SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
Current Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
August 7, 1997
Date of Report (Date of earliest event reported)
BRODERBUND SOFTWARE, INC.
(Exact name of registrant as specified in its charter)
Delaware 0-15811 94-2768218
(State of incorporation) (Commission File Number) (I.R.S. Employer
Identification No.)
500 REDWOOD BOULEVARD
NOVATO, CALIFORNIA 94947
(Address of principal executive offices, including zip code)
(415) 382-4400
(Registrant's telephone number, including area code)
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Item 2. Acquisition or Disposition of Assets
Pursuant to a Stock Purchase Agreement dated August 6, 1997 (the "Purchase
Agreement") among Broderbund Software, Inc., a Delaware corporation
("Broderbund") Intuit Inc., a Delaware corporation ("Intuit"), and Parsons
Technology, Inc., a California corporation and a wholly-owned subsidiary of
Intuit ("Parsons"), on August 7, 1997 (the "Closing"), Broderbund purchased all
of the outstanding stock of Parsons (the "Parsons Shares") from Intuit for a
purchase price of $31,000,000 in cash (the "Purchase Price") determined as a
result of arms'-length negotiations between the parties. Parsons develops and
markets a broad range of consumer software products, primarily through direct
mail and telemarketing and sales channels.
Item 7. Financial Statements and Exhibits.
(a) Financial Statements of Businesses Acquired. Not required.
(b) Pro Forma Financial Information. Not required.
(c) Exhibits. The following exhibits are filed herewith:
2.01 Stock Purchase Agreement dated as of August 6, 1997 by and among
Intuit Inc., Broderbund Software, Inc. and Parsons Technology,
Inc.*
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* Certain exhibits and schedules to the Purchase Agreement have been omitted
pursuant to Item 601(b)(2) of Regulation S-K. Broderbund agrees to
supplementally furnish to the Commission a copy of any such exhibit or
schedule upon request.
SIGNATURE
Pursuant to requirements of the Securities Exchange Act of 1934, Intuit
Inc. has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
BRODERBUND SOFTWARE, INC.
Dated: November 20, 1997 By: /s/ Thomas Marcus
---------------------------
Name: Thomas Marcus
Title: Vice President,
Secretary & General
Counsel
<PAGE>
BRODERBUND SOFTWARE, INC.
FORM 8-K
FILED NOVEMBER 20, 1997
EXHIBIT INDEX
Exhibit Description
Number
2.01 Stock Purchase Agreement dated as of August 6, 1997 by and among
Intuit Inc., Broderbund Software, Inc. and Parsons Technology, Inc.*
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* Certain exhibits and schedules to this agreement have been omitted pursuant
to Item 601(b)(2) of Regulation S-K. Broderbund agrees to supplementally
furnish to the Commission a copy of any such exhibit or schedule upon
request.
STOCK PURCHASE AGREEMENT
AMONG
BRODERBUND SOFTWARE, INC.,
INTUIT INC.
AND
PARSONS TECHNOLOGY, INC.
AUGUST 6, 1997
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TABLE OF CONTENTS
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1. DEFINITIONS................................................................ -1-
2. PURCHASE AND SALE TRANSACTION.............................................. -9-
2.1 Purchase and Sale of Stock.......................................... -9-
2.2 Purchase Price...................................................... -10-
2.3 Transfer Tax........................................................ -10-
2.4 The Closing. ...................................................... -10-
2.5 Deliveries at the Closing........................................... -10-
3. REPRESENTATIONS AND WARRANTIES OF SELLER................................... -11-
3.1 Organization of the Sellers......................................... -11-
3.2 Authorization of Transaction........................................ -12-
3.3 Noncontravention.................................................... -12-
3.4 Brokers' Fees....................................................... -12-
3.5 Title to Stock...................................................... -12-
3.6 Subsidiaries........................................................ -13-
3.7 Pro Forma Adjusted Financial Statements............................. -13-
3.8 Indebtedness Guarantees............................................. -13-
3.9 Absence of Changes.................................................. -14-
3.10 Absence of Undisclosed Liabilities.................................. -16-
3.11 Legal and Other Compliance.......................................... -16-
3.12 Taxes............................................................... -16-
3.13 Property, Plant and Equipment....................................... -17-
3.14 Intellectual Property............................................... -19-
3.15 Inventories......................................................... -21-
3.16 Contracts........................................................... -21-
3.17 Notes and Accounts Receivable....................................... -23-
3.18 Powers of Attorney.................................................. -23-
3.19 Litigation.......................................................... -23-
3.20 Product Warranties; Defects; Liability.............................. -23-
3.21 Employees........................................................... -24-
3.22 Employee Benefits................................................... -25-
3.23 Environment, Health, and Safety..................................... -26-
3.24 Affiliated Transactions............................................. -27-
3.25 Government Contracts................................................ -27-
3.26 Distributors, Products, and Suppliers............................... -27-
3.27 No Illegal Payments, Etc............................................ -28-
3.28 Books and Records................................................... -28-
3.29 Consents............................................................ -28-
3.30 No Liquidation, Insolvency, Winding-Up. ............................ -28-
3.31 Disclosure.......................................................... -29-
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(continued)
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4. REPRESENTATIONS AND WARRANTIES OF BUYER. .................................. -29-
4.1 Organization of Buyer............................................... -29-
4.2 Authority for Agreement............................................. -29-
4.3 Noncontravention.................................................... -29-
4.4 Brokers' Fees....................................................... -30-
4.5 No Liquidation, Insolvency, Winding-Up. ............................ -30-
4.6 Tax Representations................................................. -30-
4.7 Absence of Litigation. ............................................ -31-
4.8 Investment Representations.......................................... -31-
5. PRE-CLOSING COVENANTS...................................................... -32-
5.1 General............................................................. -32-
5.2 Notices and Consents................................................ -32-
5.3 Operation of Business............................................... -32-
5.4 Preservation of Business............................................ -33-
5.5 Treatment of Company Agents......................................... -33-
5.6 Full Access......................................................... -33-
5.7 Notice of Developments.............................................. -34-
5.8 No Solicitation..................................................... -34-
5.9 Best Efforts and Further Assurances................................. -34-
6. CONDITIONS TO OBLIGATION TO CLOSE.......................................... -34-
6.1 Conditions Precedent to Obligations of Buyer........................ -34-
6.2 Conditions Precedent to Obligations of the Sellers.................. -37-
7. ADDITIONAL AGREEMENTS...................................................... -38-
7.1 Section 338(h)(10) Election......................................... -38-
7.2 Returns; Indemnification; Liability for Taxes....................... -39-
7.3 Refunds and Credits................................................. -40-
7.4 Termination of Tax Sharing Agreements............................... -40-
7.5 Conduct of Audits and Other Procedural Matters...................... -40-
7.6 Access to Records................................................... -41-
7.7 Confidentiality..................................................... -41-
7.8 Reimbursement of Excess Lease Capacity.............................. -41-
7.9 Payment of Company Liabilities...................................... -41-
7.10 Distributor Guarantees.............................................. -42-
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(continued)
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7.11 Kirkwood Obligations................................................ -42-
7.12 Non-Solicitation of Company Employees............................... -42-
8. SURVIVAL OF REPRESENTATIONS, WARRANTIES, AND INDEMNIFICATION. ............. -42-
8.1 Certain Defined Terms............................................... -42-
8.2 Survival of Representations and Warranties.......................... -45-
8.3 Indemnity by Seller................................................. -45-
8.4 Indemnity by Buyer.................................................. -47-
8.5 Escrow Period; Distribution upon Termination of Escrow Period....... -48-
8.6 Protection of Escrow Account........................................ -48-
8.7 Making of Claims.................................................... -49-
8.8 Objections to Claims During Escrow Period........................... -49-
8.9 Resolution of Conflicts; Arbitration................................ -50-
8.10 Escrow Agent's Duties............................................... -51-
9. TERMINATION................................................................ -53-
9.1 Termination of Agreement............................................ -53-
9.2 Effect of Termination............................................... -54-
9.3 Fees and Expenses................................................... -54-
10. MISCELLANEOUS.............................................................. -54-
10.1 Press Releases and Public Announcements............................. -54-
10.2 No Third Party Beneficiaries........................................ -54-
10.3 Entire Agreement.................................................... -54-
10.4 Succession and Assignment........................................... -55-
10.5 Counterparts........................................................ -55-
10.6 Headings............................................................ -55-
10.7 Notices............................................................. -55-
10.8 Governing Law....................................................... -56-
10.9 Amendments and Waivers.............................................. -56-
10.10 Severability........................................................ -56-
10.11 Construction........................................................ -57-
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STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (the "Agreement") is entered into on August
6, 1997 by and among Broderbund Software, Inc., a Delaware corporation
("Buyer"), Intuit Inc., a Delaware corporation ("Seller"), and Parsons
Technology, Inc., a California corporation and wholly-owned subsidiary of Seller
(the "Company" including its wholly owned subsidiaries), (Seller and the Company
are referred to herein together as the "Sellers") and, solely for purposes of
Section 8 and Section 10 of this Agreement, the Escrow Agent (as defined below).
Each of the Buyer and the Sellers are referred to herein individually as a
"Party" and, collectively, as the "Parties."
WHEREAS, Buyer desires to purchase from Seller, and Seller desires to sell
to Buyer, all of the issued and outstanding capital stock of the Company (the
"Stock") following the distribution of the Assigned Assets (as defined below)
and the Assumed Liabilities (as defined below) to Seller pursuant to the plan of
complete liquidation as described below, in consideration of the Purchase Price
(as defined below) and on the terms and conditions set forth herein (the
"Acquisition").
WHEREAS, Seller is effecting the Acquisition as part of a tax-free plan of
complete liquidation of the assets of the Company for tax purposes pursuant to
Section 332 of the Code (as defined below).
WHEREAS, in connection with such Acquisition, Buyer, Seller and the Company
desire to make certain representations, warranties and covenants amongst one
another.
WHEREAS, a portion of the Purchase Price payable by Buyer in connection
with the Acquisition shall be placed in escrow by Buyer, as provided herein.
NOW, THEREFORE, in consideration of the premises and the mutual promises
herein made, and in consideration of the warranties, and covenants herein
contained, the Parties hereto agree as follows.
1. DEFINITIONS:
"Acquisition" shall have the meaning set forth above.
"Acquisition Proposal" shall mean any inquiry or proposal relating to (i)
any merger, consolidation, sale of substantially all of the assets of or similar
transaction involving the Company, or (ii) the sale of any of the outstanding
shares of capital stock of the Company (including without limitation by way of a
tender offer or an exchange offer) or similar transaction involving the Company.
"Affiliate" shall have the meaning set forth in Rule 12b-2 of the
regulations promulgated under the Securities Exchange Act of 1934, as amended,
of the United States.
<PAGE>
"Affiliated Group" shall mean any affiliated group within the meaning of
Code Section 1504(a) or any similar group deemed to be an affiliated group under
a similar provision of state, local, or foreign law.
"Agreement" shall have the meaning set forth in the preamble above.
"Assigned Assets Liabilities" shall have the meaning set forth in Section
2.1(b).
"Assigned Assets" shall have the meaning set forth in Section 2.1(b).
"Assumed Liabilities"shall have the meaning set forth in Section 8.1.
"Basis" shall have the meaning set forth in Section 8.1.
"Breach" and "Breaches" shall have the meanings set forth in Section 8.1.
"Business" shall mean the Company's business of developing, licensing,
marketing, selling and distributing consumer computer software products and
related services, excluding any and all business or businesses, acts, contracts
or activities related to the Assigned Assets and/or the Liabilities assumed
pursuant to the Distribution, Assignment and Assumption Agreement (as defined
below).
"Buyer" shall have the meaning set forth in the preamble above.
"Buyer's Basket" shall have the meaning set forth in Section 8.4(e).
"Cash" shall mean cash and cash equivalents within the meaning of GAAP.
"Chemical Substance" means any chemical substance, including but not
limited to any: (i) pollutant, contaminant, irritant, chemical, raw material,
intermediate, product, by-product, slag, construction debris; (ii) industrial,
solid, liquid or gaseous toxic or hazardous substance, material or waste, (iii)
petroleum or any fraction thereof; (iv) asbestos or asbestos-containing
material; (v) polychlorinated biphenyls; (vi) chlorofluorocarbons; and, (vii)
any other substance, material or waste, which is identified or regulated under
any Environmental Law or Safety Law, as now in effect, or other comparable laws.
"Closing" shall have the meaning set forth in Section 2.4.
"Closing Date" shall have the meaning set forth in Section 2.4.
"Code" shall mean the Internal Revenue Code of 1986, as amended, of the
United States.
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"Company" shall mean Parsons Technology, Inc. and both of its wholly owned
subsidiaries, collectively.
"Company Assets" shall have the meaning set forth in Section 2.1(a).
"Company Agents" shall mean officers, employees and consultants of the
Company.
"Company Employee Plan" shall refer to any Company plan, scheme, program,
policy, practice, contract, commitment, agreement or other arrangement providing
for pension, death benefit, gratuities, superannuation, performance awards,
stock or stock-related awards, share option, share participation, share
incentive, profit sharing, bonus, incentive, fringe benefits, medical, dental,
or other employee benefits of any kind, whether formal or informal, funded or
unfunded and whether or not legally binding, including without limitation, each
"employee benefit plan" within the meaning of Section 3(3) of ERISA, each
"employee pension benefit plan" within the meaning of Section 3(2) of ERISA,
"employee welfare benefit plan" within the meaning of Section 3(1) of ERISA, and
each "multiemployer plan" within the meaning of Section 3(37) of ERISA, in each
case which is or has been maintained, contributed to, or required to be
contributed to, by the Company for the benefit of any Employee, and pursuant to
which the Company has or may have any material liability, contingent or
otherwise.
"Confidentiality Agreement" shall mean that certain Business Evaluation
Agreement between Buyer, Seller and the Company dated February 21, 1997.
"Continuing Lease" means that certain Building Lease dated January 18,
1991, as amended by First Amendment to Building Lease dated April 17, 1991 and
Second Amendment to Building Lease dated July 1, 1991, between the Company and
Hiawatha Development, as such is in effect on the date of this Agreement,
pursuant to which the Company leases its administrative facility located at One
Parsons Drive, Hiawatha, Iowa (the "Continuing Lease Premises"). The term
"Continuing Lease" does not include any modification or amendment of the
Continuing Lease made after the Closing Date or any lease agreement that
replaces, in whole or in part, the Continuing Lease.
"Continuing Lease Obligation" means the Company's obligation to pay, when
due under the terms of the Continuing Lease (other than when due to a breach or
violation of the Continuing Lease by the Company after the Closing), fifty
percent (50%) of the normal and usual rental payments due from the Company under
the Continuing Lease during the remainder of the current pending term of the
Continuing Lease, excluding any renewals or extensions of such lease term
("Continuing Lease Rent") minus any amounts (including without limitation any
rent or other payments) payable, directly or indirectly, to the Company or the
landlord of the Continuing Lease Premises by any future sublessee of the
Continuing Lease Premises (a "Sublessee") by which the Company or Buyer, through
the use of commercially reasonable efforts to sublease or otherwise mitigate or
reduce such rent obligation, reduces the amount of Continuing Lease Rent payable
or paid by the Company;
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provided however, that during any time period during which the Company and/or
Buyer and/or any Affiliate of the Company or Buyer and/or any Sublessee occupy
more than fifty percent (50%) of the rentable space available in the Continuing
Lease Premises, the percentage of the Continuing Lease Rent payable by Seller as
the Continuing Lease Obligation hereunder shall be reduced to that percentage
(which shall be less than fifty percent (50%)) of the Continuing Lease Premises
not used or occupied by the Company, Buyer and/or any Affiliate of the Company
or Buyer and/or any Sublessee; and provided further, that the Continuing Lease
Obligation shall not include any obligation to pay any amounts that become due,
or whose payment is accelerated, after the Closing, as a result of (i) any
breach or violation of the Continuing Lease (or any amended or modified version
of the Continuing Lease) by Buyer or the Company or any of their respective
Affiliates, successors or assigns; or (ii) any wrongful or tortious act,
omission or other conduct by Buyer, the Company, any of their Affiliates
successor or assigns or any Sublessee; or (iii) any lease agreement or other
arrangement regarding the lease of the Continuing Lease Premises other than the
Continuing Lease, as defined above.
"Contract" shall have the meaning set forth in Section 3.16.
"Disclosed Liabilities" shall have the meaning set forth in Section 7.9
"Disclosure Letter" shall mean the Disclosure Letter of Seller dated as of
the date of this Agreement as delivered to Buyer concurrently with the execution
of this Agreement, which contains exceptions to Seller's representations and
warranties as set forth in Section 3. Such Disclosure Letter may only be amended
prior to Closing with the express written consent of Buyer.
"Distribution, Assumption and Assignment Agreement" means the Distribution,
Assumption and Assignment Agreement in the form of Exhibit A to be entered into
by Seller and the Company after the Parties have entered into this Agreement
pursuant to a plan of complete liquidation of the Company for tax purposes.
"Distributor Guarantees" shall have the meaning set forth in Section 7.10.
"Environment" shall mean real property and any improvements thereon, and
also includes, but is not limited to, air (including that within man-made
structures above or below ground), surface water, drinking water, groundwater,
land surface, subsurface strata and water body sediments.
"Environmental Authorizations" shall have the meaning set forth in Section
3.23(a).
