<PAGE> 1
As filed with the Securities and Exchange Commission on August 10, 1995
-----------------------------------------------------
Registration No. 33-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
THE REYNOLDS AND REYNOLDS COMPANY
(Exact name of registrant as specified in its charter)
Ohio
(State or other jurisdiction of incorporation or organization)
31-0421120
(I.R.S. Employer Identification No.)
115 South Ludlow Street
Dayton, Ohio 45402
(513) 443-2000
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
ADAM M. LUTYNSKI, ESQ.
The Reynolds and Reynolds Company
115 South Ludlow Street
Dayton, Ohio 45402
(513) 443-2000
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of the Registration Statement
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, check the following box. [ ]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If the Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Security Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the
same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
<TABLE>
CALCULATION OF REGISTRATION FEE
<CAPTION>
___________________________________________________________________________________________________________
Title of each Amount to be Proposed Proposed Amount of
class of registered maximum maximum registration
securities to offering price aggregate fee*
be registered per share* offering price
___________________________________________________________________________________________________________
<S> <C> <C> <C> <C>
Class A Common Shares 63,840 shares $30.75 $1,963,080 $676.92
$.625 par value
---------------------------------------------------
<PAGE> 2
<FN>
* Calculated pursuant to Section 6 of the Securities Act of 1933, as amended,
and Rule 457(c) promulgated thereunder based upon the average of the high and
low prices of the Class A Common Shares $.625 par value, on the New York Stock
Exchange on August 4, 1995, as reported in The Wall Street Journal.
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said section 8(a),
may determine.
</TABLE>
<PAGE> 3
THE REYNOLDS AND REYNOLDS COMPANY
115 SOUTH LUDLOW STREET
DAYTON, OHIO 45402
(513)443-2000
63,840 Class A Common Shares
($.625 par value)
PROSPECTUS
This Prospectus covers the resale of 63,840 Class A Common Shares, $.625 par
value ("Shares"), of The Reynolds and Reynolds Company (the "Company"), from
time to time on the New York Stock Exchange or in the over-the counter market
at prices current at the time of sale by Dealer Internet Services Corporation,
a Washington corporation ("DISC"), Martin S. Rood and Peter M. Wilson
(collectively, the "Selling Shareholders"). This Prospectus also covers any
interim distribution by DISC to Martin S. Rood and Peter M. Wilson. See
"SELLING SHAREHOLDERS." The Shares include rights to purchase from the Company
a unit consisting of one one-thousandth of a share of the Company's Series A
Participating Preferred Shares, without par value, at a price of $80, subject
to adjustments under certain circumstances (individually, a "Right" and
collectively, the "Rights"). Since May 17, 1991, the Company issues one Right
with each Class A Common Share that becomes outstanding. The Selling
Shareholders hereunder have not entered into any arrangement or agreements with
any broker or dealer for the offering or sale of the Shares. In any
transaction, a Selling Shareholder may be deemed an "underwriter" as defined in
the Securities Act of 1933, as amended. The Company will receive no part of
the proceeds of any such resales.
The Shares are traded on the New York Stock Exchange ("NYSE"). On August 4,
1995, the reported high and low sale prices of the Class A Common Shares on the
NYSE were $31.00 and $30.50 per share.
No person has been authorized in connection with this offering to give any
information or to make any representations, other than as contained in this
Prospectus and, if given or made, such information or representations must not
be relied upon. This Prospectus is not an offer or solicitation in any
jurisdiction to any person to whom such offer may not lawfully be made.
Neither the delivery of this Prospectus nor any sale made hereunder shall,
under any circumstances, create any implication that there has been no change
in the affairs of the Company since the date hereof.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
_________________________
The date of this Prospectus is August 10, 1995.
<PAGE> 4
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended, and in accordance therewith, files reports,
proxy and information statements and other information with the Securities and
Exchange Commission (the "Commission"). Such reports, proxy and information
statements and other information filed by the Company can be inspected and
copied at the public reference facilities maintained by the Commission at 450
Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at the Commission's
regional offices at 500 West Madison Street, Suite 1400, Chicago, Illinois
60661, and at 7 World Trade Center, Suite 1300, New York, New York 10048; and
copies of such material can be obtained at prescribed rates from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549. The Company's Class A Common Shares are listed on the New York Stock
Exchange and reports, proxy and information statements and other information
concerning the Company can be inspected at such exchange at 20 Broad Street,
New York, New York 10005.
A Registration Statement on Form S-3 under the Securities Act of 1933, as
amended, has been filed by the Company with the Commission with respect to the
Shares. This Prospectus does not contain all the information set forth in such
registration statement, amendments thereto and exhibits thereto which the
Company has filed with the Commission. For further information with respect to
the Company and the securities to which this Prospectus relates, reference is
made to such Registration Statement including the exhibits thereto.
The Company's principal executive offices are located at 115 South Ludlow
Street, Dayton, Ohio 45402, and its telephone number at that address is
513/443-2000.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents, all of which have been filed with the Commission
pursuant to the Securities Exchange Act of 1934, as amended (the "1934 Act"),
are incorporated herein by reference:
(a) The Company's Annual Report on Form 10-K (including financial
statements together with the report of independent certified public
accountants thereon) for the fiscal year ended September 30, 1994
(File No. 0-132).
(b)(1) The Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended December 31, 1994 (File No. 0-132).
(b)(2) The Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended March 31, 1995 (File No. 0-132).
(b)(3) The Company's Current Report on Form 8-K which was filed on July 17,
1995 (File No. 0-132).
(b)(4) The Company's Current Report on Form 8-K which was filed on July 19,
1995 (File No. 0-132).
(c)(1) The "Description of Registrant's Securities to be Registered" on pages
2 and 3 of the Company's Registration Statement on Form 8-A which
became effective on January 12, 1989 (File No. 1-10147).
(c)(2) The "Description of Registrant's Securities to be Registered" on pages
2 through 6 of the Company's Registration Statement on Form 8-A which
was filed on May 8, 1991 (File No. 1-10147).
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the 1934 Act, subsequent to the date of this Prospectus and prior to
the termination of the offering of the Shares hereunder, shall be deemed to be
incorporated by reference into this Prospectus and to be a part hereof from the
date of filing of any such document. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be deemed
to be modified by or superseded for purposes of this Prospectus to the extent
that a statement
2
<PAGE> 5
contained herein or in any other subsequently filed document which also is or
is deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
A copy of any document or part thereof incorporated by reference in the
registration statement of which this Prospectus constitutes a part (not
including exhibits to the information that is incorporated by reference unless
such exhibits are specifically incorporated by reference into the information
that the registration statement incorporates) shall be provided without charge
to each person, including any beneficial owner, to whom a copy of this
Prospectus is delivered, upon written or oral request made to the Company at
115 South Ludlow Street, Dayton, Ohio 45402, Attention: General Counsel and
Secretary, (513) 443-2000.
SELLING SHAREHOLDERS
On June 15, 1995, the Company acquired from Dealer Internet Services
Corporation, a Washington corporation ("DISC"), substantially all of the assets
of DISC. The purchase price for such assets was paid by the Company in Class A
Common Shares, resales of which are, to the extent disclosed in the table
below, covered by this Prospectus.
The Selling Shareholders named herein have informed the Company that they
desire to be in a position to sell the Shares set forth opposite their names
from time to time on the NYSE or in the over-the-counter market at prices
current at the time of sale. The Selling Shareholders have not entered into
any arrangements or agreements with any broker or dealer for the offering or
sale of the Shares.
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF
SHARES OWNED SHARES TO BE
AS OF OFFERED FOR OWNER'S
JULY 27, 1995 1 ACCOUNT 1
<S> <C> <C> <C>
Dealer Internet 21000 Highway 99
Services Corporation2 Lynnwood, WA 98046-5908 63,840 63,840
Martin S. Rood2,3 15562 Lake Shore Boulevard N.E.
Lake Forest Park, WA 98155-6700 0 0
Peter M. Wilson2,4 19331 2nd Avenue N.W.
Seattle, WA 98177 0 0
---------------------------------
<FN>
1 Certain of those Shares are subject to escrow provisions and may not
be sold until released from such escrow arrangements in the future.
2 DISC is wholly owned by Martin S. Rood and Peter M. Wilson. Shares
owned by DISC are expected to be distributed by such entity to such persons and
such persons are listed above as Selling Shareholders. This Prospectus covers
resales by such persons.
3 Martin S. Rood has been President and Chief Executive Officer of
DISC since DISC was incorporated in April, 1994. Mr. Rood now serves as a
Director for the Company.
4 Peter M. Wilson has been Business Development Manager of DISC since
DISC was incorporated in April, 1994. Mr. Wilson is now a manager for the
Company.
</TABLE>
3
<PAGE> 6
RECENT DEVELOPMENTS
On June 15, 1995 the Company purchased substantially all of the assets and
assumed certain of the liabilities of DISC. DISC was engaged in the design,
creation and coding of commercial content which was either included in a
database of text and images known as "Dealernet" or utilized by the customer in
some other manner. The purchase price for the DISC assets was $1,850,000, plus
the assumption of certain liabilities, plus a contingent future right to
receive additional consideration based upon the performance of the acquired
business. The negotiated purchase price was paid by delivery of 63,840 shares.
A total of 7,980 Shares was deposited into an escrow fund as security for the
obligations of DISC to indemnify the Company from certain losses and to pay the
amount of any purchase price adjustment based upon the balance sheet for the
acquired assets and assumed liabilities as of June 15, 1995.
EXPERTS
The financial statements and the related financial statement schedules
incorporated in this Prospectus by reference from the Company's Annual Report
on Form 10-K have been audited by Deloitte & Touche LLP, independent auditors,
as stated in their report, which is incorporated herein by reference, and have
been so incorporated in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.
With respect to the unaudited interim financial information for the periods
ended December 31, 1994 and March 31, 1995, which is incorporated herein by
reference, Deloitte & Touche LLP have applied limited procedures in accordance
with professional standards for a review of such information. However, as
stated in their reports included in the Company's Quarterly Report on Form 10-Q
for the quarters ended December 31, 1994 and March 31, 1995, and incorporated
by reference herein, they did not audit and they do not express an opinion on
that interim financial information. Accordingly, the degree of reliance on
their reports on such information should be restricted in light of the limited
nature of the review procedures applied. Deloitte & Touche LLP are not subject
to the liability provisions of Section 11 of the Securities Act of 1933 for
their reports on the unaudited interim financial information because those
reports are not "reports" or a "part" of the Registration Statement prepared or
certified by an accountant within the meaning of Sections 7 and 11 of the Act.
4
<PAGE> 7
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
An estimate of such expenses, none of which shall be borne by the Selling
Shareholders, is as follows:
<TABLE>
<S> <C>
Registration fee - Securities and Exchange Commission $ 677
Accountants' fees and expenses $ 3,000
Legal fees and expenses $ 6,000
Financial printer fees $ 500
Total $10,177
</TABLE>
The Selling Shareholders shall bear brokerage fees incurred in connection with
the resale of the registered securities, as well as any federal or state income
taxes on the proceeds of any such resale.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Pursuant to Section 1701.13(E) of the Ohio Revised Code, the Company is
permitted to indemnify any director, officer, employee or agent of the Company
against costs and expenses incurred in connection with any action, suit or
proceeding brought against any such person by reason of his having served the
Company in such capacity, provided that he meets certain "good faith" tests
provided by law, and provided further that, with respect to suits brought on
behalf of the Company, he is not adjudged to be liable for negligence or
misconduct unless the relevant court finds indemnification to be nevertheless
appropriate in view of all the circumstances. The statute also provides that
in the event an officer or director has been successful on the merits in
defense of any such action, suit or proceeding, such officer or director shall
be indemnified by the Company against actual and reasonable expenses in
connection therewith.
Article Ninth of the Company's Amended Articles of Incorporation provides that,
as more specifically set forth in the Company's Consolidated Code of
Regulations, the Company may provide to any director, officer, other employee
or agent of the Company or any person who serves at the request of the Company
as a director, trustee, other employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, the maximum
indemnification permitted under Section 1701.13(E) of the Ohio Revised Code,
including amendments thereto, or any comparable provisions of any future Ohio
statute.
Paragraph B of Section 1 of Article IX of the Company's Consolidated Code of
Regulations provides for indemnification of directors, officers and employees
of the Company, and persons who, at the request of the Company, act as a
director, trustee, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
actually and reasonably incurred in connection with any action as to which he
was or is or may be made a party by reason of his acting in such capacity,
involving a matter as to which it shall be determined, as provided therein,
that he acted in good faith and in a manner he reasonably believed to be in or
not opposed to the best interests of the Company, and, with respect to any
criminal matter or proceeding, in addition, that he had no reasonable cause to
believe that his conduct was unlawful; provided, however, that in the case of
an action by or in the right of the Company to procure a judgment in its favor,
no such indemnification shall be made in respect of any claim, issue or matter
as to which such person shall have been adjudged liable for negligence or
misconduct in the performance of his duty to the Company unless, and only to
the extent that, the Court of Common Pleas or other court where such action was
brought shall determine such indemnification to be proper.
ITEM 16. EXHIBITS
See Exhibit Index on page 9.
ITEM 17. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales
are being made, a post-effective amendment to this
registration statement:
(i) To include any prospectus required by
Section 10(a)(3) of the Securities Act
of 1933;
(ii) To reflect in the Prospectus any facts or
events arising after the effective date of
the registration statement (or the most
recent post-effective amendment thereof)
which, individually or in the aggregate,
represent a fundamental change in the
information set forth in the registration
statement; and
(iii) To include any material information with
respect to the plan of distribution not
previously disclosed in the registration
statement or any material change to such
information in the registration statement.
Provided, however, that paragraphs (a)(1)(i) and
(a)(1)(ii) do not apply if the information required
to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by
the
5
<PAGE> 8
registrant pursuant to Section 13 or Section 15(d) of
the Securities Exchange Act of 1934 that
areincorporated by reference in this registration
statement.
(2) That, for the purpose of determining any liability
under the Securities Act of 1933, each such
post-effective amendment shall be deemed to be a new
registration statement relating to the securities
offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a
post-effective amendment any of the securities being
registered which remain unsold at the termination of
the offering.
(b) The undersigned registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act
of 1933, each filing of the registrant's annual report
pursuant to Section 13(a) or Section 15(d) of the Securities
Exchange Act of 1934 that is incorporated by reference in the
registration statement shall be deemed to be a new
registration statement relating to the securities offered
therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers
and controlling persons of the registrant pursuant to the
foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such
liabilities (other than the payment by the registrant of
expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense
of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it
is against public policy as expressed in the Act and will be
governed by the final adjudication of such issue.
6
<PAGE> 9
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Dayton, State of Ohio, on August 10, 1995.
THE REYNOLDS AND REYNOLDS COMPANY
By /s/David R. Holmes
------------------------------------
David R. Holmes, Chairman of the Board,
President and Chief Executive Officer
(Principal Executive Officer)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below
constitutes and appoints David R. Holmes and Adam M. Lutynski, and each of
them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all future amendments to this
Registration Statement and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or any of them, or their or his
substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed by the following persons in the capacities and on the
dates indicated.
/s/David R. Holmes
------------------------------------------------------- August 10, 1995
David R. Holmes, Chairman of the Board, President
and Chief Executive Officer (Principal Executive Officer)
and Director
/s/Dale L. Medford
------------------------------------------------------- August 10, 1995
Dale L. Medford, Vice President, Corporate Finance
and Chief Financial Officer (Principal Financial and
Accounting Officer) and Director
/s/Joseph N. Bausman
------------------------------------------------------- August 10, 1995
Joseph N. Bausman, President, Automotive Systems
Division and Director
/s/Dr. David E. Fry
------------------------------------------------------- August 10, 1995
Dr. David E. Fry, Director
/s/Richard H. Grant, Jr.
------------------------------------------------------- August 10, 1995
Richard H. Grant, Jr., Chairman of the Steering
Committee and Director
/s/Richard H. Grant, III
------------------------------------------------------- August 10, 1995
Richard H. Grant, III, Director
/s/Robert C. Nevin
------------------------------------------------------- August 10, 1995
Robert C. Nevin, President, Business Forms Division
and Director
7
<PAGE> 10
/s/Gayle B. Price, Jr.
