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EXHIBIT 10.10
STOCK PURCHASE AGREEMENT
AGREEMENT made as of August 3, 1993 by and among Lotus Development
Corporation, a Delaware corporation ("SELLER"), Datext, Inc., a Delaware
corporation (the "COMPANY"), and Datext Holding Corporation, a Delaware
corporation ("BUYER").
The authorized capital stock of the Company consists of 100 shares of
common stock, par value $.01 per share (the "COMPANY STOCK"), of which 100
shares are issued and outstanding. Seller owns beneficially and of record 100%
of the outstanding Company Stock.
Prior to the closing of the transactions contemplated herein, Seller
will have transferred all of the assets (other than certain assets to be
licensed to the Company) and all of the liabilities of its Lotus OneSource
Division (the "DIVISION") to the Company. References herein to the "BUSINESS"
shall mean the Division prior to the asset transfer and the Company after the
asset transfer.
Buyer desires to acquire from Seller the shares of Company Stock owned
by Seller, and Seller desires to sell to the Buyer, all of the shares of Company
Stock owned by Seller.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE OF STOCK
1.01 STOCK PURCHASE. On and subject to the terms and conditions set
forth in this Agreement, on the Closing Date (as defined in Section 1.04 (a)
below), Buyer will purchase from Seller, and Seller will sell and transfer to
Buyer, all of the shares of Company Stock owned by Seller, free and clear of all
liens, charges, security interests and other encumbrances, for the consideration
specified in Section 1.02 below.
1.02 PURCHASE PRICE.
(a) The total purchase price to be paid to Seller for the Company
Stock (the "PURCHASE PRICE") will be an amount equal to (i) $8,439,000 plus (ii)
the amount, if any, that the Closing Date Asset Value (as defined in (b) below)
is greater than $15,921,000, minus (iii) the amount, if any, that the Closing
Date Asset Value is less than $15,921,000.
(b) "CLOSING DATE ASSET VALUE" shall be equal to the excess of the
Company's assets (excluding cash) over its liabilities (excluding deferred
revenues), determined as of the close of the Company's business on the day
immediately preceding the Closing Date in accordance with generally accepted
accounting principles ("GAAP") applied in a manner consistent with past
practices of Seller. In computing Closing Date Asset Value, all accounting
entries (including all liabilities and accruals) will be taken into account
regardless of their amount and all known errors and omissions will be corrected
and all known proper adjustments will be made.
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(c) The purchase price to be paid to Seller at Closing will be an
amount equal to $8,439,000 (the "ESTIMATED PURCHASE PRICE"). The Estimated
Purchase Price shall be paid as follows:
(i) $3,439,000 of which will be paid by Buyer to Seller in
cash by wire transfer of immediately available funds; and
(ii) $5,000,000 of which will be paid by Buyer to Seller by
issuance of a subordinated promissory note of Buyer in the form of
EXHIBIT A attached hereto (the "NOTE").
In addition, Buyer will issue to Seller a warrant to initially purchase
100,000 shares of Buyer's common stock in the form of EXHIBIT B attached hereto
(the "WARRANT"). The Note, the Warrant and the common stock issued or issuable
pursuant to the Warrant are referred to herein as the "BUYER Securities."
(d) As soon as practicable (but in no event later than five days)
after the Purchase Price is determined pursuant to Section 1.03 below, (i) in
the event that the Purchase Price is less than the Estimated Purchase Price,
Seller will pay to Buyer in immediately available funds an amount equal to (A)
such difference, plus (B) simple interest computed on the amount determined
pursuant to clause (i) (A) above at 8% per annum from (and including) the
Closing Date to (but not including) the date on which such payment is made, or
(ii) in the event that the Purchase Price is greater than the Estimated Purchase
Price, Buyer will pay to Seller in immediately available funds an amount equal
to (A) such difference plus (B) simple interest computed on the amount
determined pursuant to clause (ii)(A) above at 8% per annum from (and including)
the Closing Date to (but not including) the date on which such amount is paid;
provided that in the event that Buyer's financing agreements do not permit the
payment described above to Seller, Buyer may deliver to Seller its promissory
note in the principal amount as set forth above bearing interest at 8% per annum
which will mature twelve months from the date of issuance.
1.03 DETERMINATION OF PURCHASE PRICE. For the purpose of determining
the Purchase Price, Buyer's accountants will prepare and deliver to Seller,
within 60 days after the Closing Date, a detailed balance sheet for the Company
as of the close of business on the day immediately preceding the Closing Date
(the "CLOSING BALANCE SHEET"), which sets forth the determination of Closing
Date Asset Value and the Purchase Price, all computed in accordance with Section
1.02(b) hereof. Within 15 days after the accountants' delivery of the Closing
Balance Sheet and the determination of the Purchase Price, Seller will deliver a
detailed statement describing its objections (if any) to the Closing Balance
Sheet and determination of the Purchase Price. Buyer and Seller will use
reasonable efforts to resolve any disputes regarding the determination of the
Purchase Price, but if a final resolution is not obtained within 30 days after
Seller has submitted its objections, any remaining disputes will be resolved by
a nationally recognized accounting firm mutually agreeable to Buyer and Seller.
If Buyer and Seller are unable to mutually agree on such an accounting firm
within 30 days, a "big-six" accounting firm will be selected by lot after
eliminating Price Waterhouse, Coopers & Lybrand and any other
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accounting firm which has a conflict with Buyer or Seller (any accounting firms
selected or agreed upon shall be referred to herein as the "SELECTED ACCOUNTING
FIRM"). The determination of the Purchase Price by the Selected Accounting Firm
(which determination need not be in the form of an opinion of the Selected
Accounting Firm) will be made within 45 days of the date such dispute is
submitted to the Selected Accounting Firm and will be conclusive and binding
upon the parties. The Company will allow Seller, its attorneys, accountants and
representatives and the Selected Accounting Firm reasonable access to its books,
records and personnel in order to determine the Purchase Price. The Selected
Accounting Firm will determine the allocation of the costs and expenses of its
determination of the Purchase Price based upon the percentage which the portion
of the contested amount not awarded to each party bears to the amount actually
contested by such party. For example, if Seller claims the Purchase Price is
$1,000 greater than the amount determined by Buyer's accountants, and the Buyer
contests only $500 of the amount claimed by Seller, and if the Selected
Accounting Firm ultimately resolves the dispute by awarding Seller $300 of the
$500 contested, then the costs and expenses of arbitration will be allocated 60%
(i.e. 300 / 500) to Buyer and 40% (i.e. 200 / 500) to Seller.
1.04 CLOSING TRANSACTIONS.
(A) CLOSING. The closing of the transactions contemplated by this
Agreement (the "CLOSING") will take place at the offices of Lotus Development
Corporation or such other place as mutually agreed upon by Seller and Buyer, at
10:00 a.m. on the third business day following the satisfaction or waiver of all
conditions to the obligations of Seller and Buyer to consummate the transactions
contemplated hereby (other than conditions with respect to actions to be taken
at the Closing itself), or on such other date as is mutually agreeable to Buyer
and Seller. The date and time of the Closing are herein referred to as the
"CLOSING DATE."
(b) TRANSFERS. Subject to the conditions set forth in this Agreement,
the parties agree to consummate the following "CLOSING TRANSACTIONS" on the
Closing Date:
(i) Seller will deliver to Buyer certificates representing
the Company Stock owned by Seller, duly endorsed for transfer with all
requisite state and federal transfer stamps affixed thereto to be
accompanied by duly executed stock powers;
(ii) Buyer will deliver to Seller $3,439,000 in cash, by
wire transfer of immediately available funds, and the Note and
Warrant duly executed;
(iii) Buyer will deliver to Seller $3,000,000 in cash, by
wire transfer of immediately available funds, as payment of the
Non-Compete Price (as defined in Section 10.07(e) below);
(iv) The Company will deliver to Seller $400,000 in cash, by
wire transfer of immediately available funds, as payment for the
License Agreement; and
(v) There shall be delivered to Buyer, Seller and the
Company the opinions, certificates and other documents and instruments
provided to be delivered under Article II hereof.
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ARTICLE II
CONDITIONS TO CLOSING
2.01 CONDITIONS TO BUYER'S OBLIGATIONS. The obligation of Buyer to
consummate the transactions contemplated by this Agreement is subject to the
satisfaction of the following conditions on or before the Closing Date:
(a) The representations and warranties set forth in Article IV and
Article V hereof will be true and correct in all material respects at and as of
the Closing Date as though then made and as though the Closing Date were
substituted for the date of this Agreement throughout such representations and
warranties; provided, however, that any disclosures made by Seller and the
Company to Buyer pursuant to Sections 4.29 and 5.06 hereof will not be taken
into account in determining whether this condition is satisfied;
(b) Seller will have performed and complied in all material respects
with all of the covenants and agreements required to be performed under this
Agreement prior to the Closing;
(c) Since March 31, 1993, there will have been no material adverse
change in the business, financial condition, operating results, earnings,
customer, supplier or employee relations of the Business and there will have
been no material casualty loss, destruction or damage to the assets or
properties of the Company, whether or not covered by insurance;
(d) All consents by third parties that are required for the transfer
of the Company Stock to Buyer or that are set forth on Schedule 2.01(d) hereto
(the "CONSENTS SCHEDULE") will have been obtained, and releases of any and all
security interests held by third parties will have been obtained, all on terms
reasonably satisfactory to Buyer;
(e) All governmental filings, authorizations and approvals (including
filings, authorizations and approvals of foreign governments) that are required
for the consummation of the transactions contemplated hereby will have been duly
made and obtained;
(f) No action or proceeding before any court or government body will
be pending or threatened wherein an unfavorable judgment, decree, injunction or
order would prevent the carrying out of this Agreement or any of the
transactions contemplated hereby, declare unlawful the transactions contemplated
by this Agreement or cause such transactions to be rescinded, or might adversely
affect the right of Buyer to own, operate or control the Company;
(g) Seller will have entered into the License Agreement (the "LICENSE
AGREEMENT") with the Company relating to the license of certain of Seller's
intellectual property to the Company, in the form set forth in EXHIBIT C
attached hereto, and the License Agreement will be in full force and effect;
(h) Seller will have entered into a Transition Services Agreement (the
"TRANSITION AGREEMENT") with the Company, substantially in the form set forth in
EXHIBIT D attached hereto, and the Transition Agreement will be in full force
and effect;
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(i) Seller will have entered into an Assignment and Assumption
Agreement with the Company substantially in the form set forth in EXHIBIT E
attached hereto (the "ASSIGNMENT AND ASSUMPTION AGREEMENT"), and the Assignment
and Assumption Agreement will be in full force and effect;
(j) [INTENTIONALLY LEFT BLANK];
(k) Buyer will have obtained working capital financing and a term
facility in an amount sufficient to consummate the transactions contemplated by
this Agreement (which will be satisfied as to amount if Buyer receives at least
$5.0 million based upon a commitment from the equity investors of Buyer to
invest at least $4 million in Buyer) on terms satisfactory to Buyer (it being
understood that in the event that Buyer cannot obtain such financing it will use
its best efforts to deliver to Seller a letter from the potential financing
source indicating that it does not wish to provide Buyer with such financing);
(l) Buyer will be satisfied, in its sole discretion, with the results
of the confirmatory business (meaning confirming that there are no material
variances with prior diligence), legal and accounting due diligence
investigations and review of the Company performed by its representatives;
(m) Buyer will have received an opinion, dated the Closing Date, of
(i) Thomas M. Lemberg, Esq., General Counsel to Seller, in the form of EXHIBIT F
attached hereto;
(n) On or prior to the Closing Date, Seller will have delivered to
Buyer all of the following:
(i) A certificate from Seller in the form set forth in
EXHIBIT G attached hereto, dated the Closing Date, stating that the
preconditions specified in Sections 2.01(a) through (f) above have been
satisfied;
(ii) Copies of all third party and governmental consents,
approvals and filings required in connection with the consummation of
the transactions contemplated herein;
(iii) Certified copies of the resolutions of the Seller's
board of directors approving the transactions contemplated by this
Agreement;
(iv) Resignations of all of the officers and directors of
the Company, effective as of the Closing Date;
(v) All books (including the Company's corporate minute
books), records and other materials related to the Company's corporate
administration and record keeping (which Seller may deliver by delivery
of the foregoing to the Company's principal place of business);
(vi) Long form good standing certificate of the Company for
the State of Delaware;
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(vii) Certificate of Incorporation of the Company certified by
the State of Delaware and By-Laws of the Company certified by its
Secretary; and
(viii) Such other documents or instruments as Buyer reasonably
requests to effect the transactions contemplated hereby.
