1
EXHIBIT 2.1
--------------------------------------------
STOCK PURCHASE AGREEMENT
BY AND AMONG
BAKER & TAYLOR, INC.
(THE "BUYER")
AND
THE STOCKHOLDERS OF
YANKEE BOOK PEDDLER, INC.
--------------------------------------------
2
TABLE OF CONTENTS
PAGE
ARTICLE 1 CERTAIN DEFINITIONS.....................................................................1
1.1 Terms Defined in this Section.........................................................1
1.2 Rules of Construction.................................................................6
ARTICLE 2 SALE AND PURCHASE OF STOCK; ASSETS AND LIABILITIES
AT CLOSING; PURCHASE PRICE..............................................................6
2.1 Agreement to Sell and Buy.............................................................6
2.2 Purchase Price........................................................................7
2.3 Adjustments and Prorations............................................................7
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS......................................7
3.1 Organization and Authority of the Company and its Subsidiaries........................7
3.2 Authorization and Binding Obligation..................................................8
3.3 Capitalization........................................................................8
3.4 Absence of Conflicting Agreements; Consents...........................................9
3.6 Real Property........................................................................10
3.7 Tangible Personal Property...........................................................11
3.8 Contracts............................................................................11
3.9 Customers, Distributors And Suppliers................................................14
3.10 Intangibles..........................................................................14
3.11 Title to Properties..................................................................15
3.12 Financial Statements.................................................................15
3.13 Conduct of Business in Ordinary Course...............................................15
3.14 Products and Services................................................................16
3.15 Accounts Receivable..................................................................17
3.16 Taxes................................................................................17
3.17 Bank Accounts; Powers of Attorney....................................................18
3.18 Insurance............................................................................19
3.19 Personnel and Employee Benefits......................................................19
3.20 Claims and Legal Actions.............................................................22
3.21 Environmental Matters................................................................22
3.22 Exchange Act: Investment Company Act.................................................23
3.23 Transactions with Affiliates.........................................................23
-i-
3
TABLE OF CONTENTS
(CONTINUED)
PAGE
3.24 Broker...............................................................................23
3.25 Full Disclosure......................................................................24
3.26 List of Directors and Officers.......................................................24
3.27 Transfer of Company Shares...........................................................24
3.28 Stock Repurchase.....................................................................24
3.29 No Indebtedness Between Stockholder/Company..........................................24
3.30 Year 2000 Compliance.................................................................24
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF BUYER.................................................25
4.1 Organization and Authority...........................................................25
4.2 Authorization and Binding Obligation.................................................25
4.3 Absence of Conflicting Agreements; Consents..........................................25
4.4 Broker...............................................................................26
4.5 Investment Purpose; Investment Company...............................................26
4.6 Full Disclosure......................................................................26
4.7 Financial Statements.................................................................26
ARTICLE 5 SPECIAL COVENANTS AND AGREEMENTS........................................................26
5.1 Risk of Loss.........................................................................26
5.2 Confidentiality......................................................................27
5.3 Cooperation..........................................................................27
5.4 Tax Matters..........................................................................27
5.5 Employment Agreements................................................................28
5.6 Antitrust Laws Compliance............................................................29
5.7 No Issuance of Additional Capital Stock..............................................29
5.8 Release of Personal Guaranties.......................................................29
5.9 Yankee Rights Management.............................................................29
ARTICLE 6 CONDITIONS TO OBLIGATIONS OF BUYER AND STOCKHOLDER......................................30
6.1 Conditions to Obligations of Buyer...................................................30
6.2 Conditions to Obligations of Stockholders............................................31
ARTICLE 7 CLOSING AND CLOSING DELIVERIES..........................................................32
7.1 Closing..............................................................................32
-ii-
4
TABLE OF CONTENTS
(CONTINUED)
PAGE
7.2 Deliveries by Stockholders...........................................................32
7.3 Deliveries by Buyer..................................................................33
ARTICLE 8 TERMINATION.............................................................................34
8.1 Termination by Stockholders..........................................................34
8.2 Termination by Buyer.................................................................34
8.3 Rights on Termination................................................................34
8.4 Attorneys' Fees......................................................................34
ARTICLE 9 SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION; CERTAIN REMEDIES.......................................................35
9.1 Survival.............................................................................35
9.2 Indemnification by Stockholders......................................................35
9.3 Indemnification by Buyer.............................................................36
9.4 Procedure for Indemnification........................................................36
9.5 Affiliates...........................................................................37
9.6 Certain Limitations..................................................................37
9.7 Exclusive Remedy.....................................................................38
ARTICLE 10 MISCELLANEOUS...........................................................................38
10.1 Fees and Expenses....................................................................38
10.2 Notices..............................................................................38
10.3 Benefit and Binding Effect...........................................................39
10.4 Further Assurances...................................................................39
10.5 GOVERNING LAW........................................................................39
10.6 Entire Agreement.....................................................................39
10.7 Waiver of Compliance; Consents.......................................................40
10.8 Counterparts.........................................................................40
10.9 Waiver of Jury Trial.................................................................41
-iii-
5
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") entered into as of June
22, 1999 by and among Baker & Taylor, Inc., a Delaware corporation ("Buyer"),
and the holders of all of the issued and outstanding capital stock of Yankee
Book Peddler, Inc., a New Hampshire corporation (the "Company"), as listed on
Schedule 3.3 (collectively, the "Stockholders," and each individually, a
"Stockholder").
R E C I T A L S
WHEREAS, the Stockholders own of record and beneficially, in the
aggregate, all of the issued and outstanding capital stock of the Company,
consisting of 171 shares of the Company's Class A Common Stock, without par
value (the "Class A Stock"), and 9 shares of the Company's Class B Common Stock,
without par value (the "Class B Stock" and, collectively with the Class A Stock,
the "Company Shares"); and
WHEREAS, subject to the terms and conditions set forth below, the
Stockholders desire to sell all of the Company Shares to Buyer, and Buyer
desires to acquire and purchase all of the Company Shares from the Stockholders;
NOW, THEREFORE, in order to consummate said purchase and sale and in
consideration of the mutual agreements set forth herein, the parties hereto,
intending legally to be bound, hereby covenant and agree as follows:
ARTICLE 1
CERTAIN DEFINITIONS
1.1 Terms Defined in this Section
The following terms, as used in this Agreement, have the meanings set
forth in this Section 1.1:
"Affiliate" means, with respect to any specified Person, (a) any Person
that directly or indirectly through one or more intermediaries controls, is
controlled by or is under common control with the specified Person; (b) any
Person that is a director or officer of, partner in or trustee of, or serves in
a similar capacity with respect to, the specified Person or of which the
specified Person is a director, officer, partner or trustee, or with respect to
which the specified Person serves in a similar capacity; (c) any Person that
directly or indirectly through one or more intermediaries is the beneficial
owner of 10% or more of any class of equity securities of the specified Person
or of which the specified Person is directly or indirectly through one or more
intermediaries the owner of 10% or more of any class of equity securities; or
(d) any Person who is acting at the direction and primarily in furtherance of
the interests of the specified Person.
"Assets" means all assets and property, tangible or intangible, real,
personal or mixed, owned or held by the Company and each Subsidiary.
-1-
6
"Closing" means the consummation of the purchase and sale of the Company
Shares pursuant to this Agreement in accordance with the provisions of Section
7.
"Closing Date" means the date on which the Closing occurs, as determined
pursuant to Section 7.
"Code" means the Internal Revenue Code of 1986, as amended, or any
successor law, and regulations issued by the IRS pursuant to the Internal
Revenue Code of 1986, as amended, or any successor law.
"Company Shares" shall have the meaning as defined in the Recitals of
this Agreement.
"Consents" means the consents, permits or approvals of any Governmental
Body and other Persons necessary to transfer the Company Shares to Buyer or
otherwise to consummate the transactions contemplated by this Agreement.
"Contracts" means all contracts, leases, non-governmental licenses and
other agreements (including without limitation leases for personal or real
property and employment agreements), written or oral (including any amendments
and other modifications thereto) to which the Company is a party or that are
binding upon the Company and that relate to or affect the Assets or the business
and operations of the Company.
"Contemplated Transactions" means all of the transactions contemplated by
this Agreement, including:
(a) the sale of the Company Shares by the Stockholders
to Buyer;
(b) the execution, delivery and performance of this
Agreement ; and
(c) the execution and delivery of the Employment
Agreements and other agreements contemplated hereby;
and
(d) the performance by Buyer and the Stockholders of
their respective covenants and obligations under
this Agreement.
"Damages" means any loss, liability, claim, damage, expense (including,
without limitation, reasonable costs of investigation and defense and reasonable
attorneys' fees and disbursements) or diminution of value, whether or not
involving a third-party claim.
"Encumbrance" means any mortgage, conditional sale agreement, charge,
lien, option, pledge, security interest, security title or encumbrance of any
nature whatsoever.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, or any successor law, and the regulations and rules issued pursuant to
that Act or any successor law.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, or
any successor law, and the regulations and rules issued pursuant to that Act or
any successor law.
-2-
7
"Financial Statements" has the meaning set forth in Section 3.12.
"GAAP" means generally accepted accounting principles in effect from time
to time in the United States, consistently applied.
"Governmental Authorization" means any approval, consent, license,
permit, waiver or other authorization issued, granted, given or otherwise made
available by or under the authority of any Governmental Body or pursuant to any
Legal Requirement.
"Governmental Body" means any:
(a) nation, state, county, city, town, village, district or other
political jurisdiction of any nature;
(b) federal, state, local, municipal, foreign or other government;
(c) governmental or quasi-governmental authority of any nature
(including, without limitation, any governmental agency, branch,
department, official or entity and any court or other tribunal);
(d) multi-national organization or body; or
(e) body exercising, or entitled to exercise, any governmental,
administrative, executive, judicial, legislative, regulatory or taxing
authority or power of any nature.
"Informed" An individual will be deemed to be "Informed" of a particular
fact or other matter if (i) that individual has actual knowledge, or been told,
or learned, or become aware, of that fact or other matter from any source and by
any means, or (ii) but for conscious avoidance, would have actual knowledge of
that fact or other matter. A Person (other than an individual) will be deemed to
have been "Informed" of a particular fact or other matter if any individual who
is serving, or who has at the relevant time served, as a director, officer,
partner, executor or trustee of such Person has been, or at any time had been,
Informed of such fact or other matter. The Stockholders and the Company shall be
deemed Informed if, among other things, any of John R. Secor, Glen M. Secor,
Gary Shirk, Traci L. Britten or Heidi J. Coen have been or are Informed.
"Intangibles" means all copyrights, trademarks, trade names, service
marks, service names, Internet domain names and URLs, licenses, patents,
permits, proprietary information, technical information and data, machinery and
equipment warranties, and other similar intangible property rights and interests
(and any goodwill associated with any of the foregoing) applied for, issued to,
or owned by the Company or any of its Subsidiaries or under which the Company or
any of its Subsidiaries is licensed or franchised.
"IRS" means the United States Internal Revenue Service or any successor
agency, and, to the extent relevant, the United States Department of the
Treasury.
"Knowledge". An individual will be deemed to have "Knowledge" of a
particular fact or other matter if a prudent individual would be expected to
discover or otherwise become aware of
-3-
8
such fact or other matter in the course of conducting a reasonable inquiry or
investigation concerning the existence of such fact or other matter. A Person
(other than an individual) will be deemed to have "Knowledge" of a particular
fact or other matter if any individual who is serving, or who has at the
relevant time served, as a director, officer, partner, executor or trustee of
such Person (or in any similar capacity) has, or at any time had, Knowledge of
such fact or other matter.
"Legal Requirement" means any applicable federal, state, local,
municipal, foreign, international, multinational or other administrative order,
constitution, law, ordinance, regulation, statute or treaty.
"Licenses" means all licenses, permits and other authorizations issued by
any Governmental Body to the Company.
"Lookback Period" means the thirty-six months immediately preceding the
date of this Agreement.
"Material Contract" has the meaning set forth in Section 3.8(d).
"Ordinary Course of Business". An action taken by a Person will be deemed
to have been taken in the "Ordinary Course of Business" only if: (a) such action
is consistent in nature and magnitude with the past practices of such Person and
is taken in the ordinary course of the normal day-to-day operations of such
Person; and (b) such action is not required to be authorized specifically by the
board of directors of such Person (or by any Person or group of Persons
exercising similar authority).
"Organizational Documents" means (a) the articles or certificate of
incorporation or organization and the bylaws of a corporation; (b) the
partnership agreement and any certificate of partnership of a general
partnership; (c) the limited partnership agreement and the certificate of
limited partnership of a limited partnership; (d) any organizational document
and any operating agreement of any limited liability company; (e) any charter,
trust instrument or similar document adopted or filed in connection with the
creation, formation or organization of a Person; and (f) any amendment to any of
the foregoing.
"Person" means any individual, corporation (including, without
limitation, any non-profit corporation), general or limited partnership, limited
liability company, limited liability partnership, joint venture, estate, trust,
association, organization, labor union or other entity or Governmental Body.