------------------------------------------------------- August 10, 1995
Gayle B. Price, Jr., Director
/s/Kenneth W. Thiele
------------------------------------------------------- August 10, 1995
Kenneth W. Thiele, Director
/s/Martin D. Walker
------------------------------------------------------- August 10, 1995
Martin D. Walker, Director
8
<PAGE> 11
<TABLE>
EXHIBIT INDEX
<CAPTION>
EXHIBIT NO. DESCRIPTION
<S> <C>
(1) Inapplicable
(2) Acquisition Agreement dated June 15, 1995 among The Reynolds and Reynolds Company, Rood
Motors, Inc., Crown Motors, Inc., Dealer Internet Services Corporation, Martin S. Rood, and
Peter M. Wilson.*
(4)(a) Specimen Certificate for Class A Common Shares ($.625 par value) of the Company incorporated
by reference to Exhibit (4)(c) to the Company's Registration Statement on Form S-8 filed
with the Securities and Exchange Commission on March 4, 1992 (Registration No. 33-46222).
(4)(b) Amended and Restated Articles of Incorporation of the Company, incorporated by reference to
Exhibit A to the Company's definitive proxy statement dated January 5, 1995, and filed with
the Securities and Exchange Commission.
(4)(c) Consolidated Code of Regulations of the Company, incorporated by reference to Exhibit B to
the Company's definitive proxy statement dated January 8, 1990, and filed with the
Securities and Exchange Commission.
(4)(d) Shareholder Rights Plan incorporated by reference to Exhibit 1 to the Company's Form 8-A
(File No. 1-10147), which was adopted on May 6, 1991, and filed with the Securities and
Exchange Commission on May 8, 1991.
(5) Opinion of Coolidge, Wall, Womsley & Lombard Co., L.P.A., regarding legality of securities*
(8) Inapplicable
(12) Inapplicable
(15) Letter on interim financial information*
(23)(a) Consent of Coolidge, Wall, Womsley & Lombard (incorporated by reference to Exhibit 5
hereto).
(23)(b) Consent of Deloitte & Touche LLP, independent auditors*
(24) Inapplicable
(25) Inapplicable
(26) Inapplicable
(27) Inapplicable
(28) Inapplicable
(99) Inapplicable
_________________________________________
<FN>
* Filed herein.
</TABLE>
9
<PAGE> 1
Exhibit 2
ACQUISITION AGREEMENT
AMONG
THE REYNOLDS AND REYNOLDS COMPANY,
ROOD MOTORS, INC.,
CROWN MOTORS, INC.,
DEALER INTERNET SERVICES CORPORATION,
MARTIN S. ROOD
AND
PETER M. WILSON
dated as of June 15, 1995
<PAGE> 2
TABLE OF CONTENTS
1. PURCHASE AND SALE OF ASSETS . . . . . . . . . . . . . . . . . . . . 2
1.1 Personal Property . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.3 Books and Records, etc . . . . . . . . . . . . . . . . . . . . . . . 2
1.4 Licenses and Permits . . . . . . . . . . . . . . . . . . . . . . . . 2
1.5 Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.6 Intellectual Property. . . . . . . . . . . . . . . . . . . . . . . . 2
1.7 Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.8 Other Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2. EXCLUDED ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.1 Certain Balance Sheet Assets. . . . . . . . . . . . . . . . . . . . 3
2.2 Certain Books and Records . . . . . . . . . . . . . . . . . . . . . 3
2.3 Certain Contracts . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.4 Certain Other Assets. . . . . . . . . . . . . . . . . . . . . . . . 3
3. ASSUMED LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . 3
3.1 Executory Obligations. . . . . . . . . . . . . . . . . . . . . . . . 3
3.2 Balance Sheet Liabilities. . . . . . . . . . . . . . . . . . . . . . 3
3.3 Certain Transaction Expenses. . . . . . . . . . . . . . . . . . . . 3
4. EXCLUDED LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . 4
4.1 Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . 4
4.2 Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4.3 Product-related Liabilities . . . . . . . . . . . . . . . . . . . . . 4
4.4 Affiliate Payables . . . . . . . . . . . . . . . . . . . . . . . . . 4
4.5 Tax Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4.6 Employee-related and Contractor-related Liabilities . . . . . . . . . 4
4.7 Transaction Expenses . . . . . . . . . . . . . . . . . . . . . . . . 5
4.8 Excluded Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4.9 Misuse of Information/Infringement . . . . . . . . . . . . . . . . . 5
4.10 Other Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . 5
5. CONSIDERATION AND DELIVERY . . . . . . . . . . . . . . . . . . . . . 5
5.1 Closing Consideration . . . . . . . . . . . . . . . . . . . . . . . 5
5.2 Post-closing Consideration . . . . . . . . . . . . . . . . . . . . . 6
5.3 Adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
5.4 Sales or Transfer Taxes . . . . . . . . . . . . . . . . . . . . . . . 7
6. REYNOLDS SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
6.1 Issuance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
6.2 Exemptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
6.3 Securities Filings . . . . . . . . . . . . . . . . . . . . . . . . . 8
6.4 Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
7. INDIVIDUAL REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS . . . . 8
7.1 Power and Capacity . . . . . . . . . . . . . . . . . . . . . . . . . 8
7.2 No Conflict with Other Agreements or Laws . . . . . . . . . . . . . . 8
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8. REPRESENTATIONS AND WARRANTIES OF SELLER AND SHAREHOLDER . . . . . 9
8.1 Corporate Action . . . . . . . . . . . . . . . . . . . . . . . . . 9
8.2 No Conflict With Other Agreements or Laws . . . . . . . . . . . . . 9
8.3 Organization and Qualification . . . . . . . . . . . . . . . . . . . 9
8.4 Interests in other Persons . . . . . . . . . . . . . . . . . . . . . 9
8.5 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . 10
8.6 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
8.7 Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
8.8 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
8.9 Absence of Changes . . . . . . . . . . . . . . . . . . . . . . . . . 12
8.10 Personal Property . . . . . . . . . . . . . . . . . . . . . . . . . 13
8.11 Real Property . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
8.12 Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
8.13 Litigation; Compliance with Laws, Etc . . . . . . . . . . . . . . . 15
8.14 Labor Relations . . . . . . . . . . . . . . . . . . . . . . . . . . 15
8.15 Licenses and Permits . . . . . . . . . . . . . . . . . . . . . . . . 15
8.16 Contract Matters . . . . . . . . . . . . . . . . . . . . . . . . . . 16
8.17 Title to Properties; Encumbrances . . . . . . . . . . . . . . . . . 16
8.18 Intellectual Property Intangibles . . . . . . . . . . . . . . . . . 16
8.19 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . 19
8.20 Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . . 20
8.21 Customers and Suppliers . . . . . . . . . . . . . . . . . . . . . . 20
8.22 Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
8.23 Bank Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
8.24 Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . 20
8.25 Environmental Protection. . . . . . . . . . . . . . . . . . . . . . 20
8.26 Investment Intent . . . . . . . . . . . . . . . . . . . . . . . . . 21
8.27 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
9. REPRESENTATIONS AND WARRANTIES OF REYNOLDS . . . . . . . . . . . . 21
9.1 Corporate Action . . . . . . . . . . . . . . . . . . . . . . . . . . 21
9.2 No Conflict With Other Agreements or Laws . . . . . . . . . . . . . 22
9.3 Organization and Qualification . . . . . . . . . . . . . . . . . . . 22
9.4 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
10. PRE-CLOSING COVENANTS . . . . . . . . . . . . . . . . . . . . . . . 22
10.1 Conduct of Business Prior to Closing . . . . . . . . . . . . . . . . 22
10.2 Notification of Material Adverse Changes . . . . . . . . . . . . . . 23
10.3 Other Transactions . . . . . . . . . . . . . . . . . . . . . . . . . 23
10.4 Consents, Waivers and Approvals . . . . . . . . . . . . . . . . . . 23
10.5 Supplemental Disclosure . . . . . . . . . . . . . . . . . . . . . . 23
10.6 Additional Reports . . . . . . . . . . . . . . . . . . . . . . . . . 24
10.7 Conditions Precedent . . . . . . . . . . . . . . . . . . . . . . . . 24
10.8 Reynolds' Due Diligence . . . . . . . . . . . . . . . . . . . . . . 24
11. CONDITIONS PRECEDENT TO OBLIGATIONS OF REYNOLDS . . . . . . . . . . 24
11.1 Representations . . . . . . . . . . . . . . . . . . . . . . . . . . 24
11.2 Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
11.3 No Injunction, Etc. . . . . . . . . . . . . . . . . . . . . . . . . 25
11.4 Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . 25
11.5 Incumbency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
11.6 Consents, Waivers and Approvals . . . . . . . . . . . . . . . . . . 25
ii
<PAGE> 4
11.7 Absence of Material Adverse Changes . . . . . . . . . . . . . . . . 25
11.8 Certified Resolutions . . . . . . . . . . . . . . . . . . . . . . . 25
11.9 Confirmations . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
11.10 Title Assurances . . . . . . . . . . . . . . . . . . . . . . . . . 26
11.11 Basic Corporate Documents . . . . . . . . . . . . . . . . . . . . . 26
11.12 Glenn Northrup . . . . . . . . . . . . . . . . . . . . . . . . . . 26
11.13 Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
11.14 Intellectual Property Intangibles . . . . . . . . . . . . . . . . . 26
11.15 Instruments of Transfer . . . . . . . . . . . . . . . . . . . . . . 26
11.16 Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
11.17 Certain Assignments . . . . . . . . . . . . . . . . . . . . . . . . 27
11.18 Escrow Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 27
11.19 May Financial Statements . . . . . . . . . . . . . . . . . . . . . 27
11.20 Intentionally Omitted . . . . . . . . . . . . . . . . . . . . . . . 27
11.21 Releases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
11.22 Transaction Expense Confirmations . . . . . . . . . . . . . . . . . 27
11.23 Severance Agreements. . . . . . . . . . . . . . . . . . . . . . . . 27
11.24 Trademark License . . . . . . . . . . . . . . . . . . . . . . . . . 27
12. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER AND THE SHAREHOLDER . 27
12.1 Representations . . . . . . . . . . . . . . . . . . . . . . . . . . 27
12.2 Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
12.3 Certified Resolutions . . . . . . . . . . . . . . . . . . . . . . . 28
12.4 Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . 28
12.5 No Injunction, Etc. . . . . . . . . . . . . . . . . . . . . . . . . 28
12.6 Consents, Waivers and Approvals . . . . . . . . . . . . . . . . . . 28
12.7 Incumbency . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
12.8 Employment Agreements . . . . . . . . . . . . . . . . . . . . . . . 28
12.9 Escrow Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 28
12.10 Assumption Agreement. . . . . . . . . . . . . . . . . . . . . . . . 28
12.11 Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
13. MUTUAL COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . 29
13.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
13.2 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
14. CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
14.1 Time and Place . . . . . . . . . . . . . . . . . . . . . . . . . . 29
14.2 Transactions at the Closing . . . . . . . . . . . . . . . . . . . . 29
14.3 Default at Closing . . . . . . . . . . . . . . . . . . . . . . . . 30
15. EMPLOYEES OF SELLER . . . . . . . . . . . . . . . . . . . . . . . . 30
16. SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
17. TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
18. COLLECTION OF RECEIVABLES . . . . . . . . . . . . . . . . . . . . . 31
19. INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . 32
19.1 Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
19.2 Indemnification by Seller and Shareholders . . . . . . . . . . . . 32
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19.3 Indemnification by Reynolds . . . . . . . . . . . . . . . . . . . . 32
19.4 Procedures for Indemnification . . . . . . . . . . . . . . . . . . . 32
19.5 Defense of Third Party Claims . . . . . . . . . . . . . . . . . . . 33
19.6 Limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
20. TRANSACTION EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . 35
20.1 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
20.2 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
21. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
21.1 Accounting Records . . . . . . . . . . . . . . . . . . . . . . . . . 35
21.2 Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
21.3 Assignment; Binding Effect . . . . . . . . . . . . . . . . . . . . . 37
21.4 Headings; Exhibits and Schedules . . . . . . . . . . . . . . . . . . 37
21.5 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
21.6 Integration of Agreement . . . . . . . . . . . . . . . . . . . . . . 37
21.7 Time of Essence . . . . . . . . . . . . . . . . . . . . . . . . . . 37
21.8 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
21.9 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
21.10 Partial Illegality or Unenforceability . . . . . . . . . . . . . . . 38
21.11 Singular or Plural . . . . . . . . . . . . . . . . . . . . . . . . . 38
21.12 Effect of Investigation . . . . . . . . . . . . . . . . . . . . . . 38
21.13 Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
21.14 "Knowledge" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
21.15 "Person" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
21.16 "Best Efforts" . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
21.17 "Including" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
21.18 "Ordinary Course of Business" . . . . . . . . . . . . . . . . . . . 39
22. SELLER'S OBLIGATIONS; SHAREHOLDERS' LIMITATION OF LIABILITY . . . . 39
22.1 Shareholders' Guaranty . . . . . . . . . . . . . . . . . . . . . . . 39
22.2 Limitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
23. COVENANT NOT TO COMPETE . . . . . . . . . . . . . . . . . . . . . . 40
23.1 Covenant Not to Compete . . . . . . . . . . . . . . . . . . . . . . 40
23.2 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
23.3 Equitable Relief . . . . . . . . . . . . . . . . . . . . . . . . . . 41
23.4 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
24. OWNERSHIP OF ASSETS USED IN THE BUSINESS . . . . . . . . . . . . . . 42
25. USE OF SPACE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
26. CONFIDENTIAL INFORMATION. . . . . . . . . . . . . . . . . . . . . . 42
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LIST OF SCHEDULES
1 Form of Escrow Agreement
LIST OF EXHIBITS
1.2 Contracts
1.7 Interests
2.4 Certain Excluded Assets
3.1 Certain Breaches or Defaults Under the Contracts
3.2(a) 4/30/95 Balance Sheet
3.2(c) Excluded Balance Sheet Liabilities
4.10 Certain Excluded Liabilities
5.2 Contingent Payments
8.3 Organization and Qualification
8.4 Interests in other Persons
8.5(a) Financial Statements
8.5(b) Liabilities
8.5(c) Defaults
8.6 Taxes
8.7 Receivables
8.8 Insurance
8.9 Changes
8.10(a) Owned Personal Property
8.10(b) Leased Personal Property
8.10(c) Defects
8.11 Leased Real Property
8.12 Affiliates
8.13 Litigation
8.14 Labor Relations
8.15 Licenses and Permits
8.16 Contract Matters
8.17 Title to Properties; Encumbrances
8.18 Intellectual Property Intangibles
8.19 Employee Benefit Plans
8.20 Consents and Approvals
8.21 Customers and Suppliers
8.23 Bank Accounts
8.25 Environmental Matters
10.4 Permitted Encumbrances
11.4 Opinion of Counsel for Seller and Shareholders
11.13 Employment Agreements
11.17 Certain Assignments
11.22 Form of Transaction Expense Confirmation
11.24 Form of Trademark License
12.4 Opinion of Counsel for Reynolds
25 Common Assets; Certain Charges
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<PAGE> 7
ACQUISITION AGREEMENT
THE REYNOLDS AND REYNOLDS COMPANY ("REYNOLDS" or "PURCHASER"), DEALER
INTERNET SERVICES CORPORATION ("SELLER"), ROOD MOTORS, INC. ("RMI"), CROWN
MOTORS, INC. ("CMI") (RMI and CMI are sometime referred to in this agreement
individually as a "CORPORATE AFFILIATES" and collectively as the "CORPORATE
AFFILIATES"), MARTIN S. ROOD and PETER M. WILSON (individually, a "SHAREHOLDER"
and collectively, the "SHAREHOLDERS") agree as follows:
RECITALS:
Seller is an Internet-based services provider. Specifically, Seller is
engaged in the design, creation and coding of commercial content (data, text,
graphics and sound) which is either included in the database of text and images
known as "DealerNet" (which database is owned, maintained and operated by
Seller) or utilized by the customer in some other manner. In addition, Seller
holds interests in certain other persons as described in Section 1.7. Such
services and holdings are collectively referred to in this agreement (the
"AGREEMENT") as the "BUSINESS".
