC are significantly higher than 1993 levels. Increased search
volume, particularly in Business Information Services, has accounted for some of
the increase. Additionally, 1994 has benefitted from actions taken in 1993 to
reshape and expand its sales force and to restructure the business with an
emphasis on lowering costs. For the same reasons, third quarter sales were
about 13% higher in 1994 than in 1993 and third quarter pre-tax earnings
increased about 7% from the prior year.
Financial Data by Business
- --------------------------
Comparisons between 1994 and 1993 earnings in the following discussion have been
made prior to the effect on depreciation expense resulting from the change in
asset lives. This change increased earnings of the Paper segment by $21.3
million for the first three quarters of 1994 and the earnings of the Packaging
and Paperboard segment by $10.4 million and approximately one-third of those
amounts for the third quarter alone.
Third quarter 1994 sales to unaffiliated customers for the Paper segment were
slightly higher than 1993. This increase was driven primarily by volume
increases at Mead's Chillicothe, Ohio, Fine Paper mill and its Specialty Paper
Division located in South Lee, Massachusetts, and from increased sales of excess
9
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pulp. For the first three quarters of 1994, sales of the Paper segment are
sightly lower than 1993 levels, Throughout 1994, selling prices have averaged
lower than 1993, particularly for Mead's Kingsport, Tennessee, Fine Paper mill.
Toward the end of the third quarter, the segment has seen improvements in
backlogs and demand in selected grades and is optimistic about realizing
recently announced price increases, though some of the increase is a result of
rising fiber costs. Due to weak selling prices throughout the segment and
continuing losses at Kingsport, 1994 earnings on a comparable basis are about 8%
below 1993 for both the third quarter and first three quarters.
In the Packaging and Paperboard segment, sales for the third quarter of 1994
were significantly higher than they were in 1993. For the first three quarters
of 1994, sales are about 6% higher than in 1993. The third quarter of 1993 felt
the effect of disappointing U.S. soft drink sales and weak economic conditions
in Europe which resulted in downward pressure on sales volume and prices for
Coated Natural Kraft (CNK) and products of Mead Packaging. Though sales volume
has since rebounded, selling prices for CNK and beverage packaging have not.
Announced selling price increases have been difficult to realize. Some pricing
improvement, however, is expected at Mead Containerboard partially in response
to rising linerboard costs in the converting operations. Because of weak
selling prices, comparable earnings for the first three quarters of 1994 are
about 14% behind 1993. However, this segment's earnings for the third quarter
of 1994 have improved over 1993, partly because of poor 1993 market conditions,
but also because of strong CNK production and Wood Products operations at Mead
Coated Board.
Third quarter 1994 sales in Distribution and School and Office Products segment
were about 7% higher than 1993 sales. For the first three quarters, sales have
improved about 5% over 1993. Third quarter 1994 sales for Mead's Zellerbach
distribution business exceeded 1993 levels in all three of its business units.
At Mead School and Office Products, a higher mix of value-added products
contributed to a year-to-date sales increase. Sales for the third quarter of
1994 were down slightly from 1993. Third quarter earnings for the segment were
significantly higher in 1994 than 1993 due primarily to the success of the Mead
School and Office Products back-to-school season. For the first three quarters,
earnings are slightly behind last year. Higher operating expenses and continued
costs of consolidating and restructuring at Zellerbach are the primary reasons.
Liquidity and Capital Resources
- -------------------------------
Mead's consolidated working capital was $384.2 million at October 2, 1994,
compared to $380.3 at December 31, 1993. The current ratio at October 2, 1994,
was 1.5 compared to 1.6 at December 31, 1993.
Borrowed capital (long-term debt) as a percent of total capital was 44.7% at
October 2, 1994 in comparison to 46.3% at December 31, 1993.
As a result of the sale of MDC, Mead will net over one billion dollars in after
tax proceeds. Mead has authorized a $350 million stock buyback over time and
has authorized a debt committee of the Board of Directors to approve a program
to repurchase $200 million to $300 million of long-term debt contingent upon
successful completion of the sale of MDC. Mead has also announced its short
term debt portfolio (much of which is classified as long-term debt) will be
reduced
10
<PAGE>
$200 million to $300 million after the sale is completed. Mead intends to
reduce its debt to total capital ratio from its current level of 45 percent to
its long term target range of 30 percent to 40 percent.
Mead has announced that it plans to sell its Kingsport, Tennessee, paper mill
which primarily produces uncoated paper along with some coated specialty grades
used for label stock. Part of Mead's Fine Paper division, the mill employees
830 people and had 1993 sales of approximately $135 million.
Capital expenditures totaled $217.9 million and $67.9 million for the three
quarters and third quarter of 1994, respectively. In 1993, capital expenditures
were $188.8 million for the three quarters and $64.1 million in the third
quarter. Much of the 1994 spending was at the Escanaba, Michigan, and
Chillicothe, Ohio, paper mills to upgrade Mead's coated paper system.
Mead also announced it will invest $85 million in capital improvements at its
Mahrt Coated Board Mill in Phenix City, Alabama, to increase productivity and
quality, and add incremental capacity. Spending is expected to start in 1995
and extend into early 1997.
Mead uses various financial instruments, including derivative products, with
off-balance sheet risk, to manage its interest rate exposure. These derivatives
include options, forward contracts and interest rate swaps. The current
derivative portfolio includes:
(A) Interest rate caps with notional amount of $400 million having an
average strike rate of 10.1% and an average maturity of 4.4 years.
Purchased caps give Mead the right to receive a payment to offset an
increase in interest rates above strike rates. Mead uses caps to
protect its floating rate debt from abnormal rate increases such as
those experienced in the early 1980's.
(B) Interest rate swaps with a notional amount of $275 million convert a
floating rate liability into a fixed rate liability for one party and
achieves the reverse for the other party. These swap agreements do not
involve a transfer of any principal dollars, only the exchange of
interest payments for a specified period. Mead uses swaps to adjust
its mix of fixed and floating rate debt. The average fixed interest
rate received is 5.8% for an average maturity of 3.0 years and the
average fixed interest rate paid is 8.4% for an average maturity of
4.7 years.
In the opinion of management, the risk of loss to the Company in the event of
nonperformance by any counterparty under these agreements is not significant.
All counterparties are rated A or higher by Moody's and Standard and Poor's with
the majority of the contracts executed with counterparties rated AA or higher by
both agencies.
At the end of the third quarter, the Company paid a fixed rate or variable
rate subject to a capped rate on 72% of its debt and paid a floating rate of
interest on the remainder. A change of 1% in the floating interest rate, on an
annual basis, would result in a $.06 change in net earnings per share for the
year. The
11
<PAGE>
estimated market value of long-term debt, excluding capital leases, was $25.5
million less than the book value at the end of the third quarter of 1994.
The Company also uses foreign currency options and forward contracts to reduce
the Company's risk due to foreign currency exchange rate movement. Gains and
loses on these contracts generally offset losses and gains on the assets,
liabilities, and transactions being hedged. These financial instruments are
used to minimize exposure and to reduce risk from exchange rate fluctuations in
the regular course of the Company's global business. Based on the opinion of
management, no material exposure exists in any of these instruments.
12
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PART II - OTHER INFORMATION
-----------------
ITEM 1. LEGAL PROCEEDINGS
-----------------
Reference is made to the first paragraph under "Item 3. Legal Proceedings"
in Mead's Annual Report on Form 10-K for the fiscal year ended December 31,
1993, regarding a lawsuit filed in March, 1989 by the Ohio Attorney General
against Mead alleging violations of State solid waste and water pollution laws
at two landfills (the Paint Street Site and the Storage Depot Site) owned and
operated by Mead Fine Paper Division's Chillicothe, Ohio mill. A consent decree
was entered in the proceeding on August 12, 1994. Mead agreed to obtain an
NPDES permit for the Storage Depot Site, to refrain from operating spray fields,
to perform post-closure monitoring, to extend the leachate collection system at
the Paint Street Site, to pay a fine of $150,000, to pay costs of $10,000 and to
make a contribution of $55,000 to State and Ross County, Ohio environmental
community programs in settlement of the proceeding.
Reference is made to the fourth paragraph under "Item 3. Legal Proceedings"
in Mead's Annual Report on Form 10-K for the fiscal year ended December 31,
1993, regarding an appeal entitled Beazer East Inc. v. The Mead Corporation, No.
93-3372, filed in the United States Court of Appeals for the Third Circuit. An
opinion by the Court was filed September 12, 1994 which reversed the order of
the United States District Court for the Western District of Pennsylvania which
had granted summary judgment to Mead and dismissed Beazer's claim for
contribution. The Court decided there was no "clear and unambiguous intent to
transfer all CERCLA liability to Beazer" which leaves "both Beazer and Mead
responsible for their fair share of the cleanup costs associated with the Coke
Plant." The Court remanded the case to the United States District Court for the
Western District of Pennsylvania for further proceedings on Beazer's
contribution claim. Mead has filed a motion with the Court to reconsider its
decision. The potential costs and damages associated with this proceeding are
not determinable at this time.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(a) Exhibits
(10) Material Contracts:
(1) Purchase Agreement dated October 4, 1994 between The Mead
Corporation and Reed Elsevier plc.
(11.1), (11.2), (11.3) Calculations of Net Earnings per Share.
(27) Financial Data Schedule
(b) No current reports on Form 8-K were filed with the Commission in the
third quarter of 1994.
13
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: November 10, 1994
THE MEAD CORPORATION
(Registrant)
By W. R. Graber
-----------------------------
W. R. Graber
Vice President and
Chief Financial Officer
14
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Exhibit (10)(1)
________________________________________________________________________________
PURCHASE AGREEMENT
BY AND AMONG
THE MEAD CORPORATION,
REED ELSEVIER plc
AND
BUYERS LISTED ON SECTION 1.1(a)
OF
THE DISCLOSURE SCHEDULE
DATED AS OF OCTOBER 4, 1994
________________________________________________________________________________
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C> <C>
PARTIES AND PREAMBLES...................................................... 1
ARTICLE I PURCHASE AND SALE OF ASSETS
AND ASSUMPTION OF LIABILITIES............................... 1
Section 1.1 Purchase and Sale..................................... 1
Section 1.2 Consideration......................................... 5
Section 1.3 Closing............................................... 5
Section 1.4 Deliveries by Seller.................................. 6
Section 1.5 Deliveries by Buyers and Parent....................... 7
Section 1.6 Post-Closing Adjustment............................... 8
ARTICLE II RELATED MATTERS............................................. 10
Section 2.1 Use of the Seller's Mead Trademarks and Logos......... 10
Section 2.2 Books and Records of the Business..................... 11
Section 2.3 No Ongoing or Transition Services..................... 12
Section 2.4 Intercompany Accounts................................. 13
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER.............. 14
Section 3.1 Organization.......................................... 14
Section 3.2 Authorization......................................... 14
Section 3.3 Capitalization........................................ 15
Section 3.4 Interests in Other Entities........................... 15
Section 3.5 Consents and Approvals; No Violations................. 16
Section 3.6 Financial Statements.................................. 16
Section 3.7 Absence of Undisclosed Liabilities.................... 17
Section 3.8 Absence of Material Adverse and Other Changes......... 17
Section 3.9 Title, Ownership and Related Matters.................. 19
Section 3.10 Properties and Assets Necessary for Conduct of
Business.............................................. 20
Section 3.11 Leases................................................ 20
Section 3.12 Intellectual Property................................. 20
Section 3.13 Non-Proprietary Computer Software..................... 22
Section 3.14 Litigation............................................ 22
Section 3.15 Compliance with Applicable Law........................ 22
Section 3.16 Certain Contracts and Arrangements.................... 23
Section 3.17 Insurance............................................. 23
Section 3.18 Employee Benefit Plans; ERISA......................... 24
Section 3.19 Taxes................................................. 25
</TABLE>
i
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<TABLE>
<CAPTION>
Page
----
<S> <C> <C> <C> <C>
Section 3.20 Environmental Matters.................................. 26
Section 3.21 Certain Fees........................................... 27
Section 3.22 Receivables............................................ 27
Section 3.23 Projections............................................ 27
Section 3.24 Name Holding Subsidiaries.............................. 28
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER...................... 28
Section 4.1 Organization and Authority of Buyers................... 28
Section 4.2 Consents and Approvals; No Violations.................. 29
Section 4.3 Financing.............................................. 29
Section 4.4 Litigation............................................. 29
Section 4.5 Certain Fees........................................... 30
ARTICLE V COVENANTS.................................................... 30
Section 5.1 Conduct of the Business................................ 30
Section 5.2 Access to Information.................................. 31
Section 5.3 Regulatory Compliance.................................. 32
Section 5.4 Consents; Assignments.................................. 33
Section 5.5 Best Efforts........................................... 34
Section 5.6 Government Contracts................................... 35
Section 5.7 Seller's Guarantees.................................... 36
Section 5.8 Public Announcements................................... 36
Section 5.9 Intentionally Omitted.................................. 36
Section 5.10 Exercise of Options.................................... 36
Section 5.11 Employees; Employee Benefits........................... 37
Section 5.12 Allocation of Purchase Price........................... 41
Section 5.13 Guaranty............................................... 42
Section 5.14 Noncompetition......................................... 42
Section 5.15 Foreign Assets......................................... 43
Section 5.16 Cash................................................... 43
Section 5.17 Financial Statements................................... 44
Section 5.18 Proprietary Software................................... 44
Section 5.19 Recordation of Seller's Title.......................... 44
Section 5.20 Multiple Buyers........................................ 44
Section 5.21 Confidentiality........................................ 45
ARTICLE VI CERTAIN TAX MATTERS.......................................... 47
Section 6.1 Section 338(h)(10) Election............................ 47
Section 6.2 Return Filings and Liability for Taxes................. 48
Section 6.3 Transfer and Similar Taxes............................. 51
Section 6.4 Tax Indemnification.................................... 51
Section 6.5 Procedures Relating to Indemnification of Tax Claims... 52
Section 6.6 Refunds and Credits.................................... 54
</TABLE>
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Section 6.7 Termination of Tax Sharing Agreements.................. 54
Section 6.8 Carrybacks............................................. 55
Section 6.09 Employee Payroll Information........................... 55
Section 6.10 Prepaid Subscriptions.................................. 55
ARTICLE VII CONDITIONS TO OBLIGATIONS OF THE PARTIES..................... 55
Section 7.1 Conditions to Each Party's Obligation.................. 55
Section 7.2 Conditions to Obligations of Seller.................... 56
Section 7.3 Conditions to Obligations of Parent and Buyer.......... 56
ARTICLE VIII TERMINATION; AMENDMENT; WAIVER............................... 57
Section 8.1 Termination............................................ 57
Section 8.2 Procedure and Effect of Termination.................... 58
Section 8.3 Amendment, Modification and Waiver..................... 59
ARTICLE IX SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION................. 59
Section 9.1 Non-Survival of Representations and Warranties......... 59
Section 9.2 Seller's Agreement to Indemnify........................ 59
Section 9.3 Buyers' Agreement to Indemnify......................... 61
Section 9.4 Third Party Indemnification............................ 62
Section 9.5 Exclusive Remedy....................................... 63
Section 9.6 Tax Treatment of Indemnification Payments.............. 63
ARTICLE X DEFINITIONS.................................................. 63
ARTICLE XI MISCELLANEOUS................................................ 74
Section 11.1 Title Insurance........................................ 74
Section 11.2 Further Assurances..................................... 74
Section 11.3 Notices................................................ 74
Section 11.4 Severability........................................... 76
Section 11.5 Binding Effect; Assignment............................. 76
Section 11.6 No Third Party Beneficiaries........................... 77
Section 11.7 Interpretation......................................... 77
Section 11.8 Jurisdiction and Consent to Service.................... 77
Section 11.9 Entire Agreement....................................... 77
Section 11.10 Governing Law.......................................... 77
Section 11.11 Specific Performance................................... 78
Section 11.12 Counterparts........................................... 78
Section 11.13 Bulk Sales Laws........................................ 78
Section 11.14 Expenses............................................... 78
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EXHIBIT A - Bill of Sale
EXHIBIT B - Undertaking
EXHIBIT C - Trademark License
EXHIBIT D - Transition Agreement
</TABLE>
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PURCHASE AGREEMENT
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PURCHASE AGREEMENT, dated as of October 4, 1994, by and among Seller,
Parent and Buyers.
WHEREAS, pursuant to the terms and conditions of this Agreement,
Seller desires to sell to Buyers, and Buyers desire to purchase from Seller, the
Business as a going concern, including, without limitation, (i) certain assets
and liabilities of MDC, (ii) certain assets and liabilities of the Other
Divisions, and (iii) the Shares, all as more fully described below.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants, agreements and conditions hereinafter
set forth, and intending to be legally bound hereby, the parties hereto agree as
follows:
ARTICLE I
PURCHASE AND SALE OF ASSETS
AND ASSUMPTION OF LIABILITIES
Section 1.1 Purchase and Sale.
(a) Subject to paragraphs (d) and (e) of this Section 1.1 and to the
other terms and conditions of this Agreement, at the Closing, Seller will sell,
convey, assign, transfer and deliver or cause to be sold, conveyed, assigned,
transferred and delivered to the respective Buyers, and Buyers will purchase,
acquire and accept from Seller, all of Seller's rights, title and interests in
and to the respective Assets, as more particularly set forth on Section 1.1(a)
of the Disclosure Schedule, free and clear of all Liens, other than Permitted
Liens, including, without limitation, the following:
(i) the Property;
(ii) all Leases and all contracts, commitments or other
agreements relating thereto, which relate to the Business;
<PAGE>
(iii) all rights of Seller relating to LEXIS/NEXIS;
(iv) all rights of Seller relating to all Proprietary Software,
Non-Proprietary Software, Online systems, telecommunication systems and
other systems and services (and the components thereof), in addition to
LEXIS/NEXIS, relating to or used primarily in the Business, and any
documentation and resource material relating thereto;
(v) all raw materials, work-in-process, finished goods, supplies
and other inventories and fixtures which relate to the Business and the
leasehold improvements, plant and equipment located on any of the
properties referred to in subparagraphs (i) or, to the extent owned by
Seller or any of the Companies, (ii) of this Section 1.1(a);
(vi) all rights of Seller in items of computer hardware utilized
in connection with the Business which, pursuant to the terms of various
contracts, are located at the business locations of the other parties to
such contracts;
(vii) all rights in, to and under all contracts, licenses,
leases (other than leases for real property), commitments, purchase orders
and other agreements which relate primarily to the Business, including the
Material Agreements;
(viii) the Shares;
(ix) the Star Data Shares;
(x) all customer lists of whatever nature of the Business;
(xi) all accounts and other receivables and prepaid expenses of
the Business;
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(xii) subject to Section 2.1 hereof, the Intellectual Property,
including all such trademarks, trade names, service marks, service names,
logos, assumed names, copyrights, patents, registrations and applications
for the foregoing, trade secrets, know-how, product configuration designs,
and trade dress, and all licenses thereof, and all other intellectual
property rights and other proprietary rights of the Business;
(xiii) all permits, licenses, approvals and authorizations by
governmental authorities or third parties which are used or held for use in
the Business;
(xiv) all of the Business' books and records, as provided in
Section 2.2 hereof;
(xv) all other files, indices, market research studies, surveys,
reports, analyses and similar information relating to or used in the
Business;
(xvi) all personal property and interests therein, including
computer hardware, machinery, equipment, furniture, office equipment,
communications equipment, vehicles, storage tanks, spare and replacement
parts, fuel and other tangible property, to the extent owned by Seller or
any of the Companies and primarily relating to or used in the Business,
located on any of the properties referred in subparagraphs (i) or (ii) of
this Section 1.1(a);
(xvii) all petty cash located at the various locations of the
Business;
(xviii) all rights, claims, credits, causes of action or rights
of set-off against third parties relating primarily to the Business or to
the extent that any rights, claims, credits, causes of action or rights of
set-off relate to the Assumed Liabilities;
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(xix) the goodwill of the Business in or arising from the Assets
and the business represented thereby; and
(xx) all other assets reflected on the Final Statement.
(b) At the Closing, Seller shall also cause Mead Realty to sell,
convey, assign, transfer and deliver to Buyers, and Buyers will purchase,
acquire and accept from Mead Realty, all of Mead Realty's rights, title and
interests in and to the entire issued share capital of each of Reman and Derman.
(c) Such sale, assignment, transfer and delivery of the Assets will
be effected by delivery by Seller to Buyers of (i) the Bill of Sale, (ii) the
Deeds, (iii) the Real Property Lease Assignments and (iv) the Other Instruments.
(d) Notwithstanding anything contained in paragraphs (a) or (b) of
this Section 1.1 to the contrary, the following assets shall be considered
Excluded Assets:
(i) The consideration delivered by Buyers pursuant to this
Agreement;
(ii) All cash, cash equivalents and securities (other than petty
cash balances at the various locations of the Business, the Shares and any
securities of any other entity comprising the Business);
(iii) As more fully provided in Section 6.6 hereof, all tax
refunds (including any interest thereon) and all tax credits and deductions
attributable to the Business for the period prior to and including the
Closing Date;
(iv) All insurance policies and all refunds, rights and claims
thereunder (other than any rights or claims relating to the use or
operation of the Assets prior to the Closing Date);
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(v) Subject to Section 2.4 hereof, all intercompany account
balances between Seller and its affiliates (other than MDC, the Other
Divisions and the Companies), on the one hand, and MDC, the Other Divisions
and the Companies, on the other hand;
(vi) Except as specifically provided in Section 2.1 hereof,
Seller's Mead Trademarks and Logos;
(vii) Certain land adjacent to the main campus of MDC, as set
forth in Exhibit 3.9A to Section 3.9 of the Disclosure Schedule; and
(viii) the issued and outstanding shares of MDC International.