"Proceeding" means any action, arbitration, audit, hearing, litigation or
suit (whether civil, criminal or administrative ) commenced, brought, conducted
or heard by or before, any Governmental Body or arbitrator.
"Real Property" means all real property, and all buildings and other
improvements thereon, whether or not owned or held by the Company or any of its
Subsidiaries, used in the business of the Company or any of its Subsidiaries.
-4-
9
"Real Property Interests" means all interests in real property, including
fee estates, leaseholds and subleaseholds, purchase options, easements,
licenses, rights to access and rights of way, and all buildings and other
improvements thereon, owned or held by the Company or any of its Subsidiaries.
"Related Person" means, with respect to a particular individual: (a) each
other member of such individual's Family (as defined below); (b) any Person that
is directly or indirectly controlled by such individual or one or more members
of such individual's Family; (c) any Person in which such individual or members
of such individual's Family hold (individually or in the aggregate) a Material
Interest (as defined below); and (d) any Person with respect to which such
individual or one or more members of such individual's Family serves as a
director, officer, partner, manager, executor or trustee (or in a similar
capacity). With respect to a specified Person other than an individual: (a) any
Person that directly or indirectly controls, is directly or indirectly
controlled by or is directly or indirectly under common control with such
specified Person; any Person that holds a Material Interest in such specified
Person; each Person that serves as a director, officer, partner, member,
manager, executor or trustee of such specified Person (or in a similar
capacity); any Person in which such specified Person holds a Material Interest;
any Person with respect to which such specified Person serves as a general
partner or a trustee (or in a similar capacity); and (b) any Related Person of
any individual described in clause (b) or (c).
For purposes of this definition, (a) the "Family" of an individual
includes (i) the individual, (ii) the individual's spouse and former spouses,
(iii) any other natural person who is related to the individual or the
individual's spouse within the second degree of kinship, and (iv) any other
natural person who resides with such individual (excluding, in each case from
this clause (iv), any domestic employee), and (b) "Material Interest" means
direct or indirect beneficial ownership (as defined in Rule 13d-3 under the
Exchange Act) of voting securities or other voting interests representing at
least 5% of the outstanding voting power of a Person or equity securities or
other equity interests representing at least 5% of the outstanding equity
securities or equity interests in a Person.
"Securities Act" means the Securities Act of 1933, as amended, or any
successor law, and the regulations and rules issued pursuant to that Act or any
successor law.
"Stock Restrictions" means any rights of first refusal or restrictions of
any kind, including any restriction on use, voting, transfer, receipt of income
or expense of any other attribute of ownership.
"Subsidiary" has the meaning set forth in Section 3.1(b).
"Tangible Personal Property" means all machinery, equipment, tools,
vehicles, furniture, leasehold improvements, office equipment, plant, inventory
and other tangible personal property owned or held by the Company.
"Tax" means any tax (including, without limitation, any income tax,
capital gains tax, value-added tax, sales tax, use tax, property tax, gift tax,
or estate tax), levy, assessment, tariff, duty (including, without limitation,
any customs duty), deficiency or other fee, and any related
-5-
10
charge or amount (including, without limitation, any fine, penalty, interest or
addition to tax), imposed, assessed or collected by or under the authority of
any Governmental Body having jurisdiction to so act with respect thereto or
payable pursuant to any tax-sharing agreement or any other Contract relating to
the sharing or payment of any such tax, levy, assessment, tariff, duty,
deficiency or fee.
"Tax Return" means any return (including, without limitation, any
information return), report, statement, schedule, form or other document or
information filed with or submitted to or required to be filed with or submitted
to, any Governmental Body having jurisdiction to so act with respect thereto in
connection with the determination, assessment, collection or payment of any Tax
or in connection with the administration, implementation or enforcement of or
compliance with any Legal Requirement relating to any Tax.
"Threatened" means any demand or statement (orally or in writing) or any
notice (orally or in writing) that would lead a prudent Person to conclude that
a claim, Proceeding, dispute or action is likely to be asserted, commenced,
taken or otherwise pursued in the future.
"Yankee Rights Management" means those assets and corresponding
liabilities set forth on Schedule 5.9, including, without limitation, the
Company's ownership interest in YBP Media Ventures, Inc.
1.2 Rules of Construction
Words used in this Agreement, regardless of the gender and number
specifically used, shall be deemed and construed to include any other gender and
any other number as the context requires. As used in this Agreement, the word
"including" is not limiting, and the word "or" is not exclusive. Except as
specifically otherwise provided in this Agreement in a particular instance, a
reference to a Section or Schedule is a reference to a Section of this Agreement
or a Schedule hereto, and the terms "hereof," "herein," and other like terms
refer to this Agreement as a whole, including the Schedules to this Agreement,
and not solely to any particular part of this Agreement. The descriptive
headings in this Agreement are inserted for convenience of reference only and
are not intended to be part of or to affect the meaning or interpretation of
this Agreement.
ARTICLE 2
SALE AND PURCHASE OF STOCK; ASSETS AND LIABILITIES AT CLOSING;
PURCHASE PRICE
2.1 Agreement to Sell and Buy
Subject to the terms and conditions of this Agreement, the Stockholders
hereby agree to sell and transfer the Company Shares to Buyer, and Buyer hereby
agrees to purchase the Company Shares from the Stockholders. On the Closing Date
each Stockholder shall deliver or cause to be delivered to Buyer certificates
representing all of the Company Shares owned by such Stockholder, as set forth
in Schedule 3.3. Such stock certificates shall be duly endorsed in blank for
transfer, or shall be presented with stock powers duly executed in blank, to
effect a
-6-
11
valid transfer of such Company Shares by such Stockholder free and clear of any
and all encumbrances.
2.2 Purchase Price
In consideration of the sale by the Stockholders to Buyer of all of the
Company Shares and in reliance upon the representations, warranties and
covenants of the Stockholders herein contained, Buyer shall deliver to the
Stockholders, in the aggregate, payment (by wire transfer of immediately
available United States funds) equal to Eighteen Million Dollars
($18,000,000.00) (herein, the "Purchase Price"), which amount shall be payable
by Buyer to the Stockholders in full at the Closing.
2.3 Adjustments and Prorations Subject to the indemnification provisions
of Article 9, there shall be no adjustments to the Purchase Price under any
circumstances, foreseen or unforeseen, now existing or hereafter arising.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS
The Stockholders, jointly and severally, represent and warrant to Buyer
as follows:
3.1 Organization and Authority of the Company and its Subsidiaries
(a) The Company is a corporation duly organized, validly existing,
and in good standing under the laws of the State of New Hampshire, with full
corporate power and authority to conduct its business as it is now being
conducted, to own or use the properties and assets that it purports to own or
use, and to perform all its obligations under the Material Contracts. During the
Lookback Period the Stockholders have not been Informed that the Company has
failed to qualify to do business as a foreign corporation and is not in good
standing under the laws of each state or jurisdiction in which either the
ownership or use of the properties owned or used by it, or the nature of the
activities conducted by it, requires such qualification. The minute books of the
Company contain the records of all meetings of the Stockholders, the board of
directors, and any committees of the board of directors of the Company, and the
stock certificate books and the stock record books of the Company are correct
and complete. The Stockholders have delivered to Buyer true and complete copies
of the Organizational Documents of the Company, as currently in effect.
(b) The Company does not own, directly or indirectly, any shares of
capital stock, partnership interests, limited liability company membership
interests or other participation rights or other interests in the nature of an
equity interest in any corporation, partnership, company, trust or other Person,
or any option, warrant or other security convertible into or exchangeable for
any of the foregoing, other than YBP Library Services, Inc., a New Hampshire
corporation, YBP Media Ventures, Inc., a New Hampshire corporation (which is not
included in the sale to Buyer), and Yankee Book Peddler Limited, a private
limited company registered in England, doing business under the name "Lindsay &
Howes," (individually a "Subsidiary" and collectively, the "Subsidiaries"). Each
Subsidiary is duly organized, validly existing and in good standing under the
laws of its jurisdiction of organization, with full power and authority to
-7-
12
conduct its business as it is now being conducted, to own or use the properties
and assets that it purports to own or use. During the Lookback Period the
Stockholders have not been Informed that any Subsidiary has failed to qualify to
do business as a foreign corporation and is not in good standing under the laws
of each state or jurisdiction in which either the ownership or use of the
properties owned or used by it, or the nature of the activities conducted by it,
requires such qualification. No Stockholder has any Knowledge of any
restrictions applicable to any Subsidiary that would hinder or delay the
Contemplated Transactions. Stockholders have delivered to Buyer true and
complete copies of the Organizational Documents of each Subsidiary, as currently
in effect. In addition to the foregoing, YBP Media Ventures, Inc. owns some
shares of Digimarc. Digimarc shall not be deemed a Subsidiary for the purposes
of this Agreement, and Stockholders make no representations or warranties
regarding Digimarc. Subject to Section 6.1(f), YBP Media Ventures, Inc. will be
separated from the Company at or prior to the Closing, without any diminution in
the Purchase Price.
3.2 Authorization and Binding Obligation
The execution, delivery and performance of this Agreement by Stockholders
and the Company have been duly authorized by all necessary corporate action on
the part of the Company. This Agreement has been duly executed and delivered by
the Company and each Stockholder and constitutes the legal, valid and binding
obligation of each of them, enforceable against each of them in accordance with
its terms except as the enforceability of this Agreement may be affected by
bankruptcy, insolvency or similar laws affecting creditors' rights generally and
by judicial discretion in the enforcement of equitable remedies.
3.3 Capitalization
The authorized equity securities of the Company consist of (i) 500 shares
of Class A Stock, of which 171 shares are issued and outstanding, (ii) 100
shares of Class B Stock, of which 9 shares are issued and outstanding and (iii)
400 shares of preferred stock, $100 par value per share, (the "Preferred Stock")
none of which are issued or outstanding. The ownership of the Company Shares and
the shares of its Subsidiaries are set forth on Schedule 3.3. Except as set
forth on Schedule 3.3, no legend or other reference to any purported Encumbrance
or Stock Restriction appears upon any certificate representing equity securities
of the Company or any of its Subsidiaries. All of the outstanding equity
securities of the Company and its Subsidiaries have been duly authorized and
validly issued and are fully paid and nonassessable. There are no subscriptions,
warrants, options, convertible debt or securities, participation rights or other
interests in the nature of an equity interest or any commitments, agreements or
rights of any kind with respect to the capital stock of the Company or any of
its Subsidiaries, as of the date hereof. None of the outstanding equity
securities or other securities of the Company or any of its Subsidiaries have
been issued in violation of the Securities Act or any other Legal Requirement.
The Company does not own, and has no Contract to acquire, any equity securities
or other securities or participation rights of any Person or any direct or
indirect equity or ownership interest in any other business except indirectly
through short-term investments in money-market accounts and similar accounts,
all of which are included in the Financial Statements.
-8-
13
3.4 Absence of Conflicting Agreements; Consents
Except for the consent of Fleet Bank-NH and as set forth on Schedule 3.4,
the execution, delivery and performance by the Company and each Stockholder of
this Agreement and the documents contemplated hereby (with or without the giving
of notice, the lapse of time or both): (a) do not require the Consent of any
Person, including any Subsidiary; (b) will not conflict with any provision of
the Certificate of Incorporation or Bylaws of the Company or any Organizational
Document of any Subsidiary, each as currently in effect; (c) will not conflict
with, result in a breach of or constitute a default under any applicable law,
judgment, order, ordinance, injunction, decree, rule, regulation or ruling of
any court or Governmental Body; and (d) will not conflict with, constitute
grounds for termination of, result in a breach of, constitute a default under or
accelerate or permit the acceleration of any performance required by the terms
of any Material Contract. Except as described in Schedule 3.4 and Section 5.6 of
this Agreement, no consent, approval, permit, or authorization of, or
declaration to, or filing with any Governmental Body or any other Person is
required to permit Stockholders to transfer the Company Shares to Buyer or
otherwise to consummate the transactions contemplated by this Agreement.
3.5 Compliance With Legal Requirements; Governmental Authorizations
(a) Except as set forth on Schedule 3.5:
(i) During the Lookback Period the Stockholders have not
been Informed that the Company or any Subsidiary is not, or has not been, in
material compliance with each Legal Requirement that is or was applicable to it
or to the conduct or operation of its business or the ownership or use of any of
its assets;
(ii) During the Lookback Period the Stockholders have not
been Informed that any event has occurred or circumstance exists that (with or
without notice or lapse of time, or both) (A) may constitute or result in a
material violation by the Company or any of its Subsidiaries of, or a failure on
the part of the Company or any of its Subsidiaries to comply in any material
respect with, any Legal Requirement, or (B) may give rise to any obligation on
the part of the Company or any of its Subsidiaries to undertake, or to bear all
or any portion of the cost of, any material remedial action of any nature
imposed by any Legal Requirement; and
(iii) During the Lookback Period the Stockholders have not
been Informed that the Company or the Subsidiaries has received any notice or
other communication (whether oral or written) from any Governmental Body or any
other Person regarding (A) any actual, alleged or potential material violation
of, or failure to comply in any material respect with, any Legal Requirement, or
(B) any actual, alleged or potential obligation on the part of the Company or
any of its Subsidiaries to undertake, or to bear all or any portion of the cost
of, any material remedial action of any nature imposed by any Legal Requirement.