"Environmental Law" shall mean any statute, statutory instrument, common
law, treaty, regulation or legal requirement relating to pollution, or
protection or cleanup of the Environment including, without limitation, the
Comprehensive Environmental Response, Compensation and Liability Act, as
amended, the Resource Conservation and Recovery Act,
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as amended, the Clean Air Act, as amended, and the Clean Water Act, as amended,
relating to: (a) the Release, containment, removal, remediation, response,
cleanup or abatement of any sort of any Chemical Substance; (b) the manufacture,
generation, formulation, processing, labeling, distribution, introduction into
commerce, use, treatment, handling, storage, recycling, disposal or
transportation of any Chemical Substance; or (c) exposure of persons, including
employees, to any Chemical Substance.
"Environmental Permit" shall mean any Permit or authorization from any
governmental authority required under, issued pursuant to, or authorized by, any
Environmental Law.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"Escrow Account" shall have the meaning set forth in Section 2.2(b).
"Escrow Agent" shall mean the person designated as the "Escrow Agent" on
the Signature page attached hereto, or any other reasonably acceptable person
appointed by Buyer in substitution therefor.
"Escrow Amount" shall have the meaning set forth in Section 2.2(b).
"Escrow Period" shall have the meaning set forth in Section 8.1.
"Extended Buyer Claim" shall have the meaning set forth in Section 8.1.
"Extended Seller Claim" shall have the meaning set forth in Section 8.1.
"Extremely Hazardous Substance" shall have the meaning set forth in Section
302 of the Emergency Planning and Community Right-to-Know Act of 1986, as
amended.
"Fiduciary" shall have the meaning set forth in ERISA Section 3(21).
"Financial Statements" shall have the meaning set forth in Section 3.7.
"GAAP" shall mean United States generally accepted accounting principles as
in effect on the date of this Agreement.
"HSR Act" shall have the meaning set forth in Section 3.3.
"Indebtedness" shall have the meaning set forth in Section 3.8.
"Intellectual Property" shall mean (a) all inventions (whether patentable
or unpatentable and whether or not reduced to practice), all improvements
thereto, and all
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Patents, (b) all trademarks, service marks, trade dress, logos, trade names, and
corporate names, together with all translations, adaptations, derivations, and
combinations thereof and including all goodwill associated therewith, and all
applications, registrations, and renewals in connection therewith, (c) all
copyrightable works, all copyrights, design rights and all applications,
registrations, and renewals in connection therewith, (d) all mask-works and all
applications, registrations, and renewals in connection therewith, (e) all trade
secrets and confidential business information (including ideas, research and
development, know-how, formulas, manufacturing and production processes and
techniques, technical data, designs, drawings, specifications, customer and
supplier lists, pricing and cost information, and business and marketing plans
and proposals), (f) all computer software (including data and related
documentation), (g) all other proprietary rights, and (h) all copies and
tangible embodiments thereof (in whatever form or medium).
"IRS" shall mean the Internal Revenue Service.
"Knowledge" shall mean the actual knowledge of the executive officers of
the applicable Party.
"Liability" shall have the meaning set forth in Section 8.1.
"Lien" shall mean any mortgage, pledge, lien, security interest, charge,
claim, equity, encumbrance, conditional sale or other title retention device or
arrangement for the purpose of subjection to the payment of any Indebtedness, or
restriction on the creation of any of the foregoing, whether relating to any
property or right or the income or profits therefrom; provided, however, that
the term "Lien" shall not include (i) statutory liens for Taxes to the extent
that the payment thereof is not in arrears or otherwise due, (ii) encumbrances
in the nature of zoning restrictions, easements, rights or restrictions of
record on the uses of real property if the same do not materially detract from
the value of the property encumbered thereby or materially impair the use of
such property in the businesses of the Sellers as currently conducted, (iii)
statutory or common law liens to secure landlords, lessors or renters under
leases or rental agreements confirmed to the premises rented to the extent that
no payment or performance under any such lease or rental agreement is in arrears
or is otherwise due, (iv) deposits or pledges made in connection with, or to
secure payment of, worker's compensation, unemployment insurance, old age
pension programs mandated under applicable laws or other social security
regulations, and (v) statutory or common law liens in favor of carriers,
warehousemen, mechanics and materials, statutory or common law liens to secure
claims for labor, materials or supplies and other like liens, which secure
obligations to the extent that payment thereof is not in arrears or otherwise
due.
"Loss" and "Losses" shall have the meanings set forth in Section 8.1.
"Most Recent Balance Sheet" shall have the meaning set forth in Section
3.7.
"Most Recent Financial Statements" shall have the meaning set forth in
Section 3.7.
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"Officer's Indemnification Certificate" shall have the meaning set forth in
Section 8.1.
"Ordinary Course of Business" shall mean the ordinary course of a Party's
business consistent with such Party's past custom and practice including with
respect to quantity and frequency.
"Party" and "Parties" shall have the respective meanings set forth in the
preamble above.
"Patent" shall mean any: (i) patent, patent application, patent disclosure
or other patent right in any jurisdiction of the world; (ii) any division,
continuation, continuation-in-part, reissuance, reexamination, or extension of a
Patent; or (iii) any other patent right that is based upon an item described in
clause (i) or (ii) of this sentence.
"Person" shall mean an individual, a partnership, a corporation, an
association, a joint stock company, a trust, an unincorporated organization, or
a governmental entity (or any department, agency, or political subdivision
thereof).
"Premises" shall mean the real properties that are leased by the Company
under the Real Property Leases listed in Schedule 3.13(b) hereto.
"Proceedings" shall have the meaning set forth in Section 7.5.
"Prohibited Transaction" shall have the meaning set forth in ERISA Section
406 and Code Section 4975.
"Purchase Price" shall have the meaning set forth in Section 2.2.
"Real Property Leases" shall have the meaning set forth in Section 3.13(b).
"Release" shall mean any actual spilling, leaking, pumping, pouring,
emitting, dispersing, emptying, discharging, injecting, escaping, leaching,
dumping, or disposing of any Chemical Substance into the Environment that may
cause Liability under Environmental Laws (including the abandonment or
discarding of barrels, containers, tanks or other receptacles containing or
previously containing any Chemical Substance).
"Reportable Event" shall have the meaning set forth in ERISA Section 4043.
"Returns" shall have the meaning set forth in Section 3.12(a).
"Safety Laws" shall mean any statute, statutory instrument, common law,
regulation, directive, code of practice or guidance notes, or legal requirement
relating to health or safety, including but not limited to the Occupational
Safety and Health Act, as amended, relating
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to: (a) exposure of employees of the Company to any Chemical Substance, (b) the
physical structure, use or condition of a building, facility, fixture or other
structure or manufacturing processes, or (c) otherwise concerning the health and
safety of persons who work for the Company, whether as employees, consultants or
otherwise, or persons who visit the Premises or are in any way affected by the
activities of the Company or by persons who work for the Company.
"Schedules" shall mean the Schedules of Seller delivered to Buyer
concurrently with the execution of this Agreement which Schedules set forth the
specific information referenced in various sections of this Agreement. The
Schedules and the information contained therein shall not be deemed exceptions
to any of the representations or warranties contained herein, except that they
qualify Sections 3.13(b), 3.14(c)(iv), 3.21(a), 3.21(d) and 3.21(e) to the
extent set forth therein. Such Schedules may only be amended prior to Closing
with the express written consent of all parties hereto. The Schedules are
arranged to supplement various sections of this Agreement by corresponding or
cross-referencing specific lettered and numbered Sections contained herein.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Securities Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
"Seller" and "Sellers" shall have the respective meanings set forth in the
preamble above.
"Seller's Basket" shall have the meaning set forth in Section 8.3(e).
"Stock" shall have the meaning set forth in the Preamble above.
"Subsidiary" or "Subsidiaries" shall mean any corporation, or corporations,
respectively, with respect to which a specified Person (or a Subsidiary thereof)
owns a majority of the voting stock or has the power to vote or direct the
voting of sufficient securities to elect a majority of the directors of such
corporation.
"Tax," "Taxation" or "Taxes" means any and all United States and other
foreign taxes, whether governmental, local or municipal, assessments and other
governmental or local or municipal charges, duties, impositions and liabilities,
including taxes based upon or measured by gross receipts, income, profits,
sales, use and occupation, and value added, ad valorem, property transfer,
franchise, withholding, stamp, payroll, recapture, employment, national
insurance, social security, excise duties and rates together with all interest,
penalties and additions imposed with respect to such amounts.
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"Tax Return" shall mean any return, declaration, report, claim for refund,
or information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"Trademarks" shall mean any trademarks, service marks, trade dress, logos,
trade names, and corporate names, together with all goodwill associated
therewith.
2. PURCHASE AND SALE TRANSACTION.
2.1 Purchase and Sale of Stock.
(a) On the terms and subject to the conditions set forth in this Agreement,
at the Closing, Seller will sell, convey, transfer, assign and deliver to Buyer,
and Buyer will purchase and acquire from Seller on the Closing Date, all of the
Stock (and as a result thereof, all right, title, and interest to any and all
assets of the Company included in the assets listed on the Most Recent Balance
Sheet of the Company, except (i) those assets disposed of or consumed in the
Ordinary Course of Business since the date of the Most Recent Balance Sheet,
(ii) the Assigned Assets and (iii) those assets whose disposition prior to the
Closing is described in the Disclosure Letter (the "Company Assets")), in
exchange for the Purchase Price.
(b) The Parties acknowledge and agree that, immediately prior to the
effectiveness of the Closing, pursuant to a plan of complete liquidation of the
Company for tax purposes and the Distribution, Assignment and Assumption
Agreement, which will be entered into by the Company and Seller after the
Parties have entered into this Agreement, certain assets of the Company as set
forth on Schedule 2.1(b)-1 (the "Assigned Assets") will be distributed to
Seller, and those liabilities related to the Assigned Assets and assumed by
Seller under the Distribution, Assignment and Assumption Agreement (the
"Assigned Assets Liabilities") will be assumed by Seller and accordingly, the
Assigned Assets will not be owned by the Company at the Closing and thus will
not be acquired, directly or indirectly, by Buyer pursuant to its purchase of
the Stock hereunder. The Parties further acknowledge and agree that Seller will
assume all of the Assumed Liabilities (as defined in Section 8.1) effective as
of the Closing, except that Seller will have assumed the Assigned Assets
Liabilities effective immediately prior to the effectiveness of the Closing.
(c) The Acquisition will be treated as a deemed asset sale transaction for
Tax purposes by virtue of the Parties making the appropriate Code Section 338(g)
and 338(h)(10) elections, as specified in Sections 6.1(r) and 6.2(m) of this
Agreement. The Parties agree to report the Acquisition in the manner described
in the preceding sentence and none of the Parties will take any Tax position
inconsistent therewith in any Tax return or otherwise.
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2.2 Purchase Price. Buyer agrees to pay to the Seller on the Closing Date
the purchase price (the "Purchase Price") as follows:
(a) Total Cash from Buyer. At the Closing, an aggregate of U.S.
$31,000,000 in cash, less the Escrow Amount set forth in Section 2.2(b)
below, by wire transfer to the Seller pursuant to wire transfer
instructions delivered by Seller to Buyer not less than 24 hours prior to
the Closing.
(b) Escrow Amount. At the Closing, an aggregate of U.S. $4,650,000
(the "Escrow Amount") of such $31,000,000 Purchase Price in cash payable by
Buyer shall be placed by Buyer into an escrow account (the "Escrow
Account"), such amount to be payable by wire to the Escrow Agent
contemporaneously with the Closing, to be held in escrow pursuant to the
provisions of Section 8 herein.
2.3 Transfer Tax. Seller shall bear and pay any transfer Taxes (other than
any sales or use tax), documentation charges, recording fees or similar charges,
fees or expenses that may become payable in connection with the sale of the
Stock and the Acquisition, and Seller shall bear and pay any such Taxes
(including sales and use Taxes) arising from the distribution of the Assigned
Assets and Assigned Assets Liabilities pursuant to the Distribution, Assignment
and Assumption Agreement).
2.4 The Closing. Subject to the terms and conditions of this Agreement, the
closing of the sale of the Stock by Seller to Buyer and the other transactions
contemplated by this Agreement (the "Closing") shall take place immediately
after (i) the distribution of the Assigned Assets and the Assigned Assets
Liabilities from the Company to Seller pursuant to the Distribution, Assignment
and Assumption Agreement and the plan of complete liquidation of the Company
referred to herein and (ii) the satisfaction and/or waiver of all conditions
listed in Section 6 hereof. Subject to compliance with the foregoing, the
Closing shall take place effective immediately after the close of business,
Pacific Time, on August 6, 1997 (the "Closing Date"). The Closing shall take
place at the offices of Wilson, Sonsini, Goodrich & Rosati, Professional
Corporation, in Palo Alto, California.
2.5 Deliveries at the Closing. At the Closing, the following shall occur:
(i) Seller will deliver to Buyer the stock certificate(s) representing
the Stock.
(ii) Seller will deliver to Buyer the various certificates,
instruments, and documents referred to in Section 6.1 below;
(iii) Seller will execute, acknowledge (if appropriate), and deliver
to the Buyer such other instruments of sale, transfer, conveyance, and
assignment of the Stock as Buyer and its counsel may reasonably request;
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(iv) Buyer will deliver (a) the Purchase Price (less the Escrow
Amount) to Seller and (b) the Escrow Amount to the Escrow Agent, each as
specified in Section 2.2 above;
(v) Buyer will deliver to Seller the various certificates, instruments
and documents referred to in Section 6.2 below;
(vi) Buyer and Seller shall deliver or cause to be delivered to one
another such other instruments and documents as are reasonably necessary or
appropriate to evidence the due execution, delivery and performance of this
Agreement; and
At any time, and from time to time after the Closing, at the reasonable
request of Buyer and without further consideration, Seller, at Buyer's sole cost
and expense, will execute and deliver such other instruments of sale, transfer,
conveyance, assignment and confirmation and take such lawful action as Buyer may
reasonably determine is necessary to transfer, convey and assign to the Buyer,
and to confirm the Buyer's title to or interest in the Stock, to put the Buyer
in actual possession and operating control of the Business and to assist the
Buyer in exercising all rights with respect thereto.
3. REPRESENTATIONS AND WARRANTIES OF SELLER.
Seller represents and warrants to Buyer that the statements contained in
this Section 3 are true and correct as of the date of this Agreement and, if the
Closing Date is different than the date of this Agreement, will be true and
correct as of the Closing Date (as though made as of the Closing Date and as
though the Closing Date were substituted for the date of this Agreement
throughout this Section 3), except (i) for changes pursuant to the conduct of
the business of the Company occurring prior to the Closing in conformity with
this Agreement (including the Exhibits attached hereto) or (ii) as specifically
set forth in the Disclosure Letter, or (iii) for changes in the Company or its
business resulting from the distribution of the Assigned Assets and the Assigned
Assets Liabilities to Seller pursuant to the Distribution, Assignment and
Assumption Agreement.
3.1 Organization of the Sellers. Each of the Sellers is duly organized,
validly existing, and in good standing under the laws of the jurisdiction of its
incorporation. Seller is qualified to transact business as a foreign corporation
in the State of California and is a foreign corporation in good standing under
the laws of the State of California. The Company is, or at or prior to the
Closing Date will be, duly qualified to transact business as a foreign
corporation in good standing under the laws of each jurisdiction where such
qualification is required and in which the Company's failure to be so qualified
would have a material adverse effect on the Company's Business, financial
condition or results of operations. The Company has full power and authority,
and all licenses, permits and authorizations necessary to carry on the Business
and to own and use the Company Assets and properties owned and used by it except
those that will be distributed to Seller pursuant to the Distribution,
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Assignment and Assumption Agreement. Neither of the Sellers is in default under
or in violation of any provision of its respective articles (or certificate) of
incorporation or bylaws.
3.2 Authorization of Transaction. Each of the Sellers has full corporate
power and authority to execute and deliver this Agreement and to perform its
respective obligations hereunder. Without limiting the generality of the
foregoing, the board of directors of Seller has duly authorized the execution,
delivery, and performance of this Agreement by Seller, and the board of
directors of the Company has duly authorized the execution, delivery and
performance of this Agreement by the Company. This Agreement constitutes the
valid and legally binding obligation of Seller and the Company, enforceable
against Seller and the Company in accordance with its terms and conditions,
subject to the effect of bankruptcy or similar insolvency laws affecting the
rights of creditors generally and the availability of specific enforcement,
injunctive relief and other equitable remedies.
3.3 Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby will (i)
violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which either of the Sellers is subject or any
provision of any charter documents or bylaws of either Seller or (ii) conflict
with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate, modify,
or cancel, or require any notice under any agreement, contract, lease, license,
instrument, or other arrangement to which the Company is a party or by which the
Company is bound or to which any of the Company's assets (other than any of the
Assigned Assets) is subject (or result in the imposition of any Lien upon any of
the Company's assets other than any of the Assigned Assets). Neither of the
Sellers is required by any law to give any notice to, make any filing with, or
obtain any authorization, consent, or approval of any government or governmental
agency in order for the Parties to consummate the transactions contemplated by
this Agreement except for the lapsing of the waiting period under 16 C.F.R. ss.
800 et. seq. (the "HSR Act") without commencement of any action to enjoin the
transaction on the part of the Federal Trade Commission or the Department of
Justice.
3.4 Brokers' Fees. Neither of the Sellers has any Liability or obligation
to pay any fees or commissions to any broker, finder, or agent with respect to
the transactions contemplated by this Agreement for which the Buyer could become
liable or obligated.