(o) All actions to be taken by Seller in connection with the
consummation of the Closing Transactions and the other transactions contemplated
hereby and all certificates, opinions, instruments and other documents required
to be delivered by Seller to effect the transactions contemplated hereby
reasonably requested by Buyer will be reasonably satisfactory in form and
substance to Buyer.
Any condition specified in this Section 2.01 may be waived by Buyer,
PROVIDED that no such waiver will be effective unless it is set forth in a
writing executed by Buyer or unless Buyer agrees to consummate the transactions
contemplated by this Agreement without satisfaction of such condition.
2.02 CONDITIONS TO SELLER'S OBLIGATIONS. The obligation of Seller to
consummate the transactions contemplated by this Agreement is subject to the
satisfaction of the following conditions on or before the Closing Date:
(a) the representations and warranties set forth in Article VI hereof
will be true and correct in all material respects at and as of the Closing Date
as though then made and as though the Closing Date were substituted for the date
of this Agreement throughout such representations and warranties; provided,
however, that any disclosures made by Buyer to Seller pursuant to Section 6.08
will not be taken into account in determining whether this condition is
satisfied;
(b) Buyer will have performed and complied with all of the covenants
and agreements required to be performed by it under this Agreement prior to
the Closing;
(c) All governmental filings, authorizations and approvals that are
required for the consummation of the transactions contemplated hereby will have
been duly made and obtained;
(d) The company will have entered into the License Agreement with the
Seller, and the License Agreement will be in full force and effect;
(e) The Company will have entered into the Transition Agreement with
the Seller, and the Transition Agreement will be in full force and effect;
(f) The Company will have entered into the Assignment and Assumption
Agreement with the Seller, and the Assignment and Assumption Agreement will be
in full force and effect;
(g) [INTENTIONALLY LEFT BLANK];
(h) Seller will have received an opinion, dated the Closing Date,
of Kirkland & Ellis, counsel to Buyer, in the form of EXHIBIT H attached
hereto;
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(i) On or prior to the Closing Date, Buyer will have delivered to
Seller all of the following:
(i) a certificate from Buyer in the form set forth in
EXHIBIT I attached hereto, dated the Closing Date, stating that the
preconditions specified in Sections 2.02(a) through (c) above have been
satisfied;
(ii) copies, certified by the Secretary of Buyer, of the
resolutions of Buyer's board of directors approving the execution and
delivery of this Agreement, the Buyer Securities and the transactions
contemplated by this Agreement; and
(iii) such other documents or instruments as Seller reasonably
requests to effect the transactions contemplated hereby.
(j) All actions to be taken by Buyer in connection with the
consummation of the Closing Transactions and the other transactions contemplated
hereby and all certificates, opinions, instruments and other documents required
to be delivered by Buyer to effect the transactions contemplated hereby
reasonably requested by Seller will be satisfactory in form and substance to
Seller.
Any condition specified in this Section 2.02 may be waived by Seller,
PROVIDED that no such waiver will be effective unless it is set forth in a
writing executed by Seller or unless Seller agrees to consummate the
transactions contemplated by this Agreement without the satisfaction of such
condition.
ARTICLE III
COVENANTS PRIOR TO CLOSING
3.01 AFFIRMATIVE COVENANTS OF THE COMPANY AND SELLER. With respect to
the period commencing on the date hereof through the Closing Date, unless Buyer
otherwise agrees in writing, the Company and Seller covenant and agree as
follows:
(a) Except as set forth in the Assets Schedule (as defined in Section
4.10(a)), Seller will cause all of the assets (other than the assets to be
licensed to the Company by Seller pursuant to the License Agreement) of the
Division to be transferred to the Company;
(b) The Company will, and Seller will cause the Business to, conduct
its business and operations (including its cash management practices, the
collection of receivables, inventory control and payment of payables) only in
the usual and ordinary course of business in accordance with past custom and
practice;
(c) Seller will cause the Business to, and the Company will, keep in
full force and effect its corporate existence and all material rights,
franchises and intellectual property relating or pertaining to the Business;
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(d) Seller will cause the Business to, and the Company will, use its
reasonable best efforts to carry on the Business in the same manner as presently
conducted and to keep the Business' business organization and properties intact,
including its present business operations and employees and its present
relationships with lessors (through June 30, 1993 with respect to the Cambridge,
MA real estate), licensors, suppliers and customers and others having business
relations with each of them;
(e) Seller will cause the Business to, and the Company will, maintain
the assets of the Business in customary repair, order and condition consistent
with past practice and current needs, replace in accordance with past practice
their inoperable, worn out or obsolete assets with assets of comparable quality
consistent with past practice and current need and, in the event of a casualty,
loss or damage to any of such assets or properties prior to the Closing Date for
which the Business is insured, either repair or replace such damaged property or
use the proceeds of such insurance in such other manner as mutually agreed upon
by Buyer and Seller;
(f) Seller will cause the Business to, and the Company will, maintain
the books, accounts and records of the Business in accordance with past custom
and practice as used in the preparation of the Financial Statements (as such
term is defined in Section 4.06 hereof);
(g) Seller will, and will cause the Business to, and the Company will,
not act to dissuade or discourage employees from continuing such employment;
(h) Seller will, and will cause the Company and its officers,
directors, employees and agents (including attorneys and accountants) to permit
Buyer and its employees, agents, accounting and legal representatives and
lenders (and such lenders' audit staff) and their representatives to have
reasonable access at reasonable times during normal business hours and in a
manner so as not to interfere with the normal business operations of the
Business to the Business' books, records, invoices, contracts, leases,
personnel, facilities, equipment and other things reasonably related to the
business and assets of the Business, wherever located as Buyer may reasonably
request;
(i) Seller will promptly (once any officer or director of Seller or
the Company has knowledge thereof) inform Buyer in writing of any material
variances from the representations and warranties contained in Article IV or
Article V hereof or any breach of any covenant hereunder by Seller or the
Company;
(j) Seller will cause the Business to, and the Company will, comply in
all material respects with all legal requirements and contractual obligations
applicable to the operations and business of the Business and pay all applicable
taxes when due;
(k) Seller will, and will cause the Business to, and the Company will,
cooperate with Buyer and use their reasonable best efforts to make all
registrations, filings and applications, to give all notices and to cause the
conditions to Buyer's obligation to close to be satisfied (including, without
limitation, the execution and delivery of all agreements contemplated hereunder
to be so executed and delivered); and
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(l) Seller will confer on a regular and frequent reasonable basis with
representatives of Buyer to report on operational matters and the general status
of ongoing operations.
3.02 NEGATIVE COVENANTS OF THE COMPANY AND SELLER. Prior to the
Closing, without Buyer's prior written consent, Seller will cause the Business
to not, and the Company will not:
(a) take any action of the type that would require disclosure under
Section 4.09 of this Agreement;
(b) make any loans, enter into any insider transactions or make or
grant any increase in any employee's or officer's compensation in excess of 5%
of his or her previous compensation level or make or grant any increase in any
employee benefit plan, incentive arrangement or other benefit covering any of
the employees of the Business except in accordance with past practices;
(c) establish or, except in accordance with past practice, contribute
to any pension, retirement, profit sharing or stock bonus plan, multiemployer,
severance or health benefit plan covering the employees of the Business;
(d) except as specifically contemplated by this Agreement, enter into
any contract, agreement or transaction other than in the ordinary course of the
Business' business, in accordance with past custom and practice and at arm's
length with unaffiliated persons or entities;
(e) fail to use reasonable efforts to take or omit to take any action
which could reasonably be anticipated to have a material adverse effect upon the
business, operations, financial condition, operating results, earnings, assets,
customer, supplier, employee and sales representative relations, or business
prospects of the Business;
(f) terminate the employment of any senior level managers of the
Business listed on Schedule 3.02(f) attached hereto (the "MANAGERS SCHEDULE")
other than for cause; and
(g) amend, modify, renew or alter any contract of the Business with
its existing customers which would cause payments from customers to the Business
to be made more frequently than is contemplated by the contracts in existence as
of the date of this Agreement.
3.03 COVENANTS OF BUYER. Prior to the Closing, Buyer will:
(a) promptly (once it has knowledge thereof) inform Seller in writing
of any variances from the representations and warranties contained in Article VI
hereof or any breach of any covenant hereunder by Buyer; and
(b) cooperate with Seller and use its reasonable best efforts to make
all registrations, filings and applications, to give all notices and to obtain
all governmental, third party or other consents, transfers, approvals, orders,
qualifications and waivers necessary for the consummation of the transactions
contemplated hereby and to cause the other conditions to Seller's obligation to
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close to be satisfied (including, without limitation, the execution and delivery
of all agreements contemplated hereunder to be so executed and delivered).
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
CONCERNING THE BUSINESS
As a material inducement to Buyer to enter into this Agreement, Seller
and the Company hereby represent and warrant that:
4.01 ORGANIZATION AND CORPORATE POWER. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and is qualified to do business in every jurisdiction in which
the nature of its business or its ownership of property requires it to be
qualified, other than where the failure to qualify would not have a material
adverse effect on the Company or the Business. All such jurisdictions in which
the Company is qualified are set forth on Schedule 4.01 attached hereto (the
"QUALIFICATIONS SCHEDULE"). The Company has full corporate power and authority
and all licenses, permits and authorizations necessary to own and operate its
properties, to carry on its business as now conducted. The copies of the
Company's certificate of incorporation and by-laws which have been furnished to
Buyer reflect all amendments made thereto at any time prior to the date of this
Agreement and are correct and complete. The minute books containing the records
of meetings of the shareholders and board of directors, the stock certificate
books and the stock record books of the Company are correct and complete. The
Company is not in default under or in violation of any provision of its
certificate of incorporation or by-laws.
4.02 AUTHORIZATION OF TRANSACTIONS. The Company has full corporate
power and authority to execute and deliver this Agreement and all other
agreements contemplated hereby to which the Company is a party and to consummate
the transactions contemplated hereby and thereby. The board of directors of
Seller has duly approved this Agreement and all other agreements contemplated
hereby to which the Company is a party and has duly authorized the execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby and thereby. No other corporate proceedings on the part of the Company
are necessary to approve and authorize the execution and delivery of this
Agreement and all other agreements contemplated hereby to which the Company is a
party and the consummation of the transactions contemplated hereby and thereby.
This Agreement and all other agreements contemplated hereby to which the Company
is a party have been duly executed and delivered by the Company and constitute
the valid and binding agreements of the Company, enforceable against the Company
in accordance with their terms, except as enforceability hereof or thereof may
be limited by bankruptcy or other laws affecting creditor's rights generally and
limitations on the availability of equitable remedies.
4.03 CAPITALIZATION. The authorized, issued and outstanding stock of
the Company is as set forth in the second paragraph of the recitals of this
Agreement. All of the issued and outstanding shares of the Company Stock have
been duly authorized, are validly issued, fully paid and nonassessable, are not
subject to, nor were they issued in violation of, any preemptive
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rights, and are owned of record and beneficially by Seller. There are no
outstanding or authorized options, warrants, rights, contracts, calls, puts,
rights to subscribe, conversion rights or other agreements or commitments to
which the Company is a party or which are binding upon the Company providing for
the issuance, disposition or acquisition of any of its capital stock (other than
this Agreement). There are no outstanding or authorized stock appreciation,
phantom stock or similar rights with respect to the Company. There are no voting
trusts, proxies or any other agreements or understandings with respect to the
voting of the capital stock of the Company. The Company is not subject to any
obligation (contingent or otherwise) to repurchase or otherwise acquire or
retire any shares of its capital stock.