(b) Schedule 3.5 contains a complete and accurate list of each
Governmental Authorization that is held by the Company or any of its
Subsidiaries. Schedule 3.5 also contains a complete and accurate list of each
Governmental Authorization which, during the Lookback Period, the Company has
been Informed (i) binds the Company or any of its Subsidiaries or any
-9-
14
of the assets owned or used by the Company or any of its Subsidiaries, or (ii)
is required to conduct the business and operations of the Company or any of its
Subsidiaries as now conducted. Except as set forth in Schedule 3.5, each
Governmental Authorization listed on Schedule 3.5 is valid and in effect.
(c) Except as set forth on Schedule 3.5:
(i) during the Lookback Period the Stockholders have not been
Informed that the Company or any of its Subsidiaries is not, or has not been,
in compliance in all material respects with all of the terms and requirements
of each Governmental Authorization identified or required to be identified in
Schedule 3.5;
(ii) during the Lookback Period the Stockholders have not been
Informed that any event has occurred or circumstance exists that may (with or
without notice or lapse of time, or both) (A) constitute or result directly or
indirectly in a material violation of or a failure to comply in any material
respect with any term or requirement of any Governmental Authorization listed
or required to be listed on Schedule 3.5, or (B) result directly or indirectly
in the revocation, withdrawal, suspension, cancellation or termination of, or
any material modification to, any Governmental Authorization listed or required
to be listed on Schedule 3.5;
(iii) neither the Company nor any of its Subsidiaries has
received during the Lookback Period any notice or other written communication
from any Governmental Body or any other Person regarding (A) any actual,
alleged or potential material violation of or failure to comply with any term
or requirement of any Governmental Authorization, or (B) any actual, alleged or
potential revocation, withdrawal, suspension, cancellation, termination of or
modification to any Governmental Authorization; and
(iv) during the Lookback Period the Stockholders have not been
Informed that any applications required to have been filed for the renewal of
the Governmental Authorizations listed on Schedule 3.5 have not in all material
respects been duly filed on a timely basis with the appropriate Governmental
Bodies, or that any other filings required to have been made with respect to
such Governmental Authorizations have not been duly made on a timely basis with
the appropriate Governmental Bodies.
(d) During the Lookback Period the Stockholders have not been
Informed that the Governmental Authorizations listed on Schedule 3.5 do not
collectively constitute all of the Governmental Authorizations necessary (a) to
permit the Company and each of its Subsidiaries to lawfully conduct and operate
its business in the manner it currently conducts and operates such business and
(b) to permit the Company and each of its Subsidiaries to own and use (in all
material respects) its assets in the manner in which it currently owns and uses
such assets.
3.6 Real Property
Schedule 3.6 contains a complete and accurate description of all Real
Property and all Real Property Interests. With respect to each leasehold or
subleasehold interest included in the Real Property Interests, so long as each
of the Company and its Subsidiaries fulfills its obligations under the lease
therefor, the Company or the applicable Subsidiary designated as lessee or
sublessee has enforceable rights to occupy and use the premises so leased in the
manner
-10-
15
currently used, and, except as set forth in Schedule 3.6, other than mortgagees
of record, no other Person holds any interest in the leased premises with the
right to foreclose upon the Company's or any of its Subsidiaries' leasehold or
subleasehold interest. With respect to all Real Property Interests owned in fee
by the Company or its Subsidiaries, except as set forth in Schedule 3.6, the
Company and each Subsidiary has good and marketable fee simple title to all
owned Real Property on Schedule 3.6, free and clear of all liens, mortgages,
pledges and Encumbrances other than for (i) real estate taxes not yet due and
payable and (ii) easements, rights of way, mineral rights or other reservations,
restrictions and Encumbrances, which are of record or which individually or in
the aggregate do not materially and adversely affect or interfere with the use
of such Real Property. The Company and its Subsidiaries have full legal and
practical access to all of the Real Property. During the Lookback Period the
Stockholders have not been Informed that any Real Property (including the
improvements thereon) (a) are not in good condition and repair consistent with
its present use, (b) are not available for immediate use in the conduct of the
business of the Company and its Subsidiaries, and (c) do not comply with all
applicable building or zoning codes and the regulations of any Governmental Body
having jurisdiction over such Real Property.
3.7 Tangible Personal Property
Schedule 3.7 lists all items of Tangible Personal Property which are
carried upon the books of the Company at an undepreciated value of $25,000 or
more per item. Except as set forth on Schedule 3.7, with allowance for normal
repairs, maintenance, wear and obsolescence, each item of Tangible Personal
Property listed on Schedule 3.7 at a depreciated value greater than zero is in
good operation condition and repair and is available for immediate use in the
business of the Company or its Subsidiaries.
3.8 Contracts
(a) Schedule 3.8(a) contains a complete and accurate list, and the
Stockholders have made available to Buyer true and complete copies (or written
summaries in the case of oral arrangements), of the following currently
effective contracts:
(i) each Contract that involves the performance of services or
the delivery of goods or materials by the Company or any of its Subsidiaries for
an amount or having a value in excess of $20,000, but not including Approval
Plan Memoranda of Understanding;
(ii) each Contract that involves the performance of services
for, or the delivery of goods or materials to the Company or any of its
Subsidiaries for an amount or having a value in excess of $20,000;
(iii) each Contract that was not entered into in the Company's
Ordinary Course of Business and that involves expenditures or receipts of the
Company or any of its Subsidiaries in excess of $5,000;
(iv) each lease, rental or occupancy agreement, license,
installment and conditional sale agreement affecting the ownership of, leasing
of, title to, use of or any leasehold or other interest in, any real or personal
property (except personal property leases and installment
-11-
16
and conditional sales agreements having a value per item or aggregate payments
of less than $20,000, or with terms of less than one year);
(v) each licensing agreement, sales agreement or other Contract
with respect to patents, trademarks, copyrights or other intellectual property
(other than licensing agreements normally accompanying software programs such as
WordPerfect(TM) and Quicken(TM));
(vi) each currently effective Contract with current or former
employees, consultants or contractors regarding the appropriation or the
non-disclosure of any of the Company's or any of its Subsidiaries' Intangibles;
(vii) each collective bargaining Contract and each other
Contract to or with any labor union or other employee representative of a group
of employees;
(viii) each joint venture, partnership and other Contract
(however named) involving a sharing of profits, losses, costs or liabilities by
the Company or any of its Subsidiaries with any other Person;
(ix) each Contract containing covenants that in any way purport
to restrict the business activity of the Company or any of its Subsidiaries or
limit the freedom of the Company or any of its Subsidiaries to engage in any
line of business or to compete with any Person;
(x) each Contract providing for payments to or by any Person
based on sales, purchases or profits, other than direct payments for goods;
(xi) each power of attorney that is currently effective and
outstanding;
(xii) each Contract entered into other than in the Company's
Ordinary Course of Business that contains or provides for an express undertaking
by the Company to be responsible for special, consequential or indirect Damages
which may exceed $5,000;
(xiii) each Contract for capital expenditures in excess of
$20,000;
(xiv) each written warranty, guaranty or other similar
undertaking with respect to contractual performance extended by the Company or
any of its Subsidiaries other than in the Company's or any of its Subsidiaries'
Ordinary Course of Business; and
(xv) each amendment, supplement and modification (whether oral
or written) in respect of any of the foregoing.
Schedule 3.8(a) sets forth the subject matter of such Contracts, the parties to
such Contracts, and (if ascertainable) the amount of the remaining commitment of
the Company and each of its Subsidiaries under such Contracts.
(b) Except as set forth on Schedule 3.8(b):
-12-
17
(i) no Stockholder (and no Related Person of any Stockholder)
has or may acquire any rights under, and no Stockholder has or may become
subject to any obligation or liability under, any Contract; and
(ii) During the Lookback Period, the Stockholders have not been
Informed that any officer, director, agent, employee, consultant or contractor
of the Company or any of its Subsidiaries is bound by any Contract that purports
to limit the ability of such officer, director, agent, employee, consultant or
contractor to (A) compete with the Company or any of its Subsidiaries or
otherwise engage in or continue any conduct, activity or practice directly
relating to such Person's involvement with the business of the Company or any of
its Subsidiaries, or (B) assign to the Company or any of its Subsidiaries or to
any other Person any rights to any invention, improvement or discovery.
(c) Except as set forth on Schedule 3.8(c), during the Lookback
Period, the Stockholders have not been Informed that any Contract identified on
Schedule 3.8(a) or Schedule 3.8(b), is not in full force and effect and, during
the Lookback Period, the Stockholders have not been Informed that any such
Contract is not valid and enforceable in all material respects in accordance
with its terms.
(d) Except as set forth on Schedule 3.8(d):
(i) during the Lookback Period, the Stockholders have not been
Informed that the Company is not, or at any times has not been, in compliance in
all material respects with all applicable terms and requirements of each
Contract on Schedule 3.8(a) or Schedule 3.8(b) (each, a "Material Contract")
under which the Company or any of its Subsidiaries has or had any obligation or
liability or by which the Company or any of its Subsidiaries or any of the
assets owned or used by the Company or any of its Subsidiaries is or was bound;
(ii) during the Lookback Period, the Stockholders have not been
Informed that any other Person that has or had any obligation or liability under
any Material Contract under which the Company or any of its Subsidiaries has or
had any rights is not, or at any times has not been, in compliance in all
material respects with the terms and requirements of such Contract;
(iii) during the Lookback Period, the Stockholders have not
been Informed that any event has occurred or circumstance exists that (with or
without notice or lapse of time or both) may contravene, conflict with, or
result in a material violation or breach of, or give the Company or any of its
Subsidiaries or any other Person the right to declare a default or exercise any
remedy under, or to accelerate the maturity or performance of, or to cancel,
terminate or modify, any Material Contract; and
(iv) during the Lookback Period, the Stockholders have not been
Informed that either the Company or any of its Subsidiaries has given to or
received from any other Person any notice or other communication (whether oral
or written) regarding any actual, alleged or potential material violation or
breach of, or default under, any Material Contract.
-13-
18
3.9 Customers, Distributors And Suppliers
Schedule 3.9 sets forth the approximate aggregate amount of sales by the
Company and each Subsidiary from July 1, 1998 to March 31, 1999, and the name of
any customer, outside sales representative or distributor (whether pursuant to a
commission, royalty or other arrangement) which accounted for more than 5% of
the sales of the Company and its Subsidiaries for the nine months ended March
31, 1999 (the "Customers"). Schedule 3.9 lists all of the suppliers of the
Company and its Subsidiaries to whom during the nine months ended March 31, 1999
the Company or any of its Subsidiaries made payments aggregating $200,000 or
more, showing, with respect to each, the name, address and approximate dollar
volume involved for such period (the "Suppliers). Schedule 3.9(a) lists the top
250 Customer accounts by sales in the nine months ending March 31, 1999 and a
comparison of those sales with the sales to those accounts in the nine months
ending March 31, 1998. Except as set forth on Schedule 3.9 (b), the Stockholders
have not been Informed that any of those Customer accounts have, or intend to,
terminate doing business with the Company. Except as set forth on Schedule
3.9(c), since March 31, 1999, no Supplier has canceled, materially modified or
otherwise notified the Company or any of its Subsidiaries of the termination of
its relationship with the Company or any of its Subsidiaries, or has during the
last twelve months decreased materially its services, supplies or materials to
the Company or any of its Subsidiaries, nor have the Stockholders been Informed
that any Supplier has any plan or intention to do any of the foregoing. As used
in this Section 3.9, price changes and discount changes in the ordinary course
of business shall not be considered material modifications.
3.10 Intangibles
Schedule 3.10 is a true and complete list of all Intangibles. To the
Knowledge of the Stockholders, the Intangibles constitute all copyrights,
trademarks, trade names, service marks, service names, licenses and patents that
are required to conduct lawfully the business and operations of the Company and
its Subsidiaries as now conducted. Except as set forth on Schedule 3.10, during
the Lookback Period the Stockholders have not been Informed that any of the
Intangibles are not valid and in good standing and uncontested. The Stockholders
have made available to Buyer copies of all documents in the possession of the
Company establishing or evidencing the Intangibles listed on Schedule 3.10.