(e) Anything contained in this Agreement to the contrary
notwithstanding, this Agreement shall not constitute an agreement to assign any
right, title or interest in, to or under any contract, Government Contract,
license, lease, commitment, sales order, purchase order or other agreement or
any claim or right to any benefit arising thereunder or resulting therefrom if
an attempted assignment thereof, without the consent of a third party thereto,
would constitute a breach thereof, or in any way adversely affect the rights of
Buyers or Seller thereunder, and such consent is not obtained.
Section 1.2 Consideration. Subject to the terms and conditions of
this Agreement, Buyers will deliver or cause to be delivered to Seller at the
Closing the following:
(a) the Purchase Price; and
(b) the Undertaking.
Section 1.3 Closing. The Closing shall take place as promptly as
practicable, and in any event not later than the first Friday that falls on or
after the fifth business day following the satisfaction or waiver of all of the
conditions to Closing set forth in Article VII hereof, at 9:00 a.m., local time,
on the Closing Date, at the offices of Skadden, Arps, Slate, Meagher &
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Flom, 919 Third Avenue, New York, New York, or at such other place and time as
the parties may agree.
Section 1.4 Deliveries by Seller. At the Closing, Seller will
deliver or cause to be delivered to Buyers (unless delivered previously, or, in
the cases of the items described in paragraphs (g) and (h) of this Section 1.4,
made available to Buyers at the places of business of MDC, any of the Other
Divisions or any of the Companies, as the case may be) the following:
(a) the Deeds;
(b) the Real Property Lease Assignments;
(c) stock certificates (or similar evidence of ownership) representing
(i) all of the Shares and (ii) the entire issued share capital of each of Reman
and Derman, accompanied by stock powers duly executed in blank or duly executed
stock transfer forms or instruments of transfer which validly transfer title to
such shares, free of any restrictive legends reflecting limitations on the
transferability of such securities (other than as they may relate to securities
laws of the United States);
(d) a duly executed Bill of Sale;
(e) the Other Instruments, if any;
(f) the resignations of all members of the Boards of Directors of each
of the Companies, except MDC International, and Mead Data Central International
G.m.b.H.;
(g) the books and records of the Business to the extent provided in
Section 2.2 hereof;
(h) the stock books, minute books and corporate seals, if any, of each
of the Companies and Mead Data Central International G.m.b.H.;
(i) the certificate of Seller signed by an officer of Seller referred
to in Section 7.3 hereof;
(j) certified resolutions of the Board of Directors of Seller
approving the execution and delivery
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of this Agreement and the Related Agreements and the transactions contemplated
hereby and thereby;
(k) certified resolutions of the Board of Directors of Mead Realty
approving the transfer by Mead Realty pursuant to this Agreement of all of its
rights, title and interests in and to the entire issued share capital of each of
Reman and Derman;
(l) for each of the Companies, except MDC International, duly
completed Internal Revenue Service Forms 8023 (Corporate Qualified Stock
Purchase Elections) which are signed by an appropriate officer of both Buyers
and Seller;
(m) an opinion of counsel, dated as of the Closing Date, in form and
substance reasonably satisfactory to Buyers; and
(n) all other documents, instruments and writings required to be
delivered by Seller at or prior to the Closing pursuant to this Agreement or
otherwise required in connection herewith.
Section 1.5 Deliveries by Buyers and Parent. At the Closing, Buyers
or Parent, as the case may be, will deliver or cause to be delivered to Seller
(unless previously delivered) the following:
(a) the Purchase Price of $1,500,000,000 in cash delivered by wire
transfer of immediately available funds to such bank account as shall be
designated by Seller prior to the Closing;
(b) a duly executed Undertaking;
(c) the certificate of Buyers signed by an officer of REI referred to
in Section 7.2 hereof;
(d) certified resolutions of the Board of Directors or equivalent
governing body of Parent and each of Buyers approving the execution and delivery
of this Agreement and the Related Agreements and the transactions contemplated
hereby and thereby;
(e) for each of the Companies, except MDC International, duly
completed Internal Revenue Service
7
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Forms 8023 (Corporate Qualified Stock Purchase Elections) which are signed by an
appropriate officer of both REI and Seller;
(f) an opinion of counsel, dated as of the Closing Date, in form and
substance reasonably satisfactory to Seller; and
(g) all other documents, instruments and writings (including, if
necessary, the Other Instruments) required to be delivered by Parent or Buyers
at or prior to the Closing pursuant to this Agreement or otherwise required in
connection herewith.
Section 1.6 Post-Closing Adjustment.
(a) As promptly as practicable, but no later than 90 days after the
Closing Date, Buyers shall prepare and deliver to Seller the Statement. The
process and procedures to be employed in preparing the Statement shall be the
process and procedures described in Section 1.6 of the Disclosure Schedule.
Deloitte & Touche will examine the Statement in accordance with generally
accepted auditing standards and express its opinion that the Statement presents
fairly the net tangible assets of the Business as of the Closing Date. Following
the Closing, each of Buyers and Seller shall give the other party and any
independent auditors of such other party access at all reasonable times to the
properties, books, records and personnel of the Business relating to periods
prior to the Closing Date for purposes of preparing and reviewing the Statement.
Seller shall have 30 days following delivery to Seller of the Statement during
which to notify Buyers of any dispute of any item contained in the Statement,
which notice shall set forth in reasonable detail the basis for such dispute. If
Seller fails to notify Buyers of any such dispute within such 30-day period, the
Statement shall be deemed to be the Final Statement. In the event that Seller
shall so notify Buyers of any dispute, Buyers and Seller shall cooperate in good
faith to resolve such dispute as promptly as possible.
(b) If Buyers and Seller are unable to resolve any such dispute within
15 days of Seller's delivery of such notice, such dispute shall be resolved by
the Independent Accounting Firm, and such determina-
8
<PAGE>
tion shall be final and binding on the parties. If Seller and Buyers cannot
mutually agree on the identity of the Independent Accounting Firm, Seller and
Buyers shall each submit to the other party's independent auditor the name of a
big six accounting firm which does not at the time and has not in the prior two
years provided services to Seller or Buyers or Parent any of their respective
affiliates, and the Independent Accounting Firm shall be selected by lot from
these two firms by the independent auditors of the two parties. Any expenses
relating to the engagement of the Independent Accounting Firm shall be shared
equally by Buyers and Seller. The Independent Accounting Firm shall be
instructed to use every reasonable effort to perform its services within 30 days
of submission of the Statement to it and, in any case, as promptly as
practicable after such submission. The Statement, as modified by resolution of
any disputes by Buyers and Seller or by the Independent Accounting Firm, shall
be the Final Statement.
(c) The Purchase Price shall be increased by the amount by which net
tangible assets as set forth in the Final Statement (the "Closing Net Tangible
Assets") exceeds net tangible assets as of June 30, 1994 as set forth in Section
1.6 of the Disclosure Schedule (the "June 30 NTA Amount"), and the Purchase
Price shall be decreased by the amount by which the June 30 NTA Amount exceeds
the Closing Net Tangible Assets. Buyers or Seller, as the case may be, shall
within ten business days after delivery of the Final Statement make payment by
wire transfer in immediately available funds of the amount of such difference as
determined pursuant to the preceding sentence, together with interest thereon at
a rate equal to the prime rate per annum on the date immediately preceding the
date on which payment is to be made, as quoted by Morgan Guaranty Trust Company
of New York from the Closing Date to the date of payment.
(d) Buyers' and Seller's rights to indemnification pursuant to Article
IX hereof (and any limitations on such rights) shall not be deemed to limit,
supersede or otherwise affect Buyers' or Seller's rights to a purchase price
adjustment pursuant to this Section 1.6, provided that no claim for
indemnification may be made with respect to any matters or categories of items
relating to or reflected in the post-Closing adjustment contemplated by this
Section 1.6 to the extent the party
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making such claim had been compensated for any such matter or item pursuant to
the purchase price adjustment.
ARTICLE II
RELATED MATTERS
Section 2.1 Use of the Seller's Mead Trademarks and Logos.
(a) Buyers hereby expressly agree and acknowledge that, subject to
paragraphs (b) and (c) of this Section 2.1, Seller is not transferring or
selling to Buyers, and Buyers are not purchasing or acquiring from Seller, any
right, title or interest in the Seller's Mead Trademarks and Logos.
(b) Notwithstanding paragraph (a) of this Section 2.1, on the Closing
Date, Buyers and Seller will enter into a trademark license agreement,
substantially in the form attached hereto as Exhibit C (the "Trademark
License"). As more fully set forth in the Trademark License, Seller shall grant
Buyers an exclusive, world-wide license to use (i) the MeadNet trademark and
(ii) the business name "Mead Data Central" (collectively, the "Licensed Marks"),
each for a period of one year following the Closing Date in a manner consistent
with the use of such Licensed Marks by Seller in connection with the Business
prior to the Closing Date, such grant of rights to Buyers being subject to
Buyers' obligation not to use the Licensed Marks in any manner (x) tending to
degrade the quality or value of, or otherwise disparaging Seller's rights in or
the public's perception of the quality associated with, any one or more of
Seller's Mead Trademarks and Logos or (y) confusingly similar to any business
conducted by Seller from and after the Closing Date (it being acknowledged that
the use of the Licensed Marks in a manner substantially similar to the use made
in connection with the operation of the Business prior to the Closing Date shall
not violate any of the foregoing restrictions).
(c) Except to the extent permitted pursuant to the Trademark License,
Buyers agree that neither they nor any of their affiliates shall make any use of
the Seller's Mead Trademarks and Logos from and after the
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Closing Date. In addition, except as set forth in the Trademark License, as
promptly as practicable but in no event later than one year following the
Closing Date, Buyers shall, and shall cause their affiliates to remove, strike
over or otherwise obliterate all of Seller's Mead Trademarks and Logos from all
materials constituting their properties and assets, including, without
limitation, any business cards, schedules, stationery, displays, signs,
promotional materials, manuals, forms, computer software and other materials, if
such materials are distributed or made available or proposed to be distributed
or made available to any third parties.
Section 2.2 Books and Records of the Business.
(a) Seller agrees to deliver to Buyers or make available to Buyers at
the places of business of MDC, any of the Other Divisions or any of the
Companies, as the case may be, at or as soon as practicable after the Closing,
(i) all books and records relating to the Business to the extent such books and
records relate primarily to the Business and (ii) a copy of that portion of all
other books and records that relate to the Business (in the case of each of (i)
and (ii) above, including, but not limited to, correspondence, memoranda,
personnel and payroll records and the like). Notwithstanding the foregoing,
Seller shall not be obligated to provide (i) any books and records that relate
solely to or (ii) any distinct portion of any books and records which relate
solely to, The Mead Corporation as a whole or any businesses of The Mead
Corporation other than the Business.
(b) For a period of seven (7) years following the Closing, or for such
longer periods as may be required to satisfy applicable laws, regulations or
agreements, or record retention requirements for Government Contracts, (i)
Seller shall retain all books and records or that portion of books and records
relating to the Business that are not delivered or made available to Buyers
pursuant to this Agreement, and (ii) Buyers shall retain all other books and
records of the Business, including, without limitation, all other such books and
records of the Business (x) relating to Taxes, including, without limitation,
accounting and tax records and information pertaining to events occurring prior
to the Closing Date and (y) required to be retained pursuant to
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obligations imposed by any Government Contract, statute, rule or regulation
(such books and records of the Business collectively, the "Records").
(c) For a period of seven (7) years following the Closing, or for such
longer periods as may be required to satisfy applicable laws, regulations or
agreements, or record retention requirements for Government Contracts, (i) each
of the parties shall provide to duly authorized representatives of the other
party who wish to review any Records for business reasons reasonable access,
during regular business hours, to (x) employees of such party who are familiar
with such Records and who can assist such representatives of such other party,
at such other party's own expense, in locating, explaining or otherwise
reviewing such Records and (y) use of such party's copying facilities, clerical
services and telephone in a reasonable manner at such other party's own expense
and (ii) neither party shall dispose of or destroy any Records without written
permission of the other.
(d) If original documents are required to respond to legal process in
connection with the conduct by either party of any litigation, arbitration,
audit, settlement proceedings or negotiations with third parties with respect to
its conduct of the Business ("Legal Proceedings"), such party, subject to
applicable laws, regulations or agreements, shall be permitted to remove Records
temporarily from the other party's premises, provided that such party shall
return such original documents to such other party as promptly as practicable
after such time when such original documents are no longer required in
connection with such Legal Proceedings.
(e) If, in connection with Legal Proceedings, Buyers shall require the
assistance of Seller's employees, Seller shall provide such employees to Buyers
as are reasonably required by Buyers. Buyers shall pay Seller's out-of-pocket
costs incurred in connection with such use of Seller's employees.
Section 2.3 No Ongoing or Transition Services. (a) Except (i) for
accounting, human resource and benefits administration, tax administration,
administrative telecommunications, real estate administration, purchas-
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ing, electronic mail and calendaring support services presently provided
(including, without limitation, general ledger, accounts payable and payroll
services)(collectively, the "Services"), each of which Seller, to the extent
such Services may be provided by Seller to Buyers without violation or breach of
any contract or license between Seller (or any subsidiary or affiliate) and any
third party (each, a "Service Contract"), shall continue to provide to Buyers at
Buyers' expense (calculated based on actual cost to Seller), and otherwise on a
basis consistent with past practice, through nine months after the Closing Date
or, at Buyers' option, such earlier date as may be designated by Buyers for each
such Service, (ii) as identified in Section 2.3 of the Disclosure Schedule and
(iii) as otherwise agreed to by Seller and Buyers, at the Closing, all data
processing services, real estate and construction services activities, cash
management and property and casualty insurance activities, purchasing and
logistics services, corporate-wide productivity improvement programs regarding
benefits administration and certain financial matters and other products or
services provided (x) to MDC, any of the Other Divisions or any of the Companies
by Seller or any affiliates of Seller (other than MDC, any of the Other
Divisions or any of the Companies) or (y) to Seller or any affiliates of Seller
(other than MDC, any of the Other Divisions or any of the Companies) by MDC, any
of the Other Divisions or any of the Companies including any agreements or
understandings (written or oral) with respect thereto, will terminate.
(b) If the provision of any of the Services to Buyers would place
Seller in violation or breach of any Service Contract, then Buyers and Seller
will use their respective commercially reasonable efforts to obtain any consent
required for Seller to provide such Services to Buyers. If after the exercise
of such efforts, such consent cannot be obtained, Seller will use its
commercially reasonable efforts to provide Buyers with functionally equivalent
Services.
Section 2.4 Intercompany Accounts. Except as identified in Section
2.4 of the Disclosure Schedule or as provided elsewhere herein, on or prior to
the Closing Date, all intercompany account balances between MDC, any of the
Other Divisions or any of the Companies, as the case may be, on the one hand,
and Seller and its affil-
13
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iates (other than MDC, any of the Other Divisions or any of the Companies), on
the other hand, shall be cancelled or settled. No adjustment shall be made to
the Purchase Price as a result of any such cancellation or settlement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyers on the date hereof and as of
the Closing Date as follows:
Section 3.1 Organization. Seller is, and each of the Companies is, a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation and has all requisite corporate and
other power and corporate authority to own, lease and operate the Business
properties owned, leased and operated by it and to carry on the operations of
the Business as now being conducted by it. Seller is, and each of the Companies
is, duly qualified or licensed and in good standing to do business in each
jurisdiction in which the property owned, leased or operated by it with respect
to the Business or the nature of the business conducted by it with respect to
the Business makes such qualification necessary, except in any such
jurisdictions where the failure to be so duly qualified or licensed and in good
standing would not have a Material Adverse Effect. Seller has heretofore made
available to Buyers complete and correct copies of the Articles of Incorporation
and Code of Regulations or similar constituent documents, as the case may be, of
each of the Companies as currently in effect.
Section 3.2 Authorization. Seller has the corporate power and
corporate authority to execute and deliver this Agreement and the Related
Agreements and consummate the transactions contemplated hereby and thereby. The
execution and delivery of this Agreement and the Related Agreements and the
consummation of the transactions contemplated hereby and thereby have been duly
and validly authorized by the Board of Directors of Seller, Mead Realty and MDC
International, as the case may be, and no other corporate or other proceedings
on the part of Seller, Mead Realty and MDC International, as
14
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the case may be, are necessary to authorize the execution, delivery and
performance of this Agreement and the Related Agreements or the consummation of
the transactions contemplated hereby and thereby. This Agreement has been duly
executed and delivered by Seller and constitutes, and when executed and
delivered, each of the Related Agreements to be executed and delivered by Seller
pursuant hereto will constitute, a valid and binding obligation of Seller,
enforceable against Seller in accordance with its terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency or similar laws
affecting creditors' rights generally and rights of acceleration and the
availability of equitable remedies may be limited by equitable principle of
general applicability.
Section 3.3 Capitalization. The authorized and issued share capital
of each of the Companies is set forth in Section 3.3 of the Disclosure Schedule.
The Shares are legally and beneficially owned as set forth in Section 3.3 of the
Disclosure Schedule. All of the Shares are duly authorized, validly issued,
fully paid and non-assessable. Except as set forth above or in the Disclosure
Schedule, there are not now, and at Closing there will not be, (a) issued or
outstanding (i) any shares of capital stock or issued share capital of the
Companies or (ii) any securities convertible into or exchangeable for, or any
options, warrants, calls, subscriptions or other rights (preemptive or
otherwise) to acquire, any shares of capital stock or issued share capital of
the Companies or (b) any Liens on, or any agreements or contractual commitments
(other than this Agreement) obligating Seller, or restricting Seller's rights,
to transfer, sell, or vote, the Shares.
Section 3.4 Interests in Other Entities. Except as set forth in
Section 3.4 of the Disclosure Schedule, Seller, directly or indirectly, has no
(i) interest in the outstanding stock of any corporation or in any partnership,
joint venture or other entity relating to the Business or (ii) agreement,
understanding, contract or commitment relating to an interest in any such entity
or Seller's investment therein. Section 3.4 of the Disclosure Schedule sets
forth the authorized and issued share capital of Mead Data Central International
G.m.b.H.
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Section 3.5 Consents and Approvals; No Violations. Except for
applicable requirements of the HSR Act, and as set forth in Section 3.5 of the
Disclosure Schedule, neither the execution and delivery of this Agreement or the
Related Agreements nor the consummation by Seller of the transactions
contemplated hereby and thereby will (a) conflict with or result in any breach
of any provision of the Amended and Restated Articles of Incorporation or the
Amended and Restated Code of Regulations of Seller; (b) require on the part of
Seller any material filing with, or the obtaining of any material permit,
authorization, consent or approval of, any governmental or regulatory authority,
except (i) such filings as may be required for the recordation of the transfer
of title in and to any Intellectual Property with the appropriate agency of any
foreign jurisdiction, and (ii) such consent or other action which may be
required to novate, assign or transfer any Government Contract or other contract
or agreement with any government or governmental authority; (c) result in a
material default (or give rise to any material right of amendment, termination,
cancellation or acceleration) or to a loss of any material benefit relating to
the Business to which the Seller the Companies or Mead Data Central
International G.m.b.H. are entitled under any of the terms, conditions or
provisions of any Material Agreement or Material Lease; or (d) to the best
knowledge of Seller, violate any order, injunction, decree, statute, rule or
regulation applicable to Seller or the Business, the violation of which would
have a Material Adverse Effect or would have a material adverse effect on the
ability of Seller to consummate the transaction contemplated by this Agreement
or the Related Agreements, excluding from the foregoing clauses (b), (c) and (d)
such requirements, defaults, rights or violations which become applicable as a
result of (i) the business or activities in which Buyers are or propose to be
engaged or (ii) any acts or omissions by Buyers.
Section 3.6 Financial Statements. (a) Section 3.6 of the Disclosure
Schedule contains true and accurate copies of the Business' unaudited balance
sheets as of June 30, 1994 (the "June 30, 1994 Balance Sheet"), December 31,
1992, and December 31, 1993 and related statements of earnings for the periods
then ended (the "Financial Statements"). Except as set forth in Section 3.6 of
the Disclosure Schedule, the Financial Statements have
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been prepared in accordance with GAAP, consistently applied (other than for
statements of cash flows and footnotes otherwise required by GAAP) and have been
prepared on a basis consistent with the books and records of the Business.
Except as disclosed in Section 3.6 of the Disclosure Schedule, such Financial
Statements fairly present, in all material respects, the financial position and
the results of operations of the Business as of the respective dates and periods
thereof, subject in the case of interim financial statements to normal year-end
adjustments.
(b) The September 30, 1994 Financial Statements shall be prepared in
accordance with GAAP, consistently applied (other than for statements of cash
flows and the footnotes otherwise required by GAAP) and shall be prepared on a
basis consistent with the books and records of the Business. Except as
disclosed in Section 3.6 of the Disclosure Schedule, the September 30, 1994
Financial Statements shall fairly present in all material respects the financial
position and results of operation as of and for the nine months ended September
30, 1994, subject to normal year-end adjustments.