4.04 SUBSIDIARIES; INVESTMENTS. Except as set forth in Schedule 4.04
attached hereto (the "SUBSIDIARIES SCHEDULE"), the Company does not own or hold
any rights to acquire any shares of stock or any other security or interest in
any other Person, and the Company has never had any Subsidiary. "PERSON" means
an individual, a partnership, a corporation, an association, a joint stock
company, a trust, a joint venture, an unincorporated organization and a
governmental entity or any department, agency or political subdivision thereof
"SUBSIDIARY" means any corporation of which the securities having a majority of
the ordinary voting power in electing the board of directors are, at the time as
of which any determination as being made, owned by the Company either directly
or through one or more Subsidiaries.
4.05 ABSENCE OF CONFLICTS. Except as set forth in Schedule 4.05
attached hereto (the "RESTRICTIONS SCHEDULE"), the execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby (including, without limitation, the transfer of the assets
of the Division to the Company) do not and will not (a) conflict with or result
in any breach of any of the provisions of, (b) constitute a default under, (c)
result in a violation of, (d) give any third party the right to terminate or to
accelerate any obligation under, (e) result in the creation of any lien,
security interest, charge or encumbrance upon the assets of the Company or the
Company Stock, or (f) require any authorization, consent, approval, exemption or
other action by or notice to any court or other governmental body, under the
provisions of the certificate of incorporation or by-laws of the Company or any
indenture, mortgage, lease, loan agreement or other agreement or instrument to
which the Company is bound or affected, or any law, statute, rule or regulation
or any judgment, order or decree to which the Company is subject.
4.06 FINANCIAL STATEMENTS. The Company has furnished Buyer with copies
of the Division's (a) unaudited balance sheet as of March 31, 1993 (the "Latest
Balance Sheet") and the related statements of income and cash flow for the three
month period then ended and (b) audited balance sheets and statements of income
and cash flow for the fiscal years ended December 31, 1992 and 1991. Each of the
foregoing financial statements (including in all cases the notes thereto, if
any) (the "FINANCIAL STATEMENTS") is accurate and complete in all material
respects, is consistent with the Division's books and records (which, in turn,
are accurate and complete in all material respects), present fairly the
Division's financial condition and results of operations as of the times and for
the periods referred to therein, and has been prepared in accordance with GAAP,
consistently applied, subject in the case of unaudited financial statements to
changes
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resulting from normal year-end adjustments (which will not be material
individually or in the aggregate) and to the absence of footnote disclosure.
4.07 ABSENCE OF UNDISCLOSED LIABILITIES. The Company has no obligations
or liabilities (whether accrued, absolute, contingent, unliquidated or
otherwise, whether or not known, whether due or to become due and regardless of
when asserted) arising out of transactions entered into at or prior to the
Closing, or any action or inaction at or prior to the Closing, or any state of
facts existing at or prior to the Closing, including taxes with respect to or
based upon transactions or events occurring on or before the Closing, except (i)
obligations under contracts or commitments described in Schedule 4.13 or under
contracts and commitments which are not required to be disclosed thereon (but
not liabilities for breaches thereof), (ii) liabilities reflected on the Latest
Balance Sheet, (iii) liabilities which have arisen after the date of the Latest
Balance Sheet in the ordinary course of business or otherwise in accordance with
the terms and conditions of this Agreement (none of which is a liability for
breach of contract, breach of warranty, tort or infringement, or a claim or
lawsuit, or an environmental liability), and (iv) liabilities otherwise
expressly disclosed in this Agreement or the Schedules attached hereto.
4.08 ABSENCE OF MATERIAL ADVERSE CHANGE. Since March 31, 1993, there
has been no material adverse change in the business, financial condition,
operating results, earnings, assets, customer, supplier or employee relations of
the Business and there has been no material casualty loss or damage to the
assets of the Business (whether or not covered by insurance).
4.09 ABSENCE OF CERTAIN DEVELOPMENTS. Except as set forth in Schedule
4.09 attached hereto (the "DEVELOPMENTS SCHEDULE") and except as expressly
contemplated by this Agreement, since March 31, 1993, neither the Company nor
Seller with respect to the Division has:
(a) redeemed or repurchased, directly or indirectly, any shares of
capital stock or declared, set aside or paid any dividends or made any other
distributions with respect to any shares of its capital stock;
(b) issued, sold or transferred any notes, bonds or other debt
securities or any equity securities, securities convertible, exchangeable or
exercisable into equity securities, or warrants, options or other rights to
acquire equity securities, of the Company or its Subsidiaries;
(c) borrowed any amount or incurred or become subject to any
liabilities, except liabilities incurred in the ordinary course of business;
(d) discharged or satisfied any lien or encumbrance or paid any
obligation or liability, other than liabilities paid in the ordinary course of
business, or prepaid any amount of indebtedness for borrowed money;
(e) mortgaged, pledged or subjected to any lien, charge or any other
encumbrance, any portion of its properties or assets, other than purchase money
liens incurred in the ordinary course of business not to exceed $10,000 in the
aggregate;
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(f) sold, leased, assigned or transferred (including without
limitation transfers to Seller or any employees or affiliates of the Company) a
portion of its tangible assets, except in the ordinary course of business, or
cancelled without fair consideration any debts or claims owing to or held by it;
(g) sold, assigned, licensed or transferred (including without
limitation transfers to Seller or any employees or affiliates of the Company or
the Division) any Proprietary Rights;
(h) disclosed any confidential information other than pursuant to
agreements which prohibit the receiving party from disclosing such confidential
information or received any confidential information of any third party in
violation of any obligation of confidentiality;
(i) suffered any extraordinary losses or waived any rights of value,
whether or not in the ordinary course of business or consistent with past custom
and practice in excess of $10,000;
(j) suffered any theft, damage, destruction or casualty loss in
excess of $10,000, to its tangible assets, whether or not covered by insurance
or suffered any substantial destruction of the Business' books and records;
(k) entered into, amended or terminated any lease, contract, agreement
or commitment, or taken any other action or entered into any other transaction,
in each case other than in the ordinary course of business and in accordance
with past custom and practice or entered into any transaction with any insider
(as defined in Section 4.22);
(l) made or granted any bonus or any wage, salary or compensation
increase in excess of $10,000 per year to any director, officer, employee or
sales representative, group of employees or consultant or made or granted any
increase in any employee benefit plan or arrangement, or amended or terminated
any existing employee benefit plan or arrangement or adopted any new employee
benefit plan or arrangement;
(m) made any capital expenditures or commitments for capital
expenditures that aggregate in excess of $25,000;
(n) made any loans or advances to, or guarantees for the benefit of,
any persons;
(o) made any charitable contributions or pledges;
(p) entered into any lease of capital equipment or real estate
involving rental in excess of $10,000 per annum; or
(q) changed or authorized any change in its certificate of
incorporation or by-laws.
4.10 TITLE TO PROPERTIES.
(a) Except as set forth on Schedule 4.10(a) attached hereto (the
"ASSETS SCHEDULE"), Seller has transferred all of its right, title and interest
in all of the assets (other than the assets to be licensed to the Company by
Seller pursuant to the License Agreement) of the Division to the
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Company. Such transferred assets include, without limitation, the assets used
principally by the employees of the Division at each of Seller's facilities
(i.e., office furniture and computer equipment used by such employees and the
equipment used at the smaller training room in the New York, New York field
office and the training room in the Chicago, Illinois field office).
(b) The Company (i) owns no real estate and (ii) has no real estate
leases or subleases. As of the Closing, the Transition Agreement will provide
Buyer with arrangements relating to all real estate used or occupied by the
Business.
(c) Except as set forth on Schedule 4.10(c) attached hereto (the
"ENCUMBRANCES SCHEDULE"), the Business owns good and marketable title, free and
clear of all liens, charges, security interests and encumbrances to all of the
personal property and tangible assets which are shown on the Latest Balance
Sheet or acquired thereafter or located on their premises or used primarily by
the Business.
(d) The machinery, equipment, vehicles and other tangible assets of
the Business are in satisfactory operating condition and repair and are usable
in the ordinary course of business except for assets that are not necessary for
the operation of the business of the Business. The Business owns or leases under
valid leases all machinery, equipment and other tangible assets necessary for
the conduct of its business.
4.11 ACCOUNTS RECEIVABLE. Except as set forth on Schedule 4.11 attached
hereto (the "ACCOUNTS RECEIVABLE SCHEDULE"), all of the notes and accounts
receivable of the Business reflected on the Closing Balance Sheet are, and all
notes and accounts receivable of the Business as of the Closing Date will be,
good and valid receivables (subject to no counterclaims or offset except for
claims by debtors of nonperformance relating to accounts receivable which are
contingent on the Company's performance after the Closing of its obligations
pursuant to agreements) and will be collected if the Company exercises
reasonable best efforts in collection of the same (net of the allowance for
doubtful accounts) within 90 days after the Closing Date at the aggregate amount
recorded therefor on the books and records of the Business as of the Closing
Date. As of the Closing Date, there are no individual accounts receivable which
are over $25,000 and 60 days past due, except as set forth on Schedule 4.11
attached hereto (the "ACCOUNTS RECEIVABLE SCHEDULE"). As of the Closing date, no
person or entity will have any lien on such receivables or any part thereof, and
no agreement for deduction, free goods, discount or other deferred price or
quantity adjustment will have been made with respect to any such receivables
other than in the ordinary course of business.
4.12 TAXES.
(a) The Company has filed all Tax Returns that it was required to
file. All such Tax Returns were correct and complete in all material respects.
All Taxes owed by the Company (as shown on any Tax Return) have been paid. No
claim is currently outstanding and, to Seller's knowledge, for the period since
Seller has owned the Company no claim has ever been made by an authority in a
jurisdiction where the Company does not file Tax Returns that it is or may be
subject to taxation by that jurisdiction. There are no security interests on any
of the assets of the Company that arose in connection with any failure (or
alleged failure) to pay any Tax.
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(b) The Affiliated Group has filed all income Tax Returns that it was
required to file for each taxable period during which the Company was a member
of the group. All such Tax Returns were correct and complete in all material
respects in so far as they relate to the Company. All income Taxes owed by the
Affiliated Group (as shown on any Tax Return) have been paid for each taxable
period during which the Company was a member of the group.
(c) The Company 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.
(d) No director or officer (or employee responsible for Tax matters)
of the Company or Seller has knowledge of any specific issue that he expects any
Tax authority to raise which, if sustained would lead to the assessment of
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 either (i)
claimed or raised by any authority in writing or (ii) as to which any of the
Seller and the directors and officers (and employees responsible for Tax
matters) of the Company has knowledge based upon personal contact with any agent
of such authority, except liability for Taxes for which another Person is
principally responsible but for which the Company may be liable on account of
the provisions of Treasury Reg. Section 1.1504-6 (or any similar provision of
state, local or foreign law). Schedule 4.12 lists all federal, state, local and
foreign income Tax Returns filed with respect to the Company for taxable periods
ended on or after December 31, 1991, indicates those Tax Returns that have been
audited, and indicates those Tax Returns that currently are the subject of
audit. The Seller has delivered to Buyer correct and complete copies of all
federal income Tax Returns, examination reports, and statements of deficiencies
assessed against or agreed to by the Company for taxable periods ended on or
after December 31, 1991.
(e) The Company has not filed a consent under Code Section 341(f)
concerning collapsible corporations. The Company has not made any payments, is
not obligated to make any payments, and is not a party to any agreement that
under certain circumstances could obligate it to make any payments that will not
be deductible under Code Section 280G. The Company 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 Code
Section 6662. The Company is not a party to any Tax allocation or sharing
agreement. Since August 23, 1987, the Company has not been a member of an
Affiliated Group other than the Affiliated Group of which it is currently a
member.
(f) The Company has no liability for the Taxes of any Person other
than the Company (i) under Treasury Reg. Section 1. 1502-6 (or any similar
provision of state, local, or foreign law), (ii) as a transferee or successor,
(iii) by contract, or (iv) otherwise.
(g) Schedule 4.12 sets forth the following information with respect to
the Company as of April 3, 1993 (i) the basis of the Company in its assets; and
(ii) the amount of any deferred gain or loss allocable to the Company arising
out of any deferred intercompany transaction (as defined in Treasury Reg.
Section 1.1502-13). Seller will further provide to Buyer at least 5 days
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prior to the Closing: (i) an update to the information set forth in Schedule
4.12 as of June 30, 1993 and (ii) an estimated pro forma basis of the Company's
fixed assets as of the Closing.