Shareholders are the owners of all of the issued and outstanding capital
stock of Seller.
The Corporate Affiliates are related entities that have provided property,
services, and employees from time to time to the Seller. The Corporate
Affiliates are parties to this Agreement, among other reasons, for the purpose
of confirming that all assets used in or useful to the business (except for the
Excluded Assets as defined below and certain assets identified in Exhibit 25),
are owned by Seller rather than either Corporate Affiliate and are to be
transferred to Reynolds pursuant to this Agreement.
The parties intend that this Agreement constitute a plan of reorganization
and that the transfer by Seller of substantially all of its assets and certain
of its liabilities qualify for Federal income tax purposes as a
"reorganization" within the meaning of Section 368(a) of the Internal Revenue
Code of 1986, as amended (the "CODE").
A portion of the Reynolds Shares (as defined in Section 5.2) will be placed
in an escrow by Seller to be maintained by a person to be agreed to by the
parties (the "ESCROW AGENT") and will be subject to possible return to Reynolds
under conditions specified in an escrow agreement in the form of the attached
Schedule 1 (the "ESCROW AGREEMENT") and in this Agreement as a mechanism to
secure the performance by Seller and Shareholders of their obligations to
Reynolds under this Agreement.
The parties intend that notwithstanding such escrow arrangement, after the
Closing (as defined in Section 14), Seller
<PAGE> 8
(and subsequent to Seller's distribution of Reynolds Shares [including
its interest in the escrowed Reynolds Shares] to the Shareholders as
contemplated in this Agreement, the Shareholders) shall be considered the
beneficial owner of the escrowed Reynolds Shares (except for the Reynolds
Shares, if any, that are returned to Reynolds in payment of an Indemnification
Claim [as defined in Section 19.4(a)]) for Federal income tax purposes so that
the Reynolds Shares will be treated as received by Seller (and the Shareholders)
at that time for Federal income tax purposes.
The parties intend that by virtue of utilizing such escrow arrangement, no
interest income will be imputed under Section 483 (or any other provision) of
the Code to Seller or Shareholders upon receipt of the Reynolds Shares out of
escrow.
1. PURCHASE AND SALE OF ASSETS. Subject to the terms and conditions of this
Agreement, Reynolds agrees to purchase and Seller agrees to sell on the Closing
Date (as defined in Section 14), all of the rights and assets of Seller used in
or useful to the Business, wherever located, excluding the Excluded Assets (as
defined in Section 2), but including without limitation, the following, as the
same may change in the ordinary course through the Closing Date:
1.1 Personal Property. All furniture, fixtures, machinery, equipment,
vehicles, inventory and other personal property and all related warranties
(collectively, the "PERSONAL PROPERTY").
1.2 Contracts. Those contracts, agreements, leases, licenses, purchase
orders, sale orders or commitments which are identified on Exhibit 1.2 hereto
(individually, a "CONTRACT" and collectively, the "CONTRACTS").
1.3 Books and Records, etc. All books, records, accounts, customer lists,
files, videos, catalogues, sales materials, employment records and related
materials, but excluding all of Seller's corporate minute books, stock records
and other documents which are not reasonably of use to Reynolds in the conduct
of the Business (collectively, the "BOOKS AND RECORDS").
1.4 Licenses and Permits. To the extent permitted under applicable law or
regulation, all licenses, permits, certificates and governmental authorizations
of Seller.
1.5 Receivables. All accounts, notes or other receivables (collectively, the
"RECEIVABLES").
1.6 Intellectual Property. All Intellectual Property Intangibles (as
defined in Section 8.18) and all goodwill associated with the Intellectual
Property Intangibles.
2
<PAGE> 9
1.7 Interests. Those interests in other persons identified in Exhibit 1.7
(collectively, the "INTERESTS").
1.8 Other Assets. All other assets used in or useful to the Business,
wherever located, tangible or intangible, including cash, cash equivalents and
securities, prepaid expenses, deposits, causes of action and claims, including,
without limitation, all claims against Autonet and/or Delta Internet.
The assets described in this Section 1 are collectively referred to in this
Agreement as the "ACQUIRED ASSETS."
2. EXCLUDED ASSETS. Reynolds shall not acquire any right or interest of Seller
in the following assets:
2.1 Certain Balance Sheet Assets. Those assets identified on the 4/30/95
Balance Sheet (as defined in Section 3.2) as "Due from Stockholders" (including
the corresponding promissory note(s)).
2.2 Certain Books and Records. Seller's corporate minute books, records and
other documents which are not reasonably of use to Reynolds in the conduct of
the Business.
2.3 Certain Contracts. All contracts, agreements, leases, licenses,
purchase orders, sales orders or commitments not identified on Exhibit 1.2.
2.4 Certain Other Assets. Those assets identified on Exhibit 2.4.
The assets described in this Section 2 are collectively referred to in this
Agreement as the "EXCLUDED ASSETS."
3. ASSUMED LIABILITIES. As of the Closing Date, Reynolds shall assume
responsibility for the performance and satisfaction of:
3.1 Executory Obligations. The executory obligations of Seller under the
Contracts, excluding any obligations or liabilities arising from any breach or
default thereunder by Seller (except those breaches or defaults described in
Exhibit 3.1).
3.2 Balance Sheet Liabilities. The liabilities of Seller identified in the
balance sheet of Seller as of April 30, 1995 (the "4/30/95 BALANCE SHEET"), a
copy of which is attached hereto as Exhibit 3.2(a), subject to changes in the
amount of such liabilities in the ordinary course from April 30, 1995 to the
Closing Date, but in any event excluding those liabilities which are identified
in Exhibit 3.2(c).
3.3 Certain Transaction Expenses. Reasonable transaction expenses incurred
by Seller (as opposed to the Shareholders individually) solely and directly in
connection with the sale of
3
<PAGE> 10
assets contemplated by this Agreement up to a maximum amount of $15,000 (the
"TRANSACTION EXPENSES").
The liabilities described in this Section 3 are collectively referred to as the
"ASSUMED LIABILITIES."
4. EXCLUDED LIABILITIES. Except as set forth in Section 3 of this Agreement,
Reynolds shall not assume or become liable for any liabilities of Seller of any
kind or character including without limitation the following:
4.1 Undisclosed Liabilities. Any liabilities or obligations of Seller not
reflected in the 4/30/95 Balance Sheet (subject to changes in such liabilities
as permitted in Section 3.2), whether known or unknown, absolute, contingent or
otherwise, except for the executory obligations described in Section 3.1 and
the Transaction Expenses.
4.2 Defaults. Any obligation or liability arising from or relating to any
breach or default by Seller under any Contract, except such breaches or
defaults as may be identified in Exhibit 3.1.
4.3 Product-related Liabilities. Any liability or obligation arising out of
or related to any product sold or service rendered by Seller prior to the
Closing Date (including without limitation claims for breach of warranty).
4.4 Affiliate Payables. Any liabilities of Seller for certain payables
required to be disclosed on Exhibit 8.12 pursuant to Section 8.12(b) (except as
assumed pursuant to Section 3.1 and Section 3.2).
4.5 Tax Liabilities. Any liabilities or obligations arising out of or
related to Taxes (as defined in Section 8.6) other than those liabilities
assumed by Reynolds pursuant to Sections 3.2 and 5.4.
4.6 Employee-related and Contractor-related Liabilities. Except for those
liabilities assumed by Reynolds pursuant to Section 3.2, any liabilities or
obligations arising out of or related to employees or independent contractors
or former employees or former independent contractors of Seller, including
without limitation liabilities or obligations for unpaid wages, salaries,
commissions, benefits, vacation pay, sick pay, or holiday pay, withholding,
unemployment or workers compensation taxes, contributions or benefits, and
contributions or premiums payable to, under or with respect to any employee
benefit plan or arrangement or obligations under any self-funded employee
benefit plan or arrangement.
4
<PAGE> 11
4.7 Transaction Expenses. Except for those liabilities assumed by Reynolds
pursuant to Section 3.3, any expenses incurred by Seller or Shareholders in
connection with the authorization, preparation, negotiation and consummation of
this Agreement, including without limitation, fees and expenses of counsel,
brokers and accountants.
4.8 Excluded Assets. Any liabilities or obligations arising out of or
associated with the Excluded Assets, unless and to the extent assumed by
Reynolds pursuant to Section 3.2.
4.9 Misuse of Information/Infringement. Any liability or obligation arising
out of the use or misuse of another person's data, information, text, graphics
or videos or infringement of another person's intellectual property rights.
4.10 Other Liabilities. Those liabilities identified in Exhibit 4.10.
The liabilities described in this Section 4 are collectively referred to as the
"EXCLUDED LIABILITIES."
5. CONSIDERATION AND DELIVERY. The consideration for the Acquired Assets, in
addition to the assumption of the Assumed Liabilities by Reynolds, and subject
to adjustment pursuant to Section 5.3, shall be as provided in Sections 5.1 and
5.2.
5.1 Closing Consideration. (a) At Closing, Reynolds shall deliver to
Seller certificates representing that number of Reynolds' class A common shares
determined by dividing (i) $1,618,750 (the "BASE VALUE"), by (ii) the Base
Price (as defined in this Section), rounded up to the next whole number
(collectively, the "CLOSING SHARES"). "BASE PRICE" means the average closing
price for Reynolds' class A common shares on the New York Stock Exchange for
the thirty (30) trading days immediately preceding the fifth (5th) trading day
prior to the Closing.
(b) At Closing, Reynolds shall deliver to Escrow Agent certificates
representing that number of Reynolds' class A common shares determined by
dividing (i) $231,250 by (ii) the Base Price, rounded up to the next whole
number (collectively, the "ESCROW SHARES") to be held in the Escrow Fund (as
defined in the Escrow Agreement) in accordance with the Escrow Agreement.
(c) The Escrow Shares shall serve as collateral security for the
satisfaction by the Seller and Shareholders of their obligations under this
Agreement. Seller authorizes Reynolds to deliver to the Escrow Agent
certificates representing the Escrow Shares. Seller shall deliver to Escrow
Agent stock powers endorsed in blank by Seller and such further documentation
as shall be required by the Escrow Agent to effect, if necessary, the transfer
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of all or a portion of the Escrow Shares to Reynolds in satisfaction of an
Indemnification Claim.
5.2 Post-closing Consideration. In light of the unique nature and limited
existence of the Business which makes it difficult to ascertain its value at
this time, the parties have agreed to additional contingent consideration for
the Acquired Assets pursuant to the following sentence. Reynolds shall also
deliver certificates for additional class A common shares of Reynolds as
provided in (and subject to the conditions described in) Exhibit 5.2 (the
"POST-CLOSING SHARES"). The Closing Shares, the Escrow Shares and the
Post-closing Shares are collectively referred to in this Agreement as the
"REYNOLDS SHARES".
5.3 Adjustment. The Closing Shares shall be adjusted as follows:
(a) Reynolds shall deliver to Seller and Shareholders, not later than
sixty (60) days after the Closing Date, a balance sheet (the "CLOSING BALANCE
SHEET") for the Acquired Assets and Assumed Liabilities (exclusive of the
Transaction Expenses) as of the Closing Date. The Closing Balance Sheet shall
be prepared in accordance with generally accepted accounting principles
("GAAP") and otherwise consistent with the methodology employed in the 4/30/95
Balance Sheet. The Closing Balance Sheet shall be accompanied by Reynolds'
determination of the amount of the adjustment, if any, to the Closing Shares
required by Section 5.3(b). Reynolds shall also make available to Seller and
Shareholders all Books and Records as were relied upon to create the Closing
Balance Sheet and adjustment determination. Seller and Shareholders shall have
thirty (30) days from receipt of the Closing Balance Sheet and adjustment
determination to object to either by written notice to Reynolds. If Reynolds
does not receive notice of an objection within such time, the Closing Balance
Sheet and adjustment determination prepared by Reynolds shall be final and
binding on the parties for purposes of determining the adjustment. If Seller
and Shareholders timely notify Reynolds of an objection, the parties shall have
ten (10) days from the date of Seller's notice to resolve the objection. If
the parties do not resolve the objection within such time, the certified public
accounting firm of KPMG Peat Marwick (the "INDEPENDENT AUDITORS") shall resolve
the objection within thirty (30) days after expiration of such 10-day period
and such resolution shall be final and binding on the parties. The fees and
expenses of the Independent Auditors shall be borne by Seller and Reynolds in
proportion to the respective differences between their positions submitted to
the Independent Auditors and the final determination of the Independent
Auditors.
(b) The Base Value shall be reduced dollar-for-dollar by the amount the
Acquired Net Book Value on the Closing Balance Sheet is less than ($300,000)
(i.e., minus $300,000). "ACQUIRED NET BOOK
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VALUE" shall mean the difference between the book value of the Acquired Assets
and the book value of the Assumed Liabilities (exclusive of the Transaction
Expenses) as shown on the Closing Balance Sheet. There shall be no adjustment
to the Base Value if the Acquired Net Book Value is greater than ($300,000).
The adjustment to the number of Closing Shares shall be determined by dividing
(i) the difference between (A) the Acquired Net Book Value and (B) ($300,000),
by (ii) the Base Price, and rounding down to the next whole number.
(c) If there is an adjustment pursuant to Section 5.3(b) (a "CLOSING SHARES
ADJUSTMENT"), within ten (10) days after final determination of the adjustment
(whether by Seller's and Shareholders' failure to object, agreement of the
parties or determination by the Independent Auditors), Seller shall deliver
either (i) cash (by wire transfer of immediately available funds to the account
designated by Reynolds) in an amount equal to the difference between the
Acquired Net Book Value and ($300,000) or (ii) certificates for Reynolds Shares
(accompanied by duly executed stock powers sufficient to transfer to Reynolds
the required number of Reynolds Shares) representing that number of Reynolds
Shares described in the last sentence of Section 5.3(b). In the event payment
is effected pursuant to clause (ii) of the preceding sentence, Reynolds shall
promptly surrender such certificates and stock powers to Reynolds' transfer
agent and cause the transfer agent to issue to Seller certificates for the
balance of any shares represented by a certificate submitted pursuant to clause
(ii) in excess of the amount of shares required to be transferred to Reynolds.
In the event of any merger, consolidation, reorganization, recapitalization,
stock split, exchange or similar transaction affecting the Reynolds Shares
prior to the payment of a Closing Shares Adjustment, the Base Price shall be
appropriately adjusted as agreed to by Reynolds and Seller.
5.4 Sales or Transfer Taxes. Reynolds shall pay all sales or transfer
taxes, recording fees and similar fees or charges arising out of the sale of
the Acquired Assets. Seller and Reynolds shall cooperate to timely file all
Returns (as defined in Section 8.6) for Taxes described in this Section 5.4.
6. REYNOLDS SHARES.
6.1 Issuance. The Reynolds Shares may be newly issued or treasury shares,
at Reynolds' election, provided that Reynolds will comply with the following
provisions of this Section 6. In any event, all of the Reynolds Shares
(including the Post-closing Shares) will be duly and validly authorized and
issued, fully paid and nonassessable and, not later than 60 days after the date
issued pursuant to this Agreement, covered by an effective listing application
with the New York Stock Exchange.
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6.2 Exemptions. Seller acknowledges that the parties intend that (a) the
issuance of Reynolds Shares (including the Post-closing Shares) pursuant to
Section 5.1 and the distribution of the Reynolds Shares to Shareholders upon
the required dissolution of Seller pursuant to Section 13.2, and (b) each
issuance of the Post-closing Shares, if any, pursuant to Section 5.1(b) shall
qualify as exempt transactions under (a) Section 4(2) of the Securities Act of
1933, as amended, and (b) applicable state securities laws (collectively, the
"EXEMPTIONS"). All certificates for the Reynolds Shares shall bear the legends
restricting the sale, transfer or disposition of the Reynolds Shares necessary
to assure compliance with the Exemptions. Such restrictions shall be removed
as soon as the applicable listing application(s) and registration statement(s)
contemplated by this Section 6 become effective.