Section 3.7 Absence of Undisclosed Liabilities. Except for
liabilities and obligations (a) incurred since June 30, 1994 in the ordinary
course of business and consistent with past practice, (b) disclosed in Section
3.7 of the Disclosure Schedule, (c) provided for in the June 30, 1994 Balance
Sheet and (d) other undisclosed liabilities and obligations which, individually
or in the aggregate, would not have a Material Adverse Effect, the Business has
no liabilities or obligations of any kind whatsoever (whether direct, indirect,
accrued or contingent) and to the knowledge of Seller, there is no existing
condition or situation which could reasonably be expected to result in any such
liabilities or obligations.
Section 3.8 Absence of Material Adverse and Other Changes. Except as
set forth in Section 3.8 of the Disclosure Schedule or as otherwise contemplated
by this Agreement, since June 30, 1994, (a) there has not been any event or
occurrence which has resulted in or could reasonably be expected, in Seller's
commercially reasonable judgment, to result in, a material adverse change in the
business, assets, results of operations or condition
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(financial or otherwise) of the Business (other than changes resulting from
changes in general economic or financial conditions or changes affecting
generally the publishing industry), (b) Seller has conducted the Business in the
ordinary course, consistent with past practices, and there has not been (i) any
increase in the compensation of or other benefits payable to any of the officers
or employees of the Business, except such increases as are granted in the
ordinary course of business in accordance with its customary practices (which
shall include normal periodic performance reviews and related compensation and
benefit increases), (ii) any incurrence, assumption or guarantee by Seller, any
of the Companies or Mead Data Central International G.m.b.H. or any indebtedness
for borrowed money with respect to the Business other than in the ordinary
course of business consistent with past practices; (iii) any creation or other
incurrence of any Lien (other than a Permitted Lien) on any material Asset other
than in the ordinary course of business consistent with past practices; (iv) any
transaction or commitment made, or any contract or agreement entered into, by
Seller, any of the Companies relating or Mead Data Central International
G.m.b.H. to the Business or any Asset (including the acquisition or disposition
of any assets) or any relinquishment by Seller, any of the Companies or Mead
Data Central G.m.b.H. of any contract or other right, in either case, material
to the Business taken as a whole, other than transactions and commitments in the
ordinary course of business consistent with past practices and those
contemplated by this Agreement; (v) any change in any method of accounting or
accounting practice by Seller or any of the Companies with respect to the
Business except for any such change after the date hereof required by reason of
a mandatory concurrent change in generally accepted accounting principles; (vi)
any (A) employment, deferred compensation, severance, retirement or other
similar agreement entered into with any employee of the Business (or any
amendment to any such existing agreement) or (B) grant of any severance or
termination pay to any such employee, other than in each of (A) and (B) in the
ordinary course of business consistent with past practice; (vii) any material
change in the methods of operation of the Business, including, without
limitation, software and data maintenance and development activities, credit and
collection policies and practices, advertising and promotion practices,
subscription renewal practices or maintenance and repair practices; (viii) any
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loss or damage to the properties or assets of the Business which has resulted or
is reasonably likely to result in a Material Adverse Effect; or (ix) any
agreement or any commitment to take any of the actions described in this Section
3.8.
Section 3.9 Title, Ownership and Related Matters. (a) Section 3.9 of
the Disclosure Schedule lists the Property which is used in or relates to the
Business or which Seller or any of the Companies has an option to purchase and
which relates primarily to the Business and any title insurance policies and
surveys with respect thereto and any Liens thereon.
(b) Subject to Section 1.1(e) hereof, Seller or any of the Companies,
as the case may be, has, or will as of the Closing have, and will deliver to
Buyers, good and marketable, indefeasible, fee simple title to, or in the case
of leased property, has, and will deliver, a valid leasehold interest in, all of
the Assets, including, without limitation, the Property, in each case free and
clear of all Liens, except for Permitted Liens.
(c) There are no material defects in the physical condition of
buildings, structures, and other improvements included within the Property (the
"Improvements") that would materially interfere with the use or occupancy of the
Improvements in the ordinary conduct of the Business. The Improvements have
access to all utility services that are necessary and currently used in the
conduct of the Business. Neither Seller nor any of the Companies have received
notice, and have knowledge of, any pending, threatened or contemplated
condemnation proceeding, or of any sale or other disposition in lieu of
condemnation, affecting the Property or the property leased under the Leases or
any part thereof.
(d) The Improvements currently have a dedicated access to a
public road.
(e) The Seller has not received any written notice of any violation
of any law, regulation or ordinance relating to (i) the physical condition of
the Improvements or (ii) the current use of the Property, except for violations
which have previously been resolved or have not had and would not reasonably be
expected to
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have, individually or in the aggregate, a Material Adverse Effect.
Section 3.10 Properties and Assets Necessary for Conduct of Business.
Subject to Section 1.1(e) hereof, the Assets to be transferred to Buyers
pursuant to this Agreement are all the properties and assets necessary to permit
the Business to be conducted as currently conducted.
Section 3.11 Leases. Section 3.11 of the Disclosure Schedule lists,
as of the date hereof, all Leases, the name of the lessor or sublessor, the
primary lease term and any title insurance policies with respect thereto and any
Liens thereon. True and complete copies of the Leases and all written
amendments and agreements relating thereto have been made available to Buyers.
Except as set forth in Section 3.9 of the Disclosure Schedule, Seller has a
valid leasehold interest in the Leases free and clear of all Liens, other than
Permitted Liens. Neither Seller nor any of the Companies has received written
notice of default from the landlord under any of the Leases except as Seller may
otherwise disclose to Buyers prior to Closing. Seller is not in default in the
payment of any basic rent under any of the Leases and to Seller's knowledge,
there are no material defaults thereunder.
Section 3.12 Intellectual Property.
(a) Section 3.12(a) of the Disclosure Schedule describes (i) all
domestic and foreign registered trademarks, registered copyrights and patents,
and applications for registration of any of the foregoing and (ii) all material
trade names, service marks, service names, logos and assumed names which are
both owned by Seller or any of the Companies, as the case may be, and used in
the operation of the Business as currently conducted. All rights of Seller or
any of the Companies in and to the Proprietary Software, unregistered
copyrights, trade secrets, know-how, product configuration designs and trade
dress which are both owned by Seller or any of the Companies, as the case may
be, and primarily used in and material for the operation of the Business as
currently conducted (collectively, the "Unregistered Intellectual Property"),
which together with the items set forth on Section 3.12(a) of the Disclosure
Schedule, con-
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stitute and shall be referred to herein as the "Intellectual Property." Except
as set forth in Section 3.12(a) of the Disclosure Schedule, to the best
knowledge of Seller, all registered Intellectual Property has been validly
issued or registered and is subsisting. Seller's and any of the Companies'
rights in and to the Unregistered Intellectual Property used in and material to
the conduct of the Business as currently conducted, to the extent protectible
under applicable law, have not been invalidated or committed to the public
domain by any action of Seller or any of the Companies. Notwithstanding the
foregoing, Section 3.12(a)(III)(B) of the Disclosure Schedule, setting forth the
copyright registrations and applications for registration owned by Seller and
currently recorded in the name of The Michie Company, a division of Seller,
includes: (x) only those copyrights registered or renewed on or after January 1,
1964; and (y) certain copyright registrations for printed material no longer
published by The Michie Company, a division of Seller, which have been assigned
back to the original authors and which, in the aggregate, are not material to
the Business. Except as set forth in Section 3.14 of the Disclosure Schedule,
there are no pending or threatened claims of which Seller has, or, to the actual
knowledge of Seller, any of the Companies have, been given written notice by any
person challenging Seller's or any of the Companies', as the case may be,
ownership and use in the Business of the Intellectual Property owned by Seller
or such Company, as the case may be.
(b) Seller has, or any of the Companies have, as the case may be,
ownership of or such rights by license, lease or other agreement in and to the
Intellectual Property as are necessary to conduct the operations of the Business
as currently conducted, except as set forth in Sections 3.12(a) and (b) of the
Disclosure Schedule or otherwise where the failure to have such ownership or
right would not have a Material Adverse Effect.
(c) The Unregistered Intellectual Property as used in the operation
of the Business as currently conducted does not violate any proprietary right of
any third party, except as set forth in Section 3.14 of the Disclosure Schedule
or otherwise where such violation would not have a Material Adverse Effect.
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(d) To the best of Seller's knowledge, the components of each of the
Databases used in and material to the conduct of the Business as currently
conducted (including, without limitation, case law, statutes, articles, and
other materials) contained therein are: (i) proprietary to Seller or any of the
Companies, or (ii) currently in the public domain or otherwise available to
Seller or any of the Companies for inclusion in such Databases without the
approval or consent of any third party, or (iii) included in the Databases with
the approval or consent of a third party which has represented itself as either
the holder of or otherwise authorized to grant such approval or consent.
Section 3.13 Non-Proprietary Computer Software. Section 3.13 of the
Disclosure Schedule sets forth the Non-Proprietary Software primarily used in
and material to the operation of the Business as currently conducted. Seller
has, or any of the Companies have, as the case may be, such rights by license,
lease or other agreement to such Non-Proprietary Software as are necessary to
permit the operation of the Business as currently conducted, except as set forth
in Section 3.13 of the Disclosure Schedule or otherwise where the failure to
have such right, in the aggregate, would not have a Material Adverse Effect.
Section 3.14 Litigation. Except as set forth in Section 3.14 of the
Disclosure Schedule, there is no claim, action or proceeding pending or, to the
best knowledge of Seller, threatened against Seller or against any of the
Companies, as the case may be, with respect to the Business or its operations by
or before any court, governmental or regulatory authority which would reasonably
be expected to have a Material Adverse Effect or with respect to claims, actions
or proceedings, pending, as of the date hereof, which challenges the validity of
this Agreement or any Related Agreements or seeks to prevent, enjoin, materially
alter or materially delay the transactions contemplated hereby or thereby.
Section 3.15 Compliance with Applicable Law. Seller and the
Companies are not in violation of, or to the best of Seller's knowledge, are
neither under investigation with respect to nor have been threatened to be
charged with or given notice of any violation of, any applicable laws,
ordinances, rules and regulations of any
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federal, state, local or foreign governmental authority applicable to the
Business or its operations, except for such violations, if any, which, in the
aggregate, have not had and would not have a Material Adverse Effect.
Section 3.16 Certain Contracts and Arrangements. Sections 2.3, 3.4,
3.16(a) and 3.16(b) of the Disclosure Schedule lists all of the Material
Agreements. Except as set forth in Section 3.16(c) of the Disclosure Schedule,
all Material Agreements are valid, binding and enforceable in accordance with
their terms and none of Seller, MDC, the Other Divisions or the Companies nor,
to the best knowledge of Seller, any other party thereto, is in default under
any of such agreements, nor, to the best knowledge of Seller, has any event or
circumstance occurred that, with notice or lapse of time or both, would
constitute any event of default by Seller, MDC, the Other Divisions or the
Companies or any other party thereto other than with respect to any of the
foregoing such defaults, if any, which would not, in the aggregate, have a
Material Adverse Effect.
Section 3.17 Insurance. Section 3.17 of the Disclosure Schedule sets
forth a complete and accurate list of all policies and fidelity bonds (including
their respective expiration dates) of fire, liability, product liability,
worker's compensation, and other forms of insurance presently in effect with
respect to the Business and its operations. There is no claim pending under any
of such policies or bonds as to which coverage has been questioned, denied or
disputed by the underwriters of such policies or bonds or in respect of which
such underwriters have reserved their rights. All premiums payable under all
such policies and bonds have been timely paid and Seller and the Companies have
otherwise complied fully with the terms and conditions of all such policies and
bonds. Such policies of insurance and bonds (or other policies and bonds
providing substantially similar insurance coverage) have been in effect since
January 1, 1991 and remain in full force and effect. Such policies and bonds
are of the type and in amounts customarily carried by Persons conducting
businesses similar to the Business. All such insurance coverage will cease as
to the Business upon Closing.
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Section 3.18 Employee Benefit Plans; ERISA.
(a) No "employee pension benefit plan" (as defined in section 3(2) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA") and
including any plan described in Section 4(b)(4) of ERISA) (sometimes referred to
herein as a "Pension Plan") that Seller, any of the Companies or any of the
Other Divisions maintains, or to which Seller, any of the Companies or any of
the Other Divisions is obligated to contribute had, as of the respective last
annual valuation date for each such Pension Plan, an "unfunded benefit
liability" (as such term is defined in section 4001(a)(18) of ERISA), based on
reasonable actuarial assumptions utilized by Seller. None of the Pension Plans
has an "accumulated funding deficiency" (as such term is defined in section 302
of ERISA or section 412 of the Code), whether or not waived. No Pension Plan to
which Seller, any of the Companies or any of the Other Divisions is obligated to
contribute with respect to any current or former employee of the Business is a
"multiemployer plan" (as such term is defined in section 4001(a)(3) of ERISA).
(b) Each "employee welfare benefit plan" (as defined in section 3(1)
of ERISA (sometimes referred to herein as "Welfare Plan")) that Seller, any of
the Companies or any of the Other Divisions maintains and that is a "group
health plan," as such term is defined in section 5000(b)(1) of the Code,
complies in all material respects with the applicable requirements of section
4980B(f) of the Code.
(c) Other than claims for benefits arising in the ordinary course of
the administration and operation of the Pension Plans and Welfare Plans, no
claims, investigations or arbitrations are pending by or with respect to any
current or former employees of the Business against any Pension Plan or Welfare
Plan or against Seller, any of the Companies, any of the Other Divisions, any
trust or arrangement created under or as part of any Pension Plan or Welfare
Plan, or any trustee, fiduciary, custodian, administrator or other person or
entity holding or controlling assets of any Pension Plan or Welfare Plan.
(d) Section 3.18 of the Disclosure Schedule sets forth a true and
complete list of (a) the names,
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titles, targeted aggregate annual salaries and other cash compensation for the
calendar year ending December 31, 1994, of each employee of the Business whose
total compensation exceeds $100,000 per annum and (b) the wage rates for non-
salaried employees of the Business (by classification).
Section 3.19 Taxes. (a) Except as set forth in Sections 3.7 and 3.19
of the Disclosure Schedule, the Companies have (i) timely filed with the
appropriate taxing authorities all material Tax Returns required to be filed
(and will file all such Tax Returns required to be filed through the Closing
Date) and such Tax Returns are true, correct and complete in all material
respects; (ii) paid or made adequate provision in accordance with GAAP for the
payment of all Taxes shown to be due on such filed Tax Returns, and (iii) none
of the Companies is delinquent in the payment of any Tax or has requested any
extension of time within which to file any Tax Return and has not yet filed such
Tax Return; (iv) there are no outstanding requests for rulings or determinations
in respect of any Tax or Tax Asset pending between any of the Companies (or
relating to any of the Assets or the Business) and any Taxing authority; (v)
none of the Companies (nor any member of any affiliated, consolidated, combined
or unitary group of which any Company is or has been a member) has granted any
extension or waiver of the statute of limitations period applicable to any Tax
Returns, which period (after giving effect to such extension or waiver) has not
expired; (vi) none of the Companies has been a member of an affiliated,
consolidated, combined or unitary group other than one of which Seller was the
common parent; (vii) none of the Companies, MDC or the Other Divisions, are
currently under any contractual obligation to pay any amounts of the type
described in clause (ii) or (iii) of the definition of "Taxes"; (viii) all
information set forth in Section 3.7 of the Disclosure Schedule relating to
Taxes is true and complete; and (ix) Seller and the Companies have not received
any written notice of deficiency or assessment from any taxing authority with
respect to liabilities for income and other material Taxes of any of the
Companies which have not been fully paid or finally settled. There are no Liens
with respect to Taxes upon any of the properties or assets of the Business other
than Liens for Taxes not yet due and payable or that are being contested in good
faith.
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(b) Seller shall include each of the Companies in the consolidated
federal income Tax Return and all similar and corresponding state Tax Returns in
any state such Tax Returns are filed through the close of business on the
Closing Date.
Section 3.20 Environmental Matters. Except as set forth in Section
3.20 of the Disclosure Schedule:
(a) (i) With respect to the Business, Seller and each of the
Companies hold, and are in substantial compliance with, all Environmental
Permits, and with all applicable Environmental Laws, except where the
failure to hold such permits or to be in compliance would not have a
Material Adverse Effect.
(ii) As it relates to the Business, neither Seller nor any of
the Companies has received any written request for information, or has been
notified that it is a potentially responsible party, under the federal
Comprehensive Environmental Response, Compensation, and Liability Act of
1980, as amended, or any similar state law with respect to any on-site or
off-site location.
(iii) No notice, notification, demand, request for information,
citation, summons, complaint or order has been issued, no complaint has
been filed, no penalty has been assessed and no investigation or review
(collectively, "Environmental Notices") is pending, or to Seller's
knowledge, threatened by any governmental entity or other Person with
respect to any (A) alleged violation with respect to the Business by Seller
or any of the Companies of any Environmental Law or liability thereunder or
(B) alleged failure with respect to the Business by the Seller or any of
the Companies to have any Environmental Permit, except, in each case, for
Environmental Notices which would not have a Material Adverse Effect.
(iv) With respect to the Business, to Seller's knowledge, there
have been no discharges, emissions or releases of Hazardous
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Substances which are or were reportable under Environmental Laws, other
than such discharges, emissions or releases which would not have a Material
Adverse Effect.
(b) There has been no material environmental investigation, study,
audit, test, review or other analysis (including all Phase I environmental
assessments) conducted of which Seller has knowledge in relation to the Business
or any Property or Lease which has not been delivered to Buyers prior to the
date hereof. Except as set forth in Section 3.20 of the Disclosure Schedule,
neither Seller nor any of the Companies is subject to any judgment, decree or
order relating to compliance with, or the cleanup of regulated substances under,
any applicable Environmental Law.
Section 3.21 Certain Fees. Except in connection with the retention
of Goldman, Sachs & Co. (whose fees shall be the sole responsibility of Seller),
(i) Seller has not employed any financial advisor or finder and (ii) neither
Seller nor the Business has incurred any liability for any financial advisory or
finders' fees in connection with this Agreement or the Related Agreements or the
transactions contemplated hereby or thereby.
Section 3.22 Receivables. All accounts, notes receivable and other
receivables (other than receivables collected since June 30, 1994) reflected on
the June 30, 1994 Balance Sheet are, and all accounts and notes receivable
arising from or otherwise relating to the Business at the Closing Date will be,
valid, genuine and fully collectible (assuming no significant changes are made
following the Closing in the Business' collection practices and procedures) in
the aggregate amount thereof, subject to normal and customary trade discounts,
less any reserves for doubtful accounts recorded on the June 30, 1994 Balance
Sheet or established thereafter in the ordinary course of business and
consistent with past practice, and such accounts, notes receivable and other
receivables have or will have arisen out of the conduct of the Business.
Section 3.23 Projections. The financial projections for the fiscal
year ending December 31, 1994, relating to the Business delivered to Buyers
constitute Seller's reasonable good faith estimate in the aggregate of the
projections purported to be shown therein as of the date thereof.
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Section 3.24 Name Holding Subsidiaries. Michie, Nexis, Inc. and
Lexis, Inc. have not engaged in any business activities since their respective
formation, except that Lexis, Inc. has acted and continues to act as the
registered agent for Lexis Document Services.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYERS
Parent and Buyers jointly and severally represent and warrant to
Seller on the date hereof and as of the Closing Date as follows:
Section 4.1 Organization and Authority of Buyers.
(a) Parent and each of the Buyers are a corporation duly organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation. Parent and each of Buyers has heretofore delivered to Seller
complete and correct copies of its respective certificate of incorporation and
by-laws (or similar organizational documents) as currently in effect.
(b) Parent and each of Buyers has the corporate power and corporate
authority to execute and deliver this Agreement and the Related Agreements and
consummate the transactions contemplated hereby and thereby. The execution and
delivery of this Agreement and the Related Agreements and the consummation of
the transactions contemplated hereby and thereby have been duly and validly
authorized by the Board of Directors (or equivalent governing body) of Parent
and each of Buyers and no other corporate proceedings on the part of either of
Parent or Buyers are necessary to authorize the execution, delivery and
performance of this Agreement and the Related Agreements or the consummation of
the transactions so contemplated hereby or thereby, except for notification to
the shareholders of Parent's shareholders. This Agreement has been duly
executed and delivered by Parent and each of Buyers and constitutes, and when
executed and delivered each of the Related Agreements to be executed and
delivered by Parent and each of Buyers pursuant hereto will constitute, a valid
and binding obligation of Parent and each of Buyers, enforceable against Parent
and each of Buyers in accordance with its terms, except as the enforceability
thereof may be limit-
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ed by bankruptcy, insolvency or similar laws affecting creditors' rights
generally and rights of acceleration and the availability of equitable remedies
may be limited by equitable principle of general applicability.
Section 4.2 Consents and Approvals; No Violations. Except for
applicable requirements of the HSR Act and as set forth in Section 4.2 of the
Buyers' Disclosure Schedule, neither the execution and delivery of this
Agreement or the Related Agreements nor the consummation by Parent or any of
Buyers of the transactions contemplated hereby and thereby will (a) conflict
with or result in any breach of any provision of the certificate of
incorporation or by-laws (or similar organizational documents) of Parent or any
of Buyers; (b) require on the part of Parent or any of Buyers any material
filing with, or the obtaining of any material permit, authorization, license,
consent or approval of, any governmental or regulatory authority, whether within
or outside the United States, or of any third party; (c) result in a material
default (or give rise to any material right of amendment, termination,
cancellation or acceleration) under any of the terms, conditions or provisions
of any note, mortgage, other evidence of indebtedness, guarantee, license,
agreement, lease or other contract, instrument or obligation to which Parent or
any of Buyers are a party or by which Parent or any of Buyers or any of the
assets of Parent or any of Buyers may be bound or (d) violate any order,
injunction, decree, statute, rule or regulation applicable to Parent or any of
Buyers, excluding from the foregoing clauses (b), (c) and (d) such requirements,
defaults, rights or violations which become applicable as a result of any acts
or omissions by Seller.