3.5 Title to Stock.
(a) The Seller is the sole holder of outstanding capital stock of the
Company as of the date hereof.
(b) The Seller has good and marketable title to the Stock; such shares of
stock are free and clear of any Liens (as defined herein) and free from any
restriction on sale or transfer (other than restrictions imposed by applicable
securities laws), preemptive right,
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option, warrant or any other claim of any kind or nature whatsoever by any
person other than the registered owner thereof. The delivery of the Shares to
Buyer pursuant to this Agreement upon Closing will transfer to Buyer legal and
valid title to the Shares being acquired free and clear of all Liens, or other
claims of any kind or nature whatsoever.
3.6 Subsidiaries. The Company owns all of the issued and outstanding stock
of Go Direct, Inc., an Iowa corporation and Parsons Ltd., a U.K. corporation,
and does not control, directly or indirectly or have any direct or indirect
equity participation in any other corporation, partnership, trust or other
business association.
3.7 Pro Forma Adjusted Financial Statements. Schedule 3.7 sets forth the
following unaudited pro forma adjusted financial statements of the Company as a
business unit of Seller (collectively, the "Financial Statements"): (i) an
unaudited pro forma adjusted balance sheet at July 31, 1996 and pro forma
adjusted statements of income and cash flows for the fiscal year ended July 31,
1996 and (ii) an unaudited pro forma adjusted balance sheet of the Company as of
June 30, 1997 (the "Most Recent Balance Sheet") and pro forma adjusted
statements of income and cash flows for the 11 month period ended June 30, 1997
(the Most Recent Balance Sheet and such 11 month unaudited pro forma adjusted
statements of income and cash flows being hereinafter referred to as the "Most
Recent Financial Statements"). The Financial Statements, specifically including
the Most Recent Financial Statements, have been derived from unaudited financial
statements of the Company as a business unit of Seller that were prepared in
accordance with GAAP applied on a consistent basis throughout the periods
covered thereby, and have been adjusted in accordance with the assumptions,
qualifications and adjustments expressly set forth in the Financial Statements
on a pro forma basis that excludes the assets, liabilities, revenues, expenses
and other financial statement items related to the business associated with the
Assigned Assets and certain of the Assigned Assets Liabilities to be assumed by
Seller pursuant to the Distribution, Assignment and Assumption Agreement for all
periods covered by the Financial Statements, as provided therein. Subject to the
adjustments, assumptions and qualifications set forth therein, the Financial
Statements present fairly the financial condition and the results of operations
of the Company as of the date or dates of such Financial Statements and for the
periods covered thereby on the pro forma adjusted basis described herein and in
the Financial Statements and, subject to such pro forma adjustments, assumptions
and qualifications, are consistent with the books and records of the Company
that pertain to the Business of the Company, other than any business related to
the Assigned Assets or the Assigned Assets Liabilities assumed pursuant to the
Distribution, Assignment and Assumption Agreement (which books and records are
correct and complete in all material respects) except for normal year-end
adjustments which will not be material.
3.8 Indebtedness Guarantees. Except as set forth on the Most Recent
Financial Statements, the Company does not have any indebtedness for money
borrowed or for the deferred purchase price of property or services, or capital
lease obligations, or conditional sale or other title retention agreements
relating to the Business ("Indebtedness") and is not
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a guarantor or otherwise liable for any Liability or obligation of any other
Person for any matter which relates to or affects or will affect the Business.
3.9 Absence of Changes. Since the Most Recent Balance Sheet date and except
as set forth in Section 3.9 of the Disclosure Letter, there has not been any
material adverse change in the Business, financial condition, operations or
results of operations of the Company, except for any such change arising from
the assignment of the Assigned Assets and the assumption of the Assigned Assets
Liabilities by Seller pursuant to the Distribution, Assignment and Assumption
Agreement. Without limiting the generality of the foregoing, since such date,
except as set forth in the Disclosure Letter or the Distribution, Assignment and
Assumption Agreement, and except for the distribution of the Assigned Assets to
Seller and the assumption of the Assigned Assets Liabilities by Seller:
(a) The Company has not sold, leased, transferred, or assigned any of
its assets, tangible or intangible other than in the Ordinary Course of
Business;
(b) The Company has not entered into any agreement, contract, lease,
or license (or series of related agreements, contracts, leases, and
licenses) relating to the Business other than in the Ordinary Course of
Business;
(c) no party (including the Company) has accelerated, terminated,
modified or canceled any agreement, contract, lease or license (or series
of related agreements, contracts, leases and licenses) involving
individually more than $15,000 to which the Company is a party or by which
the Company is bound;
(d) The Company has not imposed, or agreed to, or suffered the
imposition of any Lien in excess of $25,000 upon any of its assets,
tangible or intangible;
(e) The Company has not made any capital expenditure (or series of
related capital expenditures) involving more than $25,000, or
(f) The Company has not made any capital investment in, any loan to,
or any acquisition of the securities or assets of, any other Person (or
series of related capital investments, loans and acquisitions) involving
individually more than $10,000 other than pursuant to agreements with
suppliers that were entered into in the Ordinary Course of Business;
(g) The Company has not issued any note, bond or other debt security
or created, incurred, assumed or guaranteed any indebtedness for borrowed
money or capitalized lease obligation either involving more than $10,000
individually or $30,000 in the aggregate;
(h) The Company has not canceled, compromised, waived or released any
right or claim (or series of related rights and claims) involving more than
$15,000;
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(i) The Company has not granted any license or sublicense of any
rights under or with respect to any Intellectual Property other than
"shrink wrap" or site licenses to end-users;
(j) There has been no change made or authorized in the Articles of
Incorporation or bylaws of the Company;
(k) The Company has not issued, sold or otherwise disposed of any of
its capital stock, or granted any options, warrants or other rights to
purchase or obtain (including upon conversion, exchange or exercise) any of
its capital stock;
(l) Except for the authorization of a plan of complete liquidation and
the distribution of the Assigned Assets and the Assigned Assets Liabilities
to Seller as part thereof, the Company has not declared, set aside or paid
any dividend or made any distribution with respect to its capital stock
(whether in cash or in kind) or redeemed, purchased or otherwise acquired
any of its capital stock;
(m) The Company has not experienced any damage, destruction or loss
(whether or not covered by insurance) to its property in excess of $10,000;
(n) The Company has not made any loan to any of its directors,
officers or employees, or entered into any other compensation transaction
with any of its directors, officers and employees that is not at least
partially deductible for Tax purposes;
(o) The Company has not entered into any employment or severance
agreement or arrangement (other than pursuant to the Company's standard
services agreement terms and conditions in the Ordinary Course of
Business), written or oral, or modified the terms of any existing such
contract or agreement;
(p) The Company has not granted any increase in the base compensation
of any of its directors, officers and employees;
(q) The Company has not adopted, amended, modified or terminated any
Seller Employee Plan for the benefit of any of its directors, officers and
employees;
(r) The Company has not made any other change in employment terms for
any of its directors, officers and employees or entered into any collective
bargaining agreement, except as described in Section 3.9(r) of the
Disclosure Letter.
(s) The Company has not made or pledged to make any charitable or
other capital contribution outside the Ordinary Course of Business; and
(t) The Company has not committed to any of the foregoing.
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3.10 Absence of Undisclosed Liabilities. The Company has no debts or
liabilities (and to the Sellers' Knowledge there is no Basis for any present or
future action, suit, proceeding, hearing, investigation, charge, complaint,
claim, or demand against the Company giving rise to any such Liability) except
for (i) debts and liabilities as are reflected in the Most Recent Financial
Statements and (ii) debts and liabilities arising in the Ordinary Course of
Business after the Most Recent Balance Sheet Date.
3.11 Legal and Other Compliance. The Company has complied in all material
respects with all applicable laws (including rules, regulations, codes, plans,
injunctions, judgments, orders, decrees, rulings, and charges thereunder) of the
United States federal, state, local, and other foreign governments (and all
agencies thereof) and no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, demand, or notice has been filed or commenced against
the Company alleging any failure so to comply.
3.12 Taxes.
(a) The Company has accurately prepared and duly filed all tax returns and
given or delivered all material information, accounts, notices, computations,
statements and reports required to be filed, given or delivered by the Company
under any applicable legislation or regulations relating to Taxation (whether of
the United States or elsewhere in the world) ("Returns") and relating to any and
all Taxes attributable to the Company or its operations, or for which the
Company is liable or has become liable, such Returns are true and correct in all
material respects and show all amounts paid or required to be paid, and have
been completed in accordance with applicable law in all material respects. All
taxes payable on the Returns have been paid in full on a timely basis. The
Company has duly and punctually withheld or paid, all income tax, social
security and other Taxes the Company is required to withhold or pay with respect
to its employees, independent contractors, or other third parties.
(b) The provisions or reserves for the Company's Taxes reflected in the
Most Recent Balance Sheet are sufficient to discharge the Taxes for all periods
(or the portion of any period) ending on or prior to the date of such Most
Recent Balance Sheet, whensoever payable.
(c) No material Tax liability has been incurred by the Company since the
date of the Most Recent Balance Sheet other than in the Ordinary Course of
Business and adequate provision has been or will be made for all Tax Liabilities
incurred since that date through the Closing Date in accordance with GAAP.
(d) The Company does not have, or prior to the Closing will not have, any
Tax, nor is there any Tax deficiency outstanding, proposed or assessed, for
which adequate provision has not been made in the Most Recent Balance Sheet, nor
has the Company executed any waiver of any statute of limitations on or
extending the period for the assessment or collection of any Tax. No dispute,
audit or other examination or investigation
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of the Tax affairs of the Company is presently in progress. Except to the extent
reflected on the Most Recent Balance Sheet, the Company does not have any
Liability for unpaid Taxes, whether asserted or unasserted, known or unknown,
contingent or otherwise and there is no basis for the assertion of any such
Liability attributable to the Company, its assets or operations except for any
Liability for Taxes incurred in the Ordinary Course of Business since the date
of the Most Recent Balance Sheet that are not yet due and payable to the
applicable taxing authority. There are (or immediately following the Closing,
there will be) no Liens on the assets of the Company relating to or attributable
to Taxes.
3.13 Property, Plant and Equipment.
(a) Schedule 3.13(a) lists and describes all real property owned by the
Company;
(b) Schedule 3.13(b) lists and describes all real property leased or
subleased to the Company. The Company has delivered to Buyer correct and
complete copies of the leases and subleases listed on Schedule 3.13(b) (the
"Real Property Leases"). Except as set forth on Schedule 3.13(a), with respect
to each of the Real Property Leases listed on Schedule 3.13(b):
(i) the lease or sublease is legal, valid, binding, enforceable
against the Company and, to the Seller's Knowledge, against the other party
thereto, subject to the effect of bankruptcy or similar insolvency laws
affecting the rights of creditors generally and the potential
unavailability of specific enforcement, injunctive relief and other
equitable remedies, and is in full force and effect;
(ii) upon obtaining any required consents of the landlord to
assignment or transfer of such lease or sublease necessitated by the
transactions contemplated by this Agreement, the lease or sublease will
continue to be legal, valid, binding, enforceable against the Company and,
to the Seller's Knowledge, against the other party thereto, subject to the
effect of bankruptcy or similar insolvency laws affecting the rights of
creditors generally and the potential unavailability of specific
enforcement, injunctive relief and other equitable remedies, and in full
force and effect on identical terms following the consummation of the
Acquisition contemplated hereby;
(iii) neither the Company nor, to the Knowledge of the Sellers, the
other party to the lease or sublease is in breach or default thereof;
(iv) to the Knowledge of the Company, no party to such lease or
sublease has overtly repudiated any provision thereof;
(v) The Company has not assigned, transferred, conveyed, mortgaged,
deeded in trust, or encumbered any interest in the leasehold or
subleasehold;
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(vi) all facilities leased or subleased under the Real Property Leases
have received all approvals of governmental authorities (including licenses
and permits) required in connection with the operation thereof as conducted
by the Company and have been operated and maintained in accordance with
applicable laws, rules, and regulations in all material respects;
(vii) all facilities leased or subleased under the Real Property
Leases are supplied with utilities and other services reasonably necessary
for the operation of said facilities.
(c) The Company does not use or occupy any premises other than the Premises
and the real property described in Schedules 3.13(a) and 3.13(b).
(d) The Company is in physical possession and actual occupation of the
whole of the Premises on an exclusive basis and no right of occupation or
enjoyment has been acquired by any third party or has been granted or agreed to
be granted to any third party.
(e) All monies due to each lessor or sublessor under each of the Real
Property Leases (whether or not reserved as rent) to which the Company is a
party or by which the Company is bound have been paid and none have been
commuted, waived or paid in advance of the due date for payment.
(f) The Premises are not subject to the payment of any outgoings other than
uniform business rates and water rates (and (in the case of leaseholds) rent
(inclusive of payments of taxes, insurances and operating costs), insurance
premiums, service charges and leasehold and subleasehold expenses) and all
outgoings have been paid when due and none are disputed under the leases.
(g) All covenants, restrictions, stipulations and other encumbrances
affecting the Premises, to the extent they have been affirmatively agreed to by
the Company, have been observed and performed in all material respects.
(h) There are no current or existing facts or circumstances which (with or
without the taking of other action) would entitle any third party to exercise a
right of entry or forfeiture or to take possession or which would in any other
way affect or restrict the continued possession, enjoyment or use of any of the
Premises for its present purpose for the duration of the term of the lease or
sublease.
(i) All buildings and structures comprised in the Premises are in a good
state of repair and condition, reasonable wear and tear excepted.
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3.14 Intellectual Property.
(a) The Company owns or has the right to use pursuant to license,
sublicense, agreement or permission all Intellectual Property reasonably
necessary for the operation of the Business as such is currently conducted. Each
item of Intellectual Property owned or used by the Company immediately prior to
the Closing (other than any of the Assigned Assets) hereunder will, immediately
after the Closing, be owned or available for use by the Buyer and the Company on
identical terms and conditions as owned or available for use by the Company
prior to the Closing subject to obtaining any required consents disclosed in
Section 3.29 of the Disclosure Letter. The Company has taken all commercially
reasonable actions to maintain and protect each item of Intellectual Property
that the Company owns or uses.
(b) The Company does not infringe upon, misappropriate, or use without a
required license, any Intellectual Property rights of third parties, nor has the
Company received any written charge, complaint, claim, demand, or notice
alleging that the operation of the Business gives rise to any such infringement,
misappropriation, or misuse that has not previously been finally resolved
(including any claim that the Company must license or refrain from using any
Intellectual Property rights of any third party). To the Knowledge of the
Sellers, no third party has infringed upon, misappropriated, or otherwise
misused any Intellectual Property rights of the Company.
(c) Schedule 3.14(c) identifies each issued patent, and each registered
copyright, trademark, trade name, mask work, service mark or other registration
which has been issued to the Company by any governmental entity with respect to
any of its Intellectual Property, identifies each pending patent application or
application or other registration which the Company has made with respect to any
of its Intellectual Property, and identifies each license, agreement, or other
permission currently in effect pursuant to which the Company has granted to any
third party rights with respect to any of the Company's Intellectual Property
(together with any exceptions) other than shrink wrap licenses to end users. The
Sellers have delivered to Buyer correct and complete copies of all such issued
patents, and registered copyrights, trademarks, trade names, mask works, service
marks, registrations, applications, licenses, agreements, and permissions (as
amended to date) and have made available to the Buyer correct and complete
copies of all other written documentation evidencing ownership and prosecution
(if applicable) of each such item. With respect to each item of Intellectual
Property required to be identified on Schedule 3.14(c), except as set forth in
Section 3.14(c) of the Disclosure Letter:
(i) the Company possesses all right, title, and interest in and to the
item, or has the valid right to use the item, free and clear of any Lien or
license;
(ii) the item is not subject to any outstanding injunction, judgment,
order, decree, ruling, or charge;
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(iii) no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand has been filed or, to the Knowledge of the
Sellers, is threatened which challenges the legality, validity,
enforceability, use, or ownership of the item; and
(iv) except for indemnification provided in connection with agreements
set forth on Schedule 3.14(c) and Schedule 3.16, the Company has not agreed
to indemnify any Person for or against any interference, infringement,
misappropriation, or other conflict with respect to the item.