6.3 Securities Filings. Reynolds shall, at its expense, and within sixty
(60) days following the date any Reynolds Shares (including the Post-closing
Shares) are issued pursuant to this Agreement, prepare and file with the
Securities and Exchange Commission a registration statement and any amendments
(including post-effective amendments thereto or supplements to any prospectus
contained therein), relating to the resale of the Reynolds Shares and will use
its best efforts to cause such registration statement and prospectus to become
and remain effective for a period of not less than three (3) years from the
applicable issue date.
6.4 Cooperation. Seller and Shareholders will cooperate with Reynolds and
provide such information in connection with any registration statement, report
of sale or other document reasonably required by Reynolds in the performance of
its obligations under Sections 5 and 6 of this Agreement.
7. INDIVIDUAL REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS. Each
Shareholder severally represents and warrants to Reynolds as follows:
7.1 Power and Capacity. Shareholder has the power and authority to execute
and consummate this Agreement. This Agreement and each other agreement
contemplated hereby which is executed by Shareholder constitute the valid and
legally binding obligations of Shareholder, enforceable in accordance with
their terms, except that enforceability may be limited by applicable equitable
principles or bankruptcy, insolvency, or similar laws affecting the enforcement
of creditors rights generally.
7.2 No Conflict with Other Agreements or Laws. The execution and
consummation by Shareholder of this Agreement and each other agreement
contemplated hereby which is executed by Shareholder will not (a) violate the
terms of any agreement, instrument, judgment or decree to which Shareholder is
a party or by which Shareholder or any of Shareholder's properties is bound,
(b) be in conflict with, or result in a breach of or constitute (with giving of
notice or
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<PAGE> 15
lapse of time or both) a default under any such agreement, instrument, judgment
or decree, or (c) violate any applicable federal, state, local or foreign law,
regulation or order, where the consequences of such violation, conflict, breach
or default, alone or in the aggregate, would have a material adverse effect on
the Business, the Acquired Assets or the Assumed Liabilities.
8. REPRESENTATIONS AND WARRANTIES OF SELLER AND SHAREHOLDERS. Seller and
Shareholders jointly and severally represent and warrant to Reynolds as
follows:
8.1 Corporate Action. Seller has taken all action required by its Articles
of Incorporation and Bylaws or otherwise to authorize the execution and
consummation of this Agreement and the other agreements, documents or
instruments to be executed by Seller pursuant to this Agreement (collectively,
the "SELLER AGREEMENTS"). The Seller Agreements will constitute the valid and
legally binding obligations of Seller, enforceable in accordance with their
terms, except that enforceability may be limited by applicable equitable
principles or bankruptcy, insolvency, or similar laws affecting the enforcement
of creditors rights generally.
8.2 No Conflict With Other Agreements or Laws. The execution and
consummation by Seller of the Seller Agreements will not (a) violate the terms
of Seller's Articles of Incorporation or Bylaws or any instrument, agreement,
judgment or decree to which Seller is a party, or by which Seller or any of its
properties is bound, (b) conflict with, result in a breach of or constitute
(with giving of notice or lapse of time or both) a default under any such
instrument, agreement, judgment or decree, except that Seller and the
Shareholders make no representation or warranty that any of the Contracts are
assignable to Reynolds, (c) result in the creation or imposition of any lien
upon Seller or its properties or assets, or (d) violate any applicable federal,
state, local or foreign law, regulation or order if the result of such
violation, conflict, breach, default or lien would have a material adverse
effect on Seller or the Business.
8.3 Organization and Qualification. Seller is a corporation duly organized,
validly existing and in good standing under the laws of Washington. Seller has
full power and authority to carry on its business as it is now being conducted,
to own and lease the properties and assets which it now owns or leases and to
consummate the Seller Agreements. Complete and correct copies of Seller's
Articles of Incorporation and Bylaws (including all amendments to either to
date) are attached in Exhibit 8.3. Exhibit 8.3 contains a list of all persons
other than the Shareholders who have stock options or other rights to acquire
an interest in Seller.
8.4 Interests in other Persons. Except as set forth in Exhibit 8.4, (a)
Seller does not own (nor has Seller executed or participated in any negotiation
involving any contract, commitment
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or letter of intent regarding) any shares or other securities of, or have any
proprietary interest in, any other person, and (b) Seller does not control, and
is not controlled by or under common control with any person.
8.5 Financial Statements.
(a) Attached as Exhibit 8.5(a) hereto are copies of (i) the 4/30/95 Balance
Sheet and a profit and loss statement for Seller from August 1, 1994 to the
close of business on April 30, 1995 (the 4/30/95 Balance Sheet and the profit
and loss statement for such period shall be referred to herein as the "APRIL
FINANCIAL STATEMENTS"), and (ii) Seller's balance sheet at February 28, 1995
and a profit and loss statement for Seller from August 1, 1994 to the close of
business on February 28, 1995 (such balance sheet and profit and loss statement
for such period shall be referred to herein as the "FEBRUARY FINANCIAL
STATEMENTS"). Prior to the Closing Date the parties shall attach to Exhibit
8.5(a) copies of Seller's balance sheet at May 31, 1995 and a profit and loss
statement for Seller from August 1, 1994 to the close of business on May 31,
1995 (such balance sheet and profit and loss statement for such period shall be
referred to herein as the "MAY FINANCIAL STATEMENTS"). The May Financial
Statements, the April Financial Statements and the February Financial
Statements are collectively referred to as the "FINANCIAL STATEMENTS"). Except
as set forth on Exhibit 8.5(a), the Financial Statements: (i) are correct and
complete, (ii) fairly present the financial condition of Seller (with respect
to the Acquired Assets and Assumed Liabilities) as of the respective dates
thereof and the results of operation of Seller for such periods, (iii) were
prepared in accordance with GAAP consistently applied, and (iv) disclose all
material Assumed Liabilities of Seller, whether absolute, contingent, accrued,
or otherwise. Except as disclosed in Exhibit 8.5(a), the Financial Statements
do not contain any items of nonrecurring income or loss or other income or loss
not earned or incurred in the ordinary course of business.
(b) Except as disclosed in Exhibit 8.5(b) hereto and except for (i) the
liabilities of Seller disclosed or reserved against in the 4/30/95 Balance
Sheet, (ii) current liabilities incurred in the ordinary course of business
since April 30, 1995, and (iii) executory obligations under contracts,
agreements, leases, licenses, purchase orders, sales orders and commitments, to
Seller's and Shareholders' knowledge, Seller has no material liability or
obligation, whether accrued, absolute, contingent or otherwise.
(c) Except as disclosed in Exhibit 8.5(c) hereto, to Seller's and
Shareholders' knowledge, no default exists as to any of the material (either
individually or in the aggregate) liabilities of Seller.
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8.6 Taxes.
(a) Definitions. For purposes of this Agreement:
(i) "TAXES" means all Federal, state, local, foreign, and other net income,
gross income, gross receipts, sales, use, ad valorem, transfer, franchise,
profits, license, lease, service, service use, withholding, payroll,
employment, excise, severance, stamp, occupation, premium, property, windfall
profits, customs, duties, or other taxes, fees, assessments, or charges of any
kind whatever, together with any interest and any penalties, additions to tax,
or additional amounts with respect thereto, and the term "TAX" means any one of
the foregoing Taxes.
(ii) "RETURNS" means all returns, declarations, reports, statements, and
other documents required to be filed in respect of Taxes, and the term "RETURN"
means any one of the foregoing Returns.
(iii) "CODE" means the Internal Revenue Code of 1986, as amended. All
citations to the Code or to the regulations promulgated thereunder shall
include any amendments or any substitute or successor provisions thereto.
(b) Seller and Shareholders jointly and severally represent and warrant,
except as disclosed in Exhibit 8.6, as follows:
(i) All Returns required to be filed on or prior to the date hereof have
been properly completed and filed on a timely basis and in correct form. As of
the time of filing, all such Returns correctly reflected the facts regarding
the income, business, assets, operations, activities, status, or other matters
of the Seller or any other information required to be shown thereon. An
extension of time within which to file any Return that has not been filed has
not been requested or granted.
(ii) With respect to all amounts in respect of Taxes imposed on the Seller
or for which the Seller is or could be liable, whether to taxing authorities
(as, for example, under tax allocation agreements), with respect to all taxable
periods or portions of periods ending on or before the Closing Date, all
applicable tax laws and agreements have been fully complied with, and all such
amounts required to be paid by the Seller to taxing authorities or others on or
before the date hereof have been paid.
(iii) The representations and warranties set forth in Sections 8.6(b)(i)
and 8.6(b)(ii) are not applicable to the extent that the Acquired Assets cannot
be made subject to tax liens and Reynolds cannot be made liable for taxes
relating to the matters constituting breaches of such representations and
warranties.
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(iv) No liens exist for Taxes (other than for current Taxes not yet due and
payable) on the Acquired Assets.
(v) To Seller's and Shareholders' knowledge, none of the Acquired Assets is
property that is required to be treated as being owned by any other person
pursuant to the so-called safe harbor lease provisions of former Section
168(f)(8) of the Code.
(vi) None of the Acquired Assets directly or indirectly secures any debt
the interest on which is tax-exempt under Section 103(a) of the Code.
(vii) None of the Acquired Assets is "tax-exempt use property" within the
meaning of Section 168(h) of the Code.
(viii) Seller is not a person other than a United States person within the
meaning of the Code.
(ix) To Seller's and Shareholders' knowledge, the transaction contemplated
herein is not subject to the tax withholding provisions of Section 3406 of the
Code, or of Subchapter A of Chapter 3 of the Code or of any other provision of
law.
(x) Seller has not received any notice of assessment or proposed
assessment with respect to the Taxes.
8.7 Receivables. (a) Except as set forth on Exhibit 8.7 hereto, all of the
Receivables have been generated in the ordinary course of business and, to
Seller's and Shareholders' knowledge, represent valid debts due and owing to
Seller. Except as set forth in Exhibit 8.7, to Seller's and Shareholders'
knowledge, no Receivable is subject to any counterclaim or any right of setoff.
(b) The Receivables will be collected in the aggregate recorded amounts
thereof (less the amount of any reserve for doubtful accounts shown on the
Closing Balance Sheet) on or before September 30, 1995.
8.8 Insurance. Exhibit 8.8 contains a true and correct list of all policies
of insurance maintained by Seller or covering any employees or assets of
Seller. Except as set forth in Exhibit 8.8, there are no outstanding
requirements or recommendations by any current insurer or underwriter with
respect to the Acquired Assets or otherwise which requires or recommends
changes in the conduct of the Business of, or requires any repairs or other
work to be done with respect to any of the Acquired Assets.
8.9 Absence of Changes. Since February 28, 1995 and except as disclosed on
Exhibit 8.9 hereto and except for the transactions contemplated by the Seller
Agreements, Seller has not (with respect to the Acquired Assets or Assumed
Liabilities):
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(a) engaged in any activity other than in the ordinary course (as to both
type and amount), including without limitation, the sale, transfer or
conveyance of any assets, entering into any Contract, the borrowing of any
amounts or the making of or committing to make any capital expenditures in an
aggregate amount greater than $10,000;
(b) suffered any material adverse change in the Business (including
prospects, both customer and product or service), the Acquired Assets, the
Assumed Liabilities, or Seller's financial condition, and no fact or condition
exists, or to the Seller's and Shareholders' knowledge, has been threatened,
which is reasonably likely to cause such a change in the future;
(c) incurred or increased the amount subject to any lien, encumbrance or
claim upon any of the Acquired Assets, except for any lien with respect to
taxes not yet due and payable;
(d) discharged or reduced any lien or encumbrance other than as required
by its terms, paid any liability in an amount greater than $1,000 other than
liabilities incurred in the ordinary course of business and paid in accordance
with their terms, or delayed payment of any account payable or other liability
of the Business in an amount greater than $1,000 beyond its due date;
(e) incurred any default in any liability (accrued or otherwise) where
the consequences of the default would, alone or in the aggregate, have a
material adverse effect on the Business, the Acquired Assets or the Assumed
Liabilities.;
(f) made any change adverse to it in the terms of any agreement or
instrument to which it is a party;
(g) declared or made any distribution or other payment to its security
holders, or issued any additional securities or redeemed, purchased or
otherwise acquired any of its securities, or made any change in its capital
structure;
(h) paid any bonus to or granted any increase in the rates of pay or any
increase in the pension, retirement or other benefits of its directors,
officers or other employees;
(i) incurred or agreed to incur any material indebtedness or liability or
entered into any material (alone or in the aggregate) agreement, contract or
commitment; or
(j) granted any license or sublicense of any rights under or with respect
to any Intellectual Property Intangibles except pursuant to customer contracts
in the ordinary course of business.
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8.10 Personal Property.
(a) Except for inventory, Exhibit 8.10(a) hereto sets forth a true and
correct (in all material respects) list of all items of Personal Property owned
by Seller and all furniture, fixtures, machinery, equipment, vehicles and other
personal property leased by Seller pursuant to a capitalized lease.
(b) Exhibit 8.10(b) hereto sets forth a true and correct (in all material
respects) list of all items of furniture, fixtures, vehicles, machinery,
equipment or other personal property leased by Seller pursuant to an operating
lease.
(c) Except as identified in Exhibit 8.10(c) and except for normal wear and
tear, to Seller's and Shareholders' knowledge, each item of personal property
required to be identified in Exhibit 8.10(a) or Exhibit 8.10(b) is in good
condition and repair.
(d) Seller's inventory is of a quantity and quality useable or saleable in
the ordinary course of business.
8.11 Real Property. Exhibit 8.11 hereto sets forth a true and correct list
of all real property leased or used by Seller.
8.12 Affiliates.
(a) Except as set forth in Exhibit 8.12, no Shareholder, nor any affiliate
(as defined in Rule 144 promulgated under the Securities Act of 1933; an
"AFFILIATE") of any Shareholder owns, of record, or beneficially, any
outstanding voting securities or other equity interests, or any other
securities exchangeable, convertible or exercisable for or into, whether or not
for any additional consideration, any voting securities or other equity
interests, in any person (except the Seller) which is involved in or related to
the Business.
(b) Except as set forth in Exhibit 8.12, Seller is not indebted to any
current or former shareholder, Affiliate of any shareholder, or to any
director, officer, employee, contractor or agent of Seller except for amounts
due as normal salaries, wages, commissions, benefits or reimbursement of
ordinary current business expenses, and no current or former shareholder,
Affiliate of any shareholder or director, officer, employee, contractor or
agent of Seller is indebted to Seller except for ordinary business expense
advances.
(c) Except as set forth in Exhibit 8.12, Seller has not performed (and is
not obligated to perform and has not proposed to perform in the future) any
service (whether or not Seller was or will be compensated therefor) for any
person in which any current or former shareholder, Affiliate of any
shareholder, or any director, officer, employee, contractor or agent of Seller
has any equity or proprietary interest or any option to acquire the same.
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8.13 Litigation; Compliance with Laws, Etc. Except as set forth in Exhibit
8.13, there is no action, claim or investigation pending, or, to Seller's or
Shareholders' knowledge, threatened, against Seller, nor is there any judgment
of any court, governmental agency, instrumentality, or arbitration outstanding
against Seller. Seller has not received any notice of any violation of any
law, regulation or ordinance applicable to the Seller, its properties or assets
(whether owned or leased) or the Business. Except as set forth in Exhibit
8.13, Seller and the Acquired Assets have complied with all applicable laws,
regulations, covenants, restrictions and ordinances (including, without
limitation, Environmental Laws, the Americans with Disabilities Act, laws
relating to occupational health and safety, zoning and land use regulations and
restrictions and the terms and conditions of those licenses, permits, approvals
and authorizations which are required to be identified on Exhibit 8.15) where
the consequences of failure to so comply would, alone or in the aggregate, have
a material adverse effect on the Business, the Acquired Assets or the Assumed
Liabilities.