Section 4.3 Financing. Buyers will have at the Closing sufficient
immediately available funds, in cash to effect the transactions contemplated
hereby and thereby, and to provide Buyers with adequate working capital to
operate the Business.
Section 4.4 Litigation. There is no claim, action or proceeding
pending or, to the best knowledge of Parent or any of Buyers, threatened against
either of Parent or any of Buyers which challenges the validity of this
Agreement or the Related Agreements, or the ability of Parent or any of Buyers
to consummate the transactions contemplated hereby and thereby, by or before any
court, governmental or regulatory authority.
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Section 4.5 Certain Fees. Except in connection with the retention of
Salomon Brothers Inc (whose fees shall be the responsibility of Buyers), none of
Parent, Buyers or their respective affiliates has employed any financial advisor
or finder or incurred any liability for any financial advisory or finders' fees
in connection with this Agreement or the Related Agreements or the transactions
contemplated hereby and thereby.
ARTICLE V
COVENANTS
Section 5.1 Conduct of the Business. Seller agrees that, during the
period from the date of this Agreement to the Closing, except as (i) otherwise
contemplated by this Agreement (including, without limitation, transfers of
Excluded Assets from the Companies to Seller), (ii) set forth in Section 5.1 of
the Disclosure Schedule or (iii) consented to by Buyers in writing:
(a) Seller shall cause the business operations of the Business to be
conducted in the ordinary course consistent with past practice and use its best
efforts to preserve intact the Business' organization in all material respects;
and
(b) Seller shall not (i) sell or dispose of any of the properties or
assets of the Business, except in the ordinary course of business consistent
with past practices; (ii) except as may be required by existing contracts, make
any loans, advances (other than advances in the ordinary course of business and
consistent with past practice of the Business) or capital contributions to, or
investments in, any other person on behalf of the Business; or (iii) take or
omit to take any action out of the ordinary course of business consistent with
past practice if such action or omission would have the effect of increasing the
Tax liability or reducing the Tax Assets of any of the Companies, the Buyers, or
any of Buyers' affiliates.
Except as otherwise contemplated by this Agreement, Seller will not
(i) take or agree or commit to take any action that would make any
representation and warranty of Seller hereunder inaccurate in any material
respect at, or as of any time prior to, the Closing Date or (ii) omit or agree
or commit to omit to take any action neces-
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sary to prevent any such representation or warranty from being inaccurate in any
material respect at any such time.
Section 5.2 Access to Information.
(a) Between the date of this Agreement and the Closing, Seller shall
(i) give to Parent and Buyers and their respective authorized representatives
reasonable access to all books, records, offices and other facilities and
properties of the Business; (ii) permit Parent and Buyers to make such
inspections thereof as Parent and Buyers may reasonably request and (iii) cause
the officers of MDC, any of the Other Divisions or any of the Companies, as the
case may be, to furnish each of Parent and Buyers with such financial and
operating data and other information with respect to the business and properties
of the Business as Parent and Buyers may from time to time reasonably request;
provided, however, that any such investigation shall be conducted during normal
business hours under the supervision of Seller's personnel and in such a manner
as to not interfere with the business operations of the Business.
(b) Seller will provide Parent and Buyers and their respective
authorized representatives reasonable access to all its books, records, offices
and properties relating solely to the Business and will fully cooperate with and
provide assistance to Buyers and Deloitte Touche in order to permit them to
prepare audited financial statements for the business for the four years ending
December 31, 1994 and an offering circular to be distributed to the shareholders
of Reed International plc, an English public limited company and a shareholder
of Parent. Seller agrees to waive any conflict of interest it may have in
connection with the preparation of such financial statements.
(c) All information concerning Seller or the Business furnished or
provided by Seller, MDC, any of the Other Divisions or any of the Companies or
their affiliates to either of Parent or Buyers or its respective representatives
(whether furnished before or after the date of this Agreement) shall be held
subject to the Confidentiality Agreement. Notwithstanding anything to the
contrary contained in this Agreement, neither Seller nor any of its affiliates
shall have any obligation to make available or provide to Parent or Buyers or
their representatives a copy of any consolidated, combined or
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unitary Tax Return filed by Seller or any of its affiliates or any related
materials, except to the extent it relates solely to any of the Companies.
Section 5.3 Regulatory Compliance.
(a) The parties hereto shall make all necessary filings, as promptly
as practicable, including, without limitation, those required under the HSR Act,
the Securities Act, the Exchange Act, applicable U.S. or foreign antitrust laws
and applicable state laws, in order to facilitate prompt consummation of the
transactions contemplated hereby and by the Related Agreements. In addition,
each of Buyers and Seller will use its best efforts (including, without
limitation, payment of any required fees), and will cooperate fully with the
other to (i) comply as promptly as practicable with all governmental
requirements applicable to the transactions contemplated by this Agreement and
the Related Agreements and (ii) obtain promptly all approvals, permits, orders
or other consents of any applicable governmental authorities necessary for the
consummation of the transactions contemplated by this Agreement and the Related
Agreements. Each of the parties hereto will furnish to the other party such
necessary information and reasonable assistance as such other party may
reasonably request in connection with the foregoing.
(b) Subject to the Confidentiality Agreement, each of Seller and
Buyers will coordinate and cooperate fully with the other in exchanging such
information and providing such assistance as the other may reasonably request in
connection with the foregoing and in seeking early termination of any applicable
waiting periods under the HSR Act or in connection with other regulatory
approvals and consents. Each of Seller and Buyers agrees to respond promptly to
and comply fully with any request for additional information or documents under
the HSR Act. Subject to the Confidentiality Agreement, Seller will provide
Buyers, and Buyers will provide Seller, with copies of all correspondence,
filings or communications (or memoranda setting forth the substance thereof)
between such party or any of its representatives, on the one hand, and any
governmental agency or authority or members of their respective staffs, on the
other hand, with respect to this Agreement and the transactions contemplated
hereby.
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Section 5.4 Consents; Assignments.
(a) Buyers and Seller will use their respective best efforts to
obtain any consent, approval or amendment required to novate and/or assign all
agreements, leases, licenses and other rights of any nature whatsoever relating
to the Assets, including, without limitation, all bids, quotations and proposals
which have been made by Seller which are outstanding as of the Closing Date;
provided, however, that except as provided in paragraph (b) below and for filing
and other administrative charges, neither Seller nor Buyers shall be obligated
to pay any consideration therefor to the third party from whom such consents,
approvals and amendments are requested. In the event and to the extent that
Buyers and Seller are unable to obtain any such required consent, approval or
amendment, or if any attempted assignment or novation would be ineffective or
would adversely affect the rights of Seller with respect to any Asset so that
Buyers would not in fact receive all the rights with respect to such Asset,
Seller and Buyers will cooperate (to the extent permitted by law or the terms of
any applicable agreement) in a mutually agreeable arrangement under which Buyers
would, to the extent possible, obtain the benefits and assume the obligations
with respect to such Asset, in accordance with this Agreement, including sub-
contracting, sub-licensing, or sub-leasing to Buyers, or under which Seller
would enforce for the benefit of Buyers, with Buyers assuming Seller's
obligations, any and all rights of Seller against a third party thereto. Seller
shall, without further consideration therefor, pay and remit to Buyers promptly
all monies, rights and other considerations received in respect of Buyers'
performance of such obligations. If and when any such consent shall be obtained
or such agreement, lease, license or other right shall otherwise become
assignable or able to be novated, Seller shall promptly assign and novate all
its rights and obligations thereunder to Buyers without payment of further
consideration and Buyers shall, without the payment of any further consideration
therefor, assume such rights and obligations and Seller shall be relieved of any
and all liability hereunder.
(b) Each of Seller on the first part and Buyers on the second part
shall pay 50% of the costs, transfer fees, expenses, losses and damages
("Consent Costs") associated with any payment (including, without limitation,
any increase in royalty payments), loss of
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exclusivity or other adverse change in the rights or benefits of the Business
arising out of or incurred in connection with obtaining any consent, approval or
amendment to the assignment of the agreements listed in Section 5.4(b) of the
Disclosure Schedule. If the Consent Cost for any such consent, approval or
amendment includes items other than an immediate cash payment, the liquidated
present value of such Consent Cost shall be determined by Buyers and Seller. If
Buyers and Seller are unable to agree within ten (10) business days upon the
amount of such Consent Cost, then either party may refer such matter to the
Consent Valuer, who shall act as an expert and not as an arbitrator, who shall
have no liability to either party for its actions hereunder absent fraud, bad
faith or gross negligence, and whose decisions shall be binding and conclusive
on the parties hereto absent fraud or manifest error. The fees and expenses of
the Consent Valuer shall be paid by Buyers and Seller in equal shares, and
Buyers and Seller jointly shall indemnify and hold harmless the Consent Valuer
in respect of any claim made against the Consent Valuer arising out of the
performance of its obligations hereunder, unless the Consent Valuer shall be
found liable in respect of such claim by reason of its fraud, bad faith or gross
negligence. The "Consent Valuer" means an internationally recognized investment
bank experienced in the valuation of the matters involved in the relevant
Consent Cost selected by the party referring any matter to the Consent Valuer
and who shall be reasonably acceptable to the other party. Notwithstanding the
foregoing, in no event shall Seller pay Consent Costs in excess of $10 million
in the aggregate.
Section 5.5 Best Efforts. Upon the terms and subject to the
conditions herein provided, each of the parties hereto agrees to use its best
efforts to take or cause to be taken all action, to do or cause to be done, and
to assist and cooperate with the other party hereto in doing, all things
necessary, proper or advisable under applicable laws and regulations, to
consummate and make effective, in the most expeditious manner practicable, the
transactions contemplated by this Agreement and the Related Agreements,
including, but not limited to, (i) the defending of any lawsuits or other legal
proceedings, whether judicial or administrative, challenging this Agreement or
the Related Agreements or the consummation of the transactions contemplated
hereby and thereby and (ii) the execution and delivery of such instruments, and
the taking of such other actions as the other party
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hereto may reasonably require in order to carry out the intent of this Agreement
and the Related Agreements.
Section 5.6 Government Contracts.
(a) Until any Novation Agreements (as defined below) legally required
with respect to any Government Contracts have been executed and delivered,
Buyers and Seller shall enter into one or more agreements, in form and substance
substantially identical to the form attached hereto as Exhibit D, pursuant to
which Buyers shall perform or discharge on behalf of Seller all of the
liabilities, responsibilities and obligations of Seller under the Government
Contracts, and Buyers shall perform or discharge all of such liabilities,
responsibilities and obligations and shall indemnify Seller for all losses,
costs and fees charged to Seller arising out of such performance by Buyers.
(b) Seller and Buyers shall notify Seller's Government Contract
customers that Seller's obligations under its Government Contracts will, after
the Closing Date, be performed by Buyers and shall seek Government consent,
where required, as soon after the date hereof as may be practicable to permit
Buyers to so act. Seller and Buyers shall assist and cooperate with each other
and use their best reasonable efforts to obtain (i) novation agreements to the
extent required by law or regulation with respect to each of the Government
Contracts ("Novation Agreements") as soon as reasonably possible, (ii) any
security clearances or permits required to operate any facility or conduct any
portion of the Business and (iii) all other consents, approvals, novations and
waivers necessary to convey to Buyers any of the other Government Contracts that
are not expressly required by law or by contract to be obtained prior to Closing
(all Novation Agreements and other consents, approvals, novations and waivers
described in (i), (ii) and (iii) above are hereinafter collectively referred to
as "Post-Closing Government Contract Consents"); provided, however, that Seller
shall not be obligated to pay any consideration therefor to the parties from
whom the Post-Closing Government Contract Consents are requested. Seller and
Buyers shall at the time of execution and delivery of Novation Agreements enter
into any amendments to this Agreement made necessary by the Novation Agreements
to effect the intentions of this Agreement.
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(c) The failure of Seller or Buyers to obtain any Post-Closing
Government Contract Consents that may be necessary pursuant to this Section 5.6
shall not give rise to any right of termination or rescission or any claim for
damages or reduction of the Purchase Price by Parent or Buyers against Seller.
Section 5.7 Seller's Guarantees. Buyers shall cooperate with Seller,
both before and after the Closing Date, by taking, and after Closing, by causing
the appropriate entity to take, all actions Seller shall reasonably request to
effect the termination of any guarantee by Seller or any obligation or liability
of the Business.
Section 5.8 Public Announcements. Except as the parties shall
mutually agree, the parties shall not issue any report, statement or press
release or otherwise make any public statements with respect to this Agreement
or the Related Agreements and the transactions contemplated hereby and thereby,
except as in the reasonable judgment of the party may be required by law or in
connection with the obligations of a publicly-held, exchange-listed company
(including any requirements of the New York, London or Amsterdam stock
exchanges), in which case the language of any such report, statement or press
release shall, to the extent practicable, be mutually agreed to by the parties.
Without limiting the foregoing, and notwithstanding the terms of the
Confidentiality Agreement, Buyers may make an announcement describing the
unaudited results of operations (including, without limitation calculations of
earnings before interest and taxes) of the Business for the nine months ending
September 30, 1994 as set forth in the September 30, 1994 Financial Statements.
Section 5.9 Intentionally Omitted.
Section 5.10 Exercise of Options. (a) Promptly after Closing, Buyers
will use commercially reasonable efforts to terminate the obligations of Mead
with respect to (i) that certain sublease between Tyris Leasing Corp., as
lessor, and Seller, as lessee, dated as of January 3, 1983 (the "Tyris
Sublease") and (ii) that certain sublease between Hollander Leasing Corp., as
lessor, and Seller, as lessee, dated as of January 3, 1983 (the "Hollander
Sublease"). In the event that such termination does not occur, Buyers shall not
exercise any purchase option, any right of first refusal or any renewal right
under either the Tyris Sublease or the Hollander
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Sublease until such termination occurs, unless Buyers can provide to Seller
adequate assurance of performance at the sole expense of Buyers or discharge of
Seller of any obligations thereunder.
(b) Seller shall extinguish any approval rights or rights of first
refusal contained in that certain deed from Seller to MDC dated June 27, 1989
filed for record as Deed No. 89-453 B04 of the Montgomery County records.
Seller shall execute an affidavit stating that Seller is in compliance with all
restrictions contained in such deed. Seller agrees that the restriction in such
deed regarding office use shall be applicable to the Excluded Asset described in
Section 1.1(d)(vii).
(c) Seller shall obtain a waiver of the Notice of Repurchase Rights,
dated March 25, 1994, pursuant to that certain Contract of Sale dated March 25,
1994, between BAT INVESTMENTS, L.L.C., a Utah limited liability company and TBC
REALTY II CORPORATION, a Texas corporation (Said Notice recorded March 11, 1994,
as Entry No. 25164, in Book 3402, at Page 411, Utah County Recorder's Office) so
that Seller may convey the real property located at 5072 North 300 West Provo,
Utah to the Buyer as contemplated herein.
Section 5.11 Employees; Employee Benefits.
(a) As of the Closing, Buyers shall offer to continue the employment,
effective the day after the Closing Date, of each person who is an active
employee of the Business on the Closing Date in a position that is substantially
similar to that held with the Business as of the Closing Date, at a salary (and
with sales commission opportunities, where applicable) substantially equivalent
to that provided as of such date. In the case of the United States of America,
the employing entity shall be REI. For purposes of this Section 5.11, the term
"active employee" shall mean any person who as of the Closing is employed by
Seller including any person who is on short-term disability leave, family leave,
authorized leave of absence, military service or lay-off (with recall rights),
but shall exclude any person (i) who is on unauthorized leave of absence as of
the Closing, (ii) who has terminated his or her employment, retired, or died on
or before the Closing, and (iii) who is on long-term disability leave as of the
Closing. Any active employee who after the Closing accepts Buyers'
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offer of employment under the first sentence of this Section 5.11(a) shall be
referred to herein as an "Affected Employee" and shall be treated as having been
an Affected Employee as of the day following the Closing Date, provided that in
the event that any person who is on long-term disability leave on the Closing
Date recovers from long-term disability within 6 months after the Closing Date,
Buyers shall, promptly after receiving notice of recovery, offer employment to
such person and such person shall be treated as Affected Employee upon
acceptance of employment.
(b) On and for a period of one year after the Closing Date, REI shall
maintain, for the benefit of all Affected Employees who are participants in
Seller's plan(s) on the Closing Date and their dependents, a group health plan
that either (i) provides coverage under the same terms and conditions as were
applicable to the Affected Employees immediately before the Closing Date or (ii)
satisfies the requirements of section 4980B(f)(2)(B)(iv) of the Code. REI or
its affiliates, as the case may be, shall cause any waiting period, pre-existing
condition exclusion, or evidence-of-insurability requirement under any plan,
program or arrangement maintained or contributed to by REI and providing health,
life insurance or disability coverage to be waived with respect to any Affected
Employee who accepts employment with REI.
(c) (i) Seller shall retain and be solely responsible for any
and all liabilities and claims relating to severance or retention
obligations in connection with employees of the Business existing on the
Closing Date, including, without limitation, all arrangements described in
Section 3.8(b)(8) and (9) of the Disclosure Schedule and all items
described in the Retention Agreements referred to therein (all such
arrangements and agreement collectively referred to as "Seller Severance
Plans"), except as otherwise set forth in Section 5.11(c)(ii)-(v) hereof.
(ii) Affected Employees shall not be entitled to participate in
any severance benefit policy of REI until immediately after the six month
anniversary of the Closing Date, at which time Affected Employees then
employed by REI shall become eligible to participate in the applicable REI
severance policy. With respect to any Affected Employee whose employment
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with REI is terminated by REI prior to the six month anniversary of the
Closing Date other than for cause and under circumstances that entitle such
Affected Employee to receive severance and other benefits under the Seller
Severance Plans, Buyers shall reimburse Seller for the direct out-of-pocket
costs of severance and other benefits paid or provided to such Affected
Employee in connection with such termination. In addition, Buyer shall
reimburse Seller to the direct out-of-pocket cost of retention obligations
paid or provided under the Retention Agreements.
(iii) Affected Employees who terminate employment with REI after
the six month anniversary of the Closing Date shall be entitled to
participate in the applicable REI severance policy; provided, however, that
(A) each such Affected Employee shall be given credit for his or her six
months of service with REI prior to participation in the applicable REI
severance policy as well as for his or her years of credited service prior
to the Closing Date to the same extent recognized for purposes of the
Seller Severance Plan prior to the Closing Date and (B) any severance
benefits payable to any such Affected Employee under the terms of the
applicable REI severance policy will be offset by any amount received, or
claimed due, by such Affected Employee, however characterized, from the
Seller as severance compensation for the termination of employment with
respect to any period in which the Affected Employee's service is credited
for purposes of the applicable Buyers severance policy; provided, however,
Seller shall only be liable to Affected Employees who are eligible under
Seller Severance Plans at the time of such termination of employment.
(iv) Seller shall be solely responsible for any withholding
taxes and any reporting obligations with respect to or arising under any
federal, state or local law arising in connection with the payment by
Seller of any severance benefits under or in connection with any Seller
Severance Plans. Buyers shall reimburse Seller for the amount of all
employment or payroll taxes imposed on Seller with respect to the payment
by Seller of any severance benefits
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with respect to which Buyers have a reimbursement obligation to Seller
hereunder.
(v) With respect to Employees located outside the United States
of America, the applicable employers shall be the Buyers purchasing the
tangible Assets located in that jurisdiction and the terms of employment
for such non-U.S. Employees shall be modified as appropriate to reflect
local law and practice and such Employees' current terms of employment.
(vi) Buyers shall be responsible for all notices, payments,
fines or assessments due to any government authority or employees pursuant
to any applicable foreign, federal, state or local law, common law,
statute, rule or regulation with respect to the employment, discharge or
layoff of Affected Employees, provided with respect to the Worker
Adjustment and Retraining Notification Act the Seller shall be responsible
for such notices, payment fines or assessments due as a result of discharge
or layoff of Employees prior to the Closing Date.
(vii) Seller and Buyers shall cooperate in carrying out their
respective obligations under this Section 5.11(c).
(d) The benefits of (i) the Employees in Seller's Salaried Retirement
Plan and Seller's Savings Plan for Salaried and Certain Non-Bargaining Hourly
Employees (which are the only qualified retirement plans relating to the
Employees) and (ii) the Employees under the Mead Data Central International
Retirement Plan for UK Employees and The Mead Data Central International
Canadian Pension Plan (which are the only foreign retirement plans relating to
the Affected Employees) shall not be transferred to tax qualified plans and
trusts maintained or to be established by Buyers. Seller shall retain all (and
Buyers do not assume any) liability with respect to benefits payable to any
Employees from such plans. Seller shall vest all accrued benefits of employees
of the Business with respect to benefits under such plans. The benefits of the
Employees in Seller's plans shall be paid to the Employees according to the
terms of such plans.
(e) Seller shall be responsible for the administration and payment of
all claims, losses, damages
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and expenses (including, without limitation, reasonable attorneys' fees) and
other liabilities and obligations relating to or arising out of all workers'
compensation claims of Employees pending as of the Closing Date, or made after
the Closing Date but relating to events occurring before the Closing Date.