Except as set forth on Schedule 3.10, during the Lookback Period neither the
Company nor any Stockholder has received any notice or demand alleging that the
Company is infringing upon or otherwise acting adversely to any trademarks,
trade names, service marks, service names, copyrights, patents, patent
applications, know-how, methods or processes owned by any other Person, and
there is no claim or action pending or, to the knowledge of the Company or any
Stockholder, Threatened with respect thereto. Except as set forth on Schedule
3.10, during the Lookback Period the Stockholders have not been Informed that
any of the Intangibles will not be available for use by the Company on identical
terms and conditions immediately subsequent to the Closing. During the Lookback
Period the Stockholders have not been Informed that the Company has not taken
all necessary action to maintain and protect each of the Intangibles. Without
expanding the representations set forth in the rest of this Section 3.10,
Stockholders do not represent that all intellectual property which is eligible
therefor has been copyrighted, registered or patented or represent that any
pending application therefor will be granted.
-14-
19
3.11 Title to Properties
Except as disclosed in Schedule 3.11, the Company has good and marketable
title to all personal property used in the conduct of its business or shown on
the balance sheet included in the Financial Statements, free and clear of all
liens, mortgages, pledges and Encumbrances other than for (i) taxes not yet due
and payable and (ii) Encumbrances, which are of record or which individually or
in the aggregate do not materially and adversely affect or interfere with the
use of such personal property.
3.12 Financial Statements
Stockholders have delivered to Buyer audited financial statements for the
year ending June 30, 1998 and un-audited interim internal financial statements
for the nine months ending March 31, 1999 (which statements are hereinafter
referred to as the "Financial Statements"). Such Financial Statements fairly
present the financial condition and the results of operations, changes in
stockholders' equity, and cash flow of the Company and its Subsidiaries as at
the respective dates of and for the periods referred to in such Financial
Statements. The June 30, 1998 Financial Statements have been prepared in
accordance with GAAP. The March 31, 1999 interim financial statements have been
prepared in accordance with the accounting principles consistently applied by
the Company, and are subject to normal recurring year-end adjustments (the
effect of which will not, except as set forth in Schedule 3.12, individually or
in the aggregate, be significantly more adverse than in prior years) and the
absence of notes (that, if presented, would not differ materially from those
included in the other Financial Statements). It is expressly agreed between
Buyer and Stockholders that the adjustments, corrections, changes, revisions and
errors mistakes and omissions set forth on Schedule 4.7, or the application of
the principles used to derive them, shall not render the representations and
warranties contained in this Section 3.12 false.
3.13 Conduct of Business in Ordinary Course
Since March 31, 1999, except as disclosed in Schedule 3.13, the Company
and each Subsidiary has conducted its business only in the Ordinary Course of
Business and has not:
(a) suffered any material adverse change in the business, assets,
properties, financial condition, results of operations or business prospects of
the Company or any of its Subsidiaries, including any damage, destruction or
loss materially affecting any assets used or useful in the conduct of the
business of the Company or any of its Subsidiaries;
(b) made or promised any material increase in compensation payable
or to become payable to any Employee, or any bonus payment made or promised to
any Employee, or established, materially amended or terminated any personnel
policy, Welfare Plan, Pension Plan, or Benefit Arrangement (as such terms are
defined in Section 3.19;
(c) entered into, established or amended any agreement for personal
services with an Employee for a term of more than one year or for compensation
in excess of $50,000;
-15-
20
(d) agreed to recognize any labor union as the representative of any
of the Employees for purposes of collective bargaining or agreed to enter into
any collective bargaining agreement;
(e) made any sale, assignment, lease or other transfer of assets
other than in the normal and usual course of business with suitable replacements
being obtained therefor;
(f) canceled any material debts owed to or claims held by the
Company or any of its Subsidiaries;
(g) made any changes in the Company's accounting practices;
(h) made any amendments to the Company's Certificate of
Incorporation or Bylaws;
(i) suffered any material write-down of the value of any Assets or
any material write-off as uncollectible of any accounts receivable;
(j) transferred or granted any right under, or entered into any
settlement regarding the breach or infringement of, any license, patent,
copyright, trademark, trade name, franchise or similar right, or modified any
existing right;
(k) made any capital expenditure (or series of related capital
expenditures) involving more than $25,000;
(l) issued any note, bond or other debt security or created,
incurred, assumed, or guaranteed any indebtedness for borrowed money or
capitalized lease obligation;
(m) materially delayed or postponed the payment of any accounts
payable other than the normal aging of accounts payable in the Ordinary Course
of Business;
(n) made any loan to, or entered into any other transaction with,
any of its directors, officers or employees involving more than $5,000 with
respect to any such transaction or more than $50,000 with respect to all such
transactions; or
(o) paid any dividend or made any other distribution or payment in
respect of, or effected any subdivision, consolidation, redemption,
reclassification, purchase or other recapitalization of, the capital stock of
the Company, or declared or authorized any of the foregoing.
3.14 Products and Services
Except as set forth on Schedule 3.14, and except for claims that have
been resolved prior to the date of this Agreement, during the Lookback Period
the Stockholders have not been Informed that any products and services sold or
delivered by the Company or any of its Subsidiaries have not been in material
conformity with all applicable contractual commitments and all express and
implied warranties, or that the Company nor any Subsidiary has any liability for
replacement or repair thereof or other Damages in connection therewith, other
than as
-16-
21
described on Schedule 3.14. During the Lookback Period the Stockholders have not
been Informed that any products and services sold or delivered by the Company or
any of its Subsidiaries are subject to any guaranty, warranty or other indemnity
beyond the applicable standard terms and conditions of sale, as described on
Schedule 3.14. To the Knowledge of the Stockholders, neither the Company nor any
of its Subsidiaries has any liability arising out of any injury to individuals
or property as a result of any products or services sold or delivered by the
Company or any of its Subsidiaries.
3.15 Accounts Receivable
Except as set forth in Schedule 3.15, all accounts receivable of the
Company and its Subsidiaries have arisen from bona fide transactions in the
Ordinary Course of Business. Except for certain accounts receivable described on
Schedule 3.15, all accounts receivable reflected on the Company's balance sheets
are good and collectible in the Ordinary Course of Business at the aggregate
recorded amounts thereof, net of doubtful accounts, and are not subject to any
setoffs or counterclaims. Any prepayments of revenue received by the Company
have been treated as a reduction of the Company's accounts receivable or are
included in liabilities on the Company's Financial Statements.
3.16 Taxes
(a) Except for federal income tax returns for the year ending
December 31, 1998 and New Hampshire business profits tax and business enterprise
tax returns for the year ending December 31, 1998, all Tax Returns that are
required to be filed by or with respect to the Company or any of its
Subsidiaries have been timely filed, and Stockholders have delivered to Buyer
true and complete copies of all of the Tax Returns of the Company and its
Subsidiaries requested by Buyer. During the Lookback Period the Stockholders
have not been informed that any such Tax Returns were not correct and complete
in all material respects when filed. No unresolved claim has ever been made by a
Governmental Body in a jurisdiction where the Company and its Subsidiaries does
not file Tax Returns that it is or may be subject to taxation by that
jurisdiction.
(b) Except for federal income taxes for the year ending December 31,
1998 and New Hampshire business profits tax and business enterprise taxes for
the year ending December 31, 1998, all Taxes for which the Company and each
Subsidiary is liable that are due and payable or required to be withheld on or
before the Closing Date without regard to any extensions (other than such Taxes
that are being contested or protested in good faith by appropriate Proceedings
and for which a reserve or other appropriate provision as required in conformity
with generally accepted accounting principles has been made in the Financial
Statements of the Company), whether or not arising under the Tax Returns
referred to in Section 3.16(a), have been or will be paid or withheld in full on
or before the Closing Date. The balance sheet included in the Financial
Statements reflects a reserve reasonable under GAAP for all unpaid Taxes payable
by the Company and its Subsidiaries for all taxable periods and portions thereof
through the date of such statements. The Company and each Subsidiary has
withheld and paid all Taxes required to have been withheld and paid in
connection with amounts paid or owing to any employee, independent contractor,
creditor, stockholder or other third party.
-17-
22
(c) Neither the Company nor any of its Affiliates has waived or been
requested to waive any statute of limitations in respect of Taxes of the Company
or any of its Subsidiaries or agreed to any extension of time with respect to an
assessment or deficiency with respect to Taxes of the Company or any of its
Subsidiaries.
(d) No material issues have been raised (and are currently pending)
by any taxing authority in connection with any of the Tax Returns referred to in
Section 3.16(a) and all material deficiencies asserted or assessments made as a
result of any examinations by taxing authorities have been paid in full. No
Stockholder expects any authority to assess any additional Taxes for any period
for which Tax Returns have been filed. There is no dispute or claim concerning
any liability for Taxes of the Company or any of its Subsidiaries either (1)
claimed or raised by any authority in writing or (2) as to which any Stockholder
has been Informed.
(e) During the Lookback Period the Stockholders have not been
Informed that the Company or any Subsidiary has any liability for Taxes, whether
currently due or deferred, of any Person under Treasury Regulation Section
1.1502-6 (or any similar provision of state or local law), as a transferee or
successor, by contract, or otherwise. Other than the consolidated federal income
Tax Returns filed by the Company, neither the Company nor any Subsidiary has
been a member of an affiliated group filing a consolidated federal income Tax
Return.
(f) No consent under Section 341(f) of the Code concerning
collapsible corporations has ever been filed with respect to the Company or any
of its Subsidiaries. During the Lookback Period the Stockholders have not been
Informed that the Company or any Subsidiary will be required to include any
amount in its income or exclude any amount from its deductions in any taxable
period ending after the Closing Date by reason of a change in method of
accounting or use of the installment method of accounting in any period ending
on or prior to the Closing Date. Neither the Company nor any Subsidiary is or
has been, a "United States real property holding corporation" within the meaning
of Section 897(c)(2) of the Code. Other than the payments to Gary Shirk in
exchange for his Class B Common Stock in the Company, neither the Company nor
any Subsidiary has made any payments, is obligated to make any payments, or is a
party to any agreement that under certain circumstances could obligate it to
make any payments that will not be deductible under Section 280G of the Code.
The Company and each of its Subsidiaries has disclosed on its federal income Tax
Returns all positions taken therein that could give rise to a substantial
understatement of federal income Tax within the meaning of Section 6662 of the
Code. Neither the Company nor any Subsidiary is a party to any Tax allocation or
sharing agreement.
(g) Schedule 3.16 sets forth the following information as of March
31, 1999: (1) the tax basis of the Company and its Subsidiaries in its assets,
(2) the amount of any net operating loss, net capital loss, unused investment or
other credit, unused foreign tax, or excess charitable contribution allocable to
the Company or any of its Subsidiaries, and (3) all federal, state and local tax
elections in effect for the Company or any of its Subsidiaries.
3.17 Bank Accounts; Powers of Attorney
Schedule 3.17 contains a correct and complete list of all accounts or
deposits of the Company and its Subsidiaries with banks or other financial
institutions, safe deposit boxes of the
-18-
23
Company and its Subsidiaries, persons authorized to sign or otherwise act with
respect thereto as of the date of this Agreement, and powers of attorney for the
Company and its Subsidiaries.
3.18 Insurance
Schedule 3.18 is a true and complete list of all insurance policies of
the Company and its Subsidiaries. During the Lookback Period the Stockholders
have not been Informed that any policies of insurance listed in Schedule 3.18
are not in full force and effect. During the Lookback Period, no insurance
policy of the Company or any Subsidiary has been canceled by the insurer and no
application of the Company or any Subsidiary for insurance has been rejected by
any insurer.
3.19 Personnel and Employee Benefits
(a) Employees and Compensation. Schedule 3.19 contains a true and
complete list of all employees of the Company and each Subsidiary and all
persons performing personal services for the Company or any Subsidiary under the
direction and control of the Company or any of its Subsidiaries and which are
retained as independent contractors by the Company or any Subsidiary
(collectively, the "Employees"), annotated to indicate which Employees, if any,
are on leave of absence or otherwise not actively employed. Schedule 3.19 also
contains a description of all compensation arrangements affecting any Employees,
including any:
(1) "Employee welfare benefit plan," as defined in Section 3(1)
of ERISA, that is maintained or administered by the Company or any trade or
business under common control with the Company within the meaning of Sections
414(b), (c), (m), or (o) of the Code ("ERISA Affiliate"), or to which the
Company or any ERISA Affiliate contributes or is required to contribute (a
"Welfare Plan");
(2) "Employee pension benefit plan," as defined in Section 3(2)
of ERISA that is maintained or administered by the Company or any ERISA
Affiliate or to which the Company or any ERISA Affiliate contributes or is
required to contribute (a "Pension Plan");
(3) Employment, severance, or other similar contract,
arrangement, or policy and each plan or arrangement (written or oral) providing
for bonuses, incentive compensation, severance, insurance coverage (including
any self-insured arrangements), workers' compensation, disability benefits,
supplemental unemployment benefits, vacation and sick leave benefits, or
retirement benefits or for deferred compensation, profit-sharing, stock options,
stock appreciation rights, stock purchases, or other forms of compensation or
benefits in excess of base salary, hourly wages, and overtime, that (A) is not a
Welfare Plan or Pension Plan, and (B) is entered into, maintained, contributed
to, or required to be contributed to by the Company or an ERISA Affiliate or
under which the Company or an ERISA Affiliate has any liability (collectively,
"Benefit Arrangements").