(h) The unpaid Taxes of the Company (i) did not, as of the date of the
Latest Balance Sheet, exceed the reserve for tax liability (rather than any
reserve for deferred taxes established to reflect timing differences between
book and tax income) set forth on the face of the Latest Balance Sheet (rather
than in any notes thereto) and (ii) do not exceed that reserve as adjusted for
the passage of time through the Closing Date in accordance with the past custom
and practice of the Company in filing their Tax Returns.
(i) For purposes of this Agreement:
(i) "TAX" means any federal, state, local, or foreign
income, gross receipts, license, payroll, employment, excise,
severance, stamp, occupation, premium, windfall profits, environmental,
customs duties, capital stock, franchise, profits, withholding, social
security (or similar), unemployment, disability, real property,
personal property, sales, use, transfer, registration, value added,
alternative or add on minimum, estimated, or other tax of any kind
whatsoever, including any interest, penalty, or addition thereto,
whether disputed or not.
(ii) "TAX RETURN" means any return, declaration, report,
claim of refund, or information return or statement relating to Taxes,
including any schedule or attachment thereto, and including any
amendment thereof.
(iii) "AFFILIATED GROUP" means the affiliated group within the
meaning of Code Section 1504, or any similar group defined under a
similar provision of state, local or foreign law, of which the Company
was a member during the period from August 23, 1987 through the Closing
Date.
(iv) "CODE" means the Internal Revenue Code of 1986, as
amended.
4.13 CONTRACTS AND COMMITMENTS.
(a) Except as specifically contemplated by this Agreement and except
as set forth in Schedule 4.13 attached hereto (the "CONTRACTS SCHEDULE"),
neither the Company nor Seller with respect to the Division is a party to or
bound by, whether written or oral, any: (i) collective bargaining agreement or
contract with any law or union or any bonus, pension, profit sharing, retirement
or any other form of deferred compensation plan or any stock purchase, stock
option, hospitalization insurance or similar plan or practice, whether formal or
informal; (ii) contract for the employment of any officer, individual employee
or other person on a full time or consulting basis or any severance agreements;
(iii) agreement or indenture relating to the borrowing of money or to
mortgaging, pledging or otherwise placing a lien on any of its assets; (iv)
agreements with respect to the lending or investing of funds; (v) license or
royalty agreements (other than the licenses granted by the Company pursuant to
its customer subscription agreements); (vi) guaranty of any obligation for
borrowed money or otherwise, other than endorsements made for collection; (vii)
lease or agreement under which it is lessee of, or holds or
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operates, any personal property owned by any other party calling for payments in
excess of $25,000 annually; (viii) lease or agreement under which it is lessor
of or permits any third party to hold or operate any property, real or personal,
owned or controlled by it; (ix) contract or group of related contracts with the
same party for the purchase or sale of raw materials, commodities, supplies,
products or other personal property or for the furnishing or receipt of services
which either calls for performance over a period of more than one year (except
if such contracts do not involve a sum in excess of $5,000 annually)or involves
a sum in excess of $25,000; (x) contract or group of related contracts with the
same party continuing over a period of more than six months from the date or
dates thereof, not terminable by it on 30 days or less notice without penalties
or involving more than $15,000; (xi) contract which prohibits it from freely
engaging in business anywhere in the world; (xii) contract or agreement with any
officer, director, shareholder or other insider of the Company or Seller or any
of its affiliates (excluding customer contracts); (xiii) contract relating to
the distribution, marketing or sales of its products; (xiv) warranty agreement
with respect to products sold; (xv) franchise agreements; (xvi) agreements,
contracts or understandings pursuant to which the Business subcontracts work to
third parties which involves a sum in excess of $25,000; or (xvii) other
agreement material to it whether or not entered into in the ordinary course of
business.
(b) Except as specifically contemplated by this Agreement or disclosed
in the Contracts Schedule, (i) no contract or commitment required to be
disclosed on the Contracts Schedule has been breached or cancelled by the other
party since April 1, 1993, (ii) since April 1, 1993, no customer or supplier has
indicated in writing or orally to an officer or director of the Company or
Seller that it will stop or materially decrease the rate of business done with
the Business, (iii) the Business has performed all the obligations required to
be performed in connection with the contracts or commitments required to be
disclosed on the Contracts Schedule and is not in receipt of any claim of
default under any contract or commitment required to be disclosed on the
Contracts Schedule, (iv) the Business has no present expectation or intention of
not fully performing any obligation pursuant to any contract set forth on the
Contracts Schedule, (v) no director, officer or division directors of the
Company or officer or director of Seller has knowledge of any breach or
anticipated breach by any other party to any contract set forth on the Contracts
Schedule, and (vi) no unfilled customer order or commitment obligating the
Business to process, manufacture or deliver products or perform services will
result in a loss to the Business upon completion of performance.
(c) Seller has provided Buyer with a true and correct copy of all
written contracts which are referred to on the Contracts Schedule, together with
all amendments, waivers or other changes thereto. The Contracts Schedule
contains an accurate and complete description of all material terms of all oral
contracts referred to therein.
4.14 PROPRIETARY RIGHTS.
(a) "PROPRIETARY RIGHTS" shall mean all of the following items owned
by, issued to or licensed to (other than the rights licensed to the Company
pursuant to the License Agreement), the Company or Seller with respect solely to
the Division, along with all income, royalties, damages and payments due or
payable at the Closing or thereafter, including, without limitation,
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damages and payments for past, present or future infringements or
misappropriations thereof, the right to sue and recover for past infringements
or misappropriations thereof and any and all corresponding rights that, now or
hereafter, may be secured throughout the world: patents, patent applications,
patent disclosures and inventions (whether or not patentable and whether or not
reduced to practice) and any reissue, continuation, continuation in part,
division, revision, extension or reexamination thereof; trademarks, service
marks, trade dress, logos, trade names and corporate names together with all
goodwill associated therewith, including, without limitation, the use of the
name "Datext", "OneSource" and all translations, adaptations, derivations and
combinations of the foregoing; copyrights registered or unregistered, statutory
or common law, and copyrighted works; mask works; and all registrations,
applications and renewals for any of the foregoing; trade secrets and
confidential information (including, without limitation, ideas, formulae,
compositions, know-how, manufacturing and production processes and techniques,
research and development information, drawings, specifications, designs, plans,
proposals, technical data, financial, business and marketing plans, and customer
and supplier lists and related information); computer software (including,
without limitation, data and related documentation); other proprietary rights;
licenses or other agreements to or from third parties regarding the foregoing;
and all copies and tangible embodiments of the foregoing (in whatever form or
medium), in each case including, without limitation, the items set forth on
Schedule 4.14 attached hereto (the "PROPRIETARY RIGHTS SCHEDULE"), but excluding
items specifically noted as excluded on the Proprietary Rights Schedule.
(b) The Proprietary Rights, the items excluded on the Proprietary
Rights Schedule and the rights licensed to the Company pursuant to the License
Agreement comprise all of the intellectual property necessary for the operation
of the Company's and the Division's businesses as currently conducted. The
Proprietary Rights Schedule sets forth a complete and correct list of: (i) all
patented or registered Proprietary Rights and all pending patent applications or
other applications for registration of Proprietary Rights owned or filed by the
Company or Seller solely with respect to the Division which constitute
Proprietary Rights; (ii) all trade names and unregistered trademarks used by the
Company or Seller solely with respect to the Division; and (iii) all licenses or
similar agreements or arrangements to which the Company or Seller with respect
to the Division is a party either as licensee or licensor for the Proprietary
Rights.
(c) Except as set forth in the Proprietary Rights Schedule, (i) the
Company or Seller with respect to the Division owns and possesses all right,
title and interest in and to, or has a valid and enforceable right to use, each
of the Proprietary Rights, and no claim by any third party contesting the
validity, enforceability, use or ownership of any of the Proprietary Rights is
currently outstanding or is, to the knowledge of Seller or the Company,
threatened, and there are no grounds for same; (ii) the Company or Seller with
respect to the Division owns or has the valid right to use each of the
Proprietary Rights necessary for the operation of its business as currently
conducted; (iii) neither the Company nor Seller has received any notices of, nor
is any officer or director of Seller or the Company aware of any facts which
indicate a likelihood of, any infringement or misappropriation by, or conflict
with, any third party with respect to the Proprietary Rights set forth in the
Proprietary Rights Schedule including, without limitation, any demand that the
Business license rights from a third party; and (iv) neither the Company nor
Seller with respect to the Division has infringed, misappropriated or otherwise
conflicted with
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any rights of any third parties and none of the officers, division directors or
directors of the Company nor the officers or directors of Seller is aware of any
infringement, misappropriation or conflict which will occur as a result of the
continued operation of the Business' businesses as currently conducted.
(d) All of the Proprietary Rights are or will be owned by, or properly
assigned or licensed to, the Company at the time of the Closing. The
transactions contemplated by this Agreement (including, without limitation, the
asset transfer from the Division to the Company) will have no adverse effect on
the Company's right, title and interest in and to the Proprietary Rights. The
Company and Seller with respect to the Division have taken all necessary action
to protect the Proprietary Rights and will continue to maintain those rights
prior to the Closing so as to not adversely affect the validity or enforcement
of such Proprietary Rights.
4.15 LITIGATION; PROCEEDINGS. Except as set forth in Schedule 4.15
attached hereto (the "LITIGATION SCHEDULE"), there are no actions, suits,
proceedings, orders or, to the knowledge of the officers, directors or division
directors of the Company or the officers or directors of Seller, governmental
investigations pending or, to the knowledge of the directors, officers or
division directors of the Company or the officers or directors of Seller,
threatened against or affecting the Company or the Seller with respect to the
Business at law or in equity, or before or by any federal, state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, and there is no basis known to the
directors, division directors or the officers of the Company or the officers or
directors of Seller for any of the foregoing. Except as set forth on the
Litigation Schedule, neither the Company nor Seller has received any opinion or
legal advice in writing from outside counsel to the effect that the Business is
exposed from a legal standpoint to any liability which may be material to the
Business, business as previously or presently conducted.
4.16 BROKERAGE. Except as set forth in Schedule 4.16 attached hereto
(the "BROKERAGE SCHEDULE"), there are no claims for brokerage commissions,
finders' fees or similar compensation in connection with the transactions
contemplated by this Agreement based on any arrangement or agreement made by or
on behalf of the Company or Seller with respect to the Division.
4.17 GOVERNMENTAL LICENSES AND PERMITS. Schedule 4.17 attached hereto
(the "LICENSES SCHEDULE") contains a complete listing and summary description of
all permits, licenses, franchises, certificates, approvals and other
authorizations of foreign, federal, state and local governments or other similar
rights (collectively, the "LICENSES") owned or possessed by the Company or
Seller with respect to the Division or used by the Company or Seller with
respect to the Division in the conduct of the Business other than real estate
leased by the Business. Except as indicated on the License Schedule, the
Business owns or possesses all right, title and interest in and to all of the
Licenses which are necessary to conduct its business as presently conducted and
will use their best efforts to maintain all such Licenses. No loss or expiration
of any License is pending or, to the knowledge of Seller or any officer or
director of the Company, threatened, other than expiration in accordance with
the terms thereof.
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4.18 EMPLOYEES. The Company and Seller with respect to the Division
have complied with all applicable laws relating to the employment of personnel
and labor, including provisions thereof relating to wages, hours, equal
opportunity, collective bargaining and the payment of social security and other
taxes, the Worker Adjustment and Retraining Act, Sections 71A-71H of Chapter
151A of the Massachusetts General Laws Annotated and similar laws regarding
plant closings or mass layoffs in other jurisdictions, and the Immigration
Reform and Control Act of 1986. Neither the Company nor Seller with respect to
the Division is a party to or bound by any collective bargaining agreement, nor
has it experienced any strikes, grievances or unfair labor practices claims.