(d) Schedule 3.14(d) lists the items of Intellectual Property that any
third party owns and that the Company uses pursuant to license, sublicense,
agreement, or permission other than pursuant to shrinkwrap software licenses or
site licenses. The Company has delivered to Buyer correct and complete copies of
all such licenses, sublicenses, agreements, and permissions (as amended to
date). Except as described in Section 3.14(d) of the Disclosure Letter, with
respect to each item of Intellectual Property required to be identified on
Schedule 3.14(d):
(i) the license, sublicense, agreement, or permission covering the
item is legal, valid, binding, enforceable against the Company and, to the
Knowledge of the Sellers, against the other party thereto, and in full
force and effect, subject to the effect of bankruptcy or similar insolvency
laws affecting the rights of creditors generally and the potential
unavailability of specific enforcement, injunctive relief and other
equitable remedies;
(ii) the license, sublicense, agreement, or permission will continue
to be legal, valid, binding, enforceable, and in full force and effect on
identical terms immediately following the consummation of the transactions
contemplated hereby;
(iii) neither the Company, nor to the Knowledge of the Sellers, any
other party to the license, sublicense, agreement, or permission is in
breach or default, and no event has occurred which with notice or lapse of
time would constitute a breach or default or permit termination,
modification, or acceleration thereunder;
(iv) to the Knowledge of the Sellers, no party to the license,
sublicense, agreement, or permission has overtly repudiated any provision
thereof;
(v) with respect to each such sublicense, the representations and
warranties set forth in subsections (i) through (iv) above are true and
correct with respect to the underlying license;
(vi) the underlying item of Intellectual Property is not subject to
any outstanding injunction, judgment, order, decree, ruling, or charge;
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(vii) no action, suit proceeding, hearing, investigation, charge,
complaint, claim, or demand has been filed against either of the Sellers
or, to the Knowledge of the Sellers, any owner of such Intellectual
Property or, to the Knowledge of the Sellers, is threatened which
challenges the legality, validity, or enforceability of the underlying item
of Intellectual Property;
(viii) the Company has not granted any sublicense or similar right
with respect to the license, sublicense, agreement or permission other than
pursuant to shrink wrap licenses or site licenses to end users; and
(ix) the item of Intellectual Property does not, infringe upon,
misappropriate, or otherwise misuse any Intellectual Property rights of
third parties as a result of the continued operation of the Business.
3.15 Inventories. The inventory of the Company consists of raw materials
and supplies, manufactured and purchased parts, goods in process, and finished
goods, all of which is merchantable and fit for the purpose for which it was
procured or manufactured, and none of which is obsolete, damaged, or defective,
subject only to the reserve for inventory write down reflected in the Most
Recent Balance Sheet as adjusted for the passage of time through the Closing
Date in accordance with the past custom and practice of the Company.
3.16 Contracts. Schedule 3.16 lists the following currently effective
contracts and other agreements (the "Contracts") to which the Company is a party
other than those that are required to be listed in any Schedule called for by
Section 3.13 or Section 3.14 of this Agreement:
(a) any agreement (or group of related agreements) for the lease of
personal property to or from any Person providing for lease payments in
excess of $25,000 per annum;
(b) any agreement (or group of related agreements) for the purchase or
sale of raw materials, commodities, supplies, products, or other personal
property, or for the furnishing or receipt of services, the performance of
which will extend over a period of more than one year, or result in a loss
in excess of $10,000 on completion of performance, or involve consideration
in excess of $10,000;
(c) any agreement concerning the participation of the Company in a
partnership or joint venture;
(d) any agreement (or group of related agreements) under which the
Company has created, incurred, assumed, or guaranteed any indebtedness for
borrowed money, or any capitalized lease obligation, in excess of $25,000
or under which it has imposed a Lien on any of its assets, tangible or
intangible (other than liens given in the Ordinary Course of Business
relating to the sale of goods and provision of services);
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(e) any agreement concerning a commitment of confidentiality or
noncompetition by the Company;
(f) any currently effective profit sharing, stock option, stock
purchase, stock appreciation, deferred compensation, severance, or other
plan or arrangement for the benefit of the Company's current or former
directors, officers, and employees (other than plans or arrangements of
Seller as to which the Company and Buyer do not have and shall not incur
any Liability);
(g) any collective bargaining agreement binding on the Company;
(h) any currently effective written agreement for the employment by
the Company of any individual on a full-time, part-time, consulting or
other basis;
(i) any agreement under which the Company has advanced or loaned any
amount in excess of $1,000 (excluding normal advances or loans associated
with travel and meal expenses advanced in the Ordinary Course of Business)
to any of its directors, officers, and employees;
(j) any agreement pursuant to which the Company has an obligation to
pay royalties or make other payments in connection with the sale of
products or services by the Company in the Ordinary Course of Business;
(k) any other agreement (or group of related agreements) the
performance of which involves payment by the Company of consideration in
excess of $100,000.
(l) any agreement, written or oral, between Seller and the Company.
The Company has delivered to the Buyer a correct and complete copy of each
written agreement listed on Schedule 3.16 and a written summary setting forth
the terms and conditions of each oral agreement referred to in this Section
3.16. With respect to each such agreement: (A) the agreement is legal, valid,
binding, enforceable, and in full force and effect with respect to the Company,
subject to the effect of bankruptcy or similar insolvency laws affecting the
rights of creditors generally and the potential unavailability of specific
enforcement, injunctive relief and other equitable remedies and, to the
Knowledge of the Sellers is a legal, valid, binding and enforceable agreement of
the other party(ies) thereto, subject to the effect of bankruptcy or similar
insolvency laws affecting the rights of creditors generally and the potential
unavailability of specific enforcement, injunctive relief and other equitable
remedies; and (B) the agreement will continue to be legal, valid, binding,
enforceable, and in full force and effect after consummation of the Acquisition
(subject only to the receipt of applicable consents set forth in Section 3.29 of
the Disclosure Letter and, subject to the effect of bankruptcy or similar
insolvency laws affecting the rights of creditors generally and the potential
unavailability of specific enforcement, injunctive relief and other equitable
remedies) on identical terms immediately following the consummation of the
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transactions contemplated hereby and, to the Knowledge of the Sellers, will be a
legal, valid, binding and enforceable agreement of the other party(ies) thereto,
subject to the effect of bankruptcy or similar insolvency laws affecting the
rights of creditors generally and the potential unavailability of specific
enforcement, injunctive relief and other equitable remedies; and (C) the Company
is not, and to the Knowledge of the Sellers, no other party is in breach or
default, and no event has occurred which with notice or lapse of time would
constitute a breach or default or permit termination, modification, or
acceleration, under the agreement; and (D) to the Knowledge of the Sellers, no
party has overtly repudiated any provision of the agreement.
3.17 Notes and Accounts Receivable. All notes and accounts receivable of
the Company shown on the Most Recent Balance Sheet are reflected properly on the
Company's books and records, are valid receivables subject to no valid setoffs
or counterclaims, are current and collectible, subject only to bankruptcy
proceedings and the reserve for bad debts reflected in the Most Recent Balance
Sheet as adjusted for the passage of time through the Closing Date in accordance
with the past custom and practice of the Company.
3.18 Powers of Attorney. There are no outstanding powers of attorney
executed on behalf of the Company.
3.19 Litigation. Section 3.19 of the Disclosure Letter sets forth each
instance in which the Company (i) is subject to any outstanding injunction,
judgment, order, decree, ruling, or charge or (ii) is a party or, to the
Knowledge of the Sellers, is threatened to be made a party to any action, suit,
proceeding, hearing, or investigation of, in, or before any court or
quasi-judicial or administrative agency of any federal, state, local, or foreign
jurisdiction or before any arbitrator.
3.20 Product Warranties; Defects; Liability. Each product manufactured,
sold, leased, or delivered by the Company (other than any product included in
the Assigned Assets) has been in substantial conformity with all applicable
contractual commitments and all express warranties made by the Company, and the
Company has no Liability other than an Assumed Liability (and there is no Basis
for any present or future action, suit, proceeding, hearing, investigation,
charge, complaint, claim, or demand against any of them giving rise to any
Liability other than an Assumed Liability) for replacement or repair thereof or
other damages in connection therewith, subject only to the reserve for product
warranty claims reflected in the Most Recent Balance Sheet as adjusted for the
passage of time through the Closing Date in accordance with the past custom and
practice of the Company and labor costs associated with warranty repairs which
are immaterial. No product (other than any product included in the Assigned
Assets) manufactured, sold, leased, or delivered by the Company is subject to
any guaranty, warranty, or other indemnity beyond the Company's applicable
standard terms and conditions of sale or lease or beyond that implied or imposed
by applicable law.
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3.21 Employees.
(a) The names of all Company Agents as of the date hereof are set out on
Schedule 3.21(a)-1. Except as set forth in Section 3.21(a) of the Disclosure
Letter, such Company Agent and each person who was a Company Agent immediately
prior to the implementation of the reduction in the Company's workforce
announced by the Company on May 29, 1997, has executed: (i) a confidentiality
agreement in the form set forth on Schedule 3.21(a)-2 and (ii) an inventions
assignment agreement in the form set forth on Schedule 3.21(a)-3. No Company
Agent has any rights (including but not limited to the right to receive
royalties or other payments from any of the Sellers in exchange for licenses or
other grants of rights to any Intellectual Property) to any of the Company's
Intellectual Property.
(b) Except as set forth in Section 3.21(b) of the Disclosure Letter, to the
Knowledge of the Sellers, no officer or management employee has any plans to
voluntarily terminate employment with the Company. The Company is not a party to
or bound by any collective bargaining agreement, nor has the Company experienced
any strikes, grievances, claims of unfair labor practices, or other collective
bargaining disputes. The Company has not committed any unfair labor practice.
Neither of the Sellers has any Knowledge of any organizational effort presently
being made or threatened by or on behalf of any labor union with respect to
employees of the Company.
(c) There is not now outstanding any contract of service or for services
between the Company and any Company Agent providing for annual compensation in
excess of $30,000 which is not terminable by the Company at any time without
compensation (other than normal severance in the Ordinary Course of Business).
(d) Except for the Company Agents who have been or shall be terminated or
receive notice of termination and who are identified on Schedule 3.21(d), to the
Knowledge of the Sellers, no present Company Agent has given or received notice
from the Company terminating his employment or appointment.
(e) Except for Company Employee Plans identified in Schedule 3.22(a), there
are no loans or other benefits enjoyed by any Company Agent in consideration of
such person's employment with, or providing service to, the Company.
(f) Except as set forth in Section 3.21(d) of the Disclosure Letter, and
except to the extent (if any) to which provision or allowance therefor has been
made in the Financial Statements, no Liability has been incurred by the Company
to make any redundancy payments or any protective awards or to pay damages or
compensation for wrongful or unfair dismissal or for failure to comply with any
order for the reinstatement or re-engagement of any employee and no gratuitous
payment has been made or promised by the Company in connection with the actual
or proposed termination or suspension of employment or variation of any contract
of employment of any present or former director or employee.
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(g) There are no claims filed or, to the Knowledge of the Sellers,
threatened against the Company (and neither of the Sellers is aware of any
circumstance which could reasonably be expected to give rise to the making of
any such claim) by any employee or former employee or workman or third party in
respect of an accident or injury which is not fully covered by insurance or by
any employee, former employee, director or former director in relation to the
terms and conditions of employment or appointment.
3.22 Employee Benefits.
(a) Plans. Schedule 3.22(a) contains an accurate and complete list of each
Company Employee Plan. The Company has made no commitment to establish any new
Company Employee Plan.
(b) Documents. The Sellers have provided to Buyer (i) correct and complete
copies of all documents embodying or relating to each Company Employee Plan
including all amendments thereto and written interpretations thereof; (ii) if
the Company Employee Plan is funded, the most recent annual and periodic
accounting of Company Employee Plan assets; (iii) all taxing or other
governmental authority determination letters and rulings relating to Company
Employee Plans; and (iv) all communications material to any employee relating to
any Company Employee Plan, in each case, relating to any amendments,
terminations, establishments, increases or decreases in benefits, acceleration
of payments or vesting schedules or other events which would result in any
material Liability to either of the Sellers.
(c) Company Employee Plan Compliance. (i) The Company has performed, in all
material respects all obligations required to be performed by the Company under
the Company Employee Plans and each Company Employee Plan has been established
and maintained in all material respects in accordance with its terms and in
compliance with all applicable laws, statutes, orders, rules and regulations;
(ii) there are no actions, suits or claims which have been filed, or, to the
Knowledge of the Sellers, threatened or anticipated (other than routine claims
for benefits) against any Company Employee Plan or against the assets of any
Company Employee Plan; and (iii) each Company Employee Plan can be amended,
terminated or otherwise discontinued after the Closing in accordance with its
terms, without liability to the Company, Buyer or their respective Affiliates
(other than ordinary administration expenses typically incurred in a termination
event); and (iv) there are no inquiries or proceedings which have been filed,
or, to the Knowledge of the Sellers, threatened by any governmental authority
with respect to any Company Employee Plan.
(d) Certain Plans. Other than the plans listed on Schedule 3.22(a), the
Company does not now, nor has it ever, maintained, established, sponsored,
participated in, or contributed to, any Company Employee Plan which is subject
to ERISA or Section 412 of the Code.
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3.23 Environment, Health, and Safety.
(a) In addition to the definitions set forth in Section 1, for purposes of
this Section 3.23: "Environmental Authorizations" means any permits, licenses,
consents or other authorizations required under any Environmental Laws for the
operation of the Business or the occupation or use of the Premises;
(b) All Environmental Authorizations are in full force and effect and no
work or other investment is necessary to maintain any such authorizations and
there are no facts or circumstances currently in existence which may lead to
revocation, suspension, variation or non-renewal of such authorizations.
(c) There are no processes being carried on or which have been carried on
at any time at the Premises by the Company which would require any Environmental
Authorization under any Environmental Law.
(d) The Company has never been required to hold, nor has the Company held
or applied for a waste disposal license or waste management license under any
Environmental Laws.
(e) Except for retail cleaning solvents and normal office supplies, no
poisonous, noxious, polluting, unauthorized, dangerous or environmentally
harmful substances or articles, whether or not the same would be designated as
"controlled waste" or "special waste" under any Environmental Laws, have been
produced, treated, kept at or deposited on the Premises by the Company or have
been released or discharged by the Company from the Premises including (for the
avoidance of doubt but not further or otherwise) into any public sewer or into
any drain or sewer communicating with a public sewer from the Premises.
(f) There are no deficiencies in the waste disposal arrangements now or at
any time carried on by the Company at or in respect of the Business or Premises
which cause the Company to fail to comply with any existing or proposed
Environmental Laws.
(g) All information provided by and on behalf of the Sellers to any
statutory authority and all records and data required to be maintained by the
Company under the provisions of any Environmental Laws regarding the operation
of the Business or any processes carried on at or emissions, discharges or waste
disposal from the Premises is complete and accurate.
(h) There have been no uncured complaints or disputes regarding the use of
the Premises, noise generated by the Company on the Premises, the release of any
substances from the Premises and, to the Knowledge of the Seller, there are no
existing facts or circumstances which are likely to lead to any such complaint
or dispute.
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(i) There is no actual or contingent liability to make good, repair,
reinstate or clean up the Premises or any land or buildings formerly owned or
occupied by the Company and no act, omission or circumstance has given or prior
to the Closing is likely to give rise in the future to any such claim,
investigation or other proceedings or any such liability under any Environmental
Laws.
(j) The Company has complied with all Environmental Laws and Safety Laws
and no action, suit, proceeding, hearing, investigation, charge, complaint,
claim, demand, or notice has been filed, served on and commenced against the
Company alleging any failure so to comply.
(k) The Company has not received any written prohibition or improvement
notices from any enforcement body, including and the relevant local authority,
with regard to breaches of Safety Laws.
(l) There have been no claims, investigations or proceedings against or, to
the Knowledge of Sellers, overtly threatened against the Company or any of its
directors, officers or employees in respect of accidents, injuries, illness,
disease or any other harm to the health and safety of employees, contractors or
any other persons caused by breaches of or otherwise and there are no facts or
circumstances which may lead to any such claims, investigations or proceedings.
(m) The Company has reasonably adequate employers liability and public
liability insurance covering the Business. Schedule 3.23(m) lists and describes
such insurance policies. No claims in respect of health and safety have been
made or are contemplated under such insurance policies.
3.24 Affiliated Transactions. No Affiliates of the Company owns any asset,
tangible or intangible, which is used in the Business.
3.25 Government Contracts. The Company is not, and has not directly been a
party to any contract or arrangement with any government agency relating to the
Business.
3.26 Distributors, Products, and Suppliers. Schedule 3.26 sets forth a
complete and accurate list of (a) the twenty largest distributors and resellers
for the Company's products (by dollar volume for the time period of August 1,
1996 through June 30, 1997 (the "Measure Period") indicating the written
contractual arrangements, if any, with each such distributor or reseller and the
dollar volume of products distributed during the Measure Period, (b) the twenty
largest products (by gross sales) of the Company (excluding products included in
the Assigned Assets and Intuit products) during the fiscal year ended July 31,
1996 and (c) suppliers of material product development services to the Company
that are material to the Company's Business.
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3.27 No Illegal Payments, Etc. Neither the Company nor, to the Seller's
knowledge, any of the Company's officers, employees, agents or Affiliates has:
(a) directly or indirectly given or agreed to give any illegal gift,
contribution, payment or similar benefit to any supplier, customer, governmental
official or employee or other person who was or is in a position to help or
hinder the Business (or assist in connection with any actual transaction) or
made or agreed to make any illegal contribution, or reimbursed any illegal
political gift or contribution made by any other person, to any candidate for
federal, state, local or foreign public office (i) which may subject the Company
to any damage or penalty in any civil, criminal or governmental litigation or
proceeding under United States law or (ii) the noncontinuation of which has had
or might have, individually or in the aggregate, a material adverse effect on
the Company.
3.28 Books and Records. The books and all corporate (including minute books
and stock record books) and financial records of the Company that are related to
the Business are complete and correct.
3.29 Consents. Except for lapsing of the waiting period pursuant to the HSR
Act, no consents are required to consummate the Acquisition and the various
transactions contemplated hereby, except as described in Section 3.29 of the
Disclosure Letter which sets forth a true and correct list of the identities of
any Person whose consent or approval is so required and the matter, agreement or
contract to which such consent relates.