(b) Pension Plans. Except as disclosed on Schedule 3.19, neither the
Company nor any ERISA Affiliate sponsors, maintains, or contributes to any
Pension Plan. During the Lookback Period the Stockholders have not been Informed
that any Pension Plan disclosed on Schedule 3.19 does not comply currently and
has not been maintained in material compliance with its terms and, both as to
form and in operation, with the requirements prescribed by any
-19-
24
statutes, order, rules, and regulations that are applicable to such plans,
including ERISA and the Code. Each Pension Plan that is intended to be
tax-qualified under Code Section 401(a) is the subject of a favorable
determination letter, and no amendment to such Pension Plan that is not the
subject of a favorable determination letter would affect the validity of such
letter. Neither the Company nor any ERISA Affiliate knows or has reason to know
that any Pension Plan is subject to any governmental audit or examination, or
that the Company, any ERISA Affiliate, or any fiduciary of a Pension Plan is
subject to any action, suit or claim with respect to any Pension Plan (other
than a routine claim for benefits). Neither the Company nor any ERISA Affiliate
has ever sponsored, maintained, contributed to or been required to contribute to
any Pension Plan subject to Section 302 or Title IV of ERISA or to Section 412
of the Code.
(c) Welfare Plans. During the Lookback Period the Stockholders have
not been Informed that any Welfare Plan does not comply currently and has not
been maintained in compliance with its terms and, both as to form and in
operation, with the requirements prescribed by any and all statutes, orders,
rules and regulations that are applicable to such plans, including ERISA and the
Code. Neither the Company nor any ERISA Affiliate sponsors, maintains or
contributes to any Welfare Plan that provides health or death benefits to former
employees of the Company or any ERISA Affiliate other than as required by
Section 4980B of the Code. Neither the Company nor any ERISA Affiliate knows or
has reason to know that any Welfare Plan is subject to any governmental audit or
examination, or that the Company, any ERISA Affiliate or any fiduciary of a
Welfare Plan is subject to any action, suit or claim with respect to any Welfare
Plan (other than a routine claim for benefits). With respect to each Welfare
Plan that provides disability benefits, neither the Company nor any ERISA
Affiliate knows of any participant in such plan who has become disabled and is
receiving or is in the waiting period to become eligible to receive disability
benefits thereunder.
(d) Benefit Arrangements. During the Lookback Period the
Stockholders have not been Informed that any Benefit Arrangement has not been
maintained in substantial compliance with its terms and with the requirements
prescribed by all statutes, orders, rules and regulations that are applicable to
such Benefit Arrangement. Schedule 3.19 contains a true and complete list of all
personal service contracts with Employees. The Company has no written or oral
contract prohibiting the immediate termination of any Employee without cause.
Neither the Company nor any ERISA Affiliate knows or has reason to know that any
Benefit Arrangement is subject to any governmental audit or examination, or that
the Company, any ERISA Affiliate or any fiduciary of any Benefit Arrangement is
subject to any action, suit, or claim with respect to any Benefit Arrangement
(other than a routine claim for benefits).
(e) Multiemployer Plans. Neither the Company nor any ERISA Affiliate
has at any time contributed to or been required to contribute to any
"multiemployer pension plan" as defined in Sections 3(37) and 4001 of ERISA (a
"Multiemployer Plan") or at any time been a "substantial employer" as defined in
Section 4001 of ERISA. Neither the Company nor any ERISA Affiliate has incurred
or reasonably expects to incur any withdrawal liability under Section 4201 of
ERISA. Neither the Company nor any ERISA Affiliate has engaged in any
transaction that could subject the Company or any ERISA Affiliate to any
liability under Section 4069 or 4212 of ERISA. The transactions contemplated by
this Agreement will not subject the Company or any ERISA Affiliate to any
liability under Section 4069 or 4212 of ERISA.
-20-
25
(f) Delivery of Copies of Relevant Documents and Other Information.
Stockholders have delivered true and complete copies of each of the following
documents to Buyer:
(1) Each currently effective Welfare Plan (and, if applicable,
related trust agreements, insurance contracts, annuity contracts or other
funding vehicles) and all amendments thereto, and written descriptions thereof
that have been distributed to Employees (including summary plan descriptions and
summaries of material modifications);
(2) Each currently effective Pension Plan (and, if applicable,
related trust agreements, insurance contracts, annuity contracts or other
funding vehicles) and all amendments thereto, and written descriptions thereof
that have been distributed to Employees (including summary plan descriptions and
summaries of material modifications), as well as any determination letters from
the Internal Revenue Service;
(3) Each currently effective Benefit Arrangement and written
descriptions thereof that have been distributed to Employees (including
descriptions of the number and level of employees covered thereby), any employee
handbooks or similar personnel policies (including a description of any
unwritten employment policies) and all personal service contracts with
Employees; and
(4) For each of the Welfare Plans or Pension Plans, for the
immediately preceding three plan years, (A) the Forms 5500 series (including all
attachments or any prospective Employee or any entity (including any union or
Governmental Body) claiming to represent any Employee or prospective Employee
and schedules thereto) filed with the Internal Revenue Service, (B) the summary
annual reports, and (C) any other governmental filings.
(g) Labor Relations. Except as set forth in the Schedules to Section
3.8, and except for employment at will contracts with employees of the Company
or its Subsidiaries, and except for contracts in employee handbooks or personnel
policies, the Company is not a party to or subject to any written or oral
employment agreement with any Employee. During the Lookback Period the
Stockholders have not been Informed that the Company has not complied in all
material respects with all laws, rules and regulations relating to the
employment of labor, including those related to wages, hours, collective
bargaining, occupational safety, discrimination and the payment of social
security and other payroll related taxes, and it has not received any notice
alleging that it has failed to comply with any such laws, rules or regulations
that have not been resolved prior to the date of this Agreement. There are no
pending nor have the Company or the Stockholders been Informed of any
Threatened, challenges, investigations or disputes regarding any alleged
misclassification of workers as independent contractors. Except as disclosed on
Schedule 3.19, no Proceedings or material disputes are pending nor have the
Company or the Stockholders been informed of any Threatened, between the Company
and any Employee (singly or collectively) or any prospective Employee or any
entity (including any union or Governmental Body) claiming to represent any
Employee or prospective Employee. The Company is not a party to or subject to
any collective bargaining agreement. No labor union or other collective
bargaining unit represents or claims to represent any of the employees of the
Company. To the knowledge of the Company and each Stockholder, there is no union
campaign
-21-
26
being conducted to solicit cards from any Employees to authorize a union to
represent any of the employees of the Company or to request a National Labor
Relations Board certification election with respect to any Employees.
(h) Accelerated Benefits. Except as specifically disclosed in
Schedule 3.19, neither the execution and delivery of this Agreement nor the sale
of the Company Shares to Buyer, alone or in conjunction with another event,
including but not limited to, a termination of any Employee's services for the
Company, will (1) result in any payment (including severance pay), or (2) result
in the acceleration of vesting of any benefit or payment under any Welfare Plan,
Pension Plan or Benefit Arrangement, or (3) materially increase any benefits
otherwise payable under any Welfare Plan, Pension Plan or Benefit Arrangement,
or (4) result in any restriction or limitation on the assets of any Welfare
Plan, Pension Plan or Benefit Arrangement or require the transfer of assets from
the Company to any funding vehicle or create any funding obligation for the
Company, or (5) result in the forgiveness of any loan; and in any event, any
such benefit or event disclosed in Schedule 3.19 will, when paid or recognized,
be fully deductible under the Code, including Sections 162, 280G, and 404 of the
Code.
3.20 Claims and Legal Actions
Except as disclosed on Schedule 3.20, there is no claim, legal action,
counterclaim, suit, arbitration or other legal, administrative or tax
Proceeding, nor any order, decree or judgment, in progress or pending, nor have
the Stockholders been Informed of any Threatened, against or relating to the
Company or any of its Subsidiaries, the Assets or the business of the Company or
any of its Subsidiaries.
3.21 Environmental Matters
(a) During the Lookback Period the Stockholders have not been
Informed that the Company or any Subsidiary has not complied in all material
respects with all laws, rules and regulations of all Governmental Bodies (and
all agencies thereof) concerning the environment, public health and safety, and
employee health and safety, or that any charge, complaint, action, suit,
Proceeding, hearing, claim, demand or notice has been filed or commenced against
the Company or any of its Subsidiaries alleging any failure to comply with any
such law, rule or regulation.
(b) During the Lookback Period the Stockholders have not been
Informed that the Company or any Subsidiary has liability (or that there is any
reasonable basis related to the Company's or any Subsidiary's past or present
operations or properties for any claim against the Company or any of its
Subsidiaries giving rise to any such liability) under the Comprehensive
Environmental Response, Compensation and Liability Act, the Resource
Conservation and Recovery Act, the Federal Water Pollution Control Act, the
Clean Air Act, the Safe Drinking Water Act, the Toxic Substances Control Act,
the Refuse Act, the Emergency Planning and Community Right-to-Know Act or the
Occupational Safety and Health Act (each as amended) or any other law, rule, or
regulation of any Governmental Body concerning release or Threatened release of
hazardous substances, public health and safety, pollution, protection of the
environment or employee health and safety.
-22-
27
(c) During the Lookback Period the Stockholders have not been
Informed that the Company or any Subsidiary has liability ( or that the Company
or any Subsidiary has handled any substance or owned or operated any property in
any manner that could reasonably be expected to give rise to any such liability)
for damage to any site, location or body of water (surface of subsurface) or for
illness or personal injury.
(d) During the Lookback Period the Stockholders have not been
Informed that any properties or equipment of the Company or any Subsidiary are
not or have not been free of asbestos and asbestos-related products, PCB's, and
other hazardous or toxic substances that are subject to regulation under any
law, rule or regulation of any Governmental Body concerning the release or
Threatened release of hazardous substances, public health and safety, pollution
or protection of the environment.
3.22 Exchange Act: Investment Company Act
No securities of the Company or any of its Subsidiaries are required to
be registered under Section 12 of the Exchange Act. Neither the Company nor any
Subsidiary is an "investment company" as such term is defined in the Investment
Company Act of 1940, as amended.
3.23 Transactions with Affiliates
Except for the Subsidiaries or as set forth on Schedule 3.23, no
Stockholder or any Related Person of any Stockholder or of the Company has had
any interest in any property (whether real, personal or mixed and whether
tangible or intangible) used in or pertaining to the Company's or any
Subsidiary's businesses and operations. Except for the Subsidiaries or as set
forth on Schedule 3.23, no Stockholder or any Related Person of any Stockholder
or of the Company is the owner of or has owned (of record or as a beneficial
owner) an equity interest or any other financial or profit interest in, a Person
that has (i) had business dealings or a material financial interest in any
transaction with the Company, or (ii) engaged in competition with the Company
with respect to any line of the products or services of the Company (a
"Competing Business") in any market presently served by the Company or any of
its Subsidiaries except for less than one percent of the outstanding capital
stock of any Competing Business that is publicly traded on any recognized
exchange or in the over-the-counter market. Except for the Subsidiaries or as
set forth on Schedule 3.23, no Stockholder or any Related Person of any
Stockholder or of the Company or any of its Subsidiaries is a party to any
Contract with, or has any claim or right against, the Company or any of its
Subsidiaries.
3.24 Broker
None of the Company or any of its Subsidiaries, any Stockholder, or any
Person acting on behalf of the Company or any of its Subsidiaries or any
Stockholder has incurred any liability for any finders' or brokers' fees or
commissions in connection with the transactions contemplated by this Agreement.
-23-
28
3.25 Full Disclosure
No representation or warranty made by the Company or any Stockholder in
this Agreement or in any certificate, document or other instrument furnished or
to be furnished by the Company or any Stockholder pursuant to this Agreement is
knowingly false when made or negligently made, or knowingly omits to state any
material fact that is required to make any statement made herein or therein not
misleading
3.26 List of Directors and Officers
Schedule 3.26 contains a true and complete list of all current directors
and officers of the Company and each Subsidiary. In addition, Schedule 3.26
contains a list of all managers, employees and persons performing personal
services for the Company or any Subsidiary under the direction and control of
the Company or any of its Subsidiaries and which are retained as independent
contractors of the Company and each Subsidiary who, individually, are scheduled
to receive compensation from the Company for the fiscal year ending June 30,
1999, in excess of $50,000. In each case such listing includes the current job
title and current aggregate annual compensation of each such individual.
3.27 Transfer of Company Shares
The Stockholders have not been Informed that, other than the Company, any
holder of stock of the Company has at any time transferred any of such stock to
any employee of the Company, which transfer constituted or could be viewed as
compensation for services rendered to the Company by said employee.
3.28 Stock Repurchase
Except as set forth on Schedule 3.28, the Company has not redeemed or
repurchased any of its capital stock.