Buyers shall have responsibility for and shall indemnify and hold harmless
Seller from and against any and all claims, losses, damages and expenses
(including, without limitation, reasonable attorneys' fees) and other
liabilities and obligations relating to or arising out of all workers'
compensation claims of Affected Employees made after the Closing Date and
relating to events occurring on or after the Closing Date. Buyers shall notify
Seller within 30 days of Buyers' becoming aware of any activity, including, but
not limited to, any applications for benefits of any kind, including new
injuries or occupational diseases, pertaining to any employee listed on Section
5.11(f) of the Disclosure Schedule.
Section 5.12 Allocation of Purchase Price. Buyers shall prepare, and
Buyers and Seller shall agree to, the allocation of the Purchase Price and the
Assumed Liabilities (other than contingent liabilities and the liability with
respect to the Prepaid Subscriptions, which shall be treated in the manner
provided in Section 6.10 hereof) among the Assets (other than the accounts
receivable treated as transferred in the manner provided in Section 6.10 hereof)
to be purchased hereunder which allocation shall be reflected on Section 5.12 of
the Disclosure Schedule hereto and which shall be finalized as of the Closing
Date but shall be adjusted to take account of any post-closing purchase price
adjustments (the "Allocation"). The Allocation shall be made in accordance with
section 1060 of the Code and applicable Treasury regulations. Each of Seller
and Buyers shall (i) be bound by the Allocation for purposes of determining any
Taxes, (ii) prepare and file, and cause its affiliates to prepare and file, its
Tax Returns on a basis consistent with the Allocation and (iii) take no
position, and cause its affiliates to take no position, inconsistent with the
Allocation on any applicable Tax Return, in any proceeding before any taxing
authority or otherwise. In the event that the Allocation is disputed by any
taxing authority, the party receiving notice of the dispute shall promptly
notify the other party hereto concerning resolution of the dispute.
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Section 5.13 Guaranty. Notwithstanding any other provision of this
Agreement, Parent (as a primary obligor and not as a surety) unilaterally,
unconditionally and irrevocably guarantees to Seller the full and timely
performance by Buyers (or with regard to Section 5.15, any other entity
nominated by Buyers as contemplated therein) of all obligations of Buyers under
this Agreement, the Undertaking and the other Related Agreements and the Other
Instruments (including any amendment hereto or thereto), including, without
limitation, all obligations for the payment of all damages (including, without
limitation, Seller Damages), costs and expenses which may become payable in
accordance herewith or therewith. Parent unconditionally waives any and all
notices of any nature in connection with its guaranty obligations pursuant to
this Section 5.13 and also unconditionally waives any and all rights it might
otherwise have to require that Seller first make a demand or institute a
proceeding against Buyers or any other person, entity or enterprise, or to
resort to any security or other guaranty, as conditions to the obligations of
Parent under this Section 5.13.
Section 5.14 Noncompetition. (a) Seller agrees that for a period of
five full years from the Closing Date, neither it nor any of its affiliates
shall:
(i) engage, either directly or indirectly, as a principal or for
its own account or solely or jointly with others, or as stockholders in any
corporation or joint stock association (other than through the ownership of
not more than 5% of the outstanding voting securities of any publicly-
traded entity), in any business that competes with the Business as it
exists on the Closing Date in any jurisdiction where the Business is
conducted or advertised on the Closing Date; or
(ii) affirmatively solicit, other than through a general
solicitation, the employment of any Affected Employee.
(b) If any provisions contained in this Section shall for any reason
be held invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other provisions of this
Section, but this Section shall be construed as if such invalid, illegal or
unenforceable provisions had never been contained herein. It is the intention
of the
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parties that if any of the restrictions or covenants contained herein is held to
cover a geographic area or to be for a length of time which is not permitted by
applicable law, or in any way construed to be too broad or to any extent
invalid, such provision shall not be construed to be null, void and of no
effect, but to the extent such provision would be valid or enforceable under
applicable law, a court of competent jurisdiction shall construe and interpret
or reform this Section to provide for a covenant having the maximum enforceable
geographic area, time period and other provisions (not greater than those
contained herein) as shall be valid and enforceable under such applicable law.
Seller acknowledges that Buyers would be irreparably harmed by any breach of
this Section and that there would be no adequate remedy at law or in damages to
compensate Buyers for any such breach. Seller agrees that Buyers shall be
entitled to injunctive relief requiring specific performance by Seller of this
Section, and Seller consents to the entry of an order thereof.
Section 5.15 Foreign Assets. Seller shall, and shall cause its
subsidiaries that are engaged in activities connected with the business in
Canada and any other country other than the United States of America, to enter
into agreements with the Buyers indicated in Section 1.1(a) of the Disclosure
Schedule or other entities nominated by them providing for the transfer of such
activities connected with the Business and the Assets and employees used in such
activities to such Buyers or their nominees for no additional consideration,
other than the assumption of related liabilities; provided, however, for
purposes of the representations and warranties set forth in Article III and all
provisions related thereto, the acquisition of the Assets contemplated by this
Section 5.15 shall be treated as if Seller had transferred the shares of MDC
International to Buyers rather than selling the Assets as contemplated in this
Section 5.15; provided, further, that Buyers shall reimburse Seller with respect
to any additional costs or liabilities other than income tax incurred by Seller
above the costs or liabilities which Seller would have incurred had the shares
of MDC International been transferred to a Buyer rather than its Assets as
contemplated in this Section 5.15.
Section 5.16 Cash. Seller agrees that it will, and will cause the
Companies to, give irrevocable instructions to all banks maintaining accounts
for the Business that all cash in any such accounts shall be transferred
automatically by the close of business on the first day
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after the Closing Date and at the close of business of each banking day
following the Closing Date to an account designated by Buyer.
Section 5.17 Financial Statements. As promptly as practicable but no
later than 45 days after the date hereof, Seller shall deliver to Buyers the
Business' unaudited balance sheet as of September 30, 1994 and related
statements of earnings and statements of cash flows for the period then ended
(the "September 30, 1994 Financial Statements").
Section 5.18 Proprietary Software. Except as set forth in Section
5.18 of the Disclosure Schedule, after the Closing, Seller shall not retain or
use, directly or indirectly, any copies or other tangible embodiments of the
Proprietary Software.
Section 5.19 Recordation of Seller's Title. To the extent that, as
of the Closing Date, the record owner of any Intellectual Property as set forth
in Section 3.12(a) of the Disclosure Schedule is not the actual owner of such
Intellectual Property, Seller shall (i) execute and deliver to Buyers such
documents and take such other action as reasonably requested by Buyers to ensure
that the record owner thereof is the actual owner thereof, and (ii) reimburse
Buyers for all reasonable and documented additional costs and fees incurred by
Buyers solely as a result of the preparation, execution and recordation of such
actual ownership that would not have otherwise been incurred by Buyers.
Section 5.20 Multiple Buyers. As contemplated herein, Seller will
transfer the Assets to the various Buyers as set forth on Section 1.1(a) of the
Disclosure Schedule. Buyers acknowledge that notwithstanding anything else
contained in this Agreement, Seller shall not be in breach of the
representations and warranties set forth in Article III if such breach would not
have occurred had the purchaser of the Assets been a single corporation
incorporated under the laws of one of the United States of America. Buyers
agree to indemnify Seller from any cost or other liabilities (other than income
Taxes) which Seller would not have incurred had the purchaser of the Assets been
a single corporation incorporated under the laws of one of the United States of
America.
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Section 5.21 Confidentiality. (a) Seller and its affiliates and
representatives will hold in confidence, unless compelled to disclose by
judicial or administrative process or by other requirements of law, all
documents and information concerning the business of Buyers or any affiliate of
Buyers furnished to Seller or any of its affiliates or representatives in
connection with the transactions contemplated by this Agreement, except to the
extent that such documents or information, (i) are in the public domain or after
the date hereof enters the public domain through no fault of Seller or its
affiliates or representatives or (ii) was known to Seller or its affiliates or
representatives before having been disclosed by or on behalf of Buyers or (iii)
was later lawfully acquired by Seller or its affiliates or representatives from
sources other than Buyers or its affiliates or representatives and none of
Seller, its affiliates or representatives was aware that such source was under
an obligation (whether contractual, legal or fiduciary) to Buyers or any of its
affiliates to keep such information confidential.
(b) Unless Buyers shall otherwise consent, after the Closing Date,
Seller and its affiliates and representatives will hold in confidence, unless
compelled to disclose by judicial or administrative process or by other
requirements of law or contract, all documents and information concerning the
Business and the Assets except to the extent that such documents or information
are in the public domain or after the Closing Date enters the public domain
through no fault of Seller or any of its affiliates or representatives.
(c) After any termination of this Agreement, Seller will promptly
redeliver or cause to be redelivered to Buyer, all copies of the documents or
information referred in paragraph (a) furnished by Buyers or any affiliate or
representative of Buyers or promptly destroy such documents or information and
immediately notify Buyers of so doing. Any portion of such documents or
information that may be found in analyses, compilations, studies or other
documents prepared by Seller or any of its affiliates or representatives or any
oral information received from Buyer, any affiliate or representatives of Buyers
by Seller or any of its affiliates or representatives will be held by Seller and
its affiliates or representatives in confidence pursuant to the terms of this
Section 5.19 or destroyed. All documents and information concerning the
business of Buyers or any affiliate of
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Buyers furnished to Seller and any of its affiliates or representatives in
connection with the transactions contemplated by this Agreement shall be used by
Seller and its affiliates and representatives solely for evaluating and
consummating this Agreement and the transactions contemplated hereby and shall
in no event be used in any way which is or could be detrimental to the Buyer, or
any of its affiliates or representatives.
(d) If Seller is requested in any judicial or administrative
proceeding or by any governmental or regulatory authority to disclose any
document or information referred to in paragraphs (a) or (b) above, Seller will
(i) give Buyers timely notice of such request so that it may seek an appropriate
protective order and (ii) consult with Buyers as to the advisability of taking
legally available steps to resist or narrow such a request. Seller will
reasonably cooperate with Buyers in obtaining such order. If in the absence of
a protective order Seller is nonetheless compelled to disclose documents or
information, Seller may make such disclosure, provided that Seller shall give
Buyers written notice of their disclosure as far in advance of their disclosure
as is practicable and, upon Buyers' request and at Buyers' expense, Seller shall
use its best efforts to obtain reasonable assurances that confidential treatment
will be accorded to such information.
(e) Seller acknowledges and agrees that money damages would not be a
sufficient remedy for any breach of any provision of this Section by Seller or
its affiliates or representatives, and that in addition to all other remedies
which Buyers, their affiliates and representatives may have, each of Buyers,
their affiliates and representatives will be entitled to specific performance
and injunctive or other equitable relief as a remedy for any such breach. No
failure or delay by Buyers, their affiliates or representatives in exercising
any right, power or privilege under this Section will operate as a waiver
thereof, nor will any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any right, power or privilege
hereunder. Seller acknowledges that Buyers, their affiliates and
representatives (and their respective successors and assigns) are third party
beneficiaries of Section 5.19 of this Agreement and shall be entitled to enforce
the provisions hereof as though parties hereto.
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ARTICLE VI
CERTAIN TAX MATTERS
Section 6.1 Section 338(h)(10) Election.
(a) (i) Seller and REI shall jointly make Elections (and any
comparable election under state or local tax law) with regard to each of the
Companies prior to or on the Closing Date, (ii) Seller and REI shall, as
promptly as practicable following the Closing Date, cooperate with each other to
take all actions necessary and appropriate (including filing such forms,
returns, elections, schedules and other documents as may be required) to effect
and preserve timely Elections in accordance with the provisions of Treasury
regulations promulgated under section 338 of the Code (or any comparable
provisions of state or local tax law) or any successor provisions and (iii)
Seller and REI shall report the purchase by REI of the Shares pursuant to this
Agreement consistent with the Elections (and any comparable elections under
state or local tax laws) and shall take no position inconsistent therewith in
any Tax Return, any proceeding before any taxing authority or otherwise.
(b) In connection with each Election, REI shall prepare, and REI and
Seller shall agree to, the determination of the "Modified Aggregate Deemed Sales
Price" (as defined under Treasury regulation section 1.338(h)(10)-1(f)) and the
allocation of each such "Modified Aggregate Deemed Sales Price" among the assets
of each respective Company, which shall be reflected on Section 5.12 of the
Disclosure Schedule hereto and which shall be finalized as of the Closing Date,
and which shall be consistent with the Allocation contemplated by Section 5.12
hereof. The determination of the amount of each such "Modified Aggregate Deemed
Sales Price" and the allocation thereof shall be made in accordance with section
338(b) of the Code and applicable Treasury regulations. Seller and Buyers shall
(i) be bound by such determination and such allocation for purposes of
determining any Taxes, (ii) prepare and file, and cause their affiliates to
prepare and file, Tax Returns on a basis consistent with each such determination
of the "Modified Aggregate Deemed Sales Price" and each such allocation and
(iii) take no position, and cause their affiliates to take no position,
inconsistent with any such determination or allocation on any applicable Tax
Return, in any proceeding before any taxing authority or otherwise. In the
event that any such
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allocation and/or determination is disputed by any taxing authority, the party
receiving notice of the dispute shall promptly notify the other party hereto
concerning resolution of the dispute.
Section 6.2 Return Filings and Liability for Taxes.
(a) Except as provided in paragraph (b) of this Section 6.2 and
Section 6.3 hereof, Seller shall (i) prepare and file, or cause to be prepared
and filed, on a timely basis (in each case, at its sole cost and expense) (x)
all Tax Returns with respect to each of the Companies, MDC and the Other
Divisions or otherwise relating to the Assets or the Business for all taxable
periods ending on or prior to the Closing Date and (y) a final short period tax
return for sales and use Taxes of MDC and the Other Divisions for any Pre-
Closing Period (collectively, the "Pre-Closing Returns") and (ii) pay, or cause
to be paid, all Taxes shown to be due on such Pre-Closing Returns.
(b) Buyers shall prepare and file, or cause to be prepared and filed,
on a timely basis (in each case, at its sole cost and expense) (i) all Tax
Returns with respect to each of the Companies, MDC and the Other Divisions or
otherwise relating to the Assets or the Business for taxable periods beginning
after the Closing Date, (ii) all Tax Returns with respect to the Companies, MDC
and the Other Divisions or otherwise relating to the Assets or the Business for
Taxes accrued on the Final Statement and (iii) all Straddle Period Returns;
provided however that Buyer shall not file any Tax Returns described in Section
6.2(a)(i)(y). Buyers shall pay, or cause to be paid, (x) all Taxes shown to be
due on the Tax Returns referred to in this Section 6.2(b) and (y) all real
estate tax bills that are accrued on the Final Statement. Buyers shall also pay
Seller an amount equal to the sales and use Taxes accrued on the Final Statement
with respect to MDC and the Other Divisions. To the extent that Buyers must
reimburse Seller for sales and use Taxes, Seller shall provide Buyers with a
copy of the related sales and use Tax Returns at least ten (10) business days
prior to the due date thereof (giving effect to any extensions thereto),
accompanied by a statement calculating in reasonable detail Buyers'
reimbursement obligation pursuant to this Section 6.2(b) (the "Sales & Use Tax
Reimbursement Statement"). Buyers shall have the right to review any of the
aforementioned documents prior to the filing of such sales and use Tax Returns.
If Buyers agree
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to the Sales & Use Tax Reimbursement Amount, Buyers shall pay to Seller an
amount equal to such Taxes shown on the Sales & Use Tax Reimbursement Statement
not later than three (3) business days before the due date (including extensions
thereof) for payment of such sales and use Taxes. If Buyers disputes the amount
calculated in the Sales & Use Tax Reimbursement Statement, Seller and Buyers
shall consult and resolve in good faith any issues arising as a result of the
review thereof. If the parties are unable to resolve any dispute within ten
(10) business days after Buyers' receipt of such sales and use Tax Returns and
Sales & Use Tax Reimbursement Statement, such dispute shall be resolved by the
Independent Accounting Firm as promptly as practicable. The determination by
the Independent Accounting Firm shall be final and binding on the parties. If
the Independent Accounting Firm is unable to make a determination with respect
to any disputed issue prior to the due date (including extensions) for the
filing of such sales and use Tax Returns or the payment of such sales and use
Taxes in question, Seller shall file, or cause to be filed, such returns and
shall pay such sales and use Taxes without such determination having been made.
Buyers shall pay to Seller not later than three (3) business days before the due
date (including any extensions thereof) for the payment of such sales and use
Taxes, an amount determined by Buyers as properly chargeable to Buyers pursuant
to this Section 6.2. Appropriate adjustments shall be made to the amount paid
by Buyers in order to reflect the decision of the Independent Accounting Firm.
(c) Seller shall reimburse Buyers for all Taxes that are payable by
Buyers pursuant to section 6.2(b) hereof that are attributable to (i) a taxable
period ending on or before the Closing Date and (ii) the Pre-Closing Period, to
the extent that such Taxes exceed the aggregate amount of all Taxes accrued on
the Final Statement, but only after Buyer has paid Taxes with respect to such
taxable periods, including amounts paid to Seller in respect of sales and use
Taxes accrued on the Final Statement with respect to MDC and the other
Divisions, in an amount equal to the aggregate amount of all Taxes accrued on
the Final Statement. Buyers shall provide Seller with copies of any Straddle
Period Returns and any bill or assessment for Taxes to be paid by Buyers
pursuant to Section 6.2(b) hereof for a period prior to the Closing Date at
least twenty (20) business days prior to the due date thereof (giving effect to
any extensions thereto), accompanied by a statement calculating in rea-
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sonable detail Seller's reimbursement obligation pursuant to this Section 6.2(c)
(the "Reimbursement Statement"), if any. Seller shall have the right to review
any of the aforementioned documents prior to the filing of such Straddle Period
Returns or the payment of any Taxes by Buyers pursuant to any bill or notice of
assessment. If Seller disputes the amount calculated in the Reimbursement
Statement or the amount of any income allocated to it on any Straddle Period
Return or bill or notice of assessment (regardless of whether Seller has any
reimbursement obligation to Buyers with respect thereto), Seller and Buyers
shall consult and resolve in good faith any issues arising as a result of the
review thereof. If Seller agrees to the Reimbursement Statement amount, Seller
shall pay to Buyers an amount equal to the Taxes shown on the Reimbursement
Statement not later than three (3) business days before the due date (including
extensions thereof) for payment of Taxes with respect to such Reimbursement
Statement. If the parties are unable to resolve any dispute within ten (10)
business days after Seller's receipt of such Straddle Period Return or
Reimbursement Statement, such dispute shall be resolved by the parties directly
with the relevant taxing authority pursuant to Section 6.5 (b) hereof or, at
Seller's election, by the Independent Accounting Firm as promptly as
practicable. If the Independent Accounting Firm is unable to make a
determination with respect to any disputed issue prior to the due date
(including extensions) for the filing of the Straddle Period Return or the
payment of Taxes in question, Buyers shall file, or shall cause to be filed,
such Straddle Period Return and shall pay such Taxes without such determination
having been made. Seller shall pay to Buyer, not later than three (3) business
days before the due date (including any extensions thereof) for the payment of
such Taxes, an amount determined by Seller as properly chargeable to Seller
pursuant to this Section 6.2. Appropriate adjustments shall be made to the
amount paid by Seller in order to reflect the decision of the Independent
Accounting Firm. The determination by the Independent Accounting Firm shall be
final and binding on the parties.
(d) In the case of any Straddle Period, Taxes of each of the
Companies, relating to MDC and the Other Divisions or otherwise relating to the
Assets or the Business for the Pre-Closing Period (including, without
limitation, any sales and use Taxes and any payroll Taxes imposed directly on
the Companies, MDC and the Other Divisions) shall be accrued on the Final
Statement on an interim-closing-of-the-books basis as if such taxable
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period ended on and included the Closing Date and determined consistent with
past practices of the Companies, MDC and the Other Divisions; provided, however,
that real property Taxes shall be accrued in accordance with the method used in
section 164(d)(1) of the Code. For purposes of the preceding sentence,
exemptions, allowances or deductions, if any, that are calculated on an annual
basis shall be apportioned based on the number of days in a Pre-Closing Period.
(e) Seller and Buyers shall reasonably cooperate, and shall cause
their respective affiliates, officers, employees, agents, auditors and
representatives reasonably to cooperate, in preparing and filing all Tax Returns
(including amended returns and claims for refund), including, without
limitation, the issuance of a power of attorney, if necessary, maintaining and
making available to each other all records necessary in connection with Taxes
and in resolving all disputes and audits with respect to all taxable periods
relating to Taxes.
Section 6.3 Transfer and Similar Taxes. Notwithstanding any other
provision of this Agreement to the contrary, all sales, use, transfer, real
property gains, stamp, duties, recording and similar Taxes incurred in
connection with the transactions contemplated by this Agreement and the Related
Agreements shall be borne one-half each by Buyers and Seller; provided, however,
that Buyers' aggregate obligation to pay the transfer and similar Taxes
described in this Section 6.3 shall not exceed $1,000,000. Buyers shall, at
their own expense, accurately file all necessary Tax Returns and other
documentation with respect to such Taxes and timely pay all such Taxes. If
required by applicable law, Seller will join in the execution of any such Tax
Returns or other documentation.
Section 6.4 Tax Indemnification.