8.14 Labor Relations. Except as set forth in Exhibit 8.14:
(a) There are no material controversies pending between Seller and any of
its current or former employees or contractors, nor, to Seller's or
Shareholders' knowledge, are any such material controversies threatened;
(b) Seller is not liable for any arrears of wages, commissions or benefits
or taxes or any penalties for failure to timely pay any of the foregoing;
(c) Seller is not a party to nor does it have any obligations under any
written, oral or implied agreement with any person or party regarding the
salary, commissions, rates of pay, benefits, or working conditions of any
employees or contractors (other than those oral agreements regarding rates of
pay set forth in Exhibit 8.14)and all of Seller's employees and contractors are
terminable at will (to the extent Washington law permits the termination of
employees "at will"); and
(d) Seller has no policy or past practice and is not a party to any
agreement relating to payment of any severance or similar benefit upon
termination of employment or contractor relationship, and no employees or
contractors of Seller will be entitled to any severance or similar benefit upon
termination of employment as contemplated by Section 15.
8.15 Licenses and Permits. Seller has obtained all licenses, permits and
governmental authorizations from all appropriate federal, state, foreign and
other public authorities necessary for the conduct of Seller's business, except
where the failure to obtain such licenses, permits or authorizations would not,
alone or
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in the aggregate, have a material adverse effect on the Business, the Acquired
Assets or the Assumed Liabilities. Exhibit 8.15 sets forth a list of each such
license, permit or authorization.
8.16 Contract Matters. Except as disclosed in Exhibit 8.16 and except for
the Contracts identified in Exhibit 1.2, Seller is not a party or subject to
any contracts, commitments, agreements, leases, purchase orders, sales orders
or licenses, which alone or in the aggregate are material to the Business, the
Acquired Assets or the Assumed Liabilities. Except as set forth in Exhibit
8.16, as to Seller, all Contracts are in full force and effect and are valid
and binding obligations enforceable against the parties thereto, except as may
be limited by applicable equitable principles or bankruptcy, insolvency, or
similar laws affecting the enforcement of creditors' rights generally. Correct
and complete copies of (a) all Contracts and (b) all agreements, leases,
licenses, contracts, commitments, purchase orders and sales orders described in
Exhibit 8.16 (the items referred to in this Exhibit 8.16 are collectively
referred to in this Agreement as the "EXCLUDED AGREEMENTS") have been delivered
to Reynolds. Except as set forth in Exhibit 8.16, to Seller's and
Shareholders' knowledge, Seller is not in default under and no condition
exists with respect to Seller which, with notice or the passage of time, or
both, would constitute a default by Seller under any of the Contracts. Except
as may be set forth in the Contracts or in the Excluded Agreements, Seller is
not subject to any agreement and has not made any commitment requiring Seller
(a) to obtain all or substantially all of its supply of any product or service
from another person, (b) to maintain the confidentiality of any non-public
information of another person, or (c) to refrain from competing or otherwise
offering its services or products to any person or in any location. Seller is
not subject to any agreement or commitment to deliver or provide any new,
modified or enhanced product or service to any customer or to develop any new,
modified or enhanced product or service.
8.17 Title to Properties; Encumbrances. Seller has good and marketable title
to all of the Acquired Assets, free and clear of any liens or encumbrances
except (a) those items disclosed on Exhibit 8.17; and (b) liens for current
personal and real property taxes assessed but not yet due and payable.
8.18 Intellectual Property Intangibles.
(a) The following items are completely and accurately (in all material
respects) described more fully in Exhibit 8.18: all United States, common law
and foreign patents, trademarks, trade names, service marks and copyrights and
all software, databases and inventions, each as owned, licensed or used by
Seller in connection with the Business.
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(b) As used in this Agreement, the term "INTELLECTUAL PROPERTY
INTANGIBLES" shall mean (i) those items required to be disclosed by Section
8.18(a) (including all registrations, and, if applicable, goodwill related to
those items) and (ii) any of the following assets of Seller owned or used in
the Business: all mask works, trade secrets, know-how, formulations, trade
dress, designs, drawings, logos, videos, technology, mailing lists, inventions,
uses of ideas, software rights, registered, assumed or fictitious business
names under which Seller is conducting the Business, confidential information,
and industrial and commercial property, whether any of the foregoing items
described in clause (i) or (ii) is owned, licensed or held for use, all without
geographical limitation and including, without limitation, the right to
infringement and other claims related thereto.
(c) All agreements to which Seller is a party relating to Intellectual
Property Intangibles, including without limitation research, development,
programming or similar services in connection therewith, are identified in
Exhibit 1.2 or Exhibit 8.16.
(d) Seller further represents and warrants, except as set forth in Exhibit
8.18, as follows:
(i) All Intellectual Property Intangibles are
owned by or are licensed to Seller without limitation or encumbrance (except
with respect to licensed Intellectual Property Intangibles as may be set forth
in the applicable agreements identified in Exhibit 1.2 or Exhibit 8.16), and,
to the extent applicable, in good standing and, to Seller's and Shareholder's
knowledge, without any challenge.
(ii) The trademarks identified in Exhibit 8.18
have been in continuous use since the date of their adoption by Seller and
first use by Seller.
(iii) All copyrights described in Exhibit 8.18
are original works of authorship of Seller or Seller has acquired all necessary
rights thereto (for the purposes for which they are used) or Seller has a valid
license to use the same.
(iv) Any trademarks, service marks or trade
names which have been obtained by Seller through transfer or assignment include
the associated goodwill.
(v) To Seller's and Shareholders' knowledge,
except as set forth in Exhibit 8.18, no infringement or unlawful use of any of
the Intellectual Property Intangibles or use of the same or similar item so as
to create a likelihood of confusion has occurred.
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(vi) To Seller's and Shareholders' knowledge,
no infringement of any copyright, trade secret, trademark rights or patent of
any other party has occurred or results from operation of the Business.
(vii) No proceedings or claims are pending or,
to Seller's knowledge, threatened, with respect to the validity or ownership of
the Intellectual Property Intangibles.
(viii) No present or former employee, officer,
director, shareholder, agent or contractor of Seller has any ownership
interest, direct or indirect, in any Intellectual Property Intangibles.
(e) Without in any way limiting the other representations
and warranties contained in this Agreement or the application of the same to
the Software (as defined below), Seller makes the following additional
representations and warranties with respect to the software and databases
identified in Exhibit 8.18 as owned by Seller (collectively, the "SOFTWARE").
Except as disclosed in Exhibit 8.18:
(i) Seller has or will have by Closing
delivered to Reynolds complete, current copies of all user and technical
documentation related to the Software. To Seller's and Shareholders'
knowledge, the Software performs in all material respects in accordance with
the documentation and other written material used in connection with the
Software and is free from any material defects in programming and operation, is
in machine-readable form, contains all current revisions of such Software, and
includes all computer programs, materials, tapes, know-how, object and source
codes related to the Software.
(ii) Neither Seller nor any contractor or agent
(directly or through employees or subcontractors or sub-agents) thereof has
developed or assisted in the enhancement of the Software or the development of
any program or product based on the Software or any part thereof without
assigning all of such person's rights and interest in the same to Seller
pursuant to an agreement included in the Contracts.
(iii) The Software was developed entirely by
employees of Seller during the time they were employees of Seller and the
Software does not, to Seller's and Shareholder's knowledge, include (A) any
inventions of the employees prior to the time they became employees of Seller
or (B) any intellectual property of any previous employer of any such employee.
(iv) No party other than Seller has any
interest in the Software. To Seller's and Shareholders' knowledge, Seller's
development, use, license or exploitation of the Software does not violate any
rights of any other person where the consequences of
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such violation could, alone or in the aggregate, have a material adverse effect
on the Business, the Acquired Assets or the Assumed Liabilities. Except as
provided in the Contracts or the Excluded Agreements, Seller does not have any
obligation to compensate any person or entity for the development, use, license
or exploitation of the Software. Except as contemplated by this Agreement and
except as licensed or used by the customers under the Contracts or the Excluded
Agreements, Seller has not granted any license, option or other rights to
develop, use, sublicense, distribute or exploit in any manner the Software,
regardless of whether requiring the payment of royalties. Seller acknowledges
that all rights in the Software shall be vested in Reynolds from and after the
Closing.
(v) Seller has taken reasonable efforts to
keep secret the source code for the Software other than for disclosure to
certain employees of, or independent contractors to, Seller in connection with
their services to Seller.
8.19 Employee Benefit Plans.
(a) Except as set forth in Exhibit 8.19, Seller has never
been a party to or otherwise obligated under or in connection with any plans,
policies, arrangements or contracts, whether written or oral, including,
without limitation, employee benefit plans as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974 ("ERISA") providing or relating
to any retirement, profit sharing, stock bonus, stock option, incentive
compensation, deferred compensation, fringe benefit or welfare benefit to or on
behalf of employees or contractors or former employees or former contractors of
Seller (including contracts or arrangements with third-party service
providers). The items described in Exhibit 8.19 are collectively referred to as
the "PLANS". Seller has provided Reynolds with true and complete copies of the
Plans and all summary plan or other descriptions related to any of the Plans.
(b) Except as disclosed in Exhibit 8.19, the Plans (and
the administration thereof) have at all times been in compliance with all
applicable laws.
(c) Except as set forth in Exhibit 8.19, no person has
asserted any claim under which Seller has any liability under any Plan (whether
or not disclosed on Exhibit 8.19) maintained by the Seller or to which Seller
is a party or may be bound, or covering or allegedly covering any employees of
Seller or under any worker's compensation or similar law, which is not fully
covered by insurance maintained with responsible insurers, paid out of a state
fund (to which Seller has made all payments due prior to the date of this
Agreement) or reserved for under the 4/30/95 Balance Sheet.
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(d) Except as otherwise required by COBRA or disclosed on
Exhibit 8.19, Seller does not provide benefits to retirees or former employees
or contractors.
8.20 Consents and Approvals. Except as set forth in Exhibit 8.20,
to Seller's and Shareholders' knowledge, no waiver, consent or approval from or
filing with any party (governmental or otherwise) is required to consummate the
Seller Agreements.
8.21 Customers and Suppliers.
(a) Seller has delivered to Reynolds a list of Seller's
customers and complete copies of all associated Contracts. Except as
identified on Exhibit 8.21, to Seller's and Shareholders' knowledge, none of
such customers intends to reduce or has threatened to reduce materially its
purchases from or business dealings with Seller whether by reason of the
consummation of this Agreement or otherwise.
(b) Seller has delivered to Reynolds a list of Seller's
suppliers. Except as identified on Exhibit 8.21, to Seller's and Shareholders'
knowledge, none of such suppliers intends to alter or has threatened to alter
materially the terms of supply to Seller whether by reason of the consummation
of this Agreement or otherwise.
8.22 Warranties. Except as may be set forth in the customer
contracts delivered to Reynolds, there are no other express warranties or
guaranties now in effect issued by Seller or outstanding with respect to the
products or services of Seller.
8.23 Bank Accounts. Exhibit 8.23 sets forth the name, location and
account number of each bank, trust company, savings and loan association or
other financial institution in which Seller has an account or safe deposit box
and the names of the persons authorized to draw thereon or having access
thereto.
8.24 Books and Records. The Books and Records are correct and
complete in all material respects with respect to the Acquired Assets and the
Assumed Liabilities.
8.25 Environmental Protection. Except as set forth on Exhibit
8.25, Seller has complied with all federal, state and local statutory and
common laws, regulations or orders relating to pollution or protection of the
environment, pollutants, contaminants, hazardous or toxic materials, wastes or
nuisance (collectively, the "ENVIRONMENTAL LAWS") and no permits, licenses or
authorizations are required in connection with such laws as a result of the
ownership of Seller's assets or the operation of its business.
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8.26 Investment Intent. Seller and Shareholders acknowledge that
the Reynolds Shares to be issued pursuant to Section 5 will be issued pursuant
to the Exemptions, and that Reynolds is relying on the representations and
warranties of Seller and Shareholders in this Section 8.26 as the basis for
Reynolds' determination that the Exemptions are available. Accordingly, Seller
and Shareholders jointly and severally represent and warrant that:
(a) they are acquiring the Reynolds Shares for investment
purposes only and without a view to the resale thereof (if at all) before such
time as such resale has been registered (or exemptions from registration
perfected) under the Act and all applicable state securities laws, and they
will not sell, encumber, dispose or otherwise transfer (collectively,
"TRANSFER") any right or interest in the Reynolds Shares, except for the
distribution of the Reynolds Shares to Shareholders upon dissolution of Seller
or surrender of Reynolds Shares to Reynolds in satisfaction of a Closing Shares
Adjustment Claim, unless such Transfer has been registered (or an exemption
from registration has been perfected) under the Act and applicable state
securities laws.
(b) Seller and Shareholders are experienced investors and
are aware of the risks inherent in an investment in the Reynolds Shares.
(c) Seller and the Shareholders have had access to such
information about Reynolds and its operations as they deem necessary to
evaluate fully an investment in the Reynolds Shares and Seller and Shareholders
are relying solely on the information provided by their advisors and
information publicly available regarding Reynolds and its operations and not
upon any statement of or information supplied by any employee, agent,
contractor or representative of Reynolds.
(d) Seller is a Washington corporation. Shareholders are
residents of the state of Washington.
8.27 Disclosure. No representation or warranty by Seller contained
in this Agreement, and no statement contained in any certificate, exhibit, list
or other instrument furnished by the Seller to Reynolds pursuant to the
provisions hereof contains or will contain any untrue statement of material
fact or omits or will omit to state a material fact necessary in order to make
the statement contained herein or therein not misleading.
9. REPRESENTATIONS AND WARRANTIES OF REYNOLDS. Reynolds represents and
warrants to Seller and Shareholders as follows:
9.1 Corporate Action. Reynolds has taken all action required by
its Articles of Incorporation or Code of Regulations or otherwise to authorize
the execution and consummation of this Agreement and each other agreement,
document or instrument to be
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executed by Reynolds pursuant to this Agreement (collectively, the "REYNOLDS
AGREEMENTS"). The Reynolds Agreements constitute the valid and legally binding
obligations of Reynolds enforceable in accordance with their terms, except that
enforceability may be limited by applicable equitable principles or bankruptcy,
insolvency, or similar laws affecting the enforcement of creditors rights
generally.
9.2 No Conflict With Other Agreements or Laws. The execution and
consummation by Reynolds of the Reynolds Agreements will not (a) violate the
terms of Reynolds' Articles of Incorporation, Bylaws or Code of Regulations or
any instrument, agreement, judgment or decree to which Reynolds is a party, or
by which Reynolds or any of its properties is bound, (b) be in conflict with,
result in a breach of or constitute (with giving of notice or lapse of time or
both) a default under any such instrument, agreement, judgment or decree, (c)
result in the creation or imposition of any lien upon Reynolds or its
properties or assets, or (d) violate any applicable federal, state, local or
foreign law, regulation or order.
9.3 Organization and Qualification. Reynolds is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Ohio. Reynolds has full power and authority to carry on its business
as it is now being conducted, to own and lease the properties and assets which
it now owns or leases and to consummate the Reynolds Agreements. Reynolds is
duly qualified to transact business and is in good standing as a foreign
corporation in each jurisdiction in which the ownership of its property or the
conduct of its business requires it to be so qualified as a foreign
corporation.
9.4 Disclosure. No representation or warranty by Reynolds
contained in this Agreement, and no statement contained in any certificate,
exhibit, list or other instrument furnished by Reynolds to Seller and
Shareholders pursuant to the provisions hereof contains or will contain any
untrue statement of material fact or omits or will omit to state a material
fact necessary in order to make the statement contained herein or therein not
misleading.
10. PRE-CLOSING COVENANTS. The parties covenant and agree as follows:
10.1 Conduct of Business Prior to Closing. Until the Closing, and
unless Reynolds shall otherwise consent in writing, Seller shall take the
following actions:
(a) operate the Business substantially as previously operated
and only in the ordinary course, and use its best efforts to preserve intact
Seller's goodwill, reputation, present business
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organization and relationships with persons having business dealings with it;
(b) maintain all personal property in good order and
condition, reasonable wear and use excepted, and maintain all policies of
insurance covering such properties in effect on the date hereof;
(c) pay Seller's accounts payable and attempt to collect the
Receivables in a manner consistent with past business practices; and
(d) comply in all material respects with all laws applicable
to the conduct of the Business.