3.29 No Indebtedness Between Stockholder/Company
Except as set forth on Schedule 3.29, no Stockholder has any outstanding
indebtedness for borrowed monies, directly, or indirectly through such
Stockholder's Related Persons, to the Company or any of its Subsidiaries as of
the date hereof; and neither the Company nor any Subsidiary has any outstanding
indebtedness for borrowed monies or, except in their capacity as an employee or
director, if any, any financial or employment obligations or liability of any
kind as of the date hereof to any Stockholder or any Related Person of such
Stockholder.
3.30 Year 2000 Compliance
The Stockholders have been Informed by J.D. Edwards that that the
Company's information technology (including without limitation all of the
computer hardware and software owned, leased or used by the Company in the
ordinary course of the business and operations of the Company) (the "Information
Technology") provided by J.D. Edwards to the Company is Year 2000 Compliant.
Furthermore, the Company has a Year 2000 plan intended by the Company to cause
the Information Technology employed by the Company to be Year 2000
-24-
29
Compliant on or prior to December 31, 1999, or to reduce the loss to be suffered
by the Company in the event that the Information Technology is not Year 2000
Compliant. For purposes of this Section 3.30, "Year 2000 Compliant" means, with
respect to Company's information technology, that the information technology is
designed to be used prior to, during, and after the calendar Year 2000 A.D., and
the information technology used during each such time period will accurately
receive, provide and process date/time data (including, but not limited to,
calculating, comparing and sequencing) from, into and between the twentieth and
twenty-first centuries, including the years 1999 and 2000, and leap year
calculations, and will not malfunction, cease to function, or provide invalid or
incorrect results as a result of date/time data, to the extent that other
information technology, used in combination with the information technology
being acquired by Buyer hereunder, properly exchanges date/time data with it.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to each Stockholder as follows:
4.1 Organization and Authority
Buyer is a corporation duly organized, validly existing, and in good
standing under the laws of the State of Delaware. Buyer has the requisite
corporate power and authority to own, lease and operate its properties, to carry
on its business in the places where such properties are now owned, leased or
operated and such business is now conducted, and to execute, deliver and perform
this Agreement and the documents contemplated hereby according to their
respective terms.
4.2 Authorization and Binding Obligation
The execution, delivery, and performance of this Agreement by Buyer have
been duly authorized by all necessary corporate action on the part of Buyer.
This Agreement has been duly executed and delivered by Buyer and constitutes a
legal, valid and binding obligation of Buyer, enforceable against Buyer in
accordance with its terms except as the enforceability of this Agreement may be
affected by bankruptcy, insolvency or similar laws affecting creditors' rights
generally and by judicial discretion in the enforcement of equitable remedies.
4.3 Absence of Conflicting Agreements; Consents
The execution, delivery and performance by Buyer of this Agreement and
the documents contemplated hereby (with or without the giving of notice, the
lapse of time or both): (a) do not require the consent of any third party; (b)
will not conflict with any provision of the Certificate of Incorporation or
Bylaws of Buyer, each as currently in effect; (c) will not conflict with, result
in a breach of, or constitute a default under, any applicable law, judgment,
order, ordinance, injunction, decree, rule, regulation or ruling of any court or
Governmental Body; and (d) will not conflict with, constitute grounds for
termination of, result in a breach of, constitute a default under, or accelerate
or permit the acceleration of any performance required by the terms of, any
agreement, instrument, license or permit to which Buyer is a party or by which
Buyer may be bound. Except as described in Section 5.6 of this Agreement, no
consent, approval, permit, or
-25-
30
authorization of, or declaration to, or filing with any Governmental Body or any
other Person is required to permit Buyer to acquire the Company Shares from
Stockholders or otherwise to consummate the transactions contemplated by this
Agreement
4.4 Broker
Neither Buyer nor any Person acting on its behalf has incurred any
liability for any finders' or brokers' fees or commissions in connection with
the transactions contemplated by this Agreement.
4.5 Investment Purpose; Investment Company
Buyer is acquiring the Company Shares for investment for its own account
and not with a view to the sale or distribution of any part thereof. Buyer is
not an "investment company" as defined in the Investment Company Act of 1940, as
amended.
4.6 Full Disclosure
No representation or warranty made by the Buyer in this Agreement or in
any certificate, document or other instrument furnished or to be furnished by
the Buyer pursuant to this Agreement is knowingly false when made or negligently
made, or knowingly omits to state any material fact that is required to make any
statement made herein or therein not misleading.
4.7 Financial Statements
Attached as Schedule 4.7 is a complete list of (a) all errors, mistakes
and omissions, and recommended adjustments, corrections, changes and revisions
in or to the Financial Statements of which Buyer has been advised by any Person,
including, but not limited to, Arthur Anderson, and (b) all adjustments,
corrections, changes and revisions to the Financial Statements, or the June 30,
1999 financial statement, which Buyer had planned to make prior to the date of
this Agreement.
ARTICLE 5
SPECIAL COVENANTS AND AGREEMENTS
5.1 Risk of Loss
Buyer shall not assume the risk of any loss, damage, impairment,
confiscation or condemnation of any of the assets of the Company from any cause
whatsoever prior to the Closing. The Buyer shall not be obligated to close if
the Assets are materially damaged on or prior to the Closing Date.
-26-
31
5.2 Confidentiality
Except as necessary for the consummation of the transactions contemplated
by this Agreement, and except as and to the extent required by law, each party
will keep confidential any information obtained from the other party in
connection with the transactions contemplated by this Agreement (the
"Confidential Information"). Each party shall use the Confidential Information
only for the purpose of implementing this Agreement, and shall, within their
respective organizations, take reasonable steps to insure that the Confidential
Information is not disclosed to any director, officer, employee or consultant
who does not need to know the Confidential Information in order to implement
this Agreement. If this Agreement is terminated, for any reason, foreseen or
unforeseen, now existing or hereafter arising, including, but not limited to,
breach of the Agreement by the other party, each party immediately will return
to the other party or destroy all information obtained by the such party from
the other party in connection with the transactions contemplated by this
Agreement and all copies and summaries thereof, and immediately will certify in
writing to the other party such return or destruction. This Section shall
survive the termination of this Agreement.
5.3 Cooperation
Buyer and the Stockholders shall cooperate fully with each other and
their respective counsel and accountants in connection with any actions required
to be taken as part of their respective obligations under this Agreement, and
Buyer and Stockholders shall execute such other documents as may be necessary
and desirable to the implementation and consummation of this Agreement, and
otherwise use commercially reasonable efforts to consummate the transactions
contemplated hereby and to fulfill their obligations under this Agreement.
5.4 Tax Matters
The following provisions shall govern the allocation of responsibility
between Buyer and Stockholders for certain tax matters following the Closing
Date:
(a) Tax Periods Ending on or Before the Closing Date. At the expense
of the Company or Buyer as Buyer shall elect, Stockholders shall cause the
Company to prepare or cause to be prepared and file or cause to be filed all
Tax Returns, which are acceptable to the Buyer, for the Company for all tax
periods ending on or prior to the Closing Date which are filed after the
Closing Date. The Stockholders shall permit Buyer to review and comment on each
such Tax Return prior to filing. The Taxes of the Company with respect to such
periods shall be paid by Buyer or the Company as Buyer shall elect, and shall
not be reimbursed to either by the Stockholders.
(b) Tax Periods Beginning Before and Ending After the Closing Date.
At the expense of the Company or Buyer as Buyer shall elect, Buyer shall
prepare or cause to be prepared and file or cause to be filed any Tax Returns
of the Company for Tax periods which begin before the Closing Date and end
after the Closing Date. Buyer shall permit a representative of the Stockholders
to review and comment on each such Tax Return prior to filing. The Taxes of the
Company with respect to such periods shall be paid by Buyer or the Company as
Buyer shall elect, and shall not be reimbursed to either by the Stockholders.
-27-
32
(c) Cooperation on Tax Matters.
(1) Buyer, the Company and the Stockholders shall cooperate
fully, as and to the extent reasonably requested by the other party, in
connection with the filing of Tax Returns pursuant to this Section 5.4 and any
audit, litigation or other Proceeding with respect to Taxes. Such cooperation
shall include the retention and (upon the other party's request) the provision
of records and information which are reasonably relevant to any such audit,
litigation or other Proceeding and making employees available on a mutually
convenient basis to provide additional information and explanation of any
material provided hereunder. Buyer and the Stockholders agree (A) to retain all
books and records with respect to Tax matters pertinent to the Company relating
to any taxable period beginning before the Closing Date until the expiration of
the statute of limitations (and, to the extent notified by Buyer or the
Stockholders, any extensions thereof) of the respective taxable periods, and to
abide by all record retention agreements entered into with any taxing authority,
and (B) to give the other party reasonable written notice prior to transferring,
destroying or discarding any such books and records and, if the other party so
requests, Buyer or the Stockholders, as the case may be, shall allow the other
party to take possession of such books and records in lieu of destruction or
discarding.
(2) Buyer and the Stockholders shall cooperate fully, as and to
the extent reasonably requested by the other party, to obtain any certificate or
other document from any Governmental Body or any other Person as may be
necessary to mitigate, reduce or eliminate any Tax that could be imposed
(including, but not limited to, with respect to the transactions contemplated
hereby).
(3) Buyer and the Stockholders further agree, upon request, to
provide the other party with all information that such other party may be
required to report pursuant to Section 6043 of the Code and all regulations
promulgated thereunder.
(d) Tax Sharing Agreements. To the extent permitted by law and
contract, all tax sharing agreements or similar agreements with respect to or
involving the Company shall be terminated as of the Closing Date and, after the
Closing Date, the Company shall not be bound thereby or have any liability
thereunder.
(e) Certain Taxes. All transfer, documentary, sales, use, stamp,
registration and other such Taxes and fees (including any penalties and
interest) incurred in connection with this Agreement shall be paid by the Buyer
when due, and Buyer will, at Buyer's own expense, file all necessary Tax Returns
and other documentation with respect to all such transfer, documentary, sales,
use, stamp, registration and other Taxes and fees, and, if required by
applicable law, Stockholders will join in the execution of any such Tax Returns
and other documentation.
5.5 Employment Agreements
As a material inducement to Buyer's purchase of the Company Shares, John
R. Secor, Glen M. Secor and Gary R. Shirk ( the "Key Executives") will each
enter into an Employment Agreement with Buyer or, at Buyer's option, with the
Company, each in a form mutually acceptable to the Buyer and each such Key
Executive (collectively, the "Employment Agreements"). The performance or not of
the Employment Agreements after the Closing shall
-28-
33
have no effect upon this Agreement. Without limiting the generality of the
immediately preceding sentence, breach of any or all of the Employment
Agreements, shall not subject Buyer or Stockholders to liability under this
Agreement.
5.6 Antitrust Laws Compliance
If it is determined that a filing is required, with respect to the
transactions contemplated by this Agreement, under Title II of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), the Company, the Stockholders and the Buyer shall each make such filings
as are required under the HSR Act. The Company, the Stockholders and the Buyer
shall each pay only the fee charged that filer, if any, by the applicable
regulations of any Governmental Body in connection with the filings required by
the HSR Act, and shall not be required to contribute to any other party's costs
or fees. The obligations of the parties to this Agreement are subject to the
expiration of any waiting periods (including any extensions of time occasioned
by requests by the Federal Trade Commission or the Department of Justice for
further information about the transactions) applicable to the Contemplated
Transactions under the HSR Act. The Closing shall not take place until such
waiting periods (including any extensions thereof) have expired without the
Federal Trade Commission or the Department of Justice having indicated to any
party to this Agreement an intention to initiate proceedings or having initiated
proceedings which look to preventing the Contemplated Transactions. The Company,
the Stockholders and Buyer shall make, or cause to be made, all filings required
under the HSR Act in order to consummate the Contemplated Transactions. If the
Federal Trade Commission or the Department of Justice requests additional
information from the Company, the Stockholders or Buyer or imposes any condition
upon the Contemplated Transactions, the Company, the Stockholders and Buyer will
use their commercially reasonable best efforts to cooperate with the Federal
Trade Commission and the Justice Department.
5.7 No Issuance of Additional Capital Stock
No signatory to this Agreement shall permit, or vote to cause, any
additional Class A Stock, Class B Stock, Preferred Stock or any other class of
capital stock to be issued by the Board of Directors of the Company without the
prior written consent of the Buyer.
5.8 Release of Personal Guaranties
Buyer will sign such documents and pledge such assets and give such
guaranties as are necessary to cause the release of Stockholders from any and
all obligations they may have on the debt of the Company set forth on Schedule
5.8 (other than obligations resulting from a breach or other failure to perform
the related underlying agreements by any Stockholder).
5.9 Yankee Rights Management
Notwithstanding anything else in this Agreement, Stockholders are not
selling and the Buyer is not assuming any liabilities relating to, and the
Purchase Price does not include, the assets related to, and the business of,
Yankee Rights Management. The assets and liabilities listed on Schedule 5.9 are
not to be transferred to or assumed by Buyer, but shall remain the property of
and the responsibility of Stockholders or their designee. Stockholders shall
indemnify the Buyer and the Company for any and all liabilities arising from the
Yankee Rights
-29-
34
Management. The Stockholders have not made, and do not make, any covenant not to
compete with Buyer with respect to the Yankee Rights Management business.