Neither the Company nor Seller with respect to the Division has engaged in any
unfair labor practice. No officer or director of the Company or Seller has any
knowledge of any organizational effort presently being made or threatened by or
on behalf of any labor union with respect to employees of the Business relating
to the Business' business. The Employees Schedule sets forth the names, present
annual or, as the case may be, hourly rate of compensation (including salary,
bonuses and commissions) of all persons employed by the Company and Seller with
respect to the Division (including independent contractors) and their job titles
and dates of hire, whether full-time or part-time, whether such employees (or
independent contractors) are remunerated on an hourly, weekly or monthly basis,
whether such employees (or independent contractors) are members of a bargaining
unit, whether such employees (or independent contractors) are actively employed
and to the extent any such employee (or independent contractor) is on a paid or
unpaid leave of absence, the nature of such leave of absence and the anticipated
date of such employee's (or independent contractor's) return to active
employment.
4.19 EMPLOYEE BENEFIT PLANS.
(a) Except as set forth on Schedule 4.19, with respect to current or
former employees of the Company or the Division, neither the Company nor the
Seller maintains or contributes to any (i) nonqualified deferred compensation,
bonus or retirement plans or arrangements, (ii) qualified defined contribution
or defined benefit plans or arrangements which are employee pension benefit
plans (as defined in Section 3(2) of the Employee Retirement Income Security Act
of 1974 ("ERISA")), or (iii) employee welfare benefit plans, (as defined in
Section 3(l) of ERISA), or material fringe benefit plans or programs. The
Company does not and the Seller has not, within the last five years, contributed
to any multiemployer pension plan (as defined in Section 3(37) of ERISA) with
respect to employees of the Company or the Division. The Company does not
maintain or contribute to or have any liability under any employee welfare
benefit plan which provides health, accident or life insurance benefits to
former employees, their spouses or dependents, other than in accordance with
Section 4980B of the Internal Revenue Code of 1986 (the "Code") or applicable
state insurance laws. All of the employee benefit plans scheduled, pursuant to
paragraphs (i), (ii) or (iii) above (the "Benefit Plans") are maintained by
Seller.
(b) The Benefit Plans (and related trusts and insurance contracts)
comply in form and in operation in all respects with the applicable requirements
of ERISA and the Code; and each Benefit Plan intended to qualify under Section
401(a) of the Code has received a favorable determination letter from the
Internal Revenue Service as to such qualification and neither Seller
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nor the Company is aware of any facts which could cause such determination
letters to be invalid as of the Closing Date.
(c) Except as set forth on Schedule 4.19, all required reports and
descriptions (including Form 5500 Annual Reports, Summary Annual Reports,
PBGC-ls and Summary Plan Descriptions) with respect to the employee pension
benefit plans and employee welfare benefit plans have been properly filed with
the appropriate government agency or distributed to participants, and the
Company or the Seller has complied with the requirements of Section 4980B of the
Code with respect to current or former employees of the Division.
(d) With respect to each Benefit Plan which is an employee pension
benefit plan, all contributions which are due (including all employer
contributions and employee salary reduction contributions) have been paid to
such employee pension benefit plan, all contributions for prior plan years which
are not yet due and with respect to the current plan year for the period ending
on the Closing Date have been made or accrued, and, with respect to any Benefit
Plan which is an employee welfare benefit plans, all premiums or other payments
which are due have been paid.
(e) With respect to any Benefit Plan currently or previously
maintained by members of the controlled group of companies (as defined in
sections 414 (b) and (c) of the Code) that includes the Company (the "Controlled
Group"), the Company has no liability to the Pension Benefit Guaranty
Corporation, the Internal Revenue Service, the Department of Labor, any
multiemployer plan, or any current or former employee of the Company or the
Division or otherwise that has not been satisfied in full, and no condition
exists that presents a material risk to the Company or any member of the
Controlled Group of incurring such a liability.
(f) With respect to each of the Benefit Plans and each employee
welfare benefit plan, Seller has furnished to Buyer true and complete copies of
(i) the plan documents and summary plan descriptions, (ii) the most recent
determination letter received from the Internal Revenue Service, and (iii) the
last Form 5500 Annual Report.
4.20 INSURANCE. Schedule 4.20 attached hereto (the "INSURANCE
SCHEDULE") lists and briefly describes each insurance policy maintained by the
Business with respect to its properties, assets and business. All of such
insurance policies are in full force and effect, and the Business is not in
default with respect to its obligations under any such insurance policies.
4.21 OFFICERS AND DIRECTORS; BANK ACCOUNTS. Schedule 4.21 attached
hereto (the "OFFICERS AND DIRECTORS SCHEDULE") lists all officers and directors
of the Company, and all of the Company's bank accounts (designating each
authorized signatory and the level of each signatory's authorization).
4.22 AFFILIATE TRANSACTIONS. Except as disclosed on Schedule 4.22
attached hereto (the "AFFILIATE TRANSACTIONS SCHEDULE"), no officer or director
of the Company or Seller or any person related by blood or marriage to any such
person (collectively, the "INSIDERS"), is a party to any material agreement,
contract, commitment or transaction with the Business or which is pertaining to
the business of the Business.
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4.23 COMPLIANCE WITH LAWS. The Company and its officers, directors,
agents and employees, and Seller with respect to the Business, have complied
with all applicable laws, regulations (including, without limitation, applicable
occupational health and safety laws and regulations) and zoning ordinances of
foreign, federal, state and local governments and all agencies thereof which
affect the business, business practices (including, but not limited to, the
Business' marketing, sales and distribution of its products and services) or any
owned or leased properties of the Business and to which the Business may be
subject, and no claims have been filed against the Company or Seller with
respect to the Business alleging a violation of any such laws or regulations.
The Company and Seller with respect to the Business have complied with, and
bears no liability or correction or remediation obligation under, any
environmental or safety laws or related common law theories. Neither the Company
nor Seller with respect to the Business have given or agreed to give any money,
gift or similar benefit (other than business meals and/or entertainment or
incidental gifts of articles of nominal value) to any actual or potential
customer, supplier, governmental employee, insider or any other person in a
position to assist or hinder the Business in connection with any actual or
proposed transaction.
4.24 PRODUCT WARRANTY. Liability for replacement, repair or refunds of
products sold or licensed by the Business in connection with the Business'
informal return policy or applicable contractual commitments or express or
implied warranties does not exceed, in the aggregate, 1% of the Business,
receipts from sales and licenses on a monthly basis. Except as set forth on
Schedule 4.24 attached hereto (the "PRODUCT WARRANTY SCHEDULE"), no product
manufactured, sold, licensed, leased or delivered by the Business is subject to
any guaranty, warranty or other indemnity beyond the applicable standard terms
and conditions of sale or lease, other than statutory warranties where the
breach thereof would not have a material adverse effect on the Business. The
Product Warranty Schedule includes copies of such standard terms and conditions
for sale or lease for the Business (containing applicable guaranty, warranty and
indemnity provisions).
4.25 PRODUCT LIABILITY. There is no existing liability, claim or
obligation arising from or alleged to arise from any actual or alleged injury to
persons or property as a result of the ownership, possession or use of any
product manufactured, sold, leased or delivered by the Company or the Division.
4.26 POWERS OF ATTORNEY. There are no outstanding powers of attorney
executed on behalf of the Company.
4.27 GUARANTEES. The Company is not a guarantor or otherwise liable for
any indebtedness of any other person, firm or corporation other than
endorsements for collection in the ordinary course of business.
4.28 DISCLOSURE. Neither this Agreement, nor any of the schedules,
attachments or exhibits hereto, contain any untrue statement of a material fact
or omit a material fact necessary to make the statements contained herein or
therein, in light of the circumstances in which they were made, not misleading.
There is no fact which has not been disclosed to Buyer of which any of the
officers or directors of Seller or the Company is aware and which materially
adversely
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affects or could reasonably be anticipated to materially adversely affect the
business, financial condition, operating results, earnings, assets, customer,
supplier, employee relations or business prospects of the Business.
4.29 CLOSING DATE. All of the representations and warranties contained
in this Article IV and elsewhere in this Agreement and all information delivered
in any schedule, attachment or exhibit hereto or in any writing delivered to
Buyer at the Closing are true and correct on the date of this Agreement and will
be true and correct on the Closing Date, except to the extent that Seller has
advised Buyer otherwise in writing prior to the Closing.
ARTICLE V
REPRESENTATIONS AND WARRANTIES WITH RESPECT TO SELLER
As a material inducement to Buyer to enter into this Agreement, Seller
represents and warrants to Buyer that:
5.01 CORPORATE ORGANIZATION AND POWER. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, with full corporate power and authority to enter into this Agreement
and the other agreements contemplated hereby to which Seller is a party and
perform its obligations hereunder and thereunder.
5.02 AUTHORIZATION. The execution, delivery and performance of this
Agreement and the other agreements contemplated hereby to which Seller is a
party by Seller and the consummation of the transactions contemplated hereby and
thereby have been duly and validly authorized by all requisite corporate action
on the part of Seller, and no other corporate proceedings on its part are
necessary to authorize the execution, delivery or performance of this Agreement.
This Agreement constitutes, and each of the other agreements contemplated hereby
to which Seller is a party will when executed constitute, a valid and binding
obligation of Seller, enforceable in accordance with their terms, except as
enforceability hereof may be limited by bankruptcy or other laws affecting
creditor's rights generally and limitations on the availability of equitable
remedies.
5.03 ABSENCE OF CONFLICTS. Neither the execution and the delivery of
this Agreement and the other documents contemplated hereby to which Seller is a
party, nor the consummation of the transactions contemplated hereby and thereby,
will (a) conflict with, result in a breach of any of the provisions of, (b)
constitute a default under, (c) result in the violation of, (d) give any third
party the right to terminate or to accelerate any obligation under, (e) result
in the creation of any lien, security interest or charge or encumbrance upon the
assets of the Company or the Company Stock, or (f) require any authorization,
consent, approval, execution or other action by or notice to any court or other
governmental body, under the provisions of the certificate of incorporation or
by-laws of the Seller or any indenture, mortgage, lease, loan agreement or other
agreement or instrument to which Seller is bound or affected, or any statute,
regulation, rule, judgment, order, decree or other restriction of any
government, governmental agency or court to which Seller is subject. No notice
to, filing with or authorization, consent or approval of any government or
governmental agency by Seller is necessary for the consummation of the
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transactions contemplated by this Agreement and the other documents contemplated
hereby to which Seller is a party.
5.04 BROKERAGE. Except as set forth on the Brokerage Schedule, there
are no claims for brokerage commissions, finders' fees or similar compensation
in connection with the transactions contemplated by this Agreement based on any
arrangement or agreement made by or on behalf of Seller.
5.05 SHARES. Seller holds of record and owns beneficially 100 shares of
Company Stock, free and clear of any restrictions on transfer (other than any
restrictions under the Securities Act of 1933, as amended, and the state
securities laws), claims, taxes, liens, charges, encumbrances, pledges, security
interests, options, warrants, rights, contracts, calls, commitments, equities
and demands. Seller is not a party to any option, warrant, right, contract,
call, put or other agreement or commitment providing for the disposition or
acquisition of any capital stock of the Company (other than this Agreement).
Seller is not a party to any voting trust, proxy or other agreement or
understanding with respect to the voting of any capital stock of the Company.
5.06 CLOSING DATE. All of the representations and warranties concerning
Seller contained in this Article V and elsewhere in this Agreement and all
information delivered in any schedule, attachment or exhibit hereto or in any
writing delivered to Buyer are true and correct on the date of this Agreement
and will be true and correct on the Closing Date, except to the extent that
Seller has advised Buyer otherwise in writing prior to the closing.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF BUYER
As a material inducement to Seller to enter into this Agreement, Buyer
hereby represents and warrants to Seller that:
6.01 CORPORATE ORGANIZATION AND POWER. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, with full corporate power and authority to enter into this Agreement
and the other agreements contemplated hereby to which Buyer is a party and
perform its obligations hereunder and thereunder.
6.02 AUTHORIZATION. The execution, delivery and performance of this
Agreement and the instruments and other agreements contemplated hereby to which
Buyer is a party by Buyer and the consummation of the transactions contemplated
hereby and thereby have been duly and validly authorized by all requisite
corporate action on the part of Buyer, and no other corporate proceedings on its
part are necessary to authorize the execution, delivery or performance of this
Agreement or the other instruments and agreements contemplated hereunder. This
Agreement constitutes, and each of the other agreements contemplated hereby to
which Buyer is a party will when executed constitute, a valid and binding
obligation of Buyer, enforceable in accordance with their terms, except as
enforceability hereof may be limited by bankruptcy or other laws affecting
creditor's rights generally and limitations on the availability of equitable
remedies.