(a) Notwithstanding anything in this Agreement to the contrary, but
subject to Section 9.2(a) hereof (but not Section 9.2(b) hereof) and except as
provided in the next succeeding sentence and in Section 6.3 hereof, Seller shall
indemnify Buyers and its affiliates and hold them harmless from and against (i)
any liability for Taxes of the Companies, MDC and the Other Divisions or
otherwise relating to the Assets or the Business for all taxable periods ending
on or before the Closing Date and for the Pre-Closing Period and (ii) any
liability for Taxes which
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result from (A) the deemed sale of assets pursuant to the Elections, and (B) the
deemed sale of assets pursuant to any comparable elections under state or local
tax laws. Seller shall be obligated to indemnify Buyers or any of their
affiliates for Taxes with respect to taxable periods ending on or before the
Closing Date and the Pre-Closing Period to the extent that Seller has not
reimbursed Buyers for such Taxes pursuant to Section 6.2(c) hereof and only for
Taxes paid by Buyer or their affiliates, including amounts paid to Seller with
respect to sales and use Taxes of MDC and the other Divisions, in excess of the
aggregate amount of all Taxes accrued on the Final Statement. Notwithstanding
the foregoing, Seller shall not indemnify or hold harmless Buyers or any of
their affiliates from and against any liability for Taxes which is directly
attributable to a breach by Buyers of their obligations under this Agreement.
(b) Notwithstanding anything in this Agreement to the contrary,
Buyers shall indemnify Seller and its affiliates and hold them harmless from and
against (i) all Taxes accrued on the Final Statement (other than Taxes with
respect to which Buyers have paid Seller pursuant to Section 6.2(b) with respect
to sales and use Taxes of MDC and the Other Divisions), (ii) any liability for
Taxes of the Companies, MDC and the Other Divisions or otherwise relating to the
Assets or the Business purchased hereunder for the portion of any Straddle
Period beginning after the Closing Date and for any taxable period beginning
after the Closing Date, and (iii) any liability for Taxes of the Companies and
for Taxes relating to MDC and the Other Divisions arising on the Closing Date
and attributable to activities (other than the transactions contemplated by this
Agreement) outside of the ordinary course of business. Notwithstanding the
foregoing, Buyers shall not indemnify Seller or its affiliates from any
liability for Taxes which is directly attributable to a breach by Seller of its
obligations under this Agreement.
Section 6.5 Procedures Relating to Indemnification of Tax Claims.
(a) If a notice of an audit or a claim for Taxes is made by any
taxing authority in writing, which, if successful, might result in an indemnity
payment pursuant to Section 6.4 hereof, the party seeking indemnification (the
"Tax Indemnified Party") shall promptly notify the other party (the "Tax
Indemnifying Party") in writing of such audit or claim (a "Tax Claim") within a
reasonably
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sufficient period of time to allow the Tax Indemnifying Party effectively to
participate in or contest such Tax Claim, and in reasonable detail to apprise
the Tax Indemnifying Party of the nature of the Tax Claim, and provide copies of
all correspondence and documents received by it from the relevant taxing
authority in connection with or related to such Tax Claim. Failure to give
prompt notice of a Tax Claim hereunder shall not affect the Tax Indemnifying
Party's obligation under Section 6.4, except to the extent that the Tax
Indemnifying Party is materially prejudiced by such failure to give prompt
notice.
(b) With respect to any Tax Claim which might result in an indemnity
payment to Buyers pursuant to Section 6.4 (including, without limitation, Taxes
of any of the Companies and Taxes relating to MDC and the Other Divisions for a
Straddle Period), Seller shall at its election control all audits and
proceedings taken in connection with such Tax Claim and, without limiting the
foregoing, may in its sole discretion and at its sole expense pursue or forego
any and all administrative appeals, proceedings, hearings and conferences with
any taxing authority with respect thereto, and may, in its sole discretion,
either pay the Tax claimed and sue for a refund where applicable law permits
such refund suits or contest such Tax Claim, provided however, (A) Seller shall
not, without Buyers' consent (which shall not unreasonably withheld) agree to
any settlement or other compromise with respect to any Tax Claim if such
settlement or other compromise could adversely affect the Buyer, the Companies
or any Buyers Affiliate (including, without limitation, effects caused by
recurring items) and (B) if Seller elects to control the Tax Claim, Seller shall
not assert that the liability for the Tax Claim, or any portion thereof, is not
within the ambit of Seller's indemnification obligation. If Seller elects to
control a contest pursuant to this Section 6.5(b), Seller shall keep Buyer
advised and shall pursue such contest in good faith. Buyers shall not, and
shall cause their affiliates not to, settle or otherwise compromise any Tax
Claim referred to in the preceding sentence without Seller's prior written
consent. In connection with any Tax Claim as to which Seller elects to control
proceedings taken in connection with such Tax Claim, (i) Seller shall keep
Buyers informed of all material developments and events relating to such Tax
Claim if involving a material liability for Taxes and (ii) Buyers shall have the
right to participate, at its sole expense, in (but not control) any such
proceedings. Buyers and their affiliates shall cooperate with Seller in
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contesting such Tax Claim (without charge to Seller), which cooperation shall
include, without limitation, the issuance of a power of attorney, if necessary,
the reasonable retention and provision to Seller of records and information
which are reasonably relevant to such Tax Claim, and the making of employees
reasonably available to provide additional information or explanation of any
material provided hereunder or to testify at proceedings relating to such Tax
Claim.
(c) With respect to any Tax Claim not described in the preceding
paragraph which might result in an indemnity payment to Seller pursuant to
Section 6.4, Buyers shall control all proceedings in accordance with provisions
that are parallel to those in the first preceding paragraph.
Section 6.6 Refunds and Credits. Any refunds and credits of Taxes
(other than refunds and credits reflected on the Final Statement) of any of the
Companies, MDC and the Other Divisions or otherwise relating to the Assets or
the Business with respect to (i) any taxable period ending on or before the
Closing Date shall be for the account of Seller, and if received or utilized by
Buyer, any of their affiliates or any of the Companies, shall be paid to Seller
within five (5) business days after Buyer, any of their affiliates or any of the
Companies receive such refund or utilize such credit, (ii) any taxable period
beginning after the Closing Date shall be for the account of Buyer, and if
received or utilized by Seller, or any of its affiliates, shall be paid by
Seller to Buyers within five (5) business days after Seller, or any of its
affiliates, receives such refund or utilizes such credit, (iii) any Straddle
Period shall be apportioned between Seller and Buyers in the same manner as such
Taxes originally had been allocated pursuant to Sections 6.2(d) hereof, and (iv)
any Election (and any comparable elections under state or local tax laws) shall
be for the account of Seller, and if received or utilized by Buyer, any of its
affiliates or any of the Companies shall be paid to Seller within five (5)
business days after Buyer, any of its affiliates or any of the Companies
receives such refund or utilizes such credit.
Section 6.7 Termination of Tax Sharing Agreements. On or prior to
the Closing Date, all tax sharing agreements and similar arrangements to which
any of the Companies is a party or otherwise relating to the Assets or the
Business shall be terminated, all obligations
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thereunder shall be settled, and no additional payments shall be made under any
thereof after the Closing Date.
Section 6.8 Carrybacks. Seller shall have the sole discretion to
accept or reject a request by Buyers to carry back any Tax Benefit to any
taxable period ending on or before the Closing Date or to a taxable year
including a Pre-Closing Period relating to Seller or the Seller Group.
Section 6.9 Employee Payroll Information. Buyers and Seller shall
make available to each other any records relating to withholding and payment of
income and unemployment taxes (federal, state and local) and FICA and FUTA taxes
with respect to wages paid to Affected Employees for the calendar year in which
the Closing occurs (including, without limitation, Forms W-4 and Employee's
Withholding Allowance Certificate).
Section 6.10 Prepaid Subscriptions. Seller and Buyers agree that an
amount of accounts receivable (net of reserves) equal to the Prepaid
Subscriptions of Seller on the Closing Date shall be treated as transferred by
Seller in consideration of the assumption by Buyers of the obligation to fulfill
the Prepaid Subscriptions. For purposes of the preparation and filing of all
Tax Returns, the actual cost to fulfill the Prepaid Subscriptions of the Seller
on the Closing Date shall be an amount equal to 61 percent of such Prepaid
Subscriptions.
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF THE PARTIES
Section 7.1 Conditions to Each Party's Obligation. The respective
obligations of each party to consummate the transactions contemplated herein is
subject to the satisfaction at or prior to the Closing of the following
conditions:
(a) Any waiting periods applicable to the transactions contemplated
by this Agreement under applicable U.S. and foreign antitrust or trade
regulation laws and regulations, including, without limitation, under the HSR
Act, shall have expired or been terminated and all governmental authorizations
or approvals required in connection with the transactions contemplated by this
Agreement shall have been obtained or given (except such
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consents, approvals or other actions which may be required to novate, assign or
transfer any Government Contract or other contract or agreement with any
government or government authority), other than those authorizations and
approvals, the failure of which to have been obtained, would not, in the
aggregate, have a Material Adverse Effect;
(b) No statute, rule or regulation shall have been enacted, entered,
promulgated or enforced by any court or governmental authority and there shall
not be in effect any judgement, order, injunction or decree of any court of
competent jurisdiction, in either instance which (i) prohibits or restricts the
consummation of the transactions contemplated hereby or (ii) would restrain,
prohibit or otherwise interfere with the effective operation or enjoyment by
Buyers of all or any material portion of the Assets.
(c) No proceeding by any Person which is reasonably likely to have
any of the effects contemplated in clauses (i) and (ii) of the preceding
subparagraph (b) shall be pending.
Section 7.2 Conditions to Obligations of Seller. The obligations of
Seller to consummate the transactions contemplated herein are further subject to
the satisfaction (or waiver) at or prior to the Closing of the following
conditions:
(a) The representations and warranties of Buyers contained in Article
IV of this Agreement shall be true and correct in all material respects at the
date hereof and as of the Closing Date as if made at and as of such time, except
for representations and warranties which are as of a specific date; and
(b) Parent and each of Buyers shall each have performed in all
material respects its respective obligations under this Agreement required to be
performed by it at or prior to the Closing pursuant to the terms hereof; and
Seller shall have received a certificate from Parent and Buyers signed by an
authorized officer of each of Parent and REI to the effect of this paragraph and
of paragraph (a) of this Section 7.2.
Section 7.3 Conditions to Obligations of Parent and Buyer. The
obligations of Parent and Buyers to consummate the transactions contemplated
hereby are further
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subject to the satisfaction (or waiver) at or prior to the Closing of the
following conditions:
(a) The representations and warranties of Seller contained in this
Agreement shall be true and correct in all material respects at the date hereof
and as of the Closing as if made at and as of such time, except for
representations and warranties which are as of a specific date;
(b) Seller shall have performed in all material respects each of its
obligations under this Agreement required to be performed by it at or prior to
the Closing pursuant to the terms hereof; and Buyers shall have received a
certificate from Seller signed by an authorized officer of Seller to the effect
of this paragraph and of paragraph (a) of this Section 7.3;
(c) Buyers shall have obtained at its sole cost and expense, title
insurance policies dated as of the Closing Date with respect to the Property,
the MDC I and II leaseholds and Easement One, on ALTA extended coverage forms
insuring good and marketable title to the Property or a valid leasehold
interest, as the case may be, free and clear of all Liens except Permitted
Liens; and
(d) All consents or renewals listed on Section 7.3 of the Disclosure
Schedule shall have been obtained on terms and conditions reasonably
satisfactory to Buyer.
ARTICLE VIII
TERMINATION; AMENDMENT; WAIVER
Section 8.1 Termination. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned:
(a) at any time, by mutual written consent of Seller and Buyer;
(b) by either Buyers or Seller, if, through no fault of the party
seeking termination, the Closing shall not have occurred on or prior to December
31, 1994; provided, however, that neither Buyers nor Seller, as the case may be,
may terminate pursuant to this clause (b) prior to March 31, 1995 if the failure
for the
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Closing to have occurred by December 31, 1994 was not the result of the failure
by the other party(ies) to perform its obligations under this Agreement,
including Sections 5.4 and 5.5 hereof; or
(c) by either Seller or Buyers if consummation of the transactions
contemplated hereby would violate any nonappealable final order, decree or
judgment of any court or governmental body having competent jurisdiction.
Section 8.2 Procedure and Effect of Termination. In the event of the
termination of this Agreement and the abandonment of the transactions
contemplated hereby pursuant to Section 8.1 hereof, written notice thereof shall
forthwith be given by the party so terminating to the other party and this
Agreement shall terminate and the transactions contemplated hereby shall be
abandoned, without further action. If this Agreement is terminated pursuant to
Section 8.1 hereof:
(a) each party shall redeliver all documents, work papers and other
materials of the other parties relating to the transactions contemplated hereby,
whether so obtained before or after the execution hereof, to the party
furnishing the same, and all confidential information received by any party
hereto with respect to the other party shall be treated in accordance with
Section 5.2(b) hereof;
(b) all filings, applications and other submissions made pursuant
hereto shall, at the option of Seller or Buyers and to the extent practicable,
be withdrawn from the agency or other person to which made; and
(c) there shall be no liability or obligation hereunder on the part
of Seller or Buyers or any of their respective directors, officers, employees,
affiliates, controlling persons, agents or representatives, except that Seller
or Buyer, as the case may be, may have liability to the other party (or parties)
if the basis of termination is a willful, material breach by Seller or Buyers,
as the case may be, of one or more of the provisions of this Agreement, and
except that the obligations provided for in Section 5.19, this Section 8.2 and
the obligation to treat information in a confidential manner, as set forth in
Section 5.2(c) hereof shall survive any such termination.
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Section 8.3 Amendment, Modification and Waiver. This Agreement may
be amended, modified or supplemented at any time only by written agreement of
Seller and Buyer. Any failure of Seller, on the one hand, or Buyer, on the
other hand, to comply with any term or provision of this Agreement may be
waived, with respect to Buyer, by Seller and, with respect to Seller, by Buyer,
by an instrument in writing signed by or on behalf of the appropriate party, but
such waiver or failure to insist upon strict compliance with such term or
provision shall not operate as a waiver of, or estoppel with respect to, any
subsequent or other failure to comply.
ARTICLE IX
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION
Section 9.1 Non-Survival of Representations and Warranties. The
representations and warranties of Seller and Buyers made in Articles III and IV
hereof, respectively, and the covenants and agreements made in Section 5.1
hereof, shall survive the Closing for a period of fifteen months after the
Closing Date. Furthermore, any claim to be made pursuant to Article VI hereof
must be made prior to the expiration of the applicable statute of limitations
(after giving effect to any waiver, tolling or extension thereof). This Section
9.1 shall not limit any covenant or agreement of the parties which contemplates
performance after the Closing, including, without limitation, the covenants and
agreements set forth in Articles V (other than Section 5.1 hereof) and VI hereof
and in the Undertaking.
Section 9.2 Seller's Agreement to Indemnify.
(a) Subject to the terms and conditions set forth herein, from and
after the Closing, Seller shall indemnify and hold harmless Buyers and the Buyer
Indemnitees from and against all Buyer Damages net of any Tax Benefit
attributable thereto.
(b) Seller's obligation to indemnify the Buyer Indemnitees for Buyer
Damages, arising solely from clause (i) of the definition of Buyer Damages set
forth in Article X hereof, pursuant to Section 9.2(a) hereof is subject to the
following limitations:
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(i) No indemnification shall be made by Seller unless and only
to the extent that the aggregate amount of such Buyer Damages net of any
Tax Benefit exceeds $7,000,000;
(ii) In no event shall Seller's aggregate obligation to
indemnify the Buyer Indemnitees exceed the Purchase Price;
(iii) The amount of any such Buyer Damages shall be reduced by
(A) any amount received by a Buyer Indemnitee with respect thereto under
any insurance coverage (net of any costs of such coverage or increased
premium incurred by such Buyer Indemnitee) or from any other party alleged
to be responsible therefor, and (B) the amount of any Tax Benefit available
to the Buyer Indemnitee relating thereto. Buyers and any Buyer Indemnitee
shall use reasonable efforts to collect any amounts available under such
insurance coverage and from such other party alleged to have
responsibility. If a Buyer Indemnitee receives an amount under insurance
coverage or from such other party with respect to Buyer Damages at any time
subsequent to any indemnification provided by Seller pursuant to this
Section 9.2, then such Buyer Indemnitee shall promptly reimburse Seller for
any payment made or expense incurred by Seller in connection with providing
such indemnification up to such amount received by the Buyer Indemnitee
(net of any costs of such coverage or of obtaining such amount incurred by
such Buyer Indemnitee);
(iv) Seller shall be obligated to indemnify Buyer Indemnitees
only for such of the Buyer Damages that result from or arise at of breaches
of representations and warranties as to which the Buyer Indemnitees have
given Seller written notice thereof on or prior to the expiration date of
the representation or warranty in respect of which indemnity may be sought.
Any written notice delivered by a Buyer Indemnitee to Seller with respect
to Buyer Damages shall set forth with as much specificity as is reasonably
practicable the basis of the claim for Buyer Damages and, to the extent
reasonably
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practicable, a reasonable estimate of the amount thereof.
Section 9.3 Buyers' Agreement to Indemnify.
------------------------------
(a) Subject to the terms and conditions set forth herein, from and
after the Closing, Buyers shall jointly and severally indemnify and hold
harmless Seller and Seller Indemnitees from and against all Seller Damages net
of any Tax Benefit attributable thereto.
(b) Buyers' obligation to indemnify Seller Indemnitees for Seller
Damages, arising solely from clause (i) of the definition of Seller Damages set
forth in Article X hereof, pursuant to Section 9.3(a) hereof is subject to the
following limitations:
(i) No indemnification shall be made by Buyers unless and only
to the extent that the aggregate amount of such Seller Damages net of any
Tax Benefit exceeds $7,000,000;
(ii) In no event shall Buyer's aggregate obligation to
indemnify Seller Indemnitees exceed the Purchase Price;
(iii) The amount of any such Seller Damages shall be reduced by
(A) any amount received by a Seller Indemnitee with respect thereto under
any insurance coverage (net of any costs of such coverage or increased
premium incurred by such Seller Indemnitee) or from any other party alleged
to be responsible therefor and (B) the amount of any Tax Benefit available
to Seller Indemnitee relating thereto. Seller and any Seller Indemnitee
shall use reasonable efforts to collect any amounts available under such
insurance coverage and from such other party alleged to hav responsibility.
If a Seller Indemnitee receives any amount under insurance coverage or from
such other party with respect to Seller Damages at any time subsequent to
any indemnification provided by Buyers pursuant to this Section 9.3, then
such Seller Indemnitee shall promptly reimburse Buyers for any payment made
or expense incurred by Buyers in connection with providing such
indemnification up to such amount received by Seller Indemnitee net of any
costs of such coverage or of obtain-
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ing such amount incurred by such Seller Indemnitee;
(iv) Buyers shall be obligated to indemnify Seller Indemnitees
only for such Seller Damages as to which Seller Indemnitees have given
Buyers written notice thereof on or prior to the expiration date of the
representation or warranty in respect of which indemnity may be sought.
Any written notice delivered by a Seller Indemnitee to Buyers with respect
to Seller Damages shall set forth with as much specificity as is reasonably
practicable the basis of the claim for Seller Damages and, to the extent
reasonably practicable, a reasonable estimate of the amount thereof.
Section 9.4 Third Party Indemnification. The obligations of Seller
to indemnify the Buyer Indemnitees under Section 9.2 hereof with respect to
Buyer Damages and the obligations of Buyers to indemnify Seller Indemnitees
under Section 9.3 hereof with respect to Seller Damages, in either case
resulting from a Claim, will be subject to the following terms and conditions:
(a) Any party against whom any Claim is asserted will give the party
required to provide indemnity hereunder written notice of any such Claim
promptly after learning of such Claim, and the indemnifying party may at its
option undertake the defense thereof by representatives of its own choosing.
Failure to give prompt notice of a Claim hereunder shall not affect the
indemnifying party's obligations under this Section 9.4, except to the extent
the indemnifying party is materially prejudiced by such failure to give prompt
notice. If the indemnifying party, within ten days after notice of any such
Claim fails to assume the defense of such Claim, the Indemnitee against whom
such Claim has been made will (upon further notice to the indemnifying party)
have the right to undertake the defense, compromise or settlement of such Claim
on behalf of and for the account and risk, and at the expense, of the
indemnifying party.
(b) Anything in this Section 9.4 to the contrary notwithstanding, the
indemnifying party shall not enter into any settlement or compromise of any
action, suit or proceeding or consent to the entry of any judgment for other
than monetary damages without the prior written
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consent of the Indemnitee, which consent shall not be unreasonably withheld.
Section 9.5 Exclusive Remedy. Buyers and Seller agree, to the
fullest extent permitted by law, that after the Closing Date none of them or any
of their directors, officers, employees, affiliates, controlling persons, agents
or representatives shall have any liability or responsibility whatsoever to the
other or such other's directors, officers, employees, affiliates, controlling
persons, agents or representatives on any basis (including, without limitation,
in contract or tort, under federal or state securities laws or otherwise) based
upon any information provided or made available, or statements made, to Buyers
or Seller or their respective directors, officers, employees, affiliates,
controlling persons, agents or representatives (or any omissions therefrom),
including, without limitation, information provided or statements made in the
specific representations and warranties set forth in this Agreement, except as
and only to the extent expressly set forth herein with respect to such
representations and warranties, covenants and rights to indemnification and
subject to the limitations and restrictions contained herein or to the extent
any such liability or responsibility is based upon a fraudulent representation
or claim.