Without limiting the generality of the immediately preceding sentence,
Stockholders may use the name Yankee, but may not use the name Yankee Book
Peddler or any trademarks, tradenames, logos or other similar identification
that would, in any way, imply that Yankee Rights Management is affiliated with
the Company. The Stockholders further agree to license the Yankee Rights
Management technology to the Company at a rate not in excess of the rate charged
any other comparable licensee upon terms and conditions reasonably satisfactory
to the Buyer and the Stockholders.
ARTICLE 6
CONDITIONS TO OBLIGATIONS OF BUYER AND STOCKHOLDER
6.1 Conditions to Obligations of Buyer
All obligations of Buyer at the Closing hereunder are subject at Buyer's
option to the fulfillment prior to or at the Closing Date of each of the
following conditions:
(a) Representations and Warranties. All representations and
warranties of Stockholders and the Company contained in this Agreement shall be
true and complete in all material respects at and as of the Closing Date as
though made at and as of that time. The Stockholders and the Company shall have
performed and shall be in compliance with all the applicable terms and
provisions of this Agreement on and as of the Closing Date. On the Closing
Date, the Stockholders shall deliver to the Buyer a certificate, dated as of
the Closing Date and signed by an executive officer of the Company certifying
compliance with the conditions of this Section 6.1(a).
(b) Covenants and Conditions. Stockholders and the Company shall
have performed and complied in all material respects with all covenants,
agreements and conditions required by this Agreement to be performed or
complied with by it prior to or on the Closing Date.
(c) Consents. All Consents shall have been obtained and delivered to
Buyer (other than any Consent required under any Contract listed on Schedule
3.8 that is not a Material Contract) without any material adverse change in the
terms or conditions of any Contract or License resulting from such Consent.
(d) Governmental Authorizations. There shall not have been any
modification, revocation or non-renewal of any License that could have a
material adverse effect on the Company or the conduct of its business or
operations. All waiting periods under the HSR Act applicable to this Agreement
or the transactions contemplated hereby shall have expired or been terminated
without the commencement of any action by an appropriate Governmental Body to
restrain or postpone any Contemplated Transaction.
(e) Tax, Lien, and Judgment Searches. Buyer's reports of searches,
if any, for tax, lien and judgment filings in the Secretary of State's records
of the State of New Hampshire
-30-
35
and in the records of Merrimack County, New Hampshire, and the Town of
Hopkinton, New Hampshire, shall fail to disclose any judgment, lien or tax
filings not present on the date of this Agreement, such searches having been
made no earlier than 30 days prior to the Closing Date.
(f) YBP Media Ventures, Inc. Buyer shall have reviewed and
reasonably accepted the transaction whereby YBP Media Ventures, Inc. has been
separated from the Company.
(g) Board of Directors. Heidi J. Coen, Glen M. Secor and John R.
Secor shall resign as members of the Board of Directors effective as of the
Closing Date.
(h) Personal Guaranty. The Buyer shall have received a Personal
Guaranty, in the form attached hereto as Exhibit 6.1(h), (the "Personal
Guaranty") from John R. Secor, Glen M. Secor, Heidi J. Coen and Traci L.
Britten.
(i) Schedules. The Schedules and Exhibits to be delivered in
accordance with the terms and conditions of this Agreement shall have been
received by Buyer and shall be satisfactory to Buyer in its sole discretion.
(j) The Deliveries. Stockholders shall have made or stand willing to
make all the deliveries to Buyer described in Section 7.2.
6.2 Conditions to Obligations of Stockholders
All obligations of the Stockholders at the Closing hereunder are
subject at Stockholders' option to the fulfillment prior to or at the Closing
Date of each of the following conditions:
(a) Representations and Warranties. All representations and
warranties of Buyer contained in this Agreement shall be true and complete in
all material respects at and as of the Closing Date as though made at and as of
that time. The Buyer shall have performed and shall be in compliance with all
the applicable terms and provisions of this Agreement on and as of the Closing
Date. On the Closing Date, the Buyer shall deliver a certificate, dated as of
the Closing Date and signed by an executive officer of the Buyer certifying
compliance with the conditions of this Section 6.2(a).
(b) Covenants and Conditions. Buyer shall have performed and
complied in all material respects with all covenants, agreements, and conditions
required by this Agreement to be performed or complied with by it prior to or on
the Closing Date.
(c) Governmental Authorizations. All waiting periods under the HSR
Act applicable to this Agreement or the transactions contemplated hereby shall
have expired or been terminated without the commencement of any action by an
appropriate Governmental Body to restrain or postpone any Contemplated
Transaction.
(d) Deliveries. Buyer shall have made or stand willing to make all
the deliveries described in Section 7.3.
-31-
36
(e) YBP Media Ventures, Inc. YBP Media Ventures, Inc. shall have
been separated from the Company in a tax free manner reasonably acceptable to
Stockholders on or prior to June 30, 1999, otherwise this Section 6.2(e) shall
be of no further force or effect.
ARTICLE 7
CLOSING AND CLOSING DELIVERIES
7.1 Closing
(a) Closing Date. Except as otherwise agreed to by Buyer and
Stockholders, the Closing shall take place at 10:00 a.m. on June 30, 1999, if
the conditions precedent set forth in Article 6 shall have been satisfied or
waived by the party entitled to the benefit thereof.
(b) Closing Place. The Closing shall be held at the offices of the
Company, or any other place that is mutually agreed upon by Buyer and the
Stockholders.
(c) Deemed Effective Date. In the event that the Closing occurs on
June 30, 1999, the Closing shall be deemed to have occurred at 11:59 p.m. EST,
or such other time as the parties may mutually agree.
7.2 Deliveries by Stockholders
Prior to or on the Closing Date, the Stockholders shall deliver to Buyer
the following, in form and substance reasonably satisfactory to Buyer and its
counsel:
(a) Company Shares. Certificates representing all of the Company
Shares, which shall be either duly endorsed or accompanied by assignment
documents duly executed in favor of Buyer, without any warranties or
representations or covenants other than those contained within this Agreement;
(b) Officer's Certificate. A certificate, dated as of the Closing
Date, executed by each Stockholder, certifying (1) that the representations and
warranties of the Stockholders and the Company contained in this Agreement are
true and complete in all material respects as of the Closing Date as though made
on and as of that date and (2) that the Stockholders and the Company have in all
material respects performed and complied with all of their obligations,
covenants, and agreements in this Agreement to be performed and complied with on
or prior to the Closing Date;
(c) Secretary's Certificate. A certificate, dated as of the Closing
Date, executed by the Company's secretary (1) certifying that the resolutions,
as attached to such certificate, were duly adopted by the Company's Board of
Directors and stockholders (if required), authorizing and approving the
execution of this Agreement and the consummation of the transactions
contemplated hereby and that such resolutions remain in full force and effect;
and (2) providing, as attachments thereto, the Certificate of Incorporation of
the Company, Certificates of Good Standing for the Company certified by an
appropriate state official of the State of New Hampshire, certified by such
state official as of a date not more than 30 days before the Closing Date and by
the Company's secretary as of the Closing Date, and a copy of the
-32-
37
Company's Bylaws as in effect on the date thereof, certified by the Company's
secretary as of the Closing Date;
(d) Consents. A manually executed copy of any instrument evidencing
receipt of any Consent or other satisfactory evidence of the receipt thereof;
(e) Corporate, Financial, and Tax Records. All corporate records
(including minute books and stock books and registers) and financial and tax
records of the Company;
(f) Employment Agreements. The employment agreements required by
Section 5.5, duly executed by each Key Executive;
(g) Guaranty of Indemnification Amount. The Personal Guaranty
required by Section 6.1(h).
(h) Opinion of Counsel. An opinion of Stockholders' counsel dated as
of the Closing Date, in substantially the form annexed hereto as Exhibit 7.2.
7.3 Deliveries by Buyer
Prior to or on the Closing Date, Buyer shall deliver to Stockholders the
following, in form and substance reasonably satisfactory to the Stockholders and
their counsel:
(a) Closing Payment. The payment described in Section 2.2 allocated
between the Stockholders as set forth on Exhibit A, attached hereto.
(b) Officer's Certificate. A certificate, dated as of the Closing
Date, executed on behalf of Buyer by an executive officer of Buyer, certifying
(1) that the representations and warranties of Buyer contained in this Agreement
are true and complete in all material respects as of the Closing Date as though
made on and as of that date, and (2) that Buyer has in all material respects
performed and complied with all of its obligations, covenants, and agreements in
this Agreement to be performed and complied with on or prior to the Closing
Date;
(c) Employment Agreement. The employment agreements required by
Section 5.5, duly executed by Buyer or the Company;
(d) Secretary's Certificate. A certificate, dated as of the Closing
Date, executed by Buyer's secretary (1) certifying that the resolutions or
minutes, as attached to such certificate, were duly adopted by Buyer's Board of
Directors, authorizing and approving the execution of this Agreement and the
consummation of the transactions contemplated hereby and that such resolutions
remain in full force and effect; and (2) providing, as attachments thereto, the
Certificate (Articles) of Incorporation of Buyer, and a copy of Buyer's Bylaws
as in effect on the date thereof, certified by the Buyer's secretary as of the
Closing Date;
(e) Opinion of Counsel. An opinion of Buyer's counsel dated as of the
Closing Date and reasonably acceptable to the Stockholders.
-33-
38
ARTICLE 8
TERMINATION
8.1 Termination by Stockholders
This Agreement may be terminated by the Stockholders and the purchase and
sale of the Company Shares abandoned, if neither the Company nor any Stockholder
is then in material default, upon written notice to Buyer, upon the occurrence
of any of the following:
(a) Conditions. If on the date on which the Closing is to occur any
of the conditions precedent to the obligations of the Stockholders to close set
forth in this Agreement has not been satisfied by Buyer or waived in writing by
the Stockholders.
(b) Judgments. If there shall be in effect on the date on which the
Closing is to occur any judgment, decree or order that would prevent or make
unlawful the Closing.
8.2 Termination by Buyer
This Agreement may be terminated by Buyer and the purchase and sale of
the Company Shares abandoned, if Buyer is not then in material default, upon
written notice to the Stockholders, upon the occurrence of any of the following:
(a) Conditions. If on the date on which the Closing is to occur any
of the conditions precedent to the obligations of Buyer to close set forth in
this Agreement has not been satisfied by the Stockholders or waived in writing
by Buyer.
(b) Judgments. If there shall be in effect on the date on which the
Closing is to occur any judgment, decree or order that would prevent or make
unlawful the Closing.
8.3 Rights on Termination
If this Agreement is terminated by either party pursuant to this Article
8, this agreement shall have no further force or effect, and neither party shall
have any further obligation to the other except for the obligations of Section
5.2, regarding confidentiality, which shall survive the termination of this
Agreement.
8.4 Attorneys' Fees
In the event of a lawsuit or other Proceeding to enforce this Agreement
or for any remedy available under this Agreement, the prevailing party shall be
entitled to reimbursement from the losing party of its reasonable attorneys fees
and expenses (whether incurred in arbitration, at trial or on appeal).
-34-
39
ARTICLE 9
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION; CERTAIN REMEDIES
9.1 Survival
All representations, warranties and covenants contained in this Agreement
shall survive the Closing for a period of twelve months; provided, however, the
representations and warranties that Stockholders are the only Persons owning the
Company Shares or any interest or rights therein, that the Stockholders own the
Company Shares free and clear of liens and Encumbrances, that the Company Shares
conveyed by Stockholders to Buyer represent 100% ownership interest in the
Company and that there are no finders or brokers fees or commissions in
connection with the Contemplated Transactions, shall survive until the end of
the applicable statute of limitations. Any investigations by or on behalf of any
party hereto shall not constitute a waiver as to enforcement of any
representation, warranty or covenant contained herein. No notice or information
delivered by any party shall affect any other party's right to rely on any
representation, warranty or covenant made by such party or relieve such party of
any obligations under this Agreement as the result of a breach of any of its
representations and warranties.
9.2 Indemnification by Stockholders
Notwithstanding the Closing, and regardless of any investigation made at
any time by or on behalf of the Buyer or any information the Buyer may have, the
Stockholders shall indemnify and hold the Buyer harmless against and with
respect to, and shall reimburse the Buyer for: any and all uninsured Qualifying
Damages resulting from any untrue representation, breach of warranty or
nonfulfillment of any covenant by the Stockholders or the Company contained
herein or in any certificate, document or instrument delivered to the Buyer
hereunder, but only to the extent that such Qualifying Damages accrue or arise
prior to that date which is twelve months after the Closing Date, and only if
Buyer gives each Stockholder the notice specified in Section 9.4(a) of this
Agreement on or before that date which is fifteen months after the Closing Date,
time being of the essence. The time limitations imposed by this Section 9.2(a)
shall apply regardless of the knowledge of Buyer. As used in Sections 9.2, 9.3
and 9.6, Damages are "Qualifying Damages" only if the loss, liability, expense
or diminution of value resulting from an untrue representation, breach of
warranty or covenant exceeds $10,000 per incident. But, if the loss, liability,
expense or diminution of value does exceed the $10,000 threshold, the entire
loss, liability, expense or diminution of value shall be a Qualifying Damage. By
way of illustration, and not in limitation, in the event one party failed to
disclose two Customers who notified the Company that the Customers terminated
doing business with the Company, and Buyer suffered a loss of $9,000 on one of
those Customers and $11,000 on the other of those Customers, only the $11,000
loss would be a Qualifying Damage. It is expressly agreed between Buyer and
Stockholders that the adjustments, corrections, changes, revisions and errors,
mistakes and omissions set forth on Schedule 4.7, or the application of the
principles used to derive them, shall not give rise to an indemnifiable loss.