10.2 Notification of Material Adverse Changes. Between the date
hereof and the Closing Date, Seller shall promptly notify Reynolds in writing
of the occurrence of any of the matters described in Section 8.9.
10.3 Other Transactions. Seller and the Shareholders shall deal
exclusively and in good faith with Reynolds regarding the sale of the Acquired
Assets, the capital stock of Seller or a merger involving Seller (a "SALE
TRANSACTION") and will not, and will direct the Seller's officers, directors,
financial advisors, accountants, agents and counsel not to, (i) solicit
submission of offers from any person relating to a Sale Transaction, (ii)
participate in any discussions or negotiations regarding, or furnish any
nonpublic information to any person regarding any Sale Transaction by any
person other than Reynolds, or (iii) enter into any agreement or understanding,
whether oral or written, that would have the effect of preventing consummation
of this Agreement. If Seller or Shareholders or their representatives or
agents should receive any proposal for a Sale Transaction or any inquiry
regarding such proposal from a third party, Seller will promptly so inform
Reynolds.
10.4 Consents, Waivers and Approvals. Seller shall obtain prior to
the Closing all consents, waivers, approvals, and releases of liens or
encumbrances necessary to effect the transactions contemplated herein, free and
clear of any and all liens or encumbrances except those permitted encumbrances
identified in Exhibit 10.4 (the "PERMITTED ENCUMBRANCES"). All such consents,
waivers, releases and approvals will be in writing and in form and substance
satisfactory to Reynolds.
10.5 Supplemental Disclosure. The parties shall have the
continuing obligation up to and including the Closing Date to supplement
promptly or amend the Exhibits with respect to any matter hereafter arising or
discovered which, if existing or known at the date of this Agreement, would
have been required to be set forth or listed in the Exhibits. For the purpose
of the rights and
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obligations of the parties hereunder, any such supplemental disclosure shall be
deemed to have been disclosed as of the date of this Agreement if the parties
proceed with the Closing of the transactions contemplated herein following
receipt of such supplemental or amended Exhibits.
10.6 Additional Reports. Promptly after they become available,
Seller will deliver to Reynolds copies of all management and control reports
(including agings of accounts receivable, listings of accounts payable and
inventory control reports) and financial statements routinely prepared by
Seller.
10.7 Conditions Precedent. The parties shall use their best
efforts in good faith to satisfy the conditions set forth in Sections 11 and 12
hereof.
10.8 Reynolds' Due Diligence. Seller and Shareholders shall give
Reynolds and its counsel, accountants and other representatives full access
during normal business hours to all of the books, records, files, documents,
assets, properties, contracts, and commitments of Seller, provided that such
examinations shall be conducted in such a manner so as not to disrupt the
normal business operations of Seller, and Seller shall furnish Reynolds with
such information concerning the affairs of Seller which Reynolds may reasonably
request, so that Reynolds may have a full opportunity to verify the
representations and warranties contained in this Agreement and to ascertain
such other matters concerning the financial condition, operations, employees,
business or prospects of Seller as Reynolds may deem necessary or appropriate.
Seller shall deliver to Reynolds correct and complete copies of all documents
referred to in the Exhibits.
11. CONDITIONS PRECEDENT TO OBLIGATIONS OF REYNOLDS. The obligation of
Reynolds to consummate this Agreement shall be subject to the satisfaction, on
or before the Closing Date, of the following conditions, any of which may be
waived by Reynolds in writing.
11.1 Representations. The representations and warranties made by
Seller and Shareholders in Sections 7 and 8 hereof shall be true and correct in
all material respects on the Closing Date as though such representations and
warranties had been made on such date and Seller and Shareholders shall deliver
to Reynolds a certificate dated as of the Closing Date to the foregoing effect.
11.2 Covenants. Seller and Shareholders shall have duly performed
all of the covenants, acts and undertakings to be performed by them on or prior
to the Closing Date, and Seller and Shareholders shall deliver to Reynolds a
certificate dated as of the Closing Date to the foregoing effect.
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11.3 No Injunction, Etc. No proceeding, investigation, or
legislation shall have been instituted, threatened or proposed before any
court, governmental agency or legislative body to enjoin, or prohibit, or to
obtain substantial damages in respect of this Agreement, or which is related to
the Seller, Shareholders, the Acquired Assets, the Assumed Liabilities, or
which arises out of the Business.
11.4 Opinion of Counsel. An opinion of counsel for Seller shall
have been delivered to Reynolds, dated as of the Closing Date, in form and
substance reasonably satisfactory to Reynolds and its counsel and containing
the opinions identified in Exhibit 11.4.
11.5 Incumbency. Seller shall have delivered a certificate of
incumbency executed by the president and secretary of Seller listing each
officer, director of Seller and the persons authorized to execute the Seller
Agreements.
11.6 Consents, Waivers and Approvals. Reynolds shall have received
a true and correct copy of each consent, waiver or approval required to be
identified in Exhibit 8.20 hereto or otherwise described in Section 10.4.
11.7 Absence of Material Adverse Changes. Since February 28, 1995,
(a) Seller shall not have suffered any material adverse change in its financial
condition, business or the Acquired Assets or Assumed Liabilities, and (b)
Seller and Shareholders shall not have taken, omitted, permitted or suffered
any transaction or event described in Section 8.9 hereof which is not described
in Exhibit 8.9 hereto.
11.8 Certified Resolutions. Seller shall have delivered to
Reynolds a certificate executed by a duly authorized officer of Seller
containing a true and correct copies of the resolutions duly adopted by the
board of directors of Seller and the Shareholders approving and authorizing the
Seller Agreements and their consummation. Such officer shall also certify that
such resolutions have not been revoked or modified and remain in full force and
effect.
11.9 Confirmations. Reynolds shall have received pay-off letters
with respect to all loans included in the Assumed Liabilities confirming the
outstanding balances under those loans and the undertaking by the lenders to
release all collateral therefor upon receipt of the balance and containing such
other terms as Reynolds may reasonably request. Reynolds shall have received
confirmations of the amounts due under such other Assumed Liabilities as
Reynolds may request. Such pay-off letters and confirmations shall not require
the payment of any pre-payment penalty or fee or require any other undertaking
by any Reynolds Company.
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11.10 Title Assurances. Reynolds shall have received certified
uniform commercial and judgment and tax lien searches from all applicable
jurisdictions confirming title to Seller's assets as represented in Section
8.17.
11.11 Basic Corporate Documents. Seller shall have delivered to
Reynolds copies of the Seller's Articles of Incorporation, certified as of a
date within 30 days prior thereto by the Secretary of State of Washington,
Seller's Bylaws, certified as of such a date by Seller's Secretary, and
certificates of good standing (long-form where available) or authority from the
Secretary of State of Washington.
11.12 Glenn Northrup. Seller shall have entered into and performed a
comprehensive mutual release agreement with Glenn Northrup in a form reasonably
satisfactory to Reynolds resolving all disputes between Seller and Glenn
Northrup and terminating all contracts or agreements between the parties and
any right of Mr. Northrup to acquire shares or any other interest in Seller.
11.13 Employment Agreements. Each of Martin Rood, Peter Wilson and
Wendy Colgan shall have executed an Employment and Non-competition Agreement in
substantially the form of the applicable agreement in Exhibit 11.13
(collectively, the "EMPLOYMENT AGREEMENTS"). All remaining employees of the
Business to whom Reynolds has offered and they have accepted full or part-time
employment shall have executed Reynolds' standard form employee confidentiality
agreements.
11.14 Intellectual Property Intangibles. Seller shall have ceased to
use in any manner the names "DISC" and "DealerNet" (and any derivatives
thereof), and any other Intellectual Property Intangibles, except in connection
with tax returns, filings with other governmental authorities and for similar
purposes. Seller shall deliver to Reynolds a duly executed amendment to
Seller's Articles of Incorporation to change Seller's corporate name (Seller
acknowledges that it is Reynolds' intention to change its name immediately
after Closing to a name incorporating "DISC", "DealerNet" or "Dealer Internet
Services Corporation" or a derivative of one or more of the foregoing and
Seller's name after the Closing shall not incorporate any of those names or
derivatives thereof).
11.15 Instruments of Transfer. Seller shall have executed and
delivered to Reynolds on the Closing Date such bills of sale, endorsements,
assignments and other instruments of transfer as are provided for herein, or as
otherwise necessary to vest in Reynolds all of Seller's title and rights with
respect to the Acquired Assets, free and clear of all liens or encumbrances
(except the Permitted Encumbrances) provided Reynolds and its legal
representatives shall undertake to prepare such instruments.
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11.16 Certificates. Seller shall have delivered to Reynolds all such
certificates, dated as of the Closing Date, as Reynolds shall reasonably
request to evidence the fulfillment by Seller, or other satisfaction as of the
Closing Date, of the terms and conditions of this Agreement.
11.17 Certain Assignments. Seller shall have delivered duly executed
assignments from the persons identified in Exhibit 11.17 (such assignments
shall be in a form satisfactory to Reynolds).
11.18 Escrow Agreement. Seller, Shareholders and the Escrow Agent
shall have executed the Escrow Agreement.
11.19 May Financial Statements. Seller shall have delivered to
Reynolds the May Financial Statements.
11.20 Intentionally Omitted.
11.21 Releases. Seller shall have delivered to Reynolds releases in a
form satisfactory to Reynolds and executed by Jay Powers, Bob Hunter and Ed
Scott in each case waiving any rights they may have to acquire any stock or
other securities of Seller.
11.22 Transaction Expense Confirmations. Seller shall have delivered
to Reynolds written confirmations in the form of Exhibit 11.22 from those
persons to whom the Transaction Expenses are owed confirming the amount of the
obligation and containing a release of Reynolds effective upon payment of such
obligation in full.
11.23 Severance Agreements. Seller shall have delivered severance
agreements (in a form satisfactory to Reynolds) executed by those employees of
Seller who have not been offered employment by Reynolds (other than Tom Hawn
and Ed Scott).
11.24 Trademark License. Seller shall have executed and delivered a
trademark license in the form of the attached Exhibit 11.24.
12. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER AND THE SHAREHOLDERS.
The obligation of Seller and the Shareholders to consummate this Agreement
shall be subject to the satisfaction, on or before the Closing Date, of the
following conditions, any of which may be waived by Seller and Shareholders in
writing.
12.1 Representations. The representations and warranties made by
Reynolds in Section 9 hereof shall be true and correct in all material respects
on the Closing Date with the same force and effect as though such
representations and warranties had been made on and as of such date and
Reynolds shall deliver to Seller and Shareholders a certificate dated as of the
Closing Date to the foregoing effect for Reynolds.
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12.2 Covenants. Reynolds shall have duly performed all of the
covenants, acts or undertakings to be performed by it on or before the Closing
Date, and Reynolds shall deliver to Seller and Shareholders certificates dated
as of the Closing Date to the foregoing effect.
12.3 Certified Resolutions. Reynolds Company shall have delivered
to Seller and Shareholders certificates executed by duly authorized officers
and containing true and correct copy of resolutions duly adopted by Reynolds'
Board of Directors approving and authorizing the issuance of the Reynolds
Shares and the obligations of Reynolds with respect to registration of the
resale thereof pursuant to Section 6 of this Agreement. Such officers shall
also certify that such resolutions have not been revoked or modified and remain
in full force and effect.
12.4 Opinion of Counsel. An opinion of counsel for Reynolds shall
have been delivered to Seller and Shareholders, dated as of the Closing Date,
in form and substance reasonably satisfactory to Seller and its counsel, and
containing the opinions identified in Exhibit 12.4.
12.5 No Injunction, Etc. No proceeding, investigation or
legislation shall have been instituted, threatened or proposed before any
court, governmental agency or legislative body to enjoin, or prohibit, or to
obtain substantial damages in respect of this Agreement.
12.6 Consents, Waivers and Approvals. Seller and Shareholders
shall have received a true and correct copy of each consent, waiver or approval
obtained by either Reynolds Company and required for its execution and
consummation of this Agreement.
12.7 Incumbency. Each Reynolds Company shall have delivered a
certificate of incumbency executed by its president or a vice president and the
secretary or an assistant secretary listing the persons authorized to execute
the Reynolds Agreements and, with respect to Reynolds, confirming that no
further action by or approval of the board of directors or shareholders of
Reynolds is required under Reynolds' Articles of Incorporation or Code of
Regulations as a condition to the validity and binding effect of the Reynolds
Agreements on Reynolds.
12.8 Employment Agreements. Reynolds shall have executed an
Employment Agreements.
12.9 Escrow Agreement. Reynolds and Escrow Agent shall have
executed the Escrow Agreement.
12.10 Assumption Agreement. Reynolds shall have executed an assumption
agreement with respect to the Assumed Liabilities in
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form and substance reasonably satisfactory to Seller and the Shareholders.
12.11 Certificates. Reynolds shall have delivered to Seller all such
certificates, dated as of the Closing Date, as the Seller shall reasonably
request to evidence the fulfillment by Reynolds, or other satisfaction as of
the Closing Date, of the terms and conditions of this Agreement.
13. MUTUAL COVENANTS.
13.1 General. Each of the parties hereto shall refrain
from taking any action which would render any representation or warranty
contained in Sections 7, 8 or 9 of this Agreement inaccurate as of the Closing
Date. Each party shall promptly notify the other of any action or proceeding
that shall be instituted or threatened against such party to restrain, prohibit
or otherwise challenge the legality of any transaction contemplated by this
Agreement. Each party shall take such further action as may reasonably be
requested by another party to evidence the consummation of this Agreement.
13.2 Tax Matters. The parties will file their respective income
tax returns on the basis that this transaction qualifies as a "reorganization"
under Section 368(a) of the Code. The parties will not take a tax return
position inconsistent with the foregoing tax return positions unless such
inconsistent position shall arise out of or through an audit of such returns by
the Internal Revenue Service or other taxing authority. Seller and
Shareholders shall cooperate with Reynolds to identify the target tax
attributes and tax basis information and shall provide Reynolds with all
relevant records related thereto. Shareholders will cause Seller to be
dissolved and completely liquidated prior to the first anniversary of the
Closing Date.
14. CLOSING.
14.1 Time and Place. The closing (the "CLOSING") shall be held at
the Embassy Suites, Lynnwood, Washington on June 15, 1995, at 3:00 p.m., or at
such other place or time or on such other date as the parties hereto may
mutually agree. For purposes of this Agreement, the "CLOSING DATE" shall be
June 15, 1995.
14.2 Transactions at the Closing. At the Closing, each of the
following transactions shall occur:
(a) Seller and Shareholders shall deliver to Reynolds the
following:
(i) the certificates, opinion, agreements,
instruments and documents required of Seller and/or the Shareholders described
in Sections 11;
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(ii) copies of the consents, waivers and approvals
described in Section 10.4;
(iii) the updated Exhibits required by Section 10.5;
and
(iv) such other evidence of the performance of
all covenants and satisfaction of all conditions required of the Seller and
Shareholders by this Agreement, at or prior to the Closing, as Reynolds or its
counsel may reasonably require.
(b) Reynolds shall deliver to Seller, Shareholders, or
Escrow Agent, as applicable, the following:
(i) certificates for the Closing Shares
required under Section 5.1 shall be delivered to Seller and Escrow Agent;
(ii) the certificates, opinion, agreements and
documents required of Reynolds described in Section 12;
(iii) copies of the consents, waivers and approvals
described in Section 12.6;
(iv) a certificate of good standing of Reynolds
from the Secretary of State of Ohio as of the most recent practicable date; and
(v) such other evidence of the performance of
all the covenants and satisfaction of all of the conditions required of
Reynolds by this Agreement, at or before the Closing, as Seller and
Shareholders or their counsel may reasonably require.
14.3 Default at Closing. If Seller or Reynolds shall fail or
refuse to consummate the transactions set forth in this Agreement on or prior
to the Closing Date, and if the other of Seller or Reynolds shall not then be
in material breach under terms of this Agreement, all other conditions to the
Closing shall have been satisfied and such other party shall stand ready,
willing and able to make tender of its deliveries required under Section 14.2,
then, in addition to any other remedies available to such other party, that
other party may invoke any equitable remedies to cause the consummation of the
transactions set forth in this Agreement, including, without limitation, an
action or suit for specific performance.