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6.03 CAPITALIZATION. On the Closing Date, the authorized capital stock
of Buyer will consist of (a) 1,300,000 shares of common stock, par value $.0l
per share, of which 810,000 shares are issued and outstanding and 100,000 are
reserved for issuance upon exercise of the Warrants, and (b) 200,000 shares of
Class P common stock, par value $.01 per share, of which 90,000 shares are
issued and outstanding. On the Closing Date, all of the issued and outstanding
shares of capital stock of Buyer will be duly authorized, validly issued, fully
paid and nonassessable, and not subject to, nor were they issued in violation
of, any preemptive rights.
6.04 NO VIOLATION. Buyer is not subject to or obligated under its
certificate of incorporation, its by-laws, any applicable law, or rule or
regulation of any governmental authority, or any agreement or instrument, or any
license, franchise or permit, or subject to any order, writ, injunction or
decree, which would be breached or violated by its execution, delivery or
performance of this Agreement and the other instruments and agreements
contemplated hereby to which Buyer is a party.
6.05 GOVERNMENTAL AUTHORITIES AND CONSENTS. Buyer is not required to
submit any notice, report or other filing with any governmental authority in
connection with the execution or delivery by it of this Agreement and the other
instruments and agreements contemplated hereby to which Buyer is a party or the
consummation of the transactions contemplated hereby or thereby. No consent,
approval or authorization of any governmental or regulatory authority or any
other party or person is required to be obtained by Buyer in connection with its
execution, delivery and performance of this Agreement and the other instruments
and agreements contemplated hereby to which Buyer is a party or the transactions
contemplated hereby or thereby.
6.06 LITIGATION. There are no actions, suits, proceedings, orders or
investigations pending or, to the best of Buyer's knowledge, threatened against
or affecting Buyer at law or in equity, or before or by any federal, state,
municipal or other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, which would adversely affect Buyer's
performance under this Agreement and the other agreements contemplated hereby to
which Buyer is a party or the consummation of the transactions contemplated
hereby or thereby.
6.07 CONDUCT OF BUSINESS. Except as contemplated herein or as necessary
to consummate the transactions contemplated hereby, Buyer has not conducted any
business, incurred any expenses, obligations or liabilities or entered into any
contracts or agreements.
6.08 CLOSING DATE. All of the representations and warranties contained
in this Article VI and elsewhere in this Agreement and all information delivered
in any schedule, attachment or exhibit hereto or in any writing delivered to
Seller are true and correct on the date of this Agreement and will be true and
correct on the Closing Date, except to the extent that Buyer has advised Seller
otherwise in writing prior to the Closing.
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ARTICLE VII
BUYER SECURITIES
7.01 INVESTMENT REPRESENTATIONS OF SELLER. In connection with the
issuance of the Buyer Securities to Seller hereunder, Seller hereby represents
and warrants to Buyer that:
(a) A duly authorized officer of Seller has had an opportunity to ask
questions and receive answers concerning the terms and conditions of the
offering of the Buyer Securities, has had full access to such other information
concerning Buyer as Seller has requested and possesses substantial information
about, and familiarity with Buyer as a result of the information provided to
Seller.
(b) Seller is able to bear the economic risk of the investment in the
Buyer Securities for an indefinite period of time.
(c) Seller is acquiring the Buyer Securities hereunder for its own
account with the present intention of holding such securities for investment
purposes and has no intention of selling such security in a public distribution
in violation of federal or state securities laws.
7.02 LEGEND. The Buyer Securities will be imprinted with a legend in
substantially the following form:
The Security represented by this [SECURITY] has not been registered
under the Securities Act of 1933, as amended (the "Act"), and may not
be sold or transferred in the absence of an effective registration
statement under the Act or an exemption from registration thereunder.
Prior to any sale or transfer of this [SECURITY], except pursuant to an
effective registration statement under the Act covering such sale or
transfer, the holder hereof shall have delivered to the issuer hereof
(the "Company") an opinion of counsel reasonably satisfactory to the
Company to the effect that such sale or transfer is exempt from
registration under the Act.
The transfer of such security is subject to the conditions specified in
the Stock Purchase Agreement, dated as of __________ __, 1993 between
the Company and Lotus Development Corporation (the "Stock Purchase
Agreement"), and the Company reserves the right to refuse the transfer
of such security until such conditions have been fulfilled with respect
to such transfer. Upon written request, a copy of such conditions shall
be furnished by the Company to the holder hereof without charge.
7.03 TRANSFER OF BUYER SECURITIES.
(a) Buyer Securities are transferable only pursuant to (i) public
offerings registered under the Securities Act of 1933, (ii) Rule 144 of the
Securities and Exchange Commission (or
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any similar rule then in force) if such rule is available or (iii) subject to
the conditions specified in paragraph (b) below, any other legally available
means of transfer.
(b) In connection with the transfer of any Buyer Securities (other
than a transfer described in paragraph 7.03 (a) (i) or (ii) above), the holder
thereof shall deliver written notice to the Company describing in reasonable
detail the transfer or proposed transfer, together with an opinion of Kirkland &
Ellis or O'Sullivan, Graev and Karabell or other counsel which (to the Company's
reasonable satisfaction) is knowledgeable in securities law matters to the
effect that such transfer of Buyer Securities may be effected without
registration of such Buyer Securities under the Securities Act. In addition, if
the holder of the Buyer Securities delivers to the Company an opinion of
Kirkland & Ellis or such other counsel that no subsequent transfer of such Buyer
Securities shall require registration under the Securities Act, the Company
shall promptly upon such contemplated transfer deliver new certificates for such
Buyer Securities which do not bear the Securities Act legend set forth in
Section 7.02. If the Company is not required to deliver new certificates for
such Buyer Securities not bearing such legend, the holder thereof shall not
transfer the same until the prospective transferee has confirmed to the Company
in writing its agreement to be bound by the conditions contained in this
paragraph and Section 7.02.
7.04 FINANCIAL STATEMENTS AND OTHER INFORMATION. Buyer shall deliver to
Seller (so long as Seller holds the Note):
(a) as soon as available but in any event within 45 days after the
end of each fiscal quarter, unaudited consolidated statements of income and cash
flows of Buyer and its subsidiaries, if any, for such quarterly period and for
the period from the beginning of the fiscal year to the end of such quarter, and
consolidated balance sheets of Buyer and its subsidiaries, if any, as of the end
of such quarterly period, and all such statements shall be prepared in
accordance with generally accepted accounting principles, consistently applied,
subject to the absence of footnote disclosures and to normal year-end
adjustments; and
(b) within 90 days after the end of each fiscal year, audited
consolidated statements of income and cash flows of Buyer and its subsidiaries,
if any, for such fiscal year, and consolidated balance sheets of Buyer and its
subsidiaries, if any, as of the end of such fiscal year, all prepared in
accordance with generally accepted accounting principles, consistently applied,
and accompanied by, with respect to the consolidated portions of such
statements, an opinion of an independent accounting firm of recognized national
standing.
7.05 ADDITIONAL RESTRICTIONS ON TRANSFER.
(a) TRANSFER OF THE WARRANT OR THE UNDERLYING COMMON STOCK. Seller
shall not sell, transfer, assign, pledge or otherwise dispose of (whether with
or without consideration and whether voluntarily or involuntarily or by
operation of law) any interest in the Warrant or any shares of Underlying Common
Stock (a "TRANSFER"), except pursuant to (i) a Public Sale or a Sale of Buyer
("EXEMPT TRANSFERS") or (ii) the provisions of this Section 7.05; provided that
in no event shall any Transfer of the Warrant or the Underlying Common Stock
pursuant to this Section 7.05 be made for any consideration other than cash
payable upon consummation of such
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Transfer or in installments over time. Prior to making any Transfer other than
an Exempt Transfer, Seller will give written notice (the "SALE NOTICE") to Buyer
and the Investors.
The Sale Notice will disclose in reasonable detail the number of shares
to be transferred and the terms and conditions of the proposed transfer. Seller
will not consummate any Transfer until 30 days after the Sale Notice has been
given to Buyer and to the Investors, unless the parties to the Transfer have
been finally determined pursuant to this Section 7.05 prior to the expiration of
such 30-day period (the "ELECTION PERIOD").
(b) FIRST REFUSAL RIGHTS. Buyer may elect to purchase all (but not
less than all) of the Warrant or the shares of the Underlying Common Stock to be
transferred upon the same terms and conditions as those set forth in the Sale
Notice by delivering a written notice of such election to Seller and the
Investors within 15 days after the Sale Notice has been given to Buyer. If Buyer
has not elected to purchase all of the Warrant or the Underlying Common Stock to
be transferred, the Investors may elect to purchase all (but not less than all)
of the Warrant or the Underlying Common Stock to be transferred upon the same
terms and conditions as those set forth in the Sale Notice by giving written
notice of such election to Seller within 30 days after the Sale Notice has been
given to the Investors. If more than one Investor elects to purchase the Warrant
or the Underlying Common Stock, the portion of the Warrant or the shares of
Underlying Common Stock to be sold will be allocated among the Investors pro
rata according to the number of shares of Buyer Common Stock owned by each
Investor on a fully diluted basis. If the Company or the Investors have elected
to purchase the Warrant or the Underlying Common Stock to be transferred, the
transfer of such shares shall be consummated as soon as practicable after the
delivery of the election notices. If neither Buyer nor the Investors elect to
purchase all of the Warrant or the shares of Underlying Common Stock specified
in the Sale Notice, Seller may, within 90 days after the expiration of the
Election Period, transfer the Warrant or the shares of Underlying Common Stock
specified in the Sale Notice to one or more third parties at a price per share
no less than the price set forth in the Sale Notice and on other terms no more
favorable to the transferee(s) thereof than specified in the Sale Notice. The
purchase price specified in the Sale Notice will be payable solely in cash at
the closing of the transaction or in installments over time, and the Warrant and
the Underlying Common Stock may not be pledged. Any portion of the Warrant or
any shares of Underlying Common Stock not transferred within such 90-day period
will be subject to the provisions of this Section 7.05(b) upon subsequent
transfer.
(c) CERTAIN PERMITTED TRANSFERS. The restrictions contained in this
Section 7.05 will not apply with respect to transfers of the Warrant or shares
of Underlying Common Stock to any entity controlled by, controlling, or under
common control with Seller, so long as such transferee agrees to be bound by the
terms and provisions of Article VII hereof.
(d) TERMINATION OF RESTRICTIONS. The restrictions on the transfer of
the Warrant and the shares of Underlying Common Stock set forth in this Section
7.05 will continue with respect to the Warrant and each share of Underlying
Common Stock, respectively, following any transfer thereof; provided that in any
event such restrictions (other than paragraph 7.05(e) below) will terminate on
the first to occur of a Sale of Buyer or a Public Offering.
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(e) HOLDBACK. Each holder of the Warrant or Underlying Common Stock
agrees not to effect any public sale or distribution of any portion of this
Warrant or any Underlying Common Stock or other equity securities of Buyer, or
any securities convertible into or exchangeable or exercisable for any of
Buyer's equity securities, during the seven days prior to and the 180 days after
the effectiveness of any underwritten Public Offering, except as part of such
underwritten Public Offering or if otherwise permitted by Buyer.
7.06 SALE OF BUYER.
(a) If the board of directors of Buyer (the "Board") and the holders
of a majority of Buyer Common Stock then outstanding approve a Sale of Buyer
(the "APPROVED SALE"), the holders of Underlying Common Stock will consent to
and raise no objections against such Approved Sale. If the Approved Sale is
structured as a (i) merger of consolidation, each holder of Underlying Common
Stock shall waive any dissenters rights, appraisal rights or similar rights in
connection with such merger or consolidation or (ii) sale of stock, each holder
of Underlying Common Stock shall agree to sell all of his shares of Underlying
Common Stock and rights to acquire shares of Underlying Common Stock on the
terms and conditions approved by the Board and the holders of a majority of
Buyer Common Stock then outstanding. Each holder of Underlying Common Stock
shall take all necessary or desirable actions in connection with the
consummation of the Approved Sale as requested by Buyer.