3.30 No Liquidation, Insolvency, Winding-Up.
(a) No order has been made, or petition presented, or resolution passed for
the winding-up of the Company (other than the complete liquidation of the
Company for Tax purposes) and there is not outstanding:
(i) any petition or order for the winding-up of the Company;
(ii) any appointment of a receiver over the whole or part of the
undertaking of assets of the Company;
(iii) any petition or order for administration of the Company;
(iv) any voluntary arrangement between the Company and any of its
creditors;
(v) any distress or execution or other process levied in respect of
the Company which remains undischarged; or
(vi) any unfulfilled or unsatisfied judgment or court order against
the Company.
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(b) To the Sellers' Knowledge, there are no circumstances which would
entitle any Person to present a petition for the winding-up or administration of
either the Company or the Seller or to appoint a receiver over the whole or any
part of the undertaking or assets of the Company.
3.31 Disclosure. None of the representations and warranties contained in
Section 3 of this Agreement and the Schedules (both as qualified by the
Disclosure Letter), or any certificate furnished by Sellers to Buyer pursuant to
this Agreement and the Schedules hereto, contain any untrue statement of a
material fact or omit to state a material fact which would have a material
adverse effect on either the Business or the Company Assets.
4. REPRESENTATIONS AND WARRANTIES OF BUYER.
Buyer represents and warrants to Seller that the statements contained in
this Section 4 are true, correct and complete as of the date of this Agreement
and, if different than the date of this Agreement, will be true, correct and
complete as of the Closing Date as though made then and as though the Closing
Date were substituted for the date of this Agreement throughout this Section 4.
4.1 Organization of Buyer. Buyer is duly organized, validly existing, and
in good standing under the laws of the jurisdiction of its incorporation or
formation. Buyer is qualified to transact business as a foreign corporation in
the state of California and is a foreign corporation in good standing under the
laws of the state of California.
4.2 Authority for Agreement. Buyer has full power and authority (including
full corporate power and authority) to execute and deliver this Agreement and to
perform its obligations hereunder. The Board of Directors of Buyer has approved
this Agreement and the transactions contemplated hereby. This Agreement
constitutes the valid and legally binding obligation of Buyer, enforceable in
accordance with its terms and conditions.
4.3 Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby will (i)
violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which Buyer is subject, or (ii) violate any
provision of any charter documents or bylaws of Buyer, or (iii) violate any
contract of Buyer required to be filed with the Securities and Exchange
Commission pursuant to the Securities Act or Securities Exchange Act. Buyer is
not required by any law to give any notice to, make any filing with, or obtain
any authorization, consent, or approval of any government or governmental agency
in order for the Parties to consummate the transactions contemplated by this
Agreement except for the lapsing of the waiting period pursuant to the HSR Act
without commencement of any action to enjoin the transaction on the part of the
Federal Trade Commission or the Department of Justice.
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4.4 Brokers' Fees. The Buyer does not have any Liability or obligation to
pay any fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which either of the Sellers
could become liable or obligated.
4.5 No Liquidation, Insolvency, Winding-Up.
(a) No order has been made, or petition presented, or resolution passed for
the winding-up of Buyer and there is not outstanding:
(i) any petition or order for the winding-up of Buyer;
(ii) any appointment of a receiver over the whole or part of the
undertaking of assets of Buyer;
(iii) any petition or order for administration of Buyer;
(iv) any voluntary arrangement between Buyer and any of its creditors;
(v) any distress or execution or other process levied in respect of
Buyer which remains undischarged; or
(vi) to the Knowledge of Buyer, any unfulfilled or unsatisfied
judgment or court order against Buyer.
(b) To the Knowledge of the Buyer, there are no circumstances which would
entitle any Person to present a petition for the winding-up or administration of
Buyer or to appoint a receiver over the whole or any part of the undertaking or
assets of Buyer.
(c) To the Knowledge of the Buyer, no petition has been filed, either
voluntarily or involuntarily, instituting bankruptcy proceedings under United
States federal or state bankruptcy laws with respect to Buyer.
4.6 Tax Representations.
(a) Prior to the Closing, neither Buyer nor any member of its affiliated
group as defined in Section 1504(a) of the Code will own, or has owned, nor will
be deemed under Section 318 of the Code to own or have owned, any Company stock.
(b) Neither Buyer nor any member of its affiliated group as defined in
Section 1504(a) of the Code has acquired within the twelve (12) months preceding
the Closing, nor will acquire prior to the filing of an election under Section
338(g) and Section 338(h)(10) of the Code or within twelve (12) months following
the Closing, any asset of the
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Company or a Company affiliate other than assets acquired in the ordinary course
of business.
(c) The Acquisition is not part of any plan by Buyer or any member of its
affiliated group as defined in Section 1504(a) of the Code to make other
"qualified stock purchases" as defined in Section 338(d)(3) and Section
338(h)(4)(B) of the Code, of any Company affiliate.
4.7 Absence of Litigation. There is no claim, suit, action, arbitration,
proceeding or investigation pending, or, to the knowledge of Buyer, threatened,
against Buyer or any affiliate of Buyer or any of their respective assets or
properties that (i) would adversely affect Buyer's ability to perform any of its
obligations under this Agreement, (ii) seeks to enjoin, prevent or delay the
consummation of any of the transactions contemplated by this Agreement, or (iii)
might result in a material adverse effect on Buyer's financial condition or
solvency.
4.8 Investment Representations.
(a) Buyer is acquiring the Stock in the Acquisition for investment purposes
for Buyer's own account only and not with a view to, or for resale in connection
with, any unlawful "distribution" thereof within the meaning of the Securities
Act. No one other than Buyer will acquire any beneficial interest in the Stock
at the Closing.
(b) Buyer is an "accredited investor" within the meaning of Regulation D
promulgated under the Securities Act. Buyer has sufficient knowledge and
experience in financial and business matters necessary to evaluate and make an
informed investment decision regarding the purchase of the Stock of the Company
pursuant hereto and has the capacity to protect Buyer's own interests in
connection with the Acquisition.
(c) Buyer acknowledges that the Sellers have made available to Buyer the
opportunity to examine such additional documents, and to ask questions of, and
receive answers from the Sellers concerning the Company, its business, financial
condition, management, activities and any other information which Buyer
considers relevant, important or material in making the decision to participate
in the Acquisition and to purchase the Stock.
(d) Buyer understands the tax consequences of investing in the Stock and
has not relied on Seller or Seller's counsel or auditors for any advice
regarding the tax consequences of the purchase of the Stock.
(e) Buyer understands that the Stock to be sold to Buyer in the Acquisition
has not been registered under the Securities Act and constitutes "restricted
securities" within the meaning of Rule 144 promulgated under the Securities Act
("Rule 144"). Buyer is familiar with the provisions of Rule 144.
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(f) Buyer also understands and agrees that there will be placed on the
certificates evidencing the ownership of the Stock, the following (or a
substantially similar) legend (in addition to any legends required by applicable
state laws):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT").
THESE SECURITIES MAY NOT BE OFFERED, SOLD, PLEDGED, OR TRANSFERRED UNLESS
(1) A REGISTRATION STATEMENT UNDER THE SECURITIES ACT (AND CURRENT
PROSPECTUS) IS IN EFFECT AS TO THE SECURITIES, OR (2) AN EXEMPTION
THEREFROM IS AVAILABLE. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN
OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE
EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE
SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
5. PRE-CLOSING COVENANTS.
The Parties agree as follows with respect to the period between the
execution of this Agreement and the Closing:
5.1 General. Each of the Parties will use its best efforts to take all
action and to do all things necessary, proper, or advisable in order to
consummate and make effective the transactions contemplated by this Agreement
and will promptly cooperate with and furnish information to any Party hereto
necessary in connection with any legal requirements imposed upon any of them or
their respective subsidiaries in connection with the consummation of the
transactions contemplated by this Agreement, and will take all reasonable
actions necessary to obtain (and will cooperate with the other parties hereto in
obtaining) any consent, approval, order or authorization of, or any
registration, declaration or filing with, any federal, state, local or foreign
governmental entity or other public or private third party required to be
obtained or made in connection with the Acquisition, or taking of any action
contemplated by this Agreement.
5.2 Notices and Consents. Sellers will use their best efforts to obtain any
material third party consents that are required to transfer the Business to the
Buyer, including, without limitation, the consents listed on Schedule 3.29. The
Sellers shall give any notices to, make any filings with, and use their best
efforts to obtain any authorizations, consents, and approvals of governments and
governmental agencies required in connection with consummation of the
transactions contemplated by this Agreement.
5.3 Operation of Business. Except as specifically contemplated hereby, and
except for the distribution of the Assigned Assets and the assumption of the
Assigned Assets Liabilities to Seller pursuant to the Distribution, Assignment
and Assumption Agreement
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immediately prior to the Closing, and except for any actions taken to fulfill
conditions to the Closing of the Acquisition or that are contemplated by this
Agreement, the Company will not engage in any practice, take any action, or
enter into any transaction outside the Ordinary Course of Business. Without
limiting the generality of the foregoing and except as required by this
Agreement, and except for the distribution of the Assigned Assets and the
assumption of the Assigned Assets Liabilities to Seller pursuant to the
Distribution, Assignment and Assumption Agreement immediately prior to the
Closing, the Company will not: (i) declare, set aside, or pay any dividend or
make any distribution with respect to its capital stock or redeem, purchase, or
otherwise acquire any of its capital stock, (ii) pay any amount to any third
party with respect to any Liability or obligation (including any costs and
expenses the Company has incurred or may incur in connection with this Agreement
and the transactions contemplated hereby, other than to the Company's
accountants and legal counsel) except in the Ordinary Course of Business, except
for (i) payments of fees and similar amounts to any governmental authority in
connection with the transactions contemplated by this Agreement and (ii) any
amounts paid to any person for any purpose that, directly or indirectly, are
related to compliance with or fulfillment of any covenant, representation,
warranty or condition to Closing set forth in this Agreement. Each of the
Sellers shall: (i) except with respect to the Company Agents listed on Schedule
3.21(d), use its commercially reasonable efforts to keep available to Buyer the
services of the Company's other present Company Agents and independent
contractors, and (ii) preserve for the benefit of Buyer the goodwill of the
Company's customers, suppliers, landlords and others having business relations
with it. The Company will not engage in any practice, take any action, or enter
into any transaction of the sort and for the amounts described in Section 3.9
above.
5.4 Preservation of Business. Each of the Sellers will use their best
efforts to keep the Company's business and properties intact, including its
present operations, physical facilities, working conditions, and relationships
with lessors, licensors, suppliers and customers, except that nothing in this
Section will prevent the distribution of the Assigned Assets and the Assigned
Assets Liabilities to Seller pursuant to the Distribution, Assignment and
Assumption Agreement.
5.5 Treatment of Company Agents. The Company shall have terminated or given
notice of termination to the Company Agents listed on Schedule 3.21(d). With
respect to the Company employees to be employed by the Company or Buyer after
the Closing, Buyer shall provide compensation and stock option grants to be paid
to such employees in accordance with Buyer's Ordinary Course of Business as if
such Company employee were an employee of Buyer.
5.6 Full Access. Subject to the provisions of that certain Business
Evaluation Agreement between Seller and Buyer dated effective as of February 21,
1997 (which shall apply, without limitation, to all "Proprietary Information"
(as defined therein) of the Company), each of the Sellers will permit
representatives of Buyer to have full access at all reasonable times, and in a
manner so as not to interfere with the normal business operations
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of the Sellers, to all premises, properties, appropriate personnel, books,
records (including Tax records), contracts, and documents of or pertaining to
the Company.
5.7 Notice of Developments. Each Party will give prompt written notice to
the other Party of any material adverse development causing a breach of any of
its own representations and warranties in Section 3 and Section 4, as the case
may be. No disclosure by Sellers pursuant to this Section 5.7, however, shall be
deemed to amend or supplement the Schedules or to prevent or cure any
misrepresentations, breach of representation or warranty, or breach of covenant
unless expressly consented to in writing by Buyer.
5.8 No Solicitation. From and after the date of this Agreement until the
earlier of the Closing or termination of this Agreement pursuant to its terms,
the Sellers will not, and will cause their respective directors, officers,
employees, representatives, investment bankers, agents and affiliates not to,
directly or indirectly, (i) solicit or encourage submission of any inquiries,
proposals or offers by any Person, entity or group (other than Buyer and its
Affiliates, agents and representatives) in connection with any Acquisition
Proposal, or (ii) participate in any discussions or negotiations with, entertain
any propositions from, or disclose any information concerning the Company to, or
afford any access to the properties, books or records of the Company to, or
otherwise assist, facilitate or encourage, or enter into any agreement or
understanding with, any Person, entity or group (other than Buyer and its
affiliates, agents and representatives), in connection with any Acquisition
Proposal. In addition, subject to the other provisions of this Section 5.8, from
and after the date of this Agreement until the earlier of the Closing or
termination of this Agreement pursuant to its terms, Sellers will not, and will
cause their respective directors, officers, employees, representatives,
investment bankers, agents and Affiliates not to, directly or indirectly, make
or authorize any statement, recommendation or solicitation in support of any
Acquisition Proposal made by any Person, entity or group (other than Buyer).
Sellers will immediately cease any and all existing activities, discussions or
negotiations with any parties conducted heretofore with respect to any of the
foregoing.
5.9 Best Efforts and Further Assurances. Each of the Parties shall use its
best efforts to effectuate the transactions contemplated hereby and to fulfill
and cause to be fulfilled the conditions to Closing under this Agreement
(including resolution of any litigation prompted hereby). Each Party hereto, at
the reasonable request of another Party hereto, shall execute and deliver such
other instruments and do and perform such other acts and things as may be
necessary or desirable for effecting completely the consummation of the
transactions contemplated hereby.
6. CONDITIONS TO OBLIGATION TO CLOSE.
6.1 Conditions Precedent to Obligations of Buyer. The obligation of Buyer
to consummate the transactions to be performed by it in connection with the
Closing is subject to satisfaction of the following conditions:
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(a) Representation and Warranties. The representations and warranties
set forth in Section 3 above and the Schedules (both, as qualified by the
Disclosure Letter) and all permitted updates thereto, shall be true and
correct in all material respects when made and shall be deemed to have been
made again at and as of the Closing Date and shall then be true and correct
in all material respects except for changes due to the conduct of the
Business prior to Closing in the Ordinary Course of Business or in
conformity with this Agreement;
(b) Performance by Sellers. The Sellers shall have performed and
complied with all of their covenants, obligations and conditions of this
Agreement required to be performed and complied with by them as of the
Closing, including each of the specific covenants contained in Section 5;
(c) Consents. The Sellers shall have procured all of the consents,
approvals or authorizations of the third parties listed on Schedule 3.29,
and the waiting period under the HSR Act shall have elapsed without the
commencement of any action to enjoin the Acquisition on the part of the
Federal Trade Commission or the Department of Justice.
(d) Absence of Litigation. No action, suit, or proceeding shall be
pending or threatened before any court or quasi-judicial or administrative
agency of any federal, state, local, or foreign jurisdiction which has a
likelihood of resulting in an unfavorable injunction, judgment, order,
decree, ruling, or charge that would (i) prevent consummation of any of the
material transactions contemplated by this Agreement, (ii) cause any of the
material transactions contemplated by this Agreement to be rescinded
following consummation, or (iii) affect adversely the right of Buyer to own
the Stock or to operate the Business or to use any of the Company Assets
(and no such injunction, judgment, order, decree, ruling, or charge shall
be in effect);
(e) Absence of Material Adverse Change. Since the date of this
Agreement, there shall not have occurred any material adverse change in the
condition, financial or otherwise, business, properties, assets or
prospects of the Company Assets, Business, or the results of operation of
the Company, except as is contemplated by the terms of this Agreement and
the Distribution, Agreement and Assumption Agreement;
(f) Absence of Disasters. The Business and the Company Assets shall
not have been materially adversely affected in any way as a result of fire,
explosion, disaster, accident, labor dispute, any action by any government
or governmental authority, domestic or foreign, flood, civil disturbance,
or act of nature;
(g) Certificates. Seller shall have delivered to the Buyer a
certificate to the effect that each of the conditions specified above in
6.1(a) through (f) are satisfied in all respects;
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(h) Escrow Agent. The Escrow Agent shall have executed and delivered a
counterpart of this Agreement;
(i) Lien Removal. Liens in the Company Assets shall have been
discharged except for liens arising from: (i) Community Betterment Economic
Account Loans; and (ii) Kirkwood New Industrial Training Agreements.
(j) All Necessary Actions. All actions to be taken by either of the
Sellers in connection with the consummation of the transactions
contemplated hereby and all certificates, opinions, instruments and other
documents required to effect the transactions contemplated hereby will be
reasonably satisfactory in form and substance to the Buyer.
(k) Trademark License Agreements. The Sellers shall have executed and
delivered the Trademark License Agreements between the Company and Seller
in the form of Exhibits B-1 and B-2 attached hereto.
(l) Distribution Agreement. The Sellers shall have executed and
delivered the Distribution Agreement among Seller, the Company and Buyer in
the form of Exhibit C-1 attached hereto.
(m) Customer Information Cross-License Agreement. The Sellers shall
have executed and delivered the Customer Information Cross-License
Agreement among Seller, the Company and Buyer in the form of Exhibit D
attached hereto.
(n) Tax Business Transition Agreement. The Sellers shall have executed
and delivered the Tax Business Transition Agreement among Seller, the
Company and Buyer in the form of Exhibit E attached hereto.