15. EMPLOYEES OF SELLER. From the date hereof to the Closing, Seller will
use its best efforts to maintain its existing relations with its employees and
not to alter current personnel policies and practices. As of the Closing Date,
Seller shall permit Reynolds to offer employment to and to hire some or all of
Seller's employees, and, as of the Closing Date, Seller terminate all of its
employees who have accepted employment with Reynolds; provided, however, that
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this Agreement shall not be construed as an obligation of Reynolds to hire or
engage any of Seller's former employees or contractors or to offer any specific
terms, benefits or compensation (this sentence shall not affect Reynolds'
obligations under the Employment Agreements [as defined in Section 11.13]).
For a period of up to 60 days after the Closing, Seller (and/or CMI) will
retain Ed Scott and Tom Hawn as employees, and Seller will make those employees
available to Reynolds to assist in the transition of the Business. Reynolds
shall reimburse Seller and CMI for a pro rata portion of the compensation and
benefits payable to such employees based upon the compensation and benefits
payable to such employees by Seller as of the Closing Date.
16. SURVIVAL. All statements contained in the Seller Agreements or the
Reynolds Agreements, as the case may be, shall be deemed representations and
warranties hereunder by Seller, Shareholders or Reynolds, as the case may be.
Except as provided in this Section 16, all representations, warranties and
covenants made by Seller, Shareholders or Reynolds in the Seller Agreements or
the Reynolds Agreements, as applicable, shall survive until the third (3rd)
anniversary of the Closing Date. The representations and warranties of Seller
and Shareholders in Section 8.6 shall survive until 30 days after expiration of
the applicable statutes of limitation and the representations and warranties in
Sections 7, 8.17, 9.1, 9.2 and 9.3 shall survive forever. No claim for breach
of a representation or warranty (including an Indemnification Claim as defined
in Section 19) may be brought by any person unless written notice of such claim
(containing such information as the notifying party shall have about such
claim) shall have been given on or prior to the last day of the applicable
survival period in this Section 16 (in which event each representation and
warranty with respect to any asserted claim shall survive until such claim is
finally resolved and all obligations with respect thereto are fully satisfied).
17. TERMINATION. This Agreement may be terminated, and the transactions
contemplated herein abandoned (a) by the mutual written consent of Seller and
Reynolds; (b) by either Seller or Reynolds upon the failure of the other to
comply substantially with its conditions precedent to Closing and other
obligations set forth herein on or before the Closing Date; or (c)
automatically at 5:00 p.m. Dayton, Ohio time on June 30, 1995, if the Closing
has not been completed by that time. Termination pursuant to this Section
shall relieve the parties of their obligations hereunder with each party
responsible for its own, fees, costs and expenses.
18. COLLECTION OF RECEIVABLES. After the Closing, Reynolds shall attempt
to collect the Receivables in the same manner as Reynolds attempts to collect
its other receivables; provided, that Reynolds shall not be required to pursue
collection through third parties or to litigation, and, provided further, that
Reynolds will not write-off any Receivable as uncollectible prior to September
30, 1995
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<PAGE> 38
without the prior approval of Marty Rood. Unless otherwise specifically
directed by the customer, all amounts received from a customer shall be applied
to outstanding invoices in chronological order. In the event any Receivables
remain uncollected at September 30, 1995 and Reynolds is indemnified for the
corresponding breach of Section 8.7(b), upon receipt of payment in full of such
indemnification, Reynolds shall assign to Seller all of Reynolds' rights in the
uncollected Receivables and any related claims against the account debtors.
19. INDEMNIFICATION.
19.1 Losses. For purposes of this Section 19, "LOSSES" shall mean
all damages, losses, costs, expenses (including attorneys' fees), interest,
penalties, charges and liabilities.
19.2 Indemnification by Seller and Shareholders. Seller and
Shareholders jointly and severally agree to indemnify, defend and hold harmless
Reynolds from and against any Loss incurred by Reynolds related to or arising
out of (a) the breach of any of the warranties, representations, covenants or
agreements of Seller or Shareholders in the Seller Agreements, or (b) any
Excluded Liability or Excluded Asset.
19.3 Indemnification by Reynolds. Reynolds agrees to indemnify,
defend and hold harmless Seller and Shareholders from and against any Loss
incurred by any of them related to or arising out of (a) the breach of any of
the warranties, representations, covenants or agreements of Reynolds in the
Reynolds Agreements, or (b) any Acquired Asset or Assumed Liability.
19.4 Procedures for Indemnification. "INDEMNITOR" shall mean the
party against whom indemnity is sought, and "INDEMNITEE" shall mean the party
seeking indemnification.
(a) A claim for indemnification hereunder
("INDEMNIFICATION CLAIM") shall be made by Indemnitee by delivery of a written
declaration to Indemnitor requesting indemnification and specifying the basis
on which indemnification is sought and the amount of asserted Losses and, in
the case of a Third Party Claim (as defined in Section 19.5 hereof), containing
such other information as Indemnitee shall have concerning such Third Party
Claim.
(b) If the Indemnification Claim involves a Third Party
Claim the procedures set forth in Section 19.5 hereof shall be observed by
Indemnitee and Indemnitor.
(c) If the Indemnification Claim involves a matter other
than a Third Party Claim, the Indemnitor shall have thirty (30) days to object
to such Indemnification Claim by delivery of a written notice of such objection
to Indemnitee specifying in reasonable detail the basis for such objection.
Failure to timely
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<PAGE> 39
so object shall constitute acceptance of the Indemnification Claim by the
Indemnitor and the Indemnification Claim shall be paid in accordance with
Section 19.4(d). If any objection is timely interposed by the Indemnitor and
the dispute is not resolved within thirty (30) days from the date Indemnitee
receives such objection, such dispute will be resolved as provided in Section
21.13 of this Agreement.
(d) Upon determination of the amount of an
Indemnification Claim (including a Third Party Claim), whether by agreement
between Indemnitor and Indemnitee, by an arbitration award or otherwise,
Indemnitor shall pay the amount of such Indemnification Claim within thirty
(30) days of the date such amount is determined.
19.5 Defense of Third Party Claims.
(a) Should any claim be made, or suit or proceeding
(including, without limitation, a binding arbitration or an audit by any taxing
authority) be instituted against Indemnitee which, if prosecuted successfully,
would be a matter for which Indemnitee is entitled to indemnification under
this Agreement (a "THIRD PARTY CLAIM"), the obligations and liabilities of the
parties with respect to such Third Party Claim shall be subject to the
following terms and conditions.
(b) Within a reasonable time (i.e., such time as will not
prejudice the contest, defense, litigation, or settlement of a Third Party
Claim) following the receipt of notice of a Third Party Claim, the party
receiving the notice of the Third Party Claim shall (i) notify the other party
of its existence setting forth in writing and with reasonable specificity the
facts and circumstances of which such party has received notice, and (ii) if
the party giving such notice is an Indemnitee, specifying in writing the basis
hereunder upon which the Indemnitee's claim for indemnification is asserted and
tendering defense of the Third Party Claim to Indemnitor. If the defense of a
Third Party Claim is so tendered and within ten (10) days thereafter such
tender is accepted without qualification by the Indemnitor as evidenced by
written notice to Indemnitee, then, except as hereinafter provided, the
Indemnitee shall not, and the Indemnitor shall, have the right to contest,
defend, litigate and settle such Third Party Claim. The Indemnitee shall have
the right to be represented by counsel at its own expense in any such contest,
defense, litigation or settlement conducted by the Indemnitor, provided that
the Indemnitee shall be entitled to reimbursement therefor if the Indemnitor
shall lose its right to contest, defend, litigation and settle the Third Party
Claim as herein provided. The Indemnitor shall lose its right to contest,
defend, litigate and settle the Third Party Claim if it shall fail to
diligently contest the Third Party Claim (except in connection with a
settlement thereof in accordance with the terms hereof). So long as the
Indemnitor has
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not lost its right to defend, contest, litigate and settle as herein provided,
the Indemnitor shall have the exclusive right to contest, defend and litigate
the Third Party Claim and shall have the exclusive right, in its discretion
exercised in good faith, and with the advice of counsel, to settle any such
matter, either before or after the initiation of litigation, at such time and
upon such terms as it deems fair and reasonable, provided that at least ten
(10) days prior to any such settlement, written notice of its intention to
settle shall be given to the Indemnitee (which notice shall specify the
proposed items of settlement). All expenses (including without limitation
attorneys' fees) incurred by the Indemnitor in connection with the foregoing
shall be paid by the Indemnitor. No failure by an Indemnitor to acknowledge in
writing its indemnification obligations under this Section 19 shall relieve it
of such obligations to the extent they exist. If an Indemnitee is entitled to
indemnification against a Third Party Claim, and the Indemnitor fails to accept
or assume the defense of a Third Party Claim pursuant to clause (i) or clause
(ii) of this Section 19.5(a), or if, in accordance with the foregoing, the
Indemnitor shall lose its right to contest, defend, litigate and settle such a
Third Party Claim, the Indemnitee shall have the right, without prejudice to
its right of indemnification hereunder, in its discretion exercised in good
faith, and upon the advice of counsel, to contest, defend and litigate such
Third Party Claim, and may, in its discretion exercised in good faith, and with
the advice of counsel, settle such Third Party Claim, either before or after
the initiation of litigation, at such time and upon such terms as it deems fair
and reasonable, provided that at least ten (10) days prior to any such
settlement, written notice of its intention to settle is given to the
Indemnitor. If, pursuant to this Section 19.5, the Indemnitee so contests,
defends, litigates or settles a Third Party Claim for which it is entitled to
indemnification hereunder, as hereinabove provided, the Indemnitee shall be
reimbursed by the Indemnitor for the reasonable attorneys' fees and other
expenses of defending, contesting, litigating and/or settling the Third Party
Claim which are incurred from time to time, forthwith following the
presentation to the Indemnitor of itemized bills for such attorneys' fees and
other expenses.
19.6 Limitations.
(a) All notices of Loss must be delivered to the
Indemnitor prior to expiration of the applicable periods for the warranties and
representations as set forth in Section 16 hereof.
(b) Notwithstanding anything to the contrary herein,
except for the obligations (the "EXEMPT INDEMNIFICATION OBLIGATIONS") under (i)
Section 19.2(a) with respect to Excluded Liabilities and breaches of the
representations and warranties of Seller or the Shareholders contained in
Sections 8.6, 8.7(b) and 8.17 and (ii) Section 19.3(a) with respect to Assumed
Liabilities and breaches of the representations and warranties of Reynolds
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<PAGE> 41
contained in Section 9, neither Seller and Shareholders nor Reynolds, as an
Indemnitor, shall have any obligation until the aggregate of all Losses payable
by the Indemnitor to the Indemnitee exceeds $10,000 (the "FLOOR"). Upon the
aggregate of all Losses payable by the Indemnitor (except the Exempt
Indemnification Obligations) exceeding the Floor, Seller and Shareholders or
Reynolds, as applicable, shall be liable to the Indemnitee on a
dollar-for-dollar basis, for the amount above the Floor.
(c) With respect to Losses payable in respect of Exempt
Indemnification Obligations, Seller and Shareholders, or Reynolds, as
applicable, shall be liable for all such Losses from the first dollar in any
event.
(d) The payment of any Indemnification Claim pursuant to
Section 19 hereunder shall constitute an additional adjustment to the Closing
Shares under Section 5.
(e) A Closing Shares Adjustment Claim shall not be an
Indemnification Claim and shall not be subject to the Floor.
(f) Subject to Section 22.2, in the event the aggregate
amount payable by Seller and the Shareholders under Section 19.2 exceeds the
balance of the Escrow Fund, Seller and the Shareholders shall remain jointly
and severally liable for the unpaid amount in excess of the balance of the
Escrow Fund.
(g) The remedies provided in this Section 19 are in
addition to, and not in derogation of, any statutory, equitable, or common law
remedy any party may have for breach of any representation, warranty, covenant
or agreement set forth in the Seller Agreements or the Reynolds Agreements, as
applicable.
20. TRANSACTION EXPENSES.
20.1 Brokers. Seller, Shareholders and Reynolds each represent and
warrant to the other that no broker or finder has acted for it or them in
connection with this Agreement.
20.2 Expenses. Except as provided in Section 3.3, all expenses
incurred by the parties in connection with or related to the authorization,
preparation, negotiation and consummation of this Agreement and the agreements,
documents or instruments contemplated hereby shall be borne solely by the party
which has incurred the same.
21. MISCELLANEOUS.
21.1 Accounting Records. From and after the Closing Date, Seller
and the Shareholders and their representatives shall have reasonable access to
all of the Books and Records for the period prior to the Closing Date, but only
to the extent that such access
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may reasonably be required by such persons in connection with matters relating
to or affected by the operations of Seller prior to the Closing Date. Such
access shall be afforded by Reynolds upon receipt of reasonable advance notice
and during normal business hours. From and after the Closing Date, Reynolds
and its representatives shall have reasonable access to all of the books and
records of the Business for the period prior to the Closing Date which are
retained by Seller, but only to the extent that such access may reasonably be
required by such persons in connection with matters relating to or affected by
the operations of Seller prior to the Closing Date. Such access shall be
afforded by Reynolds upon receipt of reasonable advance notice and during
normal business hours.
21.2 Notice. All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed given and
received (a) on the date of delivery when delivered by hand or when transmitted
by confirmed simultaneous telecopy, (b) on the following business day when sent
by receipted overnight courier, or (c) five (5) business days after deposit in
the United States Mail when mailed by registered or certified mail, return
receipt requested, first class postage prepaid, as follows:
(a) If to Seller to:
Dealer Internet Services Corporation
21000 Highway 99
P. O. Box 5908
Lynnwood, WA 98046-5908
Fax: (206) 774-8988
(b) If to either Shareholder to the applicable address:
Martin S. Rood
15562 Lake Shore Boulevard N.E.
Seattle, WA 98155
Fax: (206) 364-6307
Peter M. Wilson
19331 2nd Avenue N.W.
Seattle, WA 98177
Fax: (206) 542-7552
(c) If to Reynolds to:
The Reynolds and Reynolds Company
800 Germantown Street
Dayton, Ohio 45407
ATTN: Vice President, Information Systems Group,
Automotive Systems Division
Fax: (513) 443-2029
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With a copy to:
The Reynolds and Reynolds Company
Divisional General Counsel
800 Germantown Street
Dayton, Ohio 45407
Fax: (513) 443-2094
Any party may change the address to which notices are to be sent to it by
giving written notice of such change of address to the other parties in the
manner above provided for giving notice.
21.3 Assignment; Binding Effect. Except as contemplated by
Section 22.1 with respect to Seller and the Shareholders, this Agreement may
not be assigned by any of the parties hereto without the prior written consent
of the other parties hereto. This Agreement shall be binding upon the parties
hereto and their respective permitted successors, assigns and transferees.
21.4 Headings; Exhibits and Schedules. The Section, Subsection
and other headings in this Agreement are inserted solely as a matter of
convenience and for reference, and are not a part of this Agreement. The
Exhibits and Schedules attached hereto are a material part of this Agreement
and are incorporated herein by this reference.
21.5 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one counterpart has been signed by each party and
delivered to the other party hereto.
21.6 Integration of Agreement. This Agreement supersedes all
prior agreements, oral and written, between the parties hereto with respect to
the subject matter hereunder. Neither this Agreement, nor any provision
hereof, may be changed, waived, discharged, supplemented or terminated orally,
but only by an agreement in writing signed by the party against which the
enforcement of such change, waiver, discharge or termination is sought.
21.7 Time of Essence. Time is of the essence in this Agreement.
21.8 Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the state of Washington.
21.9 Disclosure. Reynolds, Seller and Shareholders each agree not
to issue any press release or make any public announcement or other disclosure
to competitors, customers, employees or any other person (except to employees
and agents on a need-to-know basis in order to complete transactions and who
agree to bound hereby) concerning this Agreement except as required by
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law or with the advance written approval of the other party, which approval
shall not be unreasonably withheld.