(b) The obligations of the holders of Underlying Common Stock with
respect to the Approved Sale are subject to the satisfaction of the following
conditions: (i) upon the consummation of the Approved Sale, each holder of Buyer
Common Stock shall receive the same form of consideration and the same portion
of the aggregate consideration such holder would have received if such aggregate
consideration had been distributed by Buyer in complete liquidation pursuant to
the rights and preferences set forth in Buyer's Certificate of Incorporation as
in effect immediately prior to such sale or exchange; (ii) if any holders of a
class of Buyer Common Stock are given an option as to the form and amount of
consideration to be received, each holder of such class of Buyer Common Stock
shall be given the same option; and (iii) each holder of then currently
exercisable rights to acquire shares of a class of Buyer Common Stock shall be
given an opportunity to either (A) exercise such rights prior to the
consummation of the Approved Sale and participate in such sale as holders of
such class of Buyer Common Stock or (B) upon the consummation of the Approved
Sale, receive in exchange for such rights consideration equal to the amount
determined by multiplying (1) the same amount of consideration per share of a
class of Buyer Common Stock received by holders of such class of Buyer Common
stock in connection with the Approved Sale less the exercise price per share of
such class of Buyer Common Stock of such rights to acquire such class of Buyer
Common Stock by (2) the number of shares of such class of Buyer Common Stock
represented by such rights.
(c) If Buyer or the holders of Buyer's securities enter into any
negotiation or transaction for which Rule 506 (or any similar rule then in
effect) promulgated by the Securities Exchange commission may be available with
respect to such negotiation or transaction (including a merger, consolidation or
other reorganization), the holders of Underlying Common Stock will, at the
request of Buyer, appoint a purchaser representative (as such term is defined in
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rule 501) reasonably acceptable to Buyer if any holder of Underlying Common
Stock appoints a purchaser representative designated by Buyer, Buyer will pay
the fees of such purchaser representative, but if any holder of Underlying
Common Stock declines to appoint the purchaser representative designated by
Buyer such holder will appoint another purchaser representative (reasonably
acceptable to Buyer), and such holder will be responsible for the fees of the
purchaser representative so appointed.
(d) Seller and the other holders of Underlying Common Stock (if any)
will bear their pro rata share (based upon the number of shares sold) of the
costs of any sale of Underlying Common Stock pursuant to an Approved Sale to the
extent such costs are incurred for the benefit of all holders of Buyer Common
Stock and are not otherwise paid by Buyer or the acquiring party. Costs incurred
by Seller and the other holders of Underlying Common Stock on their own behalf
will not be considered costs of the transaction hereunder.
(e) The provisions of this Section 7.06 will terminate upon the
completion of a Public Offering.
7.07 PUBLIC OFFERING. In the event that the Board and the holders of a
majority of the shares of Buyer Common Stock then outstanding approve a Public
Offering of Buyer Common Stock, the holders of Underlying Common Stock shall
take all necessary or desirable actions in connection with the consummation of
the Public Offering. In the event that such Public Offering is an underwritten
offering and the managing underwriters advise Buyer in writing that in their
opinion the Buyer Common Stock structure shall adversely affect the
marketability of the offering, each holder of Underlying common stock shall
consent to and vote for a recapitalization, reorganization and/or exchange of
Buyer Common Stock into securities that the managing underwriters, the Board and
holders of a majority of the shares of Buyer Common Stock then outstanding find
acceptable and shall take all necessary or desirable actions in connection with
the consummation of the recapitalization, reorganization and/or exchange;
provided that the resulting securities reflect and are consistent with the
rights and preferences set forth in Buyer's Certificate of Incorporation as in
effect immediately prior to such Public Offering.
7.08 ADDITIONAL DEFINITIONS. The following terms have meanings set
forth below:
"BUYER COMMON STOCK" means, collectively, Buyers common stock, par
value $.01 per share, Buyer's Class P Common Stock and any capital stock of any
class of Buyer hereafter authorized which is not limited to a fixed sum or
percentage of par or stated value in respect to the rights of the holders
thereof to participate in dividends or in the distribution of assets upon any
liquidation, dissolution or winding up of Buyer.
"INDEPENDENT THIRD PARTY" means any person who, immediately prior to
the contemplated transaction, does not own in excess of 5% of Buyer Common Stock
on a fully-diluted basis, who is not controlling, controlled by or under common
control with any such 5% owner of Buyer Common Stock and who is not the spouse
or descendent (by birth or adoption) of any such 5% owner of Buyer Common Stock.
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"INVESTORS" means Information Partners Capital Fund, L.P. and William
Blair Venture Partners III Limited Partnership and their successors and assigns.
"1933 ACT" means the Securities Act of 1933, as amended from time to
time.
"PUBLIC OFFERING" means the sale, in an underwritten public offering
registered under the 1933 Act, of shares of Buyer Common Stock.
"PUBLIC SALE" means any sale pursuant to a registered public offering
under the 1933 Act or any sale to the public pursuant to Rule 144 promulgated
under the 1933 Act effected through a broker, dealer or market maker.
"SALE OF BUYER" means the sale of Buyer to an Independent Third Party
or affiliated group of Independent Third Parties pursuant to which such party or
parties acquire (i) capital stock of Buyer possessing the voting power to elect
a majority of Buyer's board of directors (whether by merger, consolidation or
sale or transfer of Buyer's capital stock) or (ii) all or substantially all of
Buyer's assets determined on a consolidated basis.
"UNDERLYING COMMON STOCK" means shares of Buyer's common stock, par
value $.01 per share; provided that if there is a change such that the
securities issuable upon exercise of the Warrants are issued by an entity other
than Buyer or there is a change in the class of securities so issuable, then the
term "Underlying Common Stock" shall mean one share of the security issuable
upon exercise of the Warrants if such security is issuable in shares, or shall
mean the smallest unit in which such security is issuable if such security is
not issuable in shares. Underlying Common Stock will continue to be Underlying
Common Stock in the hands of any holder other than Seller (except for Buyer and
the Investors and except for transferees in a Public Sale), and except as
otherwise provided herein, each such other holder of Underlying Common Stock
will succeed to all rights and obligations attributable to Seller as a holder of
Underlying Common Stock hereunder. Underlying Common Stock will also include
shares of Buyer's capital stock issued with respect to Underlying Common Stock
by way of a stock split, stock dividend or other recapitalization.
ARTICLE VIII
TERMINATION
8.01 TERMINATION. This Agreement may be terminated at any time prior to
the Closing:
(a) by mutual written consent of Buyer and Seller;
(b) by either Buyer or Seller if there has been a material
misrepresentation or breach on the part of the other party in the
representations and warranties set forth in this Agreement, or if events have
occurred which have made it impossible to satisfy a condition precedent to the
terminating party's obligations to consummate the transactions contemplated
hereby, unless such
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terminating party's willful breach of this Agreement has caused the condition to
be unsatisfied; or
(c) by either Buyer or Seller if the Closing has not occurred on or
prior to 45 days after the date hereof; PROVIDED that neither Buyer nor Seller
will be entitled to terminate this Agreement pursuant to this Section 8.01(c) if
such person's willful breach of this Agreement has prevented the consummation of
the transactions contemplated hereby at or prior to such time.
8.02 EFFECT OF TERMINATION. In the event of termination of this
Agreement by either Buyer or Seller as provided above, this Agreement will
forthwith become void and there will be no liability on the part of any party
hereto to any other party hereto or its shareholders or directors or officers in
respect thereof, except for the obligations of the parties hereto in sections
10.05, 10.10(b) and 10.11 and except that nothing herein will relieve any party
from any breach of this Agreement prior to such termination.
ARTICLE IX
INDEMNIFICATION AND RELATED MATTERS
9.01 SURVIVAL. All representations, warranties, covenants and
agreements set forth in this Agreement or in any writing delivered in connection
with this Agreement will survive the Closing Date and the consummation of the
transactions contemplated hereby and will not be affected by any examination
made for or on behalf of Buyer, the knowledge of any of its officers, directors,
stockholders, employees or agents, or the acceptance of any certificate or
opinion; provided that in the event that Seller updates the representations and
warranties contained in Articles IV and V by written notice to Buyer prior to
Closing and the Closing occurs, such updates will be considered to be part of
the disclosure schedules to this Agreement as described in such updates.
9.02 INDEMNIFICATION.
(a) Subject to the limitations set forth in (b) below, Seller agrees
to indemnify Buyer, the Company, their officers, directors, stockholders and
lenders and hold them harmless against any loss, liability, deficiency, damage
or expense (including reasonable legal expenses and costs and including interest
and penalties) (a "Loss") which Buyer or the Company, may suffer, sustain or
become subject to, as a result of (i) the breach of any representation or
warranty made by the Company or Seller contained in Article IV of this
Agreement, (ii) the breach of any representation or warranty made by Seller
contained in Article V of the Agreement, (iii) the breach of any covenant made
by Seller or the Company contained in Article III of this Agreement, (iv) the
breach of any representation, warranty, covenant or agreement (other than
representations or warranties set forth in Articles IV and V hereof or the
covenants contained in Article III hereof) made by Seller contained in this
Agreement or any Exhibit hereto, (v) any claims of any brokers or finders
claiming by, through or under Seller, (vi) the litigation, if any, between
Seller and Disclosure Incorporated or any other obligations of Seller arising
from the Settlement Agreement (the "SETTLEMENT AGREEMENT") dated as of July 16,
1993 between Seller and Disclosure Incorporated (other than obligations assumed
by the Company under the
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Assignment and Assumption Agreement or resulting from a breach of the Assignment
and Assumption Agreement by the Company) or (viii) any other litigation
disclosed on Schedule 4.14 or 4.15.
(b) The indemnification provided for in Section 9.02(a) above is
subject to the following limitations:
(i) Seller will be liable to Buyer with respect to claims
referred to in (a) (i), (a) (ii) and (a) (iii) above only if Buyer
gives Seller written notice thereof within two years after the Closing
Date except for claims arising from breaches of the representations and
warranties (A) set forth in Sections 4.12 as to which claims must be
made prior to the expiration of the applicable statute of limitation
with respect thereto and (B) set forth in Sections 4.01, 4.02, 4.03,
5.01 and 5.02 as to which claims may be made at any time;
(ii) with respect to claims referred to in (a)(i), (a)(ii)
and (a)(iii) above, Seller will not be liable for any such Loss until
the aggregate amount of all such Losses exceeds $439,000 and then
Seller shall be liable for $219,500 of the first $439,000 of such
Losses and then 100% of all Losses in excess of the first $439,000 of
Losses; provided that in the event that the Company utilizes the
credit entitlements (the "Credit Entitlements") relating to royalty
generating licensing agreements provided to Seller by Disclosure
Incorporated pursuant to Section 4 of the Settlement Agreement, such
Credit Entitlements, to the extent actually utilized by the Company
(the "Actual Credit"), shall increase the basket amount of $439,000
dollar for dollar and Seller will not be liable for any such Loss
until the aggregate amount of all such Losses exceeds an amount equal
to the sum of $439,000 plus the Actual Credit (the "Amount"), and then
Seller shall be liable for one half of the Amount and then 100% of all
Losses in excess of the Amount; and
(iii) with respect to claims referred to in (a)(i), (a)(ii)
and (a)(iii) above, Seller's aggregate liability with respect to Losses
will not exceed $7,500,000; provided that in the event that the Note is
still outstanding and Seller has indemnified Buyer for Losses in an
amount equal to $5,000,000, Buyer agrees that any remaining Losses to
which it is entitled to be indemnified pursuant to this Section 9.02
shall be paid to Buyer by set off of the Note pursuant to paragraph
9.02(h) hereof.
(c) Buyer agrees to indemnify Seller and hold Seller harmless against
any Loss which Seller may suffer, sustain or become subject to, as the result of
(i) a breach of any representation, warranty, covenant, or agreement by Buyer
contained in this Agreement, and (ii) any claims of any brokers or finders
claiming by, through or under Buyer. Buyer will not be liable for any Loss
relating to breaches of Buyer's representations and warranties contained in
Article VI (except Sections 6.01, 6.02 and 6.03) hereof unless written notice of
such breach is given by Seller to Buyer within two years of the Closing Date.