(o) Tax Sharing Agreements. On or prior to the Closing Date, all
arrangements or agreements, if any, for the allocation of Taxes or payment
for Tax benefits with respect to a group of corporations which files a
consolidated, combined or unitary Tax Return which includes the Company
shall have been terminated, and neither the Seller nor Seller's Affiliates
shall have any further rights or obligations thereunder, and the Company
shall not have assumed the tax liability of any other person.
(p) Opinion of Fenwick & West LLP. The Seller shall have delivered an
opinion of counsel in the form of Exhibit F attached hereto.
(q) Rairdin Agreement. The Company and Craig Rairdin shall have
executed the Agreement attached hereto at Exhibit G.
(r) Section 338 Election Executed and Delivered. The Sellers shall
have delivered to Buyer a signed, completed Form 8023-A, electing under
Section 338(h)(10) of
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the Code to treat the Acquisition as a deemed asset sale pursuant to
Section 2.1 of this Agreement.
Buyer may waive any condition specified in this Section 6.1 if it executes
a written waiver thereof, specifically referenced as such therein, at or prior
to the Closing.
6.2 Conditions Precedent to Obligations of the Sellers. The obligation of
each of the Sellers to consummate the transactions to be performed by them in
connection with the Closing is subject to satisfaction of the following
conditions:
(a) Representations and Warranties. The representations and warranties
of Buyer set forth in Section 4 above shall be true and correct when made
and shall be deemed to have been made again at and as of the Closing Date
and shall then be true and correct;
(b) Performance by Buyer. The Buyer shall have performed and complied
with all of its covenants, obligations and conditions of this Agreement
required to be performed and complied with by it as of the Closing,
including, individually, with respect to each of the specific covenants
contained in Sections 5;
(c) Consents. The Buyer shall have procured all material governmental
approvals, including lapsing of the waiting period under the HSR Act, to
consummate the Acquisition;
(d) Absence of Litigation. No action, suit, or proceeding shall be
pending or threatened before any court or quasi-judicial or administrative
agency of any federal, state, local, or foreign jurisdiction which has a
likelihood of resulting in an unfavorable injunction, judgment, order,
decree, ruling, or charge that would (A) prevent consummation of any of the
material transactions contemplated by this Agreement or (B) cause any of
the material transactions contemplated by this Agreement to be rescinded
following consummation (and no such injunction, judgment, order, decree,
ruling, or charge shall be in effect);
(e) All Necessary Actions. All actions to be taken by either of the
Sellers in connection with the consummation of the transactions
contemplated hereby and all certificates, opinions, instruments and other
documents required to effect the transactions contemplated hereby will be
reasonably satisfactory in form and substance to the Buyer.
(f) Certificates. Buyer shall have delivered to the Seller a
certificate to the effect that each of the conditions specified above in
Section 6.2(a) through (d) are satisfied in all material respects; and
(g) Trademark License Agreements. The Sellers shall have executed and
delivered the Trademark License Agreements between the Company and Seller
in the form of Exhibits B-1 and B-2 attached hereto.
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(h) Distribution Agreement. The Company shall have executed and
delivered the Product Distribution Agreement between the Company and Seller
in the form of Exhibit C-2 attached hereto.
(i) Customer Information Cross-License Agreement. Buyer shall have
executed and delivered the Customer Cross-License Agreement among Seller,
the Company and Buyer in the form of Exhibit D attached hereto.
(j) Tax Business Transition Agreement. Buyer shall have executed and
delivered the Tax Business Transition Agreement among Seller, the Company
and Buyer in the form of Exhibit E attached hereto.
(k) Rairdin Agreement. The Company and Craig Rairdin shall have
executed the Agreement attached hereto as Exhibit G.
(l) Opinion of Wilson Sonsini Goodrich & Rosati. Buyer shall have
delivered an opinion of counsel in the form of Exhibit H attached hereto.
(m) Section 338 Election Executed and Delivered. Buyer shall have
delivered to Seller a signed, completed Form 8023-A, electing under Section
338(g) and Section 338(h)(10) of the Code to treat the Acquisition as a
deemed asset sale, pursuant to Section 2.1 of this Agreement.
(n) Escrow Agent. The Escrow Agent shall have executed and delivered a
counterpart of this Agreement.
Seller may waive any condition specified in this Section 6.2 if it executes
a written waiver thereof, specifically referenced as such therein, at or prior
to the Closing.
7. ADDITIONAL AGREEMENTS.
Buyer and Seller hereby covenant and agree with respect to certain matters
as follows:
7.1 Section 338(h)(10) Election.
(a) In connection with the Acquisition (i) Seller shall join with Buyer in
making a timely election available under Section 338(h)(10) of the Code and any
corresponding elections available under state and local tax laws (collectively,
the "Election") with respect to the Acquisition, (ii) Buyer and Seller 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 a timely Election in accordance with Section 338 of the Code or any
successor provisions (and all corresponding state and local tax laws) and
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(iii) Buyer and Seller shall report the Acquisition pursuant to this Agreement
consistent with the Election.
(b) In connection with the Election, within 90 days after Closing, Buyer
shall provide to Seller a schedule which sets forth the proposed allocation (the
"Acquisition Allocation Schedule") of that portion of the Purchase Price paid in
connection with the Stock Purchase among the assets of the Company. Such
allocations shall be made in accordance with Section 338(h)(10) of the Code and
any applicable Treasury Regulations.
7.2 Returns; Indemnification; Liability for Taxes.
(a) Seller shall prepare and file (or cause to be prepared and filed) on a
timely basis all Tax Returns with respect to the Company for all taxable periods
ending on or before the Closing Date ("Company Tax Returns") and shall pay, and
shall indemnify and hold Buyer harmless against and from (i) all Taxes of the
Company for all taxable years or periods which end on or before the Closing
Date; (ii) all Taxes for all taxable years or periods of all members or
subsidiaries of any affiliated group of which the Company is or has been a
member prior to the Closing Date pertaining to the Company and arising under
Treasury Regulation Section 1.1502-6 or any similar state statute; (iii) with
respect to any taxable period commencing before the Closing Date and ending
after the Closing Date (a "Straddle Period") all Taxes of the Company
attributable to the portion of the Straddle Period prior to and including the
Closing Date (the "Pre-Closing Period"); and (iv) any transfer Taxes payable by
Seller pursuant to Section 2.3 of this Agreement. For purposes of this
Agreement, the portion of any Tax that is attributable to the Pre-Closing Period
shall be (i) in the case of a Tax that is not based on net income, gross income,
premiums or gross receipts, the total amount of such Tax for the period in
question multiplied by a fraction, the numerator of which is the number of days
in the Pre-Closing Period, and the denominator of which is the total number of
days in such Straddle Period, and (ii) in the case of a Tax that is based on any
of net income, gross income, premiums or gross receipts, the Tax that would be
due with respect to the Pre-Closing Period if such Pre-Closing Period were a
separate taxable period, except that exemptions, allowances, deductions or
credits that are calculated on an annual basis (such as the deduction for
depreciation or capital allowances) shall be apportioned on a per diem basis.
Notwithstanding the foregoing, any increase in property or other ad valorem
Taxes associated with a change of control of the Company shall be considered
attributable to the period following the Closing. For purposes hereof, all Taxes
which are the subject of this Article 7 arising from the Acquisition hereof,
including Taxes resulting from the Election, shall be deemed to be Taxes
attributable to the Pre-Closing Period and shall be the responsibility of
Seller.
(b) Buyer shall prepare and file (or cause to be prepared and filed) on a
timely basis all Tax Returns of the Company relating to periods ending after the
Closing Date and shall pay, and shall indemnify and hold Seller harmless against
and from (i) all Taxes of the Company for any taxable year or period commencing
after the Closing Date; (ii) all Taxes of the Company for any Straddle Period
(other than Taxes attributable to the
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Pre-Closing Period); and (iii) and transfer Taxes payable by Buyer pursuant to
Section 2.3 of this Agreement.
7.3 Refunds and Credits.
(a) All refunds or credits of Taxes for or attributable to taxable years or
periods of the Company ending on or before the Closing Date (or the Pre-Closing
Period, in the case of a Straddle Period) shall be for the account of Seller;
all other refunds or credits of Taxes, for or attributable to the Company shall
be for the account of Buyer. Following the Closing, Buyer shall cause the
Company to forward to Seller the amount of any such refunds (including refunds
attributable to credits) due Seller pursuant to this section after receipt or
realization thereof by Buyer, and Seller shall forward (or cause to be
forwarded) to Buyer any refunds due to Buyer pursuant to this section after
receipt or realization thereof by Seller, in each case in accordance with the
provisions of subsection (b) below.
(b) Any payments of refunds (including refunds attributable to credits) for
Taxes required to be paid under this Agreement shall be made within 10 business
days of the receipt of any refund, as the case may be. Any payments not made
within such time period, shall be subject to an interest charge of 10 % per
annum.
7.4 Termination of Tax Sharing Agreements. Seller hereby agrees and
covenants that there are and will be no obligations of or to the Company
pursuant to any tax sharing agreement or any similar arrangement in effect at
any time on or before the Closing Date, and any further obligations that might
otherwise have existed thereunder shall be extinguished as of the Closing Date.
7.5 Conduct of Audits and Other Procedural Matters. Each party shall, at
its own expense, control any audit or examination by any Tax Authority, and have
the right to initiate any claim for refund or amended return, and contest,
resolve and defend against any assessment, notice of deficiency or other
adjustment or proposed adjustment of Taxes ("Proceedings") for any taxable
period for which that party is charged with payment or indemnification
responsibility under this Agreement. Each party shall promptly forward to the
other in accordance with Section 10.7 all written notifications and other
written communications, including if available the original envelope showing any
postmark, from any Tax Authority received by such party or its affiliates
relating to any liability for Taxes for any taxable period for which such other
party or any of its affiliates is charged with payment or indemnification
responsibility under this Agreement and each indemnifying party shall promptly
notify, and consult with, each indemnified party as to any action it proposes to
take with respect to any liability for Taxes for which it is required to
indemnify another party and shall not enter into any closing agreement or final
settlement with any Tax Authority with respect to any such liability without the
written consent of the indemnified parties, which consent shall not be
unreasonably withheld. In the case of any Proceedings relating to any Straddle
Period, Buyer shall control such Proceedings and shall consult in good faith
with Seller as to the conduct of such Proceedings. Seller shall reimburse Buyer
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for such portion of the costs, including legal costs, of conducting such
Proceedings as is represented by the portion of the Tax with respect to such
Straddle Period for which Seller is liable pursuant to this Agreement. Each
party shall, at the expense of the requesting party, execute or cause to be
executed any powers of attorney or other documents reasonably requested by such
requesting party to enable it to take any and all actions such party reasonably
requests with respect to any Proceedings which the requesting party controls.
The failure by a party to provide timely notice under this subsection shall
relieve the other party from its indemnification obligations under Section 7.2
with respect to the subject matter of any notification not timely forwarded, to
the extent the other party has suffered a loss or other economic detriment
because of such failure to provide notification in a timely fashion.
7.6 Access to Records following the Closing. Until the expiration of the
applicable statutes of limitations for Tax matters, Buyer and Seller agree that
so long as any books, records and files of the Company retained by Seller or the
books records and files delivered to the control of Buyer pursuant to this
Agreement, to the extent they relate to the operations of the Company prior to
the Closing Date, remain in existence and available, each Party (at its expense)
shall have the right upon prior notice to make reasonable inspection and copies
of the same at any time during business hours for any proper purpose. Buyer and
Seller shall use reasonable efforts not to destroy or allow the destruction of
any such books, records and files without first offering in writing to deliver
them to the other.
7.7 Confidentiality. The Parties acknowledge that Buyer and Sellers have
previously executed the Confidentiality Agreement, which Confidentiality
Agreement shall continue in full force and effect in accordance with its terms.
7.8 Reimbursement of Excess Lease Capacity. The parties agree that Buyer
requires only approximately fifty percent (50%) of the Company's administrative
facility at One Parsons Drive and that the balance of such facility would be
"excess space." Therefore, Seller agrees to reimburse Buyer for the Continuing
Lease Obligation after the Closing.
7.9 Payment of Company Liabilities. Buyer hereby covenants and agrees with
Seller that, at all times on and after the Closing, Buyer will cause the Company
to promptly pay (or will itself promptly pay) or perform when due any and all
Disclosed Liabilities (as defined below). As used herein, the term "Disclosed
Liabilities" means all Liabilities of the Company to any vendors, lessors and/or
any other creditors that (i) existed at, or were incurred or arose on or prior
to, the time and date of the Closing; and (ii) either (A) are reflected in the
Most Recent Balance Sheet, (B) arise in the Ordinary Course of Business of the
Company after the date of the Most Recent Balance Sheet or (C) arise under the
terms of any agreement, contract or other commitment of the Company that is
disclosed in either the Disclosure Letter or the Schedules. By way of
illustration, but not limitation, the Disclosed Liabilities include, but are not
limited to, any obligations for the payment of rent under leases, obligations
for the payment of royalties or other payments due under licenses, and the
Distributor Guarantees (as defined below). Notwithstanding the foregoing,
"Disclosed Liabilities" will not include (i) the Assumed Liabilities (ii) the
Assumed Assets
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Liabilities or (iii) any other Liabilities for which Seller is obligated to
indemnify Buyer under the provisions of Section 8 of this Agreement.
7.10 Distributor Guarantees. Buyer acknowledges that, pursuant to (i) a
letter to Ingram Micro dated July 19, 1995 that Seller has previously provided
to Buyer, and (ii) a letter to Tech Data Corporation dated December 4, 1996 that
Seller has provided to Buyer (such letters being hereinafter referred to as the
"Distributor Guarantees"), Seller has guaranteed certain obligations of the
Company to Ingram Micro and Tech Data Corporation. Buyer hereby covenants and
agrees with Seller to assume and cause to be paid when due, any and all
Liabilities of Seller arising under the Distributor Guarantees. Nothing herein
shall prevent Buyer from seeking or obtaining a release of all liability under
one or both of the Distributor Guarantees, provided that any such release
includes a full release of Seller and its Affiliates from any Liabilities under
the Distributor Guarantee being released.
7.11 Kirkwood Obligations. Buyer acknowledges that the Company is party to
six Industrial New Jobs Training Agreements with Kirkwood Community College
("Kirkwood") dated as of various dates between June 1990 and September 1996
(collectively, the "Kirkwood Agreements"). The parties acknowledge and agree
that as of the Closing Date certain unused funds may be made available to the
Company for its use pursuant to the Kirkwood Agreements. Buyer and the Company
hereby covenant and agree with Seller that Buyer and the Company shall not
request, take, receive, utilize or spend any funds whatsoever that may be
available for disbursement to or use by the Company or Buyer pursuant to any of
the Kirkwood Agreements for any purpose whatsoever (including without limitation
the training of Company employees), except to the extent that such amounts are
accounts receivable of the Company at the Closing.
7.12 Non-Solicitation of Company Employees. For a period of one (1) year
beginning on the Closing Date, neither Seller nor any of Seller's directors,
officers, employees or Affiliates who are acting in such capacity on behalf of
Seller or any of its Affiliates, shall, without Buyer's prior written consent,
solicit, encourage or otherwise take any action intended to induce any
individual who is then an employee of the Company to terminate his or her
employment with the Company; provided however, that nothing herein will prevent
Seller or any of its Affiliates from hiring any employee of the Company who,
without any solicitation, encouragement or inducement by Seller or any of its
directors, officers, employees or Affiliates, independently applies for
employment with Seller or any of its Affiliates.
8. SURVIVAL OF REPRESENTATIONS, WARRANTIES, AND INDEMNIFICATION.
8.1 Certain Defined Terms. For purposes of this Agreement, the following
terms shall have the meanings set forth below:
"Assumed Liabilities" shall mean (i) the Assigned Assets Liabilities
assumed by Seller pursuant to the Distribution, Assignment and Assumption
Agreement and (ii) those
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Liabilities set forth on Schedule 2.1(b)-2 and assumed by Seller directly
pursuant to the terms of this Agreement.
"Basis" shall mean any past or present fact, situation, circumstance,
status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to act, or transaction that forms or could reasonably form
the basis for any specified consequence.
"Breach" and "Breaches" mean:
(i) with respect to a "Breach" by Seller, (a) the failure of any
representation or warranty of Seller contained in Section 3 of this
Agreement, as qualified by the Disclosure Letter, to be true or
correct on and as of the Closing Date, (b) any breach by Seller of any
of Seller's covenants in this Agreement (including, without
limitation, the failure to promptly pay any of the Assumed
Liabilities), excluding a breach of the covenants contained in
Sections 5.1 (General), 5.2 (Notices and Consents), 5.4 (Preservation
of Business), 5.6 (Full Access), 5.8 (No Solicitation), 5.9 (Best
Efforts and Further Assurances), 7.7 (Confidentiality), or 7.12
(Non-Solicitation of Company Employees), (c) any breach by the Company
of any of the Company's covenants in this Agreement if such covenant
was to be performed by the Company prior to the Closing except the
covenants contained in Sections 5.1 (General), 5.2 (Notices and
Consents), 5.4 (Preservation of Business), 5.6 (Full Access), 5.8 (No
Solicitation), 5.9 (Best Efforts and Further Assurances), or 7.7
(Confidentiality), (d) a breach by Seller of any of Seller's
representations, warranties or covenants in the Distribution,
Assignment and Assumption Agreement, or (e) the failure by Seller
(except to the extent permitted under this Agreement or as may be
waived in writing by Buyer) to assume control of, and pay both its and
Buyer's reasonable costs of the defense and settlement of, any actual
or overtly threatened action, suit, claim or proceeding brought by a
third party based on any allegation or allegations which, if true,
would constitute a failure or breach described in subclause (a), (b),
(c), or (d) of this subparagraph (i); and
(ii) with respect to a "Breach" by Buyer: (a) the failure of any
representation or warranty of Buyer contained in Section 4 of this
Agreement to be true or correct on and as of the Closing Date; (b) any
breach by Buyer of any of Buyer's covenants in this Agreement,
excluding a breach of the covenants contained in Sections 5.1
(General), 5.7 (Notice of Developments), 5.9 (Best Efforts and Further
Assurances) and 7.7 (Confidentiality); (c) any breach by the Company
of any of the Company's covenants in this Agreement if such covenant
is to be performed by the Company after the Closing, except the
covenant contained in Section 7.7 (Confidentiality), or (d) the
failure by Buyer or (following the Closing) the Company (except to the
extent permitted under this Agreement or as may be waived in writing
by Seller) to assume control of, and pay both their and Seller's
reasonable costs of the defense and settlement of, any actual or
overtly threatened action, suit, claim or proceeding by a third party
based on any allegation or allegations which, if true, would
constitute a failure or breach described in subclause (a), (b) or (c)
of this subparagraph (ii).