-35-
40
9.3 Indemnification by Buyer
Notwithstanding the Closing, Buyer hereby agrees to indemnify and hold
each Stockholder harmless against and with respect to, and shall reimburse each
Stockholder for: any and all uninsured Qualifying Damages resulting from any
untrue representation, breach of warranty or any covenant by Buyer contained
herein or in any certificate, document, or instrument delivered to any
Stockholder hereunder, but only to the extent that such Qualifying Damages
accrue or arise prior to that date which is twelve months after the Closing
Date, time being of the essence, and only if a Stockholder gives Buyer the
notice specified in Section 9.4(a) of this Agreement on or before that date
which is fifteen months after the Closing Date. The time limitations imposed by
this Section 9.2(a) shall apply regardless of the knowledge of any Stockholder.
9.4 Procedure for Indemnification
The procedure for indemnification shall be as follows:
(a) The party claiming indemnification (the "Claimant") shall promptly
give notice to the party from whom indemnification is claimed (the "Indemnifying
Party") of any claim, whether between the parties or brought by a third party,
specifying (i) the factual basis for such claim, and (ii) the amount of the
claim. To be effective as a notice under this Section 9.4(a) the notice must be
given to the Indemnifying Party on or before that date which is fifteen months
after the Closing Date, time being of the essence (other than claims based on
breaches of representations that Stockholders are the only Persons owning the
Company Shares or any interest or rights therein, that the Stockholders own the
Company Shares free and clear of liens and Encumbrances, that the Company Shares
conveyed by Stockholders to Buyer represent 100% ownership interest in the
Company and that there are no finders or brokers fees or commissions in
connection with the Contemplated Transactions, for which such notice must be
given within the applicable limitation period). The time limitation specified in
this Section 9.4(a) shall apply regardless of the knowledge of any Claimant. The
time periods specified in Sections 9.1, 9.2, 9.3 and 9.4(a) shall not be
extended under any circumstances, foreseen or unforeseen, now existing or
hereafter arising.
(b) Following receipt of notice from the Claimant of a claim, the
Indemnifying Party shall have thirty (30) days to make such investigation of the
claim as the Indemnifying Party deems necessary or desirable. For the purposes
of such investigation, the Claimant agrees to make available to the Indemnifying
Party and/or its authorized representative(s) the information relied upon by the
Claimant to substantiate the claim. If the Claimant and the Indemnifying Party
agree at or prior to the expiration of said thirty (30) day period (or any
mutually agreed upon extension thereof) to the validity and amount of such
claim, the Indemnifying Party shall immediately pay to the Claimant the full
amount of the claim. If the Claimant and the Indemnifying Party do not agree
within said period (or any mutually agreed upon extension thereof), the Claimant
may seek appropriate legal remedy.
-36-
41
(c) With respect to any claim by a third party as to which either the
Buyer or the Stockholders is claiming indemnification hereunder, the
Indemnifying Party shall have the right at its own expense, to participate in or
assume control of the defense of such claim, and the Claimant shall cooperate
fully with the Indemnifying Party. In the event the claim of the third party is
sustained and the Claimant is entitled to indemnification for that third party
claim, the Indemnifying Party shall reimburse the Claimant for actual
out-of-pocket expenses incurred by the Claimant as the result of a request by
the Indemnifying Party. If the Indemnifying Party elects to assume control of
the defense of any third-party claim, the Claimant shall have the right to
participate in the defense of such claim at its own expense. If the Indemnifying
Party does not elect to assume control or otherwise participate in the defense
of any third party claim, it shall be bound by the results obtained by the
Claimant with respect to such claim.
9.5 Affiliates
The right to indemnification provided in Sections 9.2, 9.3 and 9.4 shall,
in any instance, also be enjoyed by any Affiliate of each of the Buyer and the
Stockholders although any indemnification claims by such parties shall be made
by and through the Claimant.
9.6 Certain Limitations
Notwithstanding anything in this Agreement to the contrary,
(a) Notwithstanding anything in this Agreement to the contrary, and
under all circumstances, foreseen and unforeseen, now existing or hereafter
arising, the obligation of Stockholders to indemnify under this Article 9 is
limited to only the excess of the aggregate of all Qualifying Damages over the
sum of One Hundred Thousand Dollars ($100,000).
(b) Notwithstanding anything in this Agreement to the contrary, and
under all circumstances, foreseen and unforeseen, now existing or hereafter
arising, Stockholders shall not pay more than [CONFIDENTIAL TREATMENT] under
this Article 9.
(c) Notwithstanding anything else herein to the contrary, and under
all circumstances, foreseen and unforeseen, now existing or hereafter arising,
in the event any Stockholder shall be found liable to Buyer by reason of this
Agreement, the breach hereof, the non-performance hereof, the interpretation
hereof, including, but not limited to, the falsity of any representations
herein, and without regard to the legal theory upon which liability is based,
the liability of each Stockholder shall not exceed that Stockholder's share of
the Purchase Price.
-37-
42
9.7 Exclusive Remedy
Notwithstanding anything else herein to the contrary, and under all
circumstances (other than in cases of fraud), foreseen and unforeseen, now
existing or hereafter arising, the indemnification provided for in this Article
9 is the exclusive remedy available for any untrue representation, breach of
warranty or covenant contained in this Agreement or in any certificate,
document, or instrument delivered hereunder.
ARTICLE 10
MISCELLANEOUS
10.1 Fees and Expenses
Except as otherwise provided in this Agreement, (i) Buyer will bear its
own costs and expenses and each of the Stockholders will bear its own costs and
expenses and the Stockholders shall jointly and severally bear the costs and
expenses of the Company paid to outside consultants (including, without
limitation, any broker's or finder's fees) in connection with the negotiation
and the consummation of this Agreement and the Contemplated Transactions, and,
(ii) no costs or expenses of the Company paid to outside consultants or any
Stockholder relating to the purchase and sale of the Company Shares hereunder
and the Contemplated Transactions hereby, including, without limitation, legal,
accounting or other professional expenses , shall be charged to or paid by the
Company or Buyer.
10.2 Notices
All notices, demands and requests required or permitted to be given under
the provisions of this Agreement shall be (i) in writing, (ii) sent by telecopy
(with receipt personally confirmed by telephone), delivered by personal
delivery, or sent by commercial delivery service or certified mail, return
receipt requested, (iii) deemed to have been given on the date telecopied with
receipt confirmed, the date of personal delivery, or the date set forth in the
records of the delivery service or on the return receipt, and (iv) addressed as
follows:
If to the Stockholders: Yankee Book Peddler, Inc.
999 Maple Street
Contoocook, NH 03229
Attention: Chief Financial Officer
Telecopy: (603) 746-5628
Telephone: (800) 258-3774
with a copy David Jordan, Esquire
(which shall Jordan, Gfroerer & Weddleton
not constitute Four Park Street
notice) to: Concord, New Hampshire 03301-6329
Telecopy: (603) 224-2686
Telephone: (603) 228-1151
-38-
43
If to the Buyer: Baker & Taylor, Inc.
2709 Water Ridge Plaza, Suite 500
Charlotte, NC 28217
Attention: Chief Financial Officer
Telecopy: (704) 329-8989
Telephone: (704) 357-3500
with a copy Edward O'Connell, Esquire
(which shall Dow, Lohnes & Albertson
not constitute 1200 New Hampshire Ave., N.W.
notice) to: Washington, D.C. 20036
Telecopy: (202) 776-2222
Telephone: (202) 776-2639
or to any such other or additional persons and addresses as the parties may from
time to time designate in a writing delivered in accordance with this Section
10.2.
10.3 Benefit and Binding Effect
No party hereto may assign this Agreement without the prior written
consent of the other parties hereto, except that the Buyer may transfer and
assign its interests hereunder to a wholly-owned subsidiary. This Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns.
10.4 Further Assurances
The parties agree (a) to furnish upon request to each other such further
information, (b) to execute and deliver to each other such other documents, and
(c) to do such other acts and things, all as the other party may reasonably
request (but which shall not cause the complying party to incur any unreasonable
expense) for the purpose of carrying out the intent of this Agreement and the
documents referred to in this Agreement.
10.5 GOVERNING LAW
THE LAWS OF THE STATE OF NEW HAMPSHIRE SHALL GOVERN THE INTERPRETATION,
VALIDITY AND PERFORMANCE OF THE TERMS OF THIS AGREEMENT, REGARDLESS OF THE LAW
THAT MIGHT BE APPLIED UNDER PRINCIPLES OF CONFLICTS OF LAW.
10.6 Entire Agreement
This Agreement, the schedules and exhibits hereto, and all documents,
certificates, and other documents to be delivered by the parties pursuant
hereto, collectively represent the entire understanding and agreement between
Buyer and the Stockholders with respect to the subject matter of this Agreement.
This Agreement supersedes all prior negotiations between the parties
-39-
44
and cannot be amended, supplemented or changed except by an agreement in writing
that makes specific reference to this Agreement and that is signed by the party
against which enforcement of any such amendment, supplement or modification is
sought.
10.7 Waiver of Compliance; Consents
Except as otherwise provided in this Agreement, any failure of any of the
parties to comply with any obligation, representation, warranty, covenant,
agreement or condition herein may be waived by the party entitled to the
benefits thereof only by a written instrument signed by the party granting such
waiver, but such waiver or failure to insist upon strict compliance with such
obligation, representation, warranty, covenant, agreement or condition shall not
operate as a waiver of, or estoppel with respect to, any subsequent or other
failure. Whenever this Agreement requires or permits consent by or on behalf of
any party hereto, such consent shall be given in a written instrument signed by
the party granting such consent.
10.8 Counterparts
This Agreement may be signed in one or more counterparts by facsimile or
original signature with the same effect as if the signature on each counterpart
were upon the same instrument.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-40-
45
10.9 Waiver of Jury Trial
EACH PARTY HERETO WAIVES IRREVOCABLY, TO THE EXTENT PERMITTED BY LAW, ANY
RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN
CONTRACT, TORT, OR OTHERWISE, BETWEEN OR AMONG ANY OR ALL OF THE PARTIES HERETO
ARISING OUT OF, IN CONNECTION WITH, RELATING TO, OR INCIDENTAL TO THE
RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH THIS AGREEMENT OR OTHER
INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH
OR THE CONTEMPLATED TRANSACTIONS RELATED HERETO. THE SCOPE OF THIS WAIVER IS
INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY
COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS AGREEMENT AND THE
CONTEMPLATED TRANSACTIONS, INCLUDING, WITHOUT LIMITATION, CONTRACT CLAIMS, TORT
CLAIMS, BREACH OF DUTY CLAIMS AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS.
EACH PARTY HERETO ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO
ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH HAS ALREADY RELIED ON THE WAIVER
IN ENTERING INTO THIS AGREEMENT AND THAT EACH WILL CONTINUE TO RELY ON THE
WAIVER IN THEIR RELATED FUTURE DEALINGS. EACH PARTY HERETO FURTHER WARRANTS AND
REPRESENTS THAT EACH HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT
EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING
CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY
NOT BE MODIFIED EITHER ORALLY OR IN WRITING (UNLESS EXPRESSLY MODIFIED IN
WRITING BY ALL PARTIES HERETO), AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT
AMENDMENTS. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN
CONSENT TO A TRIAL BY THE COURT.
IN WITNESS WHEREOF, this Agreement has been executed by Buyer and the
Stockholders as of the date first written above.
BUYER: STOCKHOLDERS:
BAKER & TAYLOR, INC. SECOR FAMILY 2 LIMITED PARTNERSHIP
By:/s/ GARY M. RAUTENSTRAUCH By:/s/ TRACI L. BRITTEN
------------------------- ------------------------
Name: Gary M. Rautenstrauch Name: Traci L. Britten
Title: Executive Vice President Title: General Partner
By:/s/ HEIDI J. COEN
------------------------
Name: Heidi J. Coen
Title: General Partner
By:/s/ GLEN M. SECOR
------------------------
Name: Glen M. Secor
Title: General Partner
By:/s/ JOHN R. SECOR
------------------------
Name: John R. Secor
Title: General Partner
/s/ GARY M. SHIRK
------------------------
Gary Shirk