Section 9.6 Tax Treatment of Indemnification Payments. Any payment
in respect of Buyer Damages or Seller Damages made by Seller to Buyers or by
Buyers to Seller, as the case may be, shall be treated as a purchase price
adjustment for all Tax purposes unless a determination (within the meaning of
Section 1313(a) of the Code) or execution of Form 870AD causes any such amount
not to constitute an adjustment to the purchase price for Federal Tax purposes.
In such an event, Buyers or Seller, as the case may be, shall pay an amount that
reflects the actual tax consequences of the receipt or accrual of such payment.
ARTICLE X
DEFINITIONS
For the purposes of this Agreement, the following terms shall have the
following respective meanings:
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"Affected Employees" has the meaning set forth in Section 5.11(a).
"affiliate" shall have the meaning set forth in Rule 12b-2 of the
General Rules and Regulations under the Securities Exchange Act of 1934, as
amended.
"Agreement" means this agreement, dated as of October 4, 1994,
together with any amendments thereto, by and among The Mead Corporation, Parent
and Buyers.
"Assets" means all of the properties, contracts and other assets (of
every kind, nature, character and description, whether real, personal or mixed,
whether tangible or intangible, whether accrued, contingent or otherwise and
wherever situated), goodwill and business as a going concern of the Business,
all as of the Closing Date, other than the Excluded Assets.
"Assumed Liabilities" means all obligations and liabilities of Seller
associated with the Business, whether known or unknown, disclosed or
undisclosed, matured or unmatured, accrued, absolute, contingent or otherwise,
to be assumed by Buyers pursuant to this Agreement, as provided in the
Undertaking.
"Bill of Sale" means the duly executed bill of sale, substantially in
the form attached hereto as Exhibit A, which Seller will deliver to Buyers
effecting the sale, assignment, transfer and delivery of the Assets.
"Business" means the business conducted by MDC, the Other Divisions
and the Companies.
"Buyers" means, REI, Reed Elsevier Properties Inc., a Delaware
corporation, Elsevier S.A., a Swiss limited company ("ESA"), Reed Elsevier (UK)
Limited, an English limited company, Butterworth Publishers Limited, a Canadian
corporation, a Werk-Verlag Dr Edmund Banachewski, a German limited company,
collectively, or, as the context indicates, one or more of Buyers as purchaser
of the relevant Assets or as successors to the relevant portion of the Business.
All of the Buyers except ESA are indirectly wholly-owned subsidiaries of Parent,
and ESA is an Affiliate of Parent.
"Buyer Damages" means all liability, demands, claims, actions or
causes of actions, assessments, losses, damages, costs and expenses (including,
without limita-
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tion, reasonable attorneys' fees and expenses) asserted against or incurred by
any Buyer Indemnitee as a result of or arising out of (i) a breach of any
representation or warranty contained in Article III of this Agreement when made
or at and as of the Closing as though such representations and warranties were
made at and as of the Closing, (ii) the indemnification contemplated by Section
6.4(a) hereof, (iii) except as otherwise expressly provided herein, any
liabilities and obligations not to be assumed by Buyers as provided in the
Undertaking and (iv) the failure to perform any covenant or agreement of Seller.
"Buyer Disclosure Schedule" means the disclosure schedule document
being delivered to Seller by Buyers in connection herewith.
"Buyer Indemnitees" means Buyers and their respective directors,
officers, employees, affiliates, controlling persons, agents and representatives
and their successors and assigns.
"Claim" means any assertion of liability by a third party.
"Closing" means the closing of the transactions contemplated by this
Agreement.
"Closing Date" means the date of the Closing.
"Code" means the Internal Revenue Code of 1986, as amended.
"Companies" means Folio, MDC International, Lexis, Inc., Nexis, Inc.,
Reman, Derman, Jurisoft Licensing, Michie, and LCC.
"Confidentiality Agreement" means the confidentiality agreement
entered into between REI and Seller.
"Consent Costs" has the meaning set forth in Section 5.4(b).
"Consent Valuer" has the meaning set forth in
Section 5.4(b).
"Databases" means any and all data and collections of data that are
made available by Seller or any Company to a subscriber to the services of, or
any other customer or client of the Business, are stored electroni-
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cally, are machine readable, and are used in and material to the operation of
the Business as currently conducted.
"Deeds" means limited warranty deeds (or the statutory equivalent
thereof with covenants against grantor's acts only), in recordable form, with
respect to the Property subject to the matters listed in a) Sections 3.8 or 3.9
of the Disclosure Schedule, or b) clause (iii) of the definition of Permitted
Liens arising after the date hereof.
"Disclosure Schedule" means the disclosure schedule document being
delivered to Buyers by Seller in connection herewith.
"Derman" means Derman, Inc., an Ohio corporation and a wholly-owned
subsidiary of Mead Realty.
"Election" means, with respect to any of the Companies, the election
to be made by REI and Seller pursuant to section 338(h)(10) of the Code, as
described in Section 6.1 hereof.
"Employee" means any employee of the Business or any former employee
of the Business.
"Environmental Laws" means any and all applicable federal, state,
local and foreign statutes, laws, judicial decisions, regulations, ordinances,
rules, judgments, judicial orders, decrees, codes, injunctions, permits, consent
decrees, consent orders and governmental restrictions, now in effect, relating
to human health, the environment or to emissions, discharges or releases of
pollutants, contaminants, Hazardous Substances or wastes into the environment,
including without limitation ambient air, surface water, ground water or land,
or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of pollutants, contaminants,
Hazardous Substances or wastes or the clean-up or other remediation thereof.
"Environmental Permits" means all permits licenses, authorizations,
certificates and approvals of governmental authorities relating to or required
by Environmental Laws and necessary or proper for the Business as currently
conducted.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
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"Excluded Assets" means those assets, enumerated in Section 1.1(d),
which are expressly excluded from the Assets to be sold, conveyed, assigned, and
transferred to Buyers and from the assets owned by the Companies and Seller.
"Final Statement" means the statement determined in accordance with
Section 1.6 hereof.
"Folio" means Folio Corporation, a Utah corporation and a wholly-owned
subsidiary of Mead.
"Folio Shares" means the entire issued share capital of Folio.
"GAAP" means U.S. generally accepted accounting principles.
"Government Contract" means a mutually binding legal relationship
obligating Seller to furnish supplies or services and a government or government
agency to pay for them, including all types of commitments that obligate the
federal government of the United States to an expenditure of appropriated funds
and that, except as otherwise authorized, are in writing. In addition to
bilateral instruments, "Government Contracts" includes (but is not limited to)
awards and notices of awards; job orders or task letters issued under basic
ordering agreements; letter contracts; orders, such as purchase orders, under
which the contract becomes effective by written acceptance or performance; and
bilateral contract modifications.
"Hazardous Substances" means any toxic, radioactive, caustic or
otherwise hazardous substance, including petroleum, its derivatives, by-products
and other hydrocarbons, or any substance having any constituent elements
displaying any of the foregoing characteristics, including, without limitation,
any substance regulated under Environmental Laws.
"Hollander Sublease" has the meaning set forth in Section 5.10 hereof.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"Indemnitee" means, as the case may be, either a Buyers Indemnitee or
a Seller Indemnitee.
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"Independent Accounting Firm" means the big six accounting firm
retained to resolve any disputes between Buyers and Seller over any item
contained in the Statement.
"June 30, 1994 Balance Sheet" has the meaning set forth in Section
3.6(a) hereof.
"Jurisoft Licensing" means Jurisoft Licensing Corp., a Nevada
corporation and a wholly-owned subsidiary of Mead.
"LCC" means LCC Holding Company, a Delaware corporation and a wholly-
owned subsidiary of Mead.
"Leases" means all leases or subleases of real property used in the
Business under which Seller or any of the Companies is a lessee or lessor, as
listed in Section 3.11 of the Disclosure Schedule.
"LEXIS/NEXIS" means the Online computer-assisted information services
provided by Seller under the "LEXIS" or "NEXIS" trademarks, any portion of such
services, or any Online computer-assisted information service provided by
Seller, regardless of the name of such service, including all Software, Online
systems and other systems, and any documentation and resource material relating
thereto or to any of the foregoing.
"Lexis, Inc." means Lexis, Inc., a Delaware corporation and a wholly-
owned subsidiary of Mead.
"Liens" means all mortgages, pledges, security interests, liens,
charges, options, easements, rights-of-way or other encumbrances of any nature
whatsoever, excluding licenses or rights to third parties.
"Material Adverse Effect" means an event which has a material adverse
effect on the business, assets, results of operations or condition (financial or
otherwise) of the Business taken as a whole.
"Material Agreements" means the following:
(i) the top 100 data source license agreements of the Business based
on royalties and fees paid in 1993 (other than those that have expired or will
expire prior to October 1, 1994);
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(ii) the distribution agreements of the Business set forth on Section
3.16(a) of the Disclosure Schedule;
(iii) partnership, joint venture or other similar agreements or
arrangements of the Business;
(iv) any agreement of the Business relating to indebtedness for
borrowed money (whether incurred, assumed, guaranteed or secured by any asset),
except any such agreement with an aggregate outstanding principal amount not
exceeding $250,000; and
(v) any agreement of the Business with or for the benefit of any
affiliate of Seller with annual payments in excess of $100,000.
"Material Leases" means those leases marked with an asterisk in
Section 3.11 of the Disclosure Schedule.
"MDC" means Mead Data Central, a division of Mead.
"MDC International" means Mead Data Central International, Inc., a
Delaware corporation and a wholly-owned subsidiary of Mead.
"Mead" means The Mead Corporation, an Ohio corporation.
"Mead Realty" means Mead Realty Group, Inc., an Ohio corporation and
a wholly-owned subsidiary of Mead.
"Michie" means The Michie Company, an Ohio corporation and a wholly-
owned subsidiary of Mead.
"Nexis, Inc." means Nexis, Inc., a Delaware corporation and a wholly-
owned subsidiary of Mead.
"Non-Proprietary Software" means all Software (other than off-the-
shelf Software) which is licensed or leased from third parties and used
primarily by Seller or any of the Companies, as the case may be, in connection
with the operation of the Business as it is currently conducted, including,
without limitation, all versions, drafts and component modules of source code or
object code or natural language code currently provided under license to Seller
or any of the Companies, whether recorded on paper, magnetic media or other
electronic device, all
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descriptions, flow-charts, and other work product currently provided under
license to Seller or any of the Companies which were used to design, plan,
organize and develop such Software, and all documentation currently provided
under license to Seller or any of the Companies, including without limitation
manuals, catalogs, leaflets, and training materials, relating to the foregoing.
"Online" means a system of computer terminals, personal computers and
similar devices directly linked by telecommunications or otherwise to a central
processing unit or units and related peripheral equipment on which data are
stored and searched.
"Other Divisions" means Lexis Document Services, Jurisoft and The
Michie Company, each a division of Mead.
"Other Instruments" means such other duly executed, good and
sufficient instruments of conveyance, transfer and assignment as the parties
shall deem necessary to convey to the appropriate Buyers all of Seller's rights,
title and interests in and to the appropriate Assets.
"Parent" means Reed Elsevier plc, an English corporation.
"Permitted Liens" means (i) mechanics', carriers', workers',
repairers', materialmens', warehousemens' and other similar Liens arising or
incurred in the ordinary course of business which are Liens for work in progress
which are not past due or otherwise reflected in the Final Statement, (ii) Taxes
or assessments which are not yet due and payable, (iii) such other Liens as
would not materially detract from the value of the Asset subject to such lien as
now used or materially interfere with any present use of such Asset, (iv) Liens
arising or resulting from any action taken by Buyer, (v) matters which would be
disclosed by an accurate survey or inspection of the Property which would not in
the aggregate have a Material Adverse Effect, and (vi) matters set forth on
Section 3.9 of the Disclosure Schedule.
"Person" means and includes an individual, a partnership, a joint
venture, a corporation, a trust, an unincorporated organization and a government
or any department or agency thereof.
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"Pre-Closing Period" means that portion of any Straddle Period which
ends on the Closing Date.
"Prepaid Subscriptions" means MDC's unearned revenue relating to
prepaid subscriptions as reflected on the Final Statement.
"Property" means the real property described as owned property in
Section 3.9 of the Disclosure Schedule, including buildings, structures and
improvements located thereon, fixtures contained therein and appurtenances
thereto and easements and other rights relating thereto.
"Proprietary Software" means any and all Software owned by Seller or
any of the Companies and used primarily in the Business, as the same has been
developed, manipulated, expanded, amplified, abridged or otherwise changed or
modified from time to time by or on behalf of Seller or any of the Companies, as
the case may be, including without limitation, all current versions, and
component modules of source code or object code or natural language code
therefor, whether recorded on paper, magnetic media or other electronic device,
all descriptions, flow-charts, and other work product used to design, plan,
organize and develop such Software, and all documentation, including without
limitation manuals, catalogs, leaflets, and training materials relating to the
foregoing.
"Purchase Price" has the meaning set forth in Section 1.5(a) hereof,
and, as the context requires, as adjusted pursuant to Section 1.6 hereof.
"Real Property Lease Assignments" means all appropriate documents for
the assignment (in form suitable for filing, registration or recording, if the
applicable agreement would permit such assignment to be filed, registered or
recorded) of rights in the Leases.
"REI" means Reed Elsevier Inc., a Massachusetts corporation and an
indirectly wholly-owned subsidiary of Parent.
"Reman" means Reman, Inc., an Ohio corporation and a wholly-owned
subsidiary of Mead Realty.
"Related Agreements" means those other agreements and instruments
required to be executed pursuant to this Agreement.
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"Securities Act" means the Securities Act of 1933, as amended.
"Seller" means Mead.
"Seller Damages" means all liability, demands, claims, actions and
causes of action, assessments, losses, damages, costs and expenses (including,
without limitation, reasonable attorneys' fees and expenses) asserted against
or incurred by any Seller Indemnitee as a result of or arising out of (i) a
breach of any representation or warranty contained in Article IV of this
Agreement when made or at and as of the Closing as though such representations
and warranties were made at and as of the Closing, (ii) the indemnification
contemplated by Section 6.4(b) hereof, (iii) the failure to perform any covenant
or agreement of Buyers and (iv) all Assumed Liabilities.
"Seller Group" means Seller's affiliated group, within the meaning of
Section 1504(a) of the Code, of which Seller is the common parent and including
any of Seller's foreign subsidiaries.
"Seller Indemnitees" means Seller and its directors, officers,
employees, affiliates, controlling persons, agents and representatives and their
successors and assigns.
"Seller's Mead Trademarks and Logos" means the name of Seller or any
trade names, trademarks, identifying logos or service marks related thereto or
employing the word "Mead" or any variation thereof, including, without
limitation, "Mead Data Central" and "Meadnet", or any confusingly similar trade
name, trademark or logo.
"Seller Severance Plans" has the meaning set forth in Section 5.11(c)
hereof.
"September 30, 1994 Financial Statements" has the meaning set forth in
Section 5.17 hereof.
"Shares" means the entire issued share capital of each of Folio, Mead
Data Central International G.m.b.H., Lexis, Inc., Nexis, Inc., Jurisoft
Licensing, Michie and LCC.
"Software" means any and all computer programs consisting of sets of
statements or instructions to be used directly or indirectly in a computer.
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"Star Data Shares" means the 1,510,000 shares representing 22.0% of
the issued and outstanding shares of Star Data System, Inc., a Canadian
corporation, owned by Mead.
"Statement" means the statement setting forth the net tangible assets
of the Business as of the close of business on the Closing Date which shall be
prepared in accordance with Section 1.6 of the Disclosure Schedule and which
preparation shall be, in all material respects, in accordance with GAAP (except
as set forth on Section 3.6 of the Disclosure Schedule) and on a basis
consistent with the balance sheet as of June 30, 1994 (except as described in
Section 1.6 of the Disclosure Schedule).
"Straddle Period" means any taxable period that begins prior to and
includes (but does not end on) the Closing Date.
"Straddle Period Returns" means all Tax Returns of the Companies for a
Straddle Period.
"Tax Asset" means any net operating loss, net capital loss, investment
tax credit, foreign tax credit, charitable deduction or any other credit or tax
attribute which could reduce Taxes (including without limitation deductions and
credits related to alternative minimum Taxes).
"Taxes" means (i) all taxes, levies or other like assessments, charges
or fees (including estimated taxes, charges and fees), including, without
limitation, income, corporation, add-on minimum, ad valorem, advance
corporation, gross receipts, transfer, excise, property, sales, use, value-
added, license, payroll, employment, severance, pay as you earn ("PAYE"),
withholding on amounts paid by or to the relevant party, social security and
franchise or other governmental taxes or charges, imposed by the United States
or any state, county, local or foreign government or subdivision or agency
thereof; and such term shall include any interest, penalties or additions to tax
attributable to such taxes, (ii) liability of any of the Companies for the
payment of any amounts of the type described in (i) as a result of being a
member of an affiliated, consolidated, combined or unitary group, and (iii)
liability of any of the Companies for the payment of any such amount as a result
of any express obligation to indemnify any other Person.
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"Tax Benefit" means the amount of any tax benefit arising from (i) a
loss, deduction or credit for any Tax purpose or (ii) a carryforward or
carryback of a loss, deduction or credit for any Tax purpose computed assuming a
25 percent tax rate in effect for the taxable year within which an indemnifying
party makes an indemnification payment to an Indemnitee pursuant to Articles VI
or IX hereof.
"Tax Return" means any report, return, statement or other written
information required to be supplied to a taxing authority in connection with
Taxes.
"Tyris Sublease" has the meaning set forth in Section 5.10 hereof.
"Undertaking" means the duly executed undertaking, substantially in
the form attached hereto as Exhibit B, whereby Buyers will assume and agree to
pay and discharge the Assumed Liabilities.
ARTICLE XI
MISCELLANEOUS
Section 11.1 Title Insurance. Buyers shall reimburse Seller for
Seller's out-of-the pockets costs for the title commitments obtained by Seller
on the Property. Buyers shall reimburse Seller for the out-of-pocket costs for
surveys of the Property and certain other real property subject to Leases
prepared for Seller.
Section 11.2 Further Assurances. From time to time after the Closing
Date, at the request of either party hereto and at the expense of such party,
the parties hereto shall execute and deliver to such requesting party such
documents and take such other action as such requesting party may reasonably
request in order to consummate more effectively the transactions contemplated
hereby.
Section 11.3 Notices. All notices, requests, demands, waivers and
other communications required or permitted to be given under this Agreement
shall be in writing and may be given by any of the following methods: (a)
personal delivery; (b) facsimile transmission; (c) registered or certified mail,
postage prepaid, return receipt requested; or (d) overnight delivery service.
Notices shall be sent to the appropriate party at its address or facsimile
number given below (or at such other
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address or facsimile number for such party as shall be specified by notice given
hereunder):
If to Parent or Buyer, to:
Reed Elsevier plc
6 Chesterfield Gardens
London W1A 1EJ
England
Fax No. 011-44-71-491-8307
Attention: Legal Advisor
with a copy to:
Reed Elsevier Inc.
275 Washington Street
Newton, Massachusetts 02158
Fax No. (617) 558-4649
Attention: General Counsel
and
Davis Polk & Wardwell
450 Lexington Avenue
New York, NY 10017
Fax No. (212) 450-4800
Attention: Joseph Rinaldi, Esq.
If to Seller, to:
The Mead Corporation
Courthouse Plaza Northeast
Dayton, Ohio 45463
Fax No.: (513) 495-2424
Attention: General Counsel
with copies to:
Skadden, Arps, Slate,
Meagher & Flom
919 Third Avenue
New York, New York 10022-9931
Fax No.: (212) 735-2001
Attention: David J. Friedman, Esq.
75
<PAGE>
and
Thompson, Hine & Flory
Courthouse Plaza Northeast
20th Floor
Dayton, Ohio 45401
Fax No.: (513) 443-6635
Attention: Sue K. McDonnell, Esq.
All such notices, requests, demands, waivers and communications shall be deemed
received upon (i) actual receipt thereof by the addressee, (ii) actual delivery
thereof to the appropriate address or (iii) in the case of a facsimile
transmission, upon transmission thereof by the sender and issuance by the
transmitting machine of a confirmation slip that the number of pages
constituting the notice have been transmitted without error. In the case of
notices sent by facsimile transmission, the sender shall contemporaneously mail
a copy of the notice to the addressee at the address provided for above.
However, such mailing shall in no way alter the time at which the facsimile
notice is deemed received.
Section 11.4 Severability. Should any provision of this Agreement
for any reason be declared invalid or unenforceable, such decision shall not
affect the validity or enforceability of any of the other provisions of this
Agreement, which remaining provisions shall remain in full force and effect and
the application of such invalid or unenforceable provision to persons or
circumstances other than those as to which it is held invalid or unenforceable
shall be valid and enforced to the fullest extent permitted by law.
Section 11.5 Binding Effect; Assignment. This Agreement and all of
the provisions hereof shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors and permitted assigns.
Neither this Agreement nor any of the rights, interests or obligations hereunder
shall be assigned, directly or indirectly, including, without limitation, by
operation of law, by any party hereto without the prior written consent of the
other parties hereto; provided, however, that Buyers may transfer or assign, in
whole or from time to time in part, to one or more of its affiliates, the right
to purchase all or a portion of the Assets but no such transfer or assignment
shall relieve Buyers of their obligations hereunder.