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"Continuing Lease Obligation" shall have the meaning set forth in
Section 1 above.
"Disclosed Liabilities" shall have the meaning set forth in Section
7.9 above.
"Escrow Account" shall have the meaning set forth in Section 2.2(b)
above.
"Escrow Agent" shall have the meaning set forth in Section 1 above.
"Escrow Amount" shall have the meaning set forth in Section 2.2(b)
above.
"Escrow Period" shall mean the period of time beginning on the Closing
Date and ending at 11:00 p.m. Pacific Time on the date eighteen (18) months
after the Closing Date.
"Extended Buyer Claim" shall mean any claim by Buyer for
indemnification from Seller in accordance with the provisions of this
Section 8 that is: (i) based upon a Breach of: (A) any of Seller's
covenants under Section 2.3 (Tax), (B) any of Seller's representations and
warranties under Section 3.12 (Taxes) or Section 3.23 (Environment, Health
and Safety); or (C) any one or more of Seller's covenants under Section 7.1
(Section 338(h)(10) Election), Section 7.2 (Returns; Indemnification;
Liability for Taxes), Section 7.3 (Refunds and Credits), Section 7.4
(Termination of Tax Sharing Agreements), Section 7.5 (Conduct of Audits and
Other Procedural Matters), or Section 7.8 (Reimbursement of Excess Lease
Capacity); or (ii) a claim for indemnification by Buyer with respect to
Seller's failure to pay any (or any portion) of the Assumed Liabilities.
"Extended Seller Claim" shall mean any claim by Seller for
indemnification from Buyer in accordance with the provisions of this
Section 8 that is based upon a Breach of (i) any of Buyer's representations
under Section 4.6 (Tax Representations) or Section 4.8 (Investment
Representations), or (ii) a Breach of any one or more of Buyer's covenants
under Section 7.1 (Section 338(h)(10) Election), Section 7.2 (Returns;
Indemnification; Liability for Taxes), Section 7.3 (Refunds and Credits),
Section 7.5 (Conduct of Audits and Other Procedural Matters), Section 7.9
(Payment of Company Liabilities), Section 7.10 (Distributor Guarantees) or
Section 7.11 (Kirkwood Obligations).
"Liability" shall mean any liability or obligation (whether known or
unknown, whether asserted or unasserted, whether absolute or contingent,
whether accrued or unaccrued, whether liquidated or unliquidated, and
whether due or to become due), including any liability for Taxes.
"Loss" and "Losses" shall mean Liabilities, obligations, judgments,
damages, deficiencies, assessments, Taxes, losses, fines, penalties,
expenses, fees, costs, amounts paid (including reasonable attorneys' and
expert witness fees and disbursements in connection with investigating,
defending or settling any action or threatened action); provided, however,
that the amount of any Loss shall be reduced by the amount of any insurance
proceeds
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actually received by the Person entitled to receive indemnification under
this Agreement in respect of such Loss.
"Officer's Indemnification Certificate" shall mean a duly authorized
and executed certificate of Seller or Buyer, as applicable, which (i)
states that such Party (or the Company) has paid or has made a reasonable,
good faith determination that it will have to pay Loss(es) and (ii)
specifies in reasonable detail the individual items of Loss(es) included in
the amount so stated, (iii) states the date each such item was paid or
reasonably determined to be paid and the basis for such determination, and
(iv) states the representation, warranty or covenant to which such alleged
item of Loss is related and the factual basis on which such Party asserts
that it is entitled to indemnification for such asserted Loss(es) under
this Agreement.
8.2 Survival of Representations and Warranties. All of the representations,
warranties and covenants of the Seller and Buyer contained herein or in any
document certificate or other instrument required to be delivered hereunder
shall survive the Closing Date and continue in full force and effect until the
expiration of the Escrow Period, on which date all such warranties,
representations and covenants shall expire; except that notwithstanding the
foregoing, all warranties, representations and covenants relating to the
Extended Buyer Claims and the Extended Seller Claims shall survive until the
expiration of the applicable legal statute of limitations underlying such claim,
provided however, that (i) the Extended Buyer Claims relating to indemnification
for Seller's failure to pay any (or a portion) of the Assumed Liabilities and
(ii) the Extended Seller's Claims relating to indemnification for a Breach by
Buyer of Sections 7.9 (Payment of Company Liabilities), 7.10 (Distributors
Guarantees) and 7.11 (Kirkwood Obligations), shall survive indefinitely.
8.3 Indemnity by Seller.
(a) Subject to the terms and conditions of this Agreement, Seller hereby
agrees to indemnify, defend and hold harmless Buyer and Buyer's directors,
officers and Affiliates (which includes the Company, and its officers, directors
and Affiliates after the Closing) against and in respect of all Loss(es)
incurred or reasonably determined in good faith by Buyer to be incurred by
Buyer, or its directors, officers and affiliates, or asserted against them to
the extent that such Loss(es) arises from (i) a Breach by Seller, or (ii)
Seller's failure to pay any (or a portion) of the Assumed Liabilities; provided
that Buyer delivers to Seller an Officer's Indemnification Certificate of Buyer
asserting Buyer's claim for indemnification for such actual or reasonably
expected Loss(es) on or before the applicable deadline for asserting such claim
for indemnification under Section 8.3(c) below.
(b) In the event of a pending or threatened action that includes asserted
claims which, if assumed to be true, would entitle Buyer or any of its
directors, officers or Affiliates to indemnification under Section 8.3(a), Buyer
shall give prompt written notice of such action or actions to Seller, and Seller
shall be entitled to control the defense and negotiation, if any, regarding
settlement of such action or actions, at Seller's expense (including the cost of
any such settlement itself), and Buyer shall cooperate with Seller, at
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Seller's expense, in the compromise or defense of any such action or actions,
provided that, in such event, (i) neither Buyer nor any director, officer or
Affiliate of Buyer shall agree to or enter into any settlement of such action or
actions without Seller's prior written consent, which consent shall not be
unreasonably withheld, and/or (ii) Seller shall not agree to or enter into any
settlement that requires cessation of Buyer's use or other similar restrictions
on use of, any of the Company Assets (other than the Assigned Assets) without
the written consent of Buyer.
(c) In order for Buyer, Buyer's directors, officers or Affiliates to be
indemnified in accordance with Section 8.3(a) above, any claim for
indemnification made by Buyer or any of Buyer's directors, officers and
Affiliates under this Agreement must be set forth in an Officer's
Indemnification Certificate of Buyer that is delivered to Seller, and if such
Officer's Indemnification Certificate is delivered to Seller prior to the
expiration of the Escrow Period, it must also be delivered to the Escrow Agent
prior to the expiration of the Escrow Period. (The Parties agree that there is
no limit on the dollar amount of indemnification to which Buyer may become
entitled to pursuant to this Section 8.3.) No claim for indemnification (i) that
is not an Extended Buyer Claim may be made, raised or asserted in any manner by
Buyer or any director, officer or Affiliate of Buyer, or any of their permitted
successors or assigns unless such claim for indemnification hereunder is set
forth in an Officer's Indemnification Certificate of Buyer that is delivered to
Seller and the Escrow Agent prior to the expiration of the Escrow Period, (ii)
that is an Extended Buyer Claim (except as set forth in the following item
(iii)) may be made, raised or asserted in any manner by Buyer or any director,
officer or Affiliate of Buyer, or any of their permitted successors or assigns,
unless such claim for indemnification hereunder is set forth in an Officer's
Indemnification Certificate of Buyer that is delivered to Seller prior to the
expiration of the applicable legal statute of limitations regarding such
Extended Buyer Claim, except that (iii) to the extent that a claim for
indemnification is an Extended Buyer Claim related to the Assumed Liabilities it
may be brought at any time.
(d) Except for any rights of specific performance under applicable law, the
rights of indemnification afforded to Buyer and its directors, officers and
Affiliates under the foregoing provisions of this Section 8.3 shall constitute
the sole and exclusive right and remedy of Buyer and its directors, officers and
Affiliates with respect to (i) any Breach by Seller or (ii) any claim, suit or
action relating to the Assumed Liabilities or any portion thereof.
(e) Notwithstanding anything herein to the contrary, neither Buyer nor any
of its directors, officers or Affiliates shall be entitled to any
indemnification of any claim from Seller under this Agreement unless and until
the aggregate amount of Loss(es) for which indemnification would otherwise be
available from Seller under this Section 8.3 exceeds an aggregate of Three
Hundred Thousand Dollars ($300,000) (the "Seller's Basket"), after which time
Buyer and its directors, officers and Affiliates will be entitled, subject to
the terms and conditions of this Section 8, to recover any and all Loss with
respect to which Buyer is entitled to indemnification pursuant to Section 8.3(a)
above; provided, however, that
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(except for claims for indemnification relating to Section 3.23 (Environment,
Health and Safety), which shall be subject to the above provisions regarding
Seller's Basket) claims for indemnification that are Extended Buyer Claims shall
not be subject to the above provisions of this subsection (e) regarding Seller's
Basket.
8.4 Indemnity by Buyer.
(a) Subject to the terms and conditions of this Agreement, Buyer hereby
agrees to indemnify, defend and hold harmless Seller, Seller's directors,
officers and Affiliates and those persons who were the directors and officers of
the Company immediately prior to the Closing (the "Company Directors and
Officers") against and in respect of all Loss(es) incurred by or asserted
against them to the extent that such Loss(es) arises from a Breach by Buyer as
provided in Section 8.1.
(b) In the event of a pending or threatened action that includes asserted
claims which, if assumed to be true, would entitle Seller or any of its
directors, officers or Affiliates or any of the Company Directors and Officers
to indemnification under Section 8.4(a), Seller shall give prompt written notice
of such action or actions to Buyer, and Buyer shall be entitled to control the
defense and negotiation, if any, regarding settlement of such action or actions,
at Buyer's expense (including the cost of any such settlement itself), and
Seller shall cooperate with Buyer, at Buyer's expense, in the compromise or
defense of any such action or actions, provided that, in such event, (i) neither
Seller nor any director, officer or Affiliate of Seller shall agree to or enter
into any settlement of such action or actions without Buyer's prior written
consent, which consent shall not be unreasonably withheld, and/or (ii) Buyer
shall not agree to or enter into any settlement that requires cessation of
Seller's use or other similar restrictions on use of any of the Assigned Assets
without the written consent of Seller.
(c) In order for Seller, Seller's directors, officers or affiliates or the
Company Directors and Officers to be indemnified in accordance with Section
8.4(a) above, any claim for indemnification made by Seller, any of Seller's
directors, officers and Affiliates or any of the Company Directors or Officers
under this Agreement must be set forth in an Officer's Indemnification
Certificate of Seller that is delivered to Buyer. No claim for indemnification:
(i) that is not an Extended Seller Claim may be made, raised or asserted in any
manner by Seller, any director, officer or Affiliate of Seller, any of the
Company Directors or Officers or any of their permitted successors or assigns,
unless such claim for indemnification is set forth in an Officer's
Indemnification Certificate that is delivered to Buyer prior to termination of
the Escrow Period; (ii) that is an Extended Seller Claim (except as set forth in
the following item (iii)) may be made, raised or asserted in any manner by
Seller, any director, officer or Affiliate of Seller, any of the Company
Directors or Officers or any of their permitted successors or assigns, unless
such claim for indemnification hereunder is set forth in an Officer's
Indemnification Certificate of Seller that is delivered to Buyer prior to the
expiration of the applicable legal statute of limitations regarding such
Extended Seller Claim, except that (iii) a claim for indemnification that is an
Extended Seller
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Claim related to Section 7.9 (Payment of Company Liabilities), 7.10 (Distributor
Guarantees) or 7.11 (Kirkwood Obligations) may be brought at any time.
(d) Except for any rights of specific performance under applicable law, the
rights of indemnification afforded to Seller, Seller's directors, officers and
Affiliates or any of the Company Directors and Officers under the foregoing
provisions of this Section 8.4 shall constitute the sole and exclusive right and
remedy of Seller and its directors, officers and Affiliates and the Company
Directors and Officers with respect to any Breach by Buyer.
(e) Notwithstanding anything herein to the contrary, neither Seller nor any
of its directors, officers or Affiliates nor any of the Company Directors or
Officers shall be entitled to any indemnification of any claim from Buyer under
this Agreement unless and until the aggregate amount of Loss(es) for which
indemnification would otherwise be available from Buyer under this Section 8.4
exceeds an aggregate of Three Hundred Thousand Dollars ($300,000) (the "Buyer's
Basket"), whereupon Seller and its directors, officers and Affiliates and the
Company Directors and Officers will be entitled to recover any and all Loss(es)
with respect to which Seller is entitled to indemnification pursuant to Section
8.4(a) above; provided, however, that claims for indemnification that are
Extended Seller Claims shall not be subject to the above provisions of this
subsection (e) regarding Buyer's Basket.
8.5 Escrow Period; Distribution upon Termination of Escrow Period. Subject
to the following requirements, the Escrow Account shall be in existence
immediately following the Closing and shall terminate at the conclusion of the
Escrow Period whereupon, subject to the immediately following provision, all
funds in the Escrow Account shall immediately be delivered to Seller; provided
however, that if at the conclusion of the Escrow Period there is pending an
unresolved bona fide claim by Buyer for indemnification under Section 8.3(a)
which claim was brought in an Officer's Indemnification Certificate of Buyer
that was delivered to Seller and the Escrow Agent prior to the expiration of the
Escrow Period in accordance with this Section 8, then a portion of the Escrow
Amount equal to the amount of Loss claimed in good faith by Buyer in such
Officer's Indemnification Certificate shall remain in the Escrow Account until
such indemnification claim of Buyer has been satisfied or resolved in accordance
with the provisions of this Section 8. Notwithstanding the foregoing, any funds,
including interest thereon, in the Escrow Account which are not the subject of a
pending indemnification claim for Loss at the end of the Escrow Period shall be
paid to Seller immediately upon expiration of the Escrow Period. After the
expiration of the Escrow Period, as soon as all pending claims have been
resolved, the Escrow Agent shall deliver to Seller the remaining portion of the
Escrow Account not required to satisfy outstanding claims for Losses.
8.6 Protection of Escrow Account.
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(a) The Escrow Agent shall hold and safeguard the Escrow Account during the
Escrow Period, shall treat such fund as a trust fund in accordance with the
terms of this Agreement and not as the property of Buyer and shall hold and
dispose of the Escrow Account only in accordance with the terms of this Section
8.
(b) The Escrow Account shall be invested in U.S. Treasury bills with
maturities of not more than thirty (30) days and any interest paid on the Escrow
Account shall be added to the Escrow Account and deemed part thereof. Seller
shall be liable for any Taxes with respect to income earned on the Escrow
Account and Buyer will direct the Escrow Agent to promptly release from the
Escrow Account to Seller, upon Seller's request an amount sufficient to pay such
Taxes when due.
8.7 Making of Claims.
(a) Buyer may not make any claim for indemnification hereunder unless Buyer
first delivers to Seller and (if such claim is made within the Escrow Period) to
the Escrow Agent, an Officer's Indemnification Certificate of Buyer asserting
such claim for indemnification.
(b) If such Officer's Indemnification Certificate of Buyer is delivered to
Seller and the Escrow Agent prior to expiration of the Escrow Period, then the
provisions of Section 8.8 shall apply to such claim for indemnification.
(c) If such Officer's Indemnification Certificate of Buyer is delivered to
Seller after expiration of the Escrow Period, then Seller shall have thirty (30)
days after Seller's receipt of such Officer's Indemnification Certificate to
object to the indemnification claims set forth in such Officer's Indemnification
Certificate. If Seller does not object to such indemnification claim or claims
in a written statement and deliver such written statement of objection to Buyer
within such thirty (30) day period, then Seller shall deliver to Buyer, as
promptly as practicable, an amount equal to the Loss(es) claimed by Buyer in
such Officer's Indemnification Certificate.
8.8 Objections to Claims During Escrow Period. At the time of delivery of
any Officer's Indemnification Certificate to the Escrow Agent, a duplicate copy
of such Officer's Indemnification Certificate shall concurrently be delivered to
Seller by Buyer, and for a period of thirty (30) days after delivery of such
Officer's Indemnification Certificate to Seller, the Escrow Agent shall make no
delivery of all or any portion of the Escrow Amount unless the Escrow Agent
shall have received written authorization from Seller to make such a delivery.