21.10 Partial Illegality or Unenforceability. Wherever possible, each
provision hereof shall be interpreted in such manner as to be effective under
applicable law, but in case any one or more of the provisions contained herein
shall, for any reason, be held to be illegal or unenforceable in any respect,
such illegality or unenforceability shall not affect any other provisions of
this Agreement, and this Agreement shall be construed as if such illegal or
unenforceable provision or provisions had never been contained herein unless
the deletion of such provision or provisions would result in such a material
change as to cause completion of the transactions contemplated hereby to be
unreasonable.
21.11 Singular or Plural. All defined terms used herein shall have
the same meaning, whether used in the singular or plural form, unless the
context clearly requires otherwise.
21.12 Effect of Investigation. Any inspection, preparation or
compilation of information or Exhibits or audit of the inventories, properties,
financial condition or other matters relating to the Seller, the Acquired
Assets, the Assumed Liabilities or the Business conducted by or on behalf of
Reynolds pursuant to this Agreement shall in no way limit, affect or impair the
ability of Reynolds to rely upon the representations, warranties, covenants and
agreements of Seller and Shareholders set forth herein.
21.13 Arbitration.
(a) Any controversy, dispute or claim arising out of or
relating to this Agreement shall be submitted to a single arbitrator in
accordance with the commercial rules of the American Arbitration Association
("AAA"), and each party will be bound by such arbitrator's award or
determination.
(b) If the parties have not agreed within thirty (30)
days after service of a demand upon the single arbitrator to whom the
controversy, dispute or claim will be submitted, then such arbitrator, who
shall not be from the Dayton, Ohio or Seattle, Washington metropolitan areas,
shall be appointed by the AAA. The provisions of the Federal Rules of Civil
Procedure which provide for discovery shall be applicable to any such
arbitration. The parties agree that such discovery must be completed within
six (6) months after the claim has been filed with the AAA and service on the
other party effected.
(c) Any arbitration proceedings will be conducted in San
Francisco, California unless the parties otherwise agree.
(d) The parties agree to be bound by the decision of the
arbitrator and the decision thereof to be entered into any
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appropriate court or other jurisdiction. Unless otherwise provided in this
Agreement, the prevailing party in the arbitration shall be promptly reimbursed
for its reasonable costs and fees (including attorneys' fees) incurred in
connection with the arbitration and shall not be responsible for the costs of
arbitration.
21.14 "Knowledge." For purposes of this Agreement, "to Seller's
knowledge" or "to Seller's and Shareholders' knowledge" shall mean the
actual knowledge of the officers, directors and Shareholders of Seller after
due inquiry into the subject matter.
21.15 "Person." The term "person" shall be broadly interpreted to
include, without limitation, any corporation, partnership, association, limited
liability company, other association, trust or individual.
21.16 "Best Efforts." The use of the term "best efforts" herein shall
in no event require any party to (a) expend funds which are not commercially
reasonable in relation to the transactions contemplated hereby or (b) take, or
cause to be taken, any action which would have a material adverse effect with
respect to it.
21.17 "Including." Whenever the term "including" is used in this
Agreement, it shall mean "including, without limitation," (whether or not such
language is specifically set forth) and shall not be deemed to limit the range
of possibilities of those items specifically enumerated.
21.18 "Ordinary Course of Business." "Ordinary course of business"
means consistent with past custom and practice (including with respect to
quantity and frequency).
22. SELLER'S OBLIGATIONS; SHAREHOLDERS' LIMITATION OF LIABILITY.
22.1 Shareholders' Guaranty. Shareholders hereby jointly and
severally guarantee the prompt performance by Seller of its obligations under
this Agreement. This guaranty is one of payment, not collection. Upon the
dissolution and liquidation of Seller as contemplated by this Agreement,
Shareholders shall automatically and without further action assume all
obligations of the Seller hereunder and shall receive all rights and benefits
of Seller hereunder; provided, however, that Section 23 shall not apply to the
Shareholders and they shall be subject to the corresponding provisions of their
respective Employment Agreements.
22.2 Limitation. Notwithstanding anything to the contrary
contained herein, the cumulative liability of each of the Shareholders under
all of the provisions of this Agreement, including, without limitation,
Sections 7, 8, 10, 11, 13-17, 19, 21.13, 22.1 and 26, shall be limited to the
pro rata portion (i.e., 95% or 5%, as applicable) of the dollar value of the
Reynolds
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Shares (including, without limitation, Post-closing Shares), previously
delivered to Seller (or, upon dissolution of Seller, its successors) or Escrow
Agent, including a pro rata portion of all Reynolds Shares deliverable to
Seller but for the exercise by Reynolds of its right of set- off under Section
5 of Exhibit 5.2 (it being the intention of the parties that inclusion of such
Reynolds Shares shall not result in a double counting) and the reduction
required by Section 8 of Exhibit 5.2. The "dollar value" shall be determined
by using the Base Price for the Closing Shares and the Escrow Shares and the
applicable "Current Base Price" (as defined in Exhibit 5.2) for all
Post-closing Shares. In the event the preceding limitation applies and,
subsequent to that event, additional Post-closing Shares become deliverable to
Seller or its successors (or subject to such right of set-off), the limitation
shall be increased to reflect such additional Post-closing Shares. In the
event the preceding limitation applies, Reynolds waives all claims against the
Shareholders for amounts otherwise due under this Agreement in excess of the
foregoing limitation.
23. COVENANT NOT TO COMPETE.
23.1 Covenant Not to Compete. Seller covenants and agrees that,
prior to the first (1st) anniversary of the Closing Date, Seller shall not,
either directly or indirectly, compete with any Reynolds Company in the Subject
Business in the world.
23.2 Definitions. The following definitions shall apply to this
Section 23:
(a) "COMPETE" shall mean: (i) calling on, soliciting or
accepting as a client or customer, any person that on the applicable date is
presently or was a client or customer of the Business during the twelve (12)
month period prior to the applicable date; (ii) entering into, or attempting to
enter into, the Subject Business, either alone or in conjunction with any
person; or (iii) hiring or attempting to hire, for Seller's or another person's
behalf, any employees of the Business as of the Closing Date or at any time
during the duration of the covenant in Section 23.1.
(b) "DIRECT OR INDIRECT" competition shall include (i)
acting (directly through Seller or indirectly through its employees, agents or
contractors), with respect to the Subject Business, as an agent,
representative, consultant, officer, director, independent contractor or
employee of any person that is engaged in the Subject Business or engaging on
Seller's own behalf in the Subject Business, or (ii) participating in any such
competing person as an owner, partner, limited partner, joint venturer,
creditor, stockholder, or member. "Direct" or "indirect" competition shall not
include the ownership of voting securities or other equity interest
representing less than 5% (collectively among Seller, Shareholders, and their
Affiliates) of the voting power of an entity.
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(c) "SUBJECT BUSINESS" shall mean those businesses in
which Reynolds (for this purpose only Reynolds shall include all subsidiaries
of Reynolds) is engaged at any time during the duration of the covenant in
Section 23.1. "Subject Business" shall include all potential applications of
any particular business in which Reynolds is so engaged to persons engaged in
any of the following: (a) the manufacture, sale, service, repair, rental, lease
or other transfer or the location of automobiles, trucks, motorcycles,
recreational vehicles, marine vessels or equipment or farm implements of any
kind or parts of any of the foregoing or the after-market for parts for any of
the foregoing, (b) the provision of medical, dental, nursing, chiropractic or
psychiatric care or services or location of such services or the distribution
or provision of pharmaceutical products of any kind or the location of such
products or the after-market for those products or services, (c) the provision
or location of financial services (including loans, leases, appraisals and
credit analysis and/or reporting) or investment services, or (d) the provision
or location of insurance services.
For example, if Reynolds is engaged in a particular computer
service for new vehicle dealers that could similarly be applied to physicians
but is not so applied during the Term, the Subject Business would include not
only that service for new vehicle dealers but that same service for physicians.
23.3 Equitable Relief. Seller acknowledges that a breach of any
provision of this Section 23 cannot be compensated adequately by damages in an
action at law, and that such a breach would cause Reynolds irreparable harm.
Seller agrees that Reynolds shall be entitled to temporary and permanent
injunctive and other equitable relief, provided that such equitable remedies
shall be in addition to and not in lieu of other remedies available at law or
in equity to Reynolds as a result of such a breach. Seller agrees that the
duration, geographical scope and subject matter of this Section 23 are
reasonable in light of all of the facts and circumstances. Seller acknowledges
that the duration of this Section 23 is limited to one year based upon the
obligation of Seller to dissolve during that period under Section 13.2. In
the event Seller breaches that obligation and fails to dissolve prior to the
first anniversary of the Closing Date, the duration of this Section 23 shall be
extended until Seller so dissolves. To the extent permitted by law, Seller
waives any defenses or objections related to the reasonableness of the items
specified in the next preceding sentence.
23.4 Severability. If any court of competent jurisdiction shall
determine that any provision of this Section 23 is invalid or unenforceable,
such determination shall not affect the other provisions of this Agreement
(including Section 23). The invalid or unenforceable provision shall be
modified to the minimum degree necessary to make such provision valid and
enforceable, and this Agreement shall thereafter be enforced to the fullest
extent possible.
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24. OWNERSHIP OF ASSETS USED IN THE BUSINESS. The Corporate Affiliates
acknowledge that the only assets with a value greater than $200 each owned by
either of them and regularly used in the Business are the real property located
at 21000 Highway 99, Lynnwood, Washington and the assets described in Exhibit
25. The Corporate Affiliates hereby relinquish in favor of Seller any right or
interest they may have in any other assets used in the Business (and such
relinquished rights and interests shall be an Acquired Asset) and agree to
execute such documents and take such actions as may reasonably be requested by
Reynolds to evidence the transfer of assets contemplated hereby, including
without limitation the execution of bills of sale and other documents of
transfer.
25. USE OF SPACE. The Corporate Affiliates agree to permit Reynolds to
occupy the same space and to make use of the same shared facilities and
equipment as Seller used prior to the Closing for the operation of the Business
for a period of up to ninety (90) days after the Closing. The Corporate
Affiliates further agree to make available to Reynolds those employees
previously made available to the Business as "shared employees". Reynolds
shall pay to The Corporate Affiliates an amount equal to that paid by Seller
immediately prior to the Closing for use of such space, facilities and
equipment and as reimbursement for employee wages and benefits for shared
employees (such charges are set forth in Exhibit 25; payments shall be made no
later than 30 days after receipt of an invoice therefor). Each of Reynolds and
the Corporate Affiliates shall maintain such insurance as they deem appropriate
for their respective assets and operations conducted on the facility and each
shall indemnify the other for all Losses arising out of or incurred in
connection with their respective assets or the actions or omissions of their
respective employees, agents, contractors and invitees. The "shared employees"
shall at all times be employees of the Corporate Affiliates and Reynolds shall
not be responsible for any wages, salaries, benefits, workers compensation,
withholding or other taxes or other liabilities related to those persons except
for the charges described above.
26. CONFIDENTIAL INFORMATION. For purposes of this Section 26,
"Confidential Information" means any information concerning the business and
affairs of the Business that is not already generally available to the public.
Seller will treat and hold as such all of the Confidential Information, refrain
from using any of the Confidential Information except in connection with this
Agreement and the filing of tax returns and other governmental filings, and
deliver promptly to Reynolds or destroy, at the request and option of Reynolds,
all tangible embodiments (and all copies, but excluding the books and records
which are Excluded Assets) of the Confidential Information which are in its
possession. In the event that Seller is requested or required (by oral
question or request for information or documents in any legal proceeding,
interrogatory, subpoena, civil investigative demand, or similar process) to
disclose any Confidential Information, Seller will notify Reynolds promptly of
the request or requirement so that
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Reynolds may seek an appropriate protective order or waive compliance with the
provisions of this Section 26. If, in the absence of a protective order or the
receipt of a waiver hereunder, Seller is, on the advice of counsel, compelled
to disclose any Confidential Information to any tribunal or else stand liable
for contempt, Seller may disclose the Confidential Information to the tribunal;
provided, however, that Seller shall use its reasonable best efforts to obtain,
at the reasonable request of Reynolds, an order or other assurance that
confidential treatment will be accorded to such portion of the Confidential
Information required to be disclosed as Reynolds may designate. The foregoing
provisions shall not apply to any Confidential Information which is generally
available to the public immediately prior to the time of disclosure.
The parties have executed this Agreement as of this 15th day of June,
1995.
DEALER INTERNET SERVICES CORPORATION
BY MARTIN S. ROOD
-----------------------------
TITLE: President
-------------------------
THE REYNOLDS AND REYNOLDS COMPANY
BY JEFFREY A. WXXXXXXX
-----------------------------
TITLE: Vice President
-------------------------
CROWN MOTORS, INC.
BY MARTIN S. ROOD
-----------------------------
TITLE: President
-------------------------
ROOD MOTORS, INC.
BY MARTIN S. ROOD
-----------------------------
TITLE: President
-------------------------
43
<PAGE> 50
MARTIN S. ROOD
----------------------
MARTIN S. ROOD
PETER M. WILSON
----------------------
PETER M. WILSON
648000\553DMV5.ACQ
6-15-95-1
44
<PAGE> 1
Exhibit (5)
August 8, 1995
The Reynolds and Reynolds Company
115 South Ludlow Street
Dayton, Ohio 45402
Gentlemen:
As counsel for The Reynolds and Reynolds Company (the "Company"), we are
familiar with the Amended Articles of Incorporation of the Company under the
laws of the State of Ohio, its Consolidated Code of Regulations, and the
respective actions taken by the Shareholders and by the Board of Directors in
connection therewith, and all subsequent corporate proceedings with respect
thereto.
In addition, we are familiar with the preparation of the Form S-3 Registration
Statement currently being filed with the Securities and Exchange Commission.
We are also acquainted with the business activities of the Company and have
examined corporate minute books, records and such other documents as we have
deemed necessary in order to render to you the following opinion.
Based upon the foregoing, we are of the opinion that:
1. The Company has been duly organized and is a validly existing
corporation in good standing under the laws of the State of Ohio.
2. As of August 8, 1995, the 63,840 Class A Common Shares proposed to be
sold by the Selling Shareholders, as defined in such Registration
Statement, have been duly authorized and validly issued, and are fully
paid and nonassessable as described in such Registration Statement.
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The Reynolds and Reynolds Company
August 8, 1995
Page 2
We hereby consent to the references to our firm in the Registration Statement
on Form S-3 and in the Prospectus constituting a part thereof, and to the use
of this opinion as an exhibit to such Registration Statement.
Very truly yours,
/s/ Coolidge, Wall, Womsley & Lombard
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EXHIBIT 15
The Reynolds and Reynolds Company
115 S. Ludlow Street
Dayton, Ohio 45402
We have made a review, in accordance with standards established by the American
Institute of Certified Public Accountants, of the unaudited interim financial
information of The Reynolds and Reynolds Company and subsidiaries for the
periods ended December 31, 1994, and March 31, 1995, as indicated in our reports
dated February 7, 1995 and May 31, 1995; because we did not perform an audit,
we expressed no opinion on that information.
We are aware that our reports referred to above, which were included in your
Quarterly Reports on Form 10-Q for the quarters ended December 31, 1994 and
March 31, 1995, are incorporated by reference in this Registration Statement on
Form S-3.
We also are aware that the aforementioned reports, pursuant to Rule 436(c)
under the Securities Act of 1933, are not considered a part of the Registration
Statement prepared or certified by an accountant or a report prepared or
certified by an accountant within the meaning of Sections 7 and 11 of that Act.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Dayton, Ohio
August 4, 1995
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EXHIBIT 23(b)
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
The Reynolds and Reynolds Company on Form S-3 of our report dated November 14,
1994, which includes an explanatory paragraph concerning a change in the method
of accounting for post-retirement benefits other than pensions in 1993 and a
change in the method of accounting for income taxes in 1992, appearing in the
Annual Report on Form 10-K of The Reynolds and Reynolds Company for the year
ended September 30, 1994, and to the reference to us under the heading
"Experts" in the Prospectus, which is part of such Registration Statement.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Dayton, Ohio
August 4, 1995