76
<PAGE>
Section 11.6 No Third Party Beneficiaries. This Agreement is solely
for the benefit of Seller and its successors and permitted assigns, with respect
to the obligations of Parent and Buyers under this Agreement, and for the
benefit of Parent and Buyer, and their respective successors and permitted
assigns, with respect to the obligations of Seller, under this Agreement, and,
except as provided in Section 5.19(e), this Agreement shall not be deemed to
confer upon or give to any other third party any remedy, claim, liability,
reimbursement, cause of action or other right.
Section 11.7 Interpretation. The article and section headings
contained in this Agreement are solely for the purpose of reference, are not
part of the agreement of the parties and shall not in any way affect the meaning
or interpretation of this Agreement.
Section 11.8 Jurisdiction and Consent to Service. In accordance with
Section 5.1401 of the General Obligations Law of the State of New York, and
without limiting the jurisdiction or venue of any other court, Seller, Parent
and Buyers (a) agree that any suit, action or proceeding arising out of or
relating to this Agreement will be brought solely in the state or federal courts
of New York; (b) consent to the exclusive jurisdiction of each such court in any
suit, action or proceeding relating to or arising out of this Agreement; (c)
waive any objection which it may have to the laying of venue in any such suit,
action or proceeding in any such court and (d) agree that service of any court
paper may be made in any manner as may be provided under applicable laws or
court rules governing service of process in such court.
Section 11.9 Entire Agreement. Except for this Agreement, the
Confidentiality Agreement, the Disclosure Schedule, the Buyer Disclosure
Schedule and the Exhibits and other documents referred to herein or delivered
pursuant hereto which form a part hereof constitute the entire agreement among
the parties with respect to the subject matter hereof and supersede all other
prior agreements and understandings, both written and oral, between the parties
or any of them with respect to the subject matter hereof.
Section 11.10 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York (regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof) as to all matters, including
77
<PAGE>
but not limited to matters of validity, construction, effect, performance and
remedies.
Section 11.11 Specific Performance. The parties acknowledge and
agree that any breach of the terms of this Agreement would give rise to
irreparable harm for which money damages would not be an adequate remedy and
accordingly the parties agree that, in addition to any other remedies, each
shall be entitled to enforce the terms of this Agreement by a decree of specific
performance without the necessity of proving the inadequacy of money damages as
a remedy.
Section 11.12 Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
Section 11.13 Bulk Sales Laws. Buyers and Seller each hereby waive
compliance by Seller with the provisions of the "bulk sales", "bulk transfer" or
similar laws of any state.
Section 11.14 Expenses. Except as otherwise provided herein, all
costs and expenses incurred in connection with this Agreement shall be paid by
the party incurring such cost or expense and no such costs or expenses shall be
charged to the Business.
78
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the duly authorized officers of the parties hereto as of the date
first above written.
THE MEAD CORPORATION
THOMAS E. PALMER
By: ____________________________________________________
Thomas E. Palmer, Vice President and General Counsel
REED ELSEVIER PLC
HERMAN J. BRUGGINK
By: ____________________________________________________
Herman J. Bruggink,
Director
REED ELSEVIER INC.
HERMAN J. BRUGGINK
By: ____________________________________________________
Herman J. Bruggink,
Vice Chairman
REED ELSEVIER PROPERTIES INC.
MARK L. SEELEY
By: ____________________________________________________
Mark L. Seeley,
President
ELSEVIER S.A.
NIGEL J. STAPLETON
By: ____________________________________________________
Nigel J. Stapleton,
Authorized Representative
REED ELSEVIER (UK) LIMITED
NIGEL J. STAPLETON
By: ____________________________________________________
Nigel J. Stapleton,
Director
BUTTERWORTH PUBLISHERS LIMITED
NIGEL J. STAPLETON
By: ____________________________________________________
Nigel J. Stapleton,
Authorized Representative
WERK-VERLAG DR EDMUND BANACHEWSKI GmbH
NIGEL J. STAPLETON
By: ____________________________________________________
Nigel J. Stapleton
Authorized Representative
79
<PAGE>
Exhibit A
---------
BILL OF SALE
------------
BILL OF SALE, dated as of ________, 1994 (the "Bill of Sale"), by and
between The Mead Corporation, an Ohio corporation ("Seller") and REI, Reed
Elsevier Properties Inc., a Delaware corporation, Elsevier S.A., a Swiss private
limited company, Reed Elsevier (U.K.) Limited, an English private limited
company, Butterworth Publishers Limited, a Canadian corporation, and Werk-Verlag
Dr. Edmund Banachewski, a German private limited company, ("Buyers").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, pursuant to that certain Purchase Agreement dated as of ,
October 4, 1994 (the "Purchase Agreement"), by and among Buyers, Parent and
Seller, Seller has agreed to sell, convey, assign, transfer and deliver all of
its right, title and interest in the assets associated with the Business to
Buyers and Buyers have agreed to purchase and acquire such assets from Seller,
all as more fully described in the Purchase Agreement; and
WHEREAS, pursuant to the Purchase Agreement, Buyers, Parent and Seller
have agreed to enter into this Bill of Sale pursuant to which such assets will
be conveyed to Buyers.
NOW, THEREFORE, in consideration of the foregoing premises and for
other good and valuable consideration, the receipt and adequacy of which is
hereby acknowledged, the parties hereto hereby agree as follows:
1. Defined Terms. Capitalized terms which are used but not defined
in this Bill of Sale shall have the meanings ascribed to such terms in the
Purchase Agreement.
2. Assignment. Except as set forth in Section 3 below and subject to
the terms and conditions of the Purchase Agreement, Seller does hereby sell,
convey, assign, transfer and deliver to Buyers all of Seller's right, title and
interest in and to all of the Assets (as defined in the Purchase Agreement).
<PAGE>
3. Assets Not Assigned. Notwithstanding anything herein to the
contrary, the Excluded Assets are specifically excluded from the Assets and
shall be retained by Seller at and following the Closing Date.
4. Appointment. Seller hereby constitutes and appoints Buyers, and
their successors and assigns, as Seller's true and lawful attorney and
attorneys, with full power of substitution, in Seller's name and stead, by, on
behalf of and for the benefit of Buyers, and their successors and assigns, to
demand and receive any and all of the Assets transferred hereunder and to give
receipts and releases for and in respect of the same, and any part thereof, and
from time to time to institute and prosecute, at the expense and for the benefit
of Buyers, and their successors and assigns, any and all proceedings at law, in
equity or otherwise, which Buyers, and their successors or assigns, may deem
proper for the collection or reduction to possession of any of the Assets
transferred hereunder or for the collection and enforcement of any claim or
right of any kind hereby sold, conveyed, assigned, transferred and delivered,
and to do all acts and things in relation to the Assets transferred hereunder
which Buyers, and their successors or assigns, shall deem desirable, Seller
hereby declaring that the foregoing powers are coupled with an interest and are
and shall be irrevocable by Seller in any manner or for any reason whatsoever.
5. No Third Party Beneficiaries. Nothing in this instrument, express
or implied, is intended or shall be construed to confer upon, or give to, any
person other than Buyers any remedy or claim under or by reason of this
instrument or any agreements, terms, covenants or conditions hereof, and all the
agreements, terms, covenants and conditions in this instrument contained shall
be for the sole and exclusive benefit of Buyers and their permitted assigns.
6. Binding Effect; Assignment. This Bill of Sale and all of the
provisions hereof shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and permitted assigns. Neither
this Bill of Sale nor any of the rights, interests or obligations hereunder
shall be assigned, directly or indirectly, including, without limitation, by
operation of law, by any party hereto without the prior written consent of the
other parties hereto.
A-2
<PAGE>
7. Governing Law. This Bill of Sale shall be governed by and
construed in accordance with the laws of the State of New York, without regard
to the conflict of laws principles thereof.
A-3
<PAGE>
IN WITNESS WHEREOF, this Bill of Sale has been duly executed and
delivered by the duly authorized officers of the parties hereto as of the date
first written above.
THE MEAD CORPORATION
By:______________________________________
REED ELSEVIER PLC
By:______________________________________
REED ELSEVIER INC.
By:______________________________________
REED ELSEVIER PROPERTIES INC.
By:______________________________________
ELSEVIER S.A.
By:______________________________________
REED ELSEVIER (UK) LIMITED
By:______________________________________
BUTTERWORTH PUBLISHERS LIMITED
By:______________________________________
WERK-VERLAG DR EDMUND BANACHEWSKI GmbH
By:______________________________________
A-4
<PAGE>
EXHIBIT B
---------
UNDERTAKING
-----------
UNDERTAKING executed and delivered on _______, 1994 (the
"Undertaking"), by REI, Reed Elsevier Properties Inc., a Delaware corporation,
Elsevier S.A., a Swiss private limited company, Reed Elsevier (U.K.) Limited, an
English private limited company, Butterworth Publishers Limited, a Canadian
corporation, and Werk-Verlag Dr. Edmund Banachewski, a German private limited
company, ("Buyers") in favor of The Mead Corporation, an Ohio corporation
("Seller").
W I T N E S S E T H:
-------------------
WHEREAS, pursuant to a Purchase Agreement, dated as of __________,
1994 (the "Purchase Agreement"), by and among Seller, Parent and Buyers, Seller
has agreed to sell, convey, assign, transfer and deliver all of its right, title
and interest in the assets associated with the Business to Buyers, and Buyers
have agreed to purchase and acquire such assets from Seller, all as more fully
described in the Purchase Agreement; and
WHEREAS, pursuant to the Purchase Agreement, Buyers have agreed to
enter into this Undertaking, pursuant to which Buyers shall assume and agree to
pay, perform, and discharge or cause to be performed and discharged the
liabilities and obligations associated with the Business, as more fully provided
herein.
NOW, THEREFORE, in consideration of the foregoing premises and for
other good and valuable consideration, the receipt and adequacy of which is
hereby acknowledged, Buyer hereby agrees as follows:
1. Defined Terms. Capitalized terms which are used but not defined
herein shall have the meaning ascribed to such terms in the Purchase Agreement.
2. Undertaking. Except as provided in Section 3 below and subject to
the terms and conditions of the Purchase Agreement, Buyers hereby jointly and
severally undertake, assume and agree to pay, perform or discharge, all
obligations and liabilities of Seller asso-
<PAGE>
ciated with the Business, whether known or unknown, disclosed or undisclosed,
matured or unmatured, accrued, absolute, contingent or otherwise other than the
Excluded Liabilities (the "Assumed Liabilities"), including, without limitation:
(a) all liabilities of the Business reflected on the Final
Statement;
(b) all of the Seller's obligations existing on the date hereof
and arising hereafter under all contracts, commitments, agreements, options and
other arrangements of every kind and description which have been or will be
assigned to Buyers or performed by Buyers pursuant to Section 5.4 of the
Purchase Agreement;
(c) all of the Seller's obligations existing on the date hereof
and arising hereafter under all Government Contracts; and
(d) all of the Seller's obligations existing on the date hereof
and arising hereafter under all authorizations, consents, approvals, licenses,
orders, permits, exemptions, filings or registrations with any court or
administrative or governmental authority in any jurisdiction to the extent
assigned or transferred to Buyers.
3. Excluded Liabilities. Notwithstanding anything contained herein
or in the Purchase Agreement to the contrary, it is expressly understood that
Buyers shall not assume, or agree to perform, pay or discharge, and Buyers have
not assumed, and will never assume, any liabilities, obligations or commitments
(the "Excluded Liabilities") relating to or arising out of the following:
(a) any obligations and liabilities relating to the Excluded
Assets;
(b) except as otherwise provided herein, all Taxes, (i) now or
hereafter owed by Seller or any of its affiliates or (ii) attributable to
the Business, the Assets or to the Companies relating to any taxable
period, or any portion thereof (including the Pre-Closing Period), ending
on or prior to the Closing Date;
B-2
<PAGE>
(c) all liabilities associated with Seller's deferred
compensation plans with respect to the individuals set forth below:
(i) Executive Deferred Compensation Plan obligations with
respect to Messrs. Stuart C. Harvey, Edward W. Parken,
George Relles and Bruce E. Rhoades; and
(ii) Incentive Compensation Election Plan obligations with
respect to Messrs. George M. McGill and George Relles;
(d) all liabilities associated with The Mead Retirement Plan, The
Mead Salaried Savings Plan, The Mead Data Central International Retirement
Plan for UK Employees and The Mead Data Central International Canadian
Pension Plan that relate to Employees of the Business;
(e) all liabilities associated with The Mead Excess Benefit Plan
that relate to Employees of the Business;
(f) except to the extent Buyer has specifically assumed a
liability under Section 5.11, all liabilities associated with claims
arising prior to the Closing Date under any Pension Plan, Welfare Plan or
other benefit arrangement that relates to Employees and their dependents;
and
(g) all liability associated with claims under any Pension Plan,
Welfare Plan or other benefit arrangement that relates to any Employee who
is not an Affected Employee; and
(h) except to the extent Buyer has a reimbursement obligation
under Section 5.11(c), all liabilities associated with Seller Severance
Plans;
(i) liabilities arising from the matter set forth in item II. E.
on Section 3.14 of the Disclosure Schedule, to the extent such liabilities
are related to pre-closing actions;
(j) liabilities from the matter set forth in Item II.H.6 on
Section 3.14 of the Disclosure Schedule;
B-3
<PAGE>
(k) liabilities arising in connection with the merger of Mead Data
Central, Inc. into Seller and the related intercompany reorganization completed
by the Seller on December 31, 1993 (except to the extent the liabilities relate
to claims settled by Buyers without the consent of Seller which shall not be
unreasonably withheld);
(l) liabilities not related to the operation of the Business, but
which are incurred, imputed or otherwise attributed to the Business as a
result of the Business's affiliation with the Seller prior to the Closing;
(m) all liabilities associated with any deferred purchase price
consideration payable to the former owners of Folio;
(n) all liabilities associated with the threatened Folio
litigation described in item II.B(1) of Section 3.14 of the Disclosure
Schedule; and
(o) all liabilities associated with the 1992 restructuring
program.
4. Assignment. Neither this Undertaking nor any of the rights,
interests or obligations hereunder shall be assigned or delegated, directly or
indirectly, including, without limitation, by operation of law, by Buyers
without the prior written consent of Seller.
5. Binding Effect. This Undertaking shall inure to the benefit of
Seller and its successors and permitted assigns and be binding upon and
enforceable against Buyers and their respective successors and permitted
assigns.
6. Governing Law. This Undertaking shall be governed by and
construed in accordance with the laws of the State of New York, without regard
to the conflict of law principles thereof.
B-4
<PAGE>
IN WITNESS WHEREOF, this Undertaking has been duly executed and
delivered by the duly authorized officers of Buyer as of the date first above
written.
[Buyers]
By:_______________________________
Name:
Title:
B-5
<PAGE>
Exhibit (11.1)
THE MEAD CORPORATION AND CONSOLIDATED SUBSIDIARIES
- --------------------------------------------------
CALCULATION OF PRIMARY NET EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE
- --------------------------------------------------------------------------
(ALL AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Third Quarter Ended Three Quarters Ended
---------------------- ----------------------
October 2, October 3, October 2, October 3,
1994 1993 1994 1993
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
NET EARNINGS APPLICABLE TO COMMON AND COMMON
EQUIVALENT SHARES $53,188 $29,994 $133,186 $102,807
ADJUSTMENT FOR OTHER POTENTIALLY DILUTIVE
SECURITIES - Interest savings (net of tax) on
Convertible Subordinated Debentures as if
converted at the beginning of the period 1,389 4,166 4,292
------- ------- -------- --------
NET EARNINGS APPLICABLE TO COMMON AND COMMON
EQUIVALENT SHARES $54,577 $29,994 $137,352 $107,099
======= ======= ======== ========
AVERAGE NUMBER OF COMMON AND COMMON EQUIVALENT
SHARES OUTSTANDING:
Average number of common shares outstanding 59,390 59,097 59,312 58,976
Dilutive effect of stock options after
application of treasury stock method 702 616 586 597
Adjustment for other potentially dilutive
securities - Dilutive effect of Convertible
Subordinated Debentures as if converted
at the beginning of the period 2,630 2,630 2,630
------- ------- -------- --------
AVERAGE NUMBER OF COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING 62,722 59,713 62,528 62,203
======= ======= ======== ========
PRIMARY NET EARNINGS PER COMMON AND COMMON
EQUIVALENT SHARE $.87 $.50 $2.20 $1.72
==== ==== ===== =====
</TABLE>
<PAGE>
Exhibit (11.2)
THE MEAD CORPORATION AND CONSOLIDATED SUBSIDIARIES
- --------------------------------------------------
CALCULATION OF FULLY DILUTED NET EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE
- --------------------------------------------------------------------------------
(1)
- ---
(ALL AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Third Quarter Ended Three Quarters Ended
---------------------- ----------------------
October 2, October 3, October 2, October 3,
1994 1993 1994 1993
---------- --------- ---------- ----------
<S> <C> <C> <C> <C>
NET EARNINGS APPLICABLE TO COMMON AND COMMON
EQUIVALENT SHARES $54,577 $29,994 $137,352 $107,099
======= ======= ======== ========
AVERAGE NUMBER OF SHARES OUTSTANDING ON A
FULLY DILUTED BASIS:
Shares used in calculating primary earnings
per share 62,722 59,713 62,528 62,203
Additional dilutive effect of stock options after
application of treasury stock method 279 2 393 10
------- ------- -------- --------
AVERAGE NUMBER OF SHARES OUTSTANDING ON A
FULLY DILUTED BASIS 63,000 59,715 62,922 62,213
======= ======= ======== ========
FULLY DILUTED NET EARNINGS PER COMMON AND
COMMON EQUIVALENT SHARE $.87 $.50 $2.18 $1.72
==== ==== ===== =====
</TABLE>
(1) This calculation is submitted in accordance with 17 CFR 229.601(b)(11)
although not required by APB Opinion No. 15 because it results in
dilution of less than 3%.
<PAGE>
Exhibit (11.3)
THE MEAD CORPORATION AND CONSOLIDATED SUBSIDIARIES
- --------------------------------------------------
CALCULATION OF FULLY DILUTED NET EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE
- --------------------------------------------------------------------------------
(1)
- ---
(ALL AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Third Quarter Ended Three Quarters Ended
----------------------- ---------------------
October 3, October 3, October 3, October 3,
1994 1993 1994 1993
---------- ---------- --------- ----------
<S> <C> <C> <C> <C>
NET EARNINGS APPLICABLE TO COMMON AND COMMON
EQUIVALENT SHARES $54,577 $29,994 $137,352 $107,099
ADJUSTMENT FOR OTHER POTENTIALLY DILUTIVE
SECURITIES - Interest savings (net of tax) on
Convertible Subordinated Debentures as if converted
at the beginning of the period 1,431
------- ------- -------- --------
NET EARNINGS APPLICABLE TO COMMON AND COMMON
EQUIVALENT SHARES ON A FULLY DILUTED BASIS $54,577 $31,425 $137,352 $107,099
======= ======= ======== ========
AVERAGE NUMBER OF SHARES OUTSTANDING ON A
FULLY DILUTED BASIS:
Shares used in calculating primary earnings
per share 62,722 59,713 62,528 62,203
Additional dilutive effect of stock options after
application of treasury stock method 279 2 393 10
Adjustment for other potentially dilutive
securities - Dilutive effect of Convertible
Subordinated Debentures as if converted at the
beginning of the period 2,630
------- ------- -------- --------
AVERAGE NUMBER OF SHARES OUTSTANDING ON A
FULLY DILUTED BASIS 63,000 62,345 62,922 62,213
======= ======= ======== ========
FULLY DILUTED NET EARNINGS PER COMMON AND
COMMON EQUIVALENT SHARE $.87 $.50 $2.18 $1.72
==== ==== ===== =====
</TABLE>
(1) This calculation is submitted in accordance with 17 CFR 229.601(b)(11)
although it is contrary to paragraph 40 of APB Opinion No. 15 because it
produces an antidilutive result (less than $.01 per share in the third
quarter of 1993).
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
QUARTERLY REPORT ON FORM 10-Q OF THE MEAD CORPORATION FOR THE QUARTERLY PERIOD
ENDED OCTOBER 2, 1994 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
THIS SCHEDULE SHALL NOT BE DEEMED TO BE FILED FOR PURPOSES OF SECTION 11 OF THE
SECURITIES ACT OF 1933, SECTION 18 OF THE SECURITIES EXCHANGE ACT OF 1934 AND
SECTION 323 OF THE TRUST INDENTURE ACT OF 1939, OR OTHERWISE SUBJECT TO THE
LIABILITIES OF SUCH SECTIONS, NOR SHALL IT BE DEEMED A PART OF ANY REGISTRATION
STATEMENT TO WHICH IT RELATES.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> OCT-02-1994
<CASH> 19
<SECURITIES> 0
<RECEIVABLES> 626
<ALLOWANCES> 0
<INVENTORY> 382
<CURRENT-ASSETS> 1,101
<PP&E> 4,252
<DEPRECIATION> 1,923
<TOTAL-ASSETS> 4,290
<CURRENT-LIABILITIES> 717
<BONDS> 1,356
<COMMON> 177
0
0
<OTHER-SE> 1,503
<TOTAL-LIABILITY-AND-EQUITY> 4,290
<SALES> 0
<TOTAL-REVENUES> 3,382
<CGS> 0
<TOTAL-COSTS> 2,813
<OTHER-EXPENSES> 380
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 78
<INCOME-PRETAX> 111
<INCOME-TAX> 44
<INCOME-CONTINUING> 67
<DISCONTINUED> 31
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 133
<EPS-PRIMARY> 2.20
<EPS-DILUTED> 2.18
</TABLE>