After expiration of such thirty (30) day period, the Escrow Agent shall, subject
to the provisions of Sections 8.3 and 8.7, make delivery to Buyer of cash from
the Escrow Account equal to the amount of such Loss(es) claimed in such
Officer's Indemnification Certificate of Buyer; provided however, that no such
payment or delivery may be made by Escrow Agent if Seller objects in a written
statement to a claim in Buyer's Officer's
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Indemnification Certificate, and such objecting statement of Seller is delivered
to the Escrow Agent and Buyer prior to the expiration of such thirty (30) day
period.
8.9 Resolution of Conflicts; Arbitration.
(a) In case Seller shall so object in writing to any claim or claims made
in any Officer's Indemnification Certificate, Seller and Buyer shall attempt in
good faith to agree upon the rights of the respective parties with respect to
each of such claims. If Seller and Buyer should so agree, a memorandum setting
forth such agreement shall be prepared and signed by both parties and, if such
claims were made by Buyer and were set forth in an Officer's Indemnification
Certificate of Buyer that was delivered to both Seller and the Escrow Agent
prior to expiration of the Escrow Period such memorandum shall be furnished to
the Escrow Agent. The Escrow Agent shall be entitled to rely on any such
memorandum and shall distribute cash from the Escrow Account in accordance with
the terms thereof.
(b) If no such agreement of Buyer and Seller can be reached after good
faith negotiation, either the Buyer or Seller may demand arbitration of the
matter in accordance with this Agreement unless the amount of the Loss is at
issue in pending litigation with a third party, in which event arbitration shall
not be commenced until such amount is ascertained or both Parties agree to
arbitration, whichever is earlier; and in either such event the matter shall be
settled by arbitration conducted by a single arbitrator acceptable to both Buyer
and Seller in accordance with the commercial arbitration rules of the American
Arbitration Association as modified by this Agreement. The arbitrator shall set
a limited time period and establish procedures designed to reduce the cost and
time for discovery while allowing the parties an opportunity, adequate in the
sole judgement of the arbitrator, to discover relevant information from the
opposing Parties about the subject matter of the dispute. The arbitrator shall
rule upon motions to compel or limit discovery and shall have the authority to
impose sanctions, including attorneys fees and costs, to the extent as a court
of competent law or equity, should the arbitrators determine that discovery was
sought without substantial justification or that discovery was refused or
objected to without substantial justification. The decision of the arbitrator as
to the validity and amount of any claim in such Officer's Certificate shall be
binding and conclusive upon the Parties to this Agreement, and notwithstanding
anything herein to the contrary, the Escrow Agent shall be entitled to act in
accordance with such decision and make or withhold payments out of the Escrow
Account in accordance therewith. Such decision shall be written and shall be
supported by written findings of fact and conclusions which shall set forth the
award, judgment, decree or order awarded by the arbitrator.
(c) Judgment upon any award rendered by the arbitrator may be entered in
any court having jurisdiction. Any such arbitration shall be held in San Mateo
County, California under the Rules of the American Arbitration Association. The
arbitrator shall determine how all expenses relating to the arbitration shall be
paid, including without limitation, the respective expenses of each Party.
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(d) The foregoing arbitration provisions shall apply to any dispute arising
under or relating to this Agreement, concerning the Escrow, or the
indemnification obligations set forth in Sections 8.3 or 8.4.
8.10 Escrow Agent's Duties.
(a) The Escrow Agent shall be obligated only for the performance of such
duties as are specifically set forth herein, and as set forth in any additional
written escrow instructions which the Escrow Agent may receive after the date of
this Agreement which are signed by both an officer of Buyer and Seller, and may
rely and shall be protected in relying or refraining from acting on any
instrument reasonably believed to be genuine and to have been signed or
presented by the proper party or parties. The Escrow Agent shall not be liable
for any act done or omitted hereunder as Escrow Agent while acting in good faith
and in the exercise of reasonable judgment, and any act done or omitted pursuant
to the advice of counsel shall be conclusive evidence of such good faith.
(b) The Escrow Agent is hereby expressly authorized to disregard any and
all warnings given by any of the Parties hereto (except for objections of Seller
to Buyer's claims for indemnification as set forth in Section 8.8 above, or as
described in writing and signed by an officer of Buyer and an officer of Seller)
or by any other person, excepting only orders or process of courts of law, and
is hereby expressly authorized to comply with and obey orders, judgments or
decrees of any court. In case the Escrow Agent obeys or complies with any such
order, judgment or decree of any court, the Escrow Agent shall not be liable to
any of the Parties hereto or to any other person by reason of such compliance,
notwithstanding any such order, judgment or decree being subsequently reversed,
modified, annulled, set aside, vacated or found to have been entered without
jurisdiction.
(c) The Escrow Agent shall not be liable in any respect on account of the
identity, authority or rights of the Parties executing or delivering or
purporting to execute or deliver this Agreement or any documents or papers
deposited or called for hereunder.
(d) The Escrow Agent shall not be liable for the expiration of any rights
under any statute of limitations with respect to this Agreement or any documents
deposited with the Escrow Agent.
(e) In performing any duties under this Agreement, the Escrow Agent shall
not be liable to any party for damages, losses, or expenses, except for
negligence or willful misconduct on the part of the Escrow Agent. The Escrow
Agent shall not incur any such liability for (A) any act or failure to act made
or omitted in good faith, or (B) any action taken or omitted in reliance upon
any instrument, including any written statement of affidavit provided for in
this Agreement that the Escrow Agent shall in good faith believe to be genuine,
nor will the Escrow Agent be liable or responsible for forgeries, fraud,
impersonations, or determining the scope of any representative authority. In
addition, the Escrow Agent may consult with legal counsel in connection with
performing the Escrow
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Agent's duties under this Agreement and shall be fully protected in any act
taken, suffered, or permitted by him/her in good faith in accordance with the
advice of counsel. The Escrow Agent is not responsible for determining and
verifying the authority of any person acting or purporting to act on behalf of
any party to this Agreement.
(f) If any controversy arises between the Parties to this Agreement, or
with any other party, concerning the subject matter of this Agreement, its terms
or conditions, the Escrow Agent will not be required to determine the
controversy or to take any action regarding it. The Escrow Agent may hold all
documents and the Escrow Amount and may wait for settlement of any such
controversy by final appropriate legal proceedings or other means as, in the
Escrow Agent's discretion, the Escrow Agent may reasonably be required, despite
what may be set forth elsewhere in this Agreement. In such event, the Escrow
Agent will not be liable for damages. Furthermore, the Escrow Agent may at its
option, file an action of interpleader requiring the Parties to answer and
litigate any claims and rights among themselves. The Escrow Agent is authorized
to deposit with the clerk of the court all documents and the Escrow Amount,
except all cost, expenses, charges and reasonable attorney fees incurred by the
Escrow Agent due to the interpleader action and which the Buyer and the Sellers'
Agent jointly and severally agree to pay. Upon initiating such action, the
Escrow Agent shall be fully released and discharged of and from all obligations
and liability imposed by the terms of this Agreement.
(g) Buyer agrees to indemnify and hold Escrow Agent harmless against any
and all losses, claims, damages, liabilities, and expenses, including reasonable
costs of investigation, counsel fees, including allocated costs of in-house
counsel and disbursements that may be imposed on Escrow Agent or incurred by
Escrow Agent in connection with the performance of his/her duties under this
Agreement, including but not limited to any litigation arising from this
Agreement or involving its subject matter other than arising out of its
negligence or willful misconduct.
(h) The Escrow Agent may resign at any time upon giving at least thirty
(30) days written notice to Buyer and Seller; provided, however, that no such
resignation shall become effective until the appointment by Buyer of a successor
escrow agent who shall be reasonably acceptable to Seller; provided that, Buyer
hereby appoints as a successor escrow agent any Person with which the Escrow
Agent shall have been merged or consolidated, or to which the Escrow Agent shall
have transferred a substantial amount of its escrow business, without any
further action or execution of any further documentation by any of the Parties
upon notice to Buyer and Seller by the Escrow Agent of such merger,
consolidation or transfer. The successor escrow agent shall execute and deliver
an instrument accepting such appointment and it shall, without further acts, be
vested with all the estates, properties, rights, powers, and duties of the
predecessor escrow agent as if originally named as Escrow Agent. Upon
appointment of a successor escrow agent, the Escrow Agent shall be discharged
from any further duties and liability under this Agreement.
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(i) Fees. All fees of the Escrow Agent for performance of its duties
hereunder shall be paid by Buyer. It is understood that the fees and usual
charges agreed upon for services of the Escrow Agent shall be considered
compensation for ordinary services as contemplated by this Agreement. In the
event that the conditions of this Agreement are not promptly fulfilled, or if
the Escrow Agent renders any service not provided for in this Agreement, or if
the Parties request a substantial modification of its terms, or if any
controversy arises, or if the Escrow Agent is made a party to, or intervenes in,
any litigation pertaining to the Escrow Account or its subject matter, the
Escrow Agent shall be reasonably compensated for such extraordinary services and
reimbursed for all costs, attorney's fees, including allocated costs of in-house
counsel, and expenses occasioned by such default, delay, controversy or
litigation. Buyer promises to pay these sums upon demand.
9. TERMINATION.
9.1 Termination of Agreement. Certain of the Parties may terminate this
Agreement prior to the Closing as provided below.
(a) The Parties may terminate this Agreement by mutual written consent
at any time prior to the Closing.
(b) The Parties may terminate this Agreement if the Closing has not
occurred by August 15, 1997 unless the Closing has not occurred solely
because the HSR waiting period has not yet elapsed; provided that, the
right to terminate this Agreement under this Section 9.1(b) shall not be
available to either Party hereto if the failure to have effected the
Closing on or prior to such date results primarily from such Party's (or
its Affiliates') breaching any representation, warranty or covenant
contained in this Agreement.
(c) Buyer may terminate this Agreement by giving written notice to
Seller at any time prior to the Closing in the event Seller has breached
any representation, warranty or covenant contained in this Agreement in any
material respect, Buyer has notified Seller of the breach, and the breach
has continued without cure for a period of twenty (20) days after the
notice of breach or by reason of the failure of any condition precedent
under Section 6.1 hereof to have been satisfied by August 15, 1997 (unless
the failure results primarily from Buyer itself breaching any
representation, warranty or covenant contained in this Agreement).
(d) Seller may terminate this Agreement by giving written notice to
Buyer at any time prior to the Closing in the event Buyer has breached any
representation, warranty or covenant contained in this Agreement in any
material respect, Seller has notified Buyer of the breach, and the breach
has continued without cure for a period of twenty (20) days after the
notice of breach or by reason of the failure of any condition precedent
under Section 6.2 hereof (unless the failure results primarily from the
Seller itself breaching any representation, warranty or covenant contained
in this Agreement).
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(e) Buyer may terminate this Agreement on or prior to the Closing Date
if there shall be any action taken, or any statute, rule, regulation or
order enacted, promulgated, issued or deemed applicable to the Acquisition
by any governmental entity, which would: (i) prohibit the Buyer's ownership
or operation of all or a material portion of the Business or the Company
Assets, or (ii) compel the Buyer to dispose of all or a material portion of
the Business or the Company Assets as a result of the Acquisition.
9.2 Effect of Termination
Any termination of this Agreement in accordance with Section 9.1(a) or (b)
above will be effective immediately and any termination of this Agreement in
accordance with Section 9.1(d) or (e) will be effective immediately upon the
delivery of written notice by the terminating Party to the other Parties hereto.
In the event of the termination of this Agreement as provided in Section 9.1,
this Agreement shall be of no further force or effect, except (i) as set forth
in this Section 9.2, Section 9.3 and Article 10 (miscellaneous), each of which
shall survive the termination of this Agreement. No termination of this
Agreement shall affect the obligations of the parties contained in the
Confidentiality Agreement, all of which obligations shall survive termination of
this Agreement in accordance with their terms.
9.3 Fees and Expenses.
(a) Each of Buyer and Seller will bear its own costs and expenses
(including legal and accounting fees and expenses) incurred in connection with
this Agreement, the Acquisition, and the transactions contemplated hereby and
thereby.
10. MISCELLANEOUS.
10.1 Press Releases and Public Announcements. No Party shall issue any
press release or make any public announcement relating to the subject matter of
this Agreement prior to the Closing without the prior written approval of the
other Party; provided, however, that the Party may make any public disclosure it
believes in good faith is required by applicable law or any listing or trading
agreement concerning its publicly-traded securities (in which case the
disclosing Party will advise the other Party prior to making the disclosure).
10.2 No Third Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their respective
successors and permitted assigns.
10.3 Entire Agreement. This Agreement, the Exhibits, the Disclosure Letter
and the Schedules to be delivered contemporaneously herewith and any of the
documents set forth in Sections 6.1 and 6.2 constitute the entire agreement
among the Parties and the Escrow Agent and supersedes any prior understandings,
agreements, or representations by or among the Parties, written or oral, to the
extent they related in any way to the subject
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matter hereof including that certain term sheet dated May 28, 1997 between Buyer
and Seller which shall terminate in its entirety upon the execution of this
Agreement.
10.4 Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written consent of
the other Parties; provided, however, that after the Closing Buyer may assign
any or all of its rights and interests (but not its obligations) hereunder to
one or more, of its Affiliates provided no such assignment shall affect or
defeat any rights of Seller hereunder or relieve Buyer of any obligation it has
to Seller hereunder.
10.5 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
10.6 Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
10.7 Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given (i) upon
confirmation of facsimile, (ii) when sent by overnight delivery and (iii) when
mailed by registered or certified mail return receipt requested and postage
prepaid at the following address:
If to the Sellers: Intuit Inc.
2535 Garcia Drive
Mountain View, California 94043
Tel: (415) 944-6656
Fax: (415) 944-6622
Attn: General Counsel
Copy to: Fenwick & West, LLP
Two Palo Alto Square
Palo Alto, California 94306
Tel: (415) 494-0600
Fax: (415) 857-0361
Attn: Kenneth A. Linhares, Esq.
If to the Buyer: Broderbund Software, Inc.
500 Redwood Blvd.
Novato, California 94948-6121
Tel: (415) 382-4652
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<PAGE>
Fax: (415) 382-4582
Attn: Thomas L. Marcus, Esq.
Michael J. Pendergast, Esq.
Copy to: Wilson, Sonsini, Goodrich & Rosati
Professional Corporation
650 Page Mill Road
Palo Alto, California 94301
Tel: (415) 493-9300
Fax: (415) 493-6811
Attn: Tor R. Braham, Esq.
If to the Escrow Agent:
At the address set forth on the signature pages to this
Agreement.
Any Party may send any notice, request, demand, claim, or other
communication hereunder to the intended recipient at the address set forth above
using any other means (including personal delivery, expedited courier, messenger
service, telecopy, telex, ordinary mail, or electronic mail), but no such
notice, request, demand, claim, or other communication shall be deemed to have
been duly given unless and until it actually is received by the intended
recipient or confirmation of delivery is obtained by the sender. Any party
hereto may change the address to which notices, requests, demands, claims, and
other communications hereunder are to be delivered by giving the other Party
notice in the manner herein set forth.
10.8 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of California without giving effect to any choice or
conflict of law provision or rule of any other jurisdiction whatsoever that
would cause the application of the laws of any jurisdiction other than
California.
10.9 Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by Buyer
and the Sellers. No waiver by any Party of any default, misrepresentation, or
breach of warranty or covenant hereunder, whether intentional or not, shall be
deemed to extend to any prior or subsequent default, misrepresentation, or
breach of warranty or covenant hereunder or affect in any way any rights arising
by virtue of any prior or subsequent such occurrence.
10.10 Severability. Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or the
validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
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10.11 Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder prior to the Closing, unless the context
requires otherwise. The word "including" shall mean including without
limitation. Nothing in the Schedules hereto shall be deemed adequate to disclose
an exception to a representation or warranty made herein unless the Schedule
identifies the exception with reasonable particularity and describes the
relevant facts in reasonable detail. The Parties intend that each representation
or warranty and covenant contained herein shall have independent significance.
If any Party has breached any representation, warranty or covenant contained
herein in any respect, the fact that there exists another representation,
warranty or covenant relating to the same subject matter (regardless of the
relative levels of specificity) which the Party has not breached shall not
detract from or mitigate the fact that the Party is in breach of the first
representation, warranty or covenant.
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SIGNATURES
IN WITNESS WHEREOF, the Parties hereto have executed this Stock Purchase
Agreement on the date first above written.
"BUYER"
BRODERBUND SOFTWARE, INC.
By /s/ William M. McDonagh
-----------------------------
Name: William M. McDonagh
Title: President
"SELLERS"
INTUIT INC.
By /s/ Greg J. Santora
-----------------------------
Name: Greg J. Santora
Title: Vice President Finance
and Chief Financial Officer
PARSONS TECHNOLOGY, INC.
By /s/ Greg J. Santora
-----------------------------
Name: Greg J. Santora
Title: Vice President Finance
and Chief Financial Officer
"ESCROW AGENT"
By /s/ Mary Lou Fuette
-----------------------------
Mary Lou Fuette
Trust Officer
First Trust of California, N.A.
Global Escrow Depositary
Services #SANF 0527
One California Street, 4th Floor
San Francisco, CA 94111
Tel: 415-273-4533
Fax: 415-273-4593
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