(d) If a party hereto seeks indemnification under this Section 9,02,
such party (the "INDEMNIFIED PARTY") shall give written notice to the other
party (the "Indemnifying Party") of the facts and circumstances giving rise to
the claim. In that regard, if any suit, action, claim,
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liability or obligation shall be brought or asserted by any third party which,
if adversely determined, would entitle the Indemnified Party to indemnity
pursuant to this Section 9.02, the Indemnified Party shall promptly notify the
Indemnifying Party of the same in writing, specifying in detail the basis of
such claim and the facts pertaining thereto and the Indemnifying Party, if it so
elects (except that the Indemnifying Party may not so elect without the
Indemnified Party's consent if such suit, action, claim, liability or obligation
relates to the Indemnified Party's relationship with its customers or
employees), shall assume and control the defense thereof (and shall consult with
the Indemnified Party with respect thereto), including the employment of counsel
reasonably satisfactory to the Indemnified Party and the payment of expenses. If
the Indemnifying Party elects to assume and control the defense, the Indemnified
Party shall have the right to employ counsel separate from counsel employed by
the Indemnifying Party in any such action and to participate in the defense
thereof, but the fees and expenses of such counsel employed by the Indemnified
Party shall be at the expense of the Indemnified Party unless (i) the employment
thereof has been specifically authorized by the Indemnifying Party in writing or
(ii) the Indemnifying Party has failed to assume the defense or employ counsel
reasonably satisfactory to the Indemnified Party. The Indemnifying Party shall
not be liable for any settlement of any action or proceeding, the defense of
which it has elected to assume, which settlement is effected without the written
consent of the Indemnifying Party. If there shall be a settlement to which the
Indemnifying Party consents or a final judgment for the plaintiff in any action
or proceeding, the defense of which the Indemnifying Party has elected to
assume, the Indemnifying Party shall indemnify and hold harmless the Indemnified
Party from and against any loss or liability by reason of such settlement or
judgment.
(e) Except as otherwise provided in Section 9.02 (b) (iii), the
Indemnifying party shall pay the Indemnified Party in immediately available
funds promptly after the Indemnified Party provides the Indemnifying Party with
written notice of a claim hereunder and the parties reasonably agree that there
is a reasonable basis for such claim or a final result, determination, finding,
judgment and/or award is made pursuant to the terms of Section 9.03 hereof.
(f) The foregoing indemnification provisions are the sole remedy for
monetary damages that any party may have for misrepresentation, breach of
warranty or breach of covenant, provided that nothing herein shall limit or
preclude the availability of injunctive relief or any other equitable remedy.
(g) Amounts paid to or on behalf of Buyer or Seller as indemnification
shall be treated as adjustments to the Purchase Price.
(h) In the event that Seller is required to indemnify Buyer and/or the
Company pursuant to Section 9.02 (e), Buyer, in its sole discretion, may set off
all or a portion of the amount of such indemnity obligation against the
outstanding principal amount and interest on the Note.
9.03 ARBITRATION PROCEDURE.
(a) Buyer and Seller agree that the arbitration procedure set forth
below shall be the sole and exclusive method for resolving and remedying claims
for money damages arising out of
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the provisions of Article IX, other than disputes relating to (i) Proprietary
Rights and breaches of Section 4.14 and (ii) the provisions of Section 10.07
(the "DISPUTES"). Nothing in this section 9.03 shall prohibit a party hereto
from instituting litigation to enforce any Final Determination (as defined
below). The parties hereby agree and acknowledge that, except as otherwise
provided in this Section 9.03 or in the Commercial Arbitration Rules of the
American Arbitration Association as in effect from time to time, the arbitration
procedures and any Final Determination hereunder shall be governed by, and shall
be enforced pursuant to the Uniform Arbitration Act as in effect in the
Commonwealth of Massachusetts.
(b) In the event that any party asserts that there exists a Dispute,
such party shall deliver a written notice to each other party involved therein
specifying the nature of the asserted Dispute and requesting a meeting to
attempt to resolve the same. If no such resolution is reached within ten
business days after such delivery of such notice, the party delivering such
notice of Dispute (the "DISPUTING PERSON") may, within 45 business days after
delivery of such notice, commence arbitration hereunder by delivering to each
other party involved therein a notice of arbitration (a "NOTICE OF
Arbitration"). Such Notice of Arbitration shall specify the matters as to which
arbitration is sought, the nature of any Dispute, the claims of each party to
the arbitration and shall specify the amount and nature of any damages, if any,
sought to be recovered as a result of any alleged claim, and any other matters
required by the Commercial Arbitration Rules of the American Arbitration
Association as in effect from time to time to be included therein, if any.
(c) Buyer and Seller each shall select one non-neutral arbitrator
expert in the subject matter of the Dispute (the arbitrators so selected shall
be referred to herein as the "BUYER'S ARBITRATOR" and the "SELLER'S ARBITRATOR,"
respectively). In the event that either party fails to select an arbitrator as
set forth herein within 20 days from the delivery of a Notice of Arbitration,
then the matter shall be resolved by the arbitrator selected by the other party.
Seller's Arbitrator and Buyer's Arbitrator shall select a third independent
neutral arbitrator expert in the subject matter of the dispute, and the three
arbitrators so selected shall resolve the matter according to the procedures set
forth in this Section 9.03. If Seller's Arbitrator and Buyer's Arbitrator are
unable to agree on a third arbitrator within 20 days after their selection,
Seller's Arbitrator and Buyer's Arbitrator shall each prepare a list of three
independent arbitrators. Seller's Arbitrator and Buyer's Arbitrator shall each
have the opportunity to designate as objectionable and eliminate one arbitrator
from the other arbitrator's list within 7 days after submission thereof, and the
third arbitrator shall then be selected by lot from the arbitrators remaining on
the lists submitted by Seller's Arbitrator and Buyer's Arbitrator.
(d) The arbitrator(s) selected pursuant to paragraph (c) will
determine the allocation of the costs and expenses of arbitration based upon the
percentage which the portion of the contested amount not awarded to each party
bears to the amount actually contested by such party. For example, if Buyer
submits a claim for $1,000 and if Seller contests only $500 of the amount
claimed by Buyer, and if the arbitrator(s) ultimately resolves the dispute by
awarding Buyer $300 of the $500 contested, then the costs and expenses of
arbitration will be allocated 60% (i.e., 300/500) to Seller and 40% (i.e., 200 /
500) to Buyer.
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(e) The arbitration shall be conducted under the Commercial
Arbitration Rules of the American Arbitration Association as in effect from time
to time, except as modified by the agreement of all of the parties to this
Agreement. The arbitrator(s) shall so conduct the arbitration that a final
result, determination, finding, judgment and/or award (the "FINAL
DETERMINATION") is made or rendered as soon as practicable, but in no event
later than 90 business days after the delivery of the Notice of Arbitration nor
later than 10 days following completion of the arbitration. The Final
Determination must be agreed upon and signed by the sole arbitrator or by at
least two of the three arbitrators (as the case may be). The Final Determination
shall be final and binding on all parties and there shall be no appeal from or
reexamination of the Final Determination, except for fraud, perjury, evident
partiality or misconduct by an arbitrator prejudicing the rights of any party
and to correct manifest clerical errors.
(f) Buyer and Seller may enforce any Final Determination in any state
or federal court having jurisdiction over the dispute. For the purpose of any
action or proceeding instituted with respect to any Final Determination, each
party hereto hereby irrevocably submits to the jurisdiction of such courts,
irrevocably consents to the service of process by registered mail or personal
service and hereby irrevocably waives, to the fullest extent permitted by law,
any objection which it may have or hereafter have as to personal jurisdiction,
the laying of the venue of any such action or proceeding brought in any such
court and any claim that any such action or proceeding brought in any court has
been brought in an inconvenient forum.
(g) If any party shall fail to pay the amount of any damages, if any,
assessed against it within 10 days of the delivery to such party of such Final
Determination, the unpaid amount shall bear interest from the date of such
delivery at the lesser of (i) the prime rate of interest announced by Morgan
Guaranty Trust Company of New York, in effect from time to time (which rate
shall be adjusted on the effective date of each change in such prime rate) plus
3.00% and (ii) the maximum rate permitted by applicable usury laws. Interest on
any such unpaid amount shall be compounded semiannually, computed on the basis
of a 360-day year consisting of twelve 30-day months and shall be payable on
demand. In addition, such party shall promptly reimburse the other party for any
and all costs and expenses of any nature or kind whatsoever (including but not
limited to all attorneys' fees) incurred in seeking to collect such damages or
to enforce any Final Determination.
ARTICLE X
ADDITIONAL AGREEMENTS
10.01 SALE OF BUYER.
(a) In the event that the sale of Buyer or any transferee of the
Business controlled by Buyer (whether by sale of at least two-thirds of Buyer's
common stock, by merger or by sale of substantially all of its assets) (a "BUYER
SALE") is consummated to Dun & Bradstreet Corporation or any of its Subsidiaries
("D&B") within 18 months following the Closing Date for a total aggregate cash
purchase price (including assumed funded debt) which is in excess of $18
million, Buyer agrees to pay to Seller in immediately available funds all of the
net proceeds in excess of $18 million within two business days of the receipt
thereof.
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(b) In the event that a Buyer Sale is consummated to any third party
(other than D&B) within one year following the Closing Date for a total cash
purchase price (including assumed funded debt) which is in excess of $18
million, Buyer agrees to pay to Seller in immediately available funds 50% of the
net proceeds in excess of $18 million within two business days of the receipt
thereof.
10.02 EMPLOYEES AND EMPLOYEE BENEFIT PLANS. Seller shall retain any and
all liability with respect to benefits, claims or other entitlements arising as
a result of events, incidents or illnesses incurred prior to the Closing Date
with respect to former employees of the Company or the Division and employees of
the Company or the Division on the Closing Date. Additionally, Seller shall
retain any and all liability with respect to all Benefit Plans maintained or
contributed to by Seller, the Company or the Division (or any predecessors
thereto) with respect to current or former employees of the Company or the
Division. The Buyer will not terminate the employment of a sufficient number of
current employees of the Company or the Division during the six-month period
commencing on the Closing Date which would result in a "plant closing" (as
defined in the Worker Adjustment and Retraining Notification Act).
10.03 CONTINUING ASSISTANCE. Subsequent to the Closing, Seller and
Buyer at their own cost will assist each other (including making records
available) in the preparation of their respective tax returns and the filing and
execution of tax elections, if required, as well as any audits or litigation
that ensue as a result of the filing thereof, to the extent that such assistance
is reasonably requested.
10.04 TAX MATTERS.
(a) Any Tax sharing agreement between the Company and Seller or any
other member of an Affiliated Group is terminated as of the Closing Date and
will have no further effect for any taxable year (whether the current year, a
future year, or a past year).
(b) The Seller agrees to indemnify the Buyer from and against the
entirety of any losses the Buyer may suffer resulting from, arising out of,
relating to, in the nature of, or caused by any Liability of the Company for
Taxes (i) of the Company for all Taxes for all taxable periods ending on or
before (or which includes) the Closing Date (or if a taxable period begins
before and ends after the Closing Date, so much if such taxable period as falls
on or before the Closing Date), or (ii) of any Person other than the Company (A)
under Treasury Reg. ss.1.1502-6 (or any similar provision of state, local or
foreign law), (B) as a transferee or successor, (C) by contract, or (D)
otherwise.
(c) Seller shall prepare and timely file (or cause to be prepared and
timely filed) (i) a consolidated federal income Tax Return for the Seller
Affiliated Group for Tax years ending on or before (or which include) the
Closing Date, and (ii) a combined or unitary state, local or foreign income Tax
Return of which the Company has been included as a member for Tax years ending
on or before (or which include) the Closing Date (collectively, "GROUP TAX
RETURNS"). Seller will include the income of the Company (including any deferred
income triggered into income by Reg. ss.1.1502-13 and Reg. ss.1.1502-14 and any
excess loss accounts taken into income under Reg. ss.1.1502-19) on the Seller
consolidated federal income Tax Return (and any
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applicable state local or foreign combined or unitary Tax Return) for the period
which includes the Closing Date in accordance with the Company's past custom and
practice.
(d) Seller shall prepare and timely file (or cause to be prepared and
timely filed) all state, local and foreign income Tax Returns for the Company
for Tax years ending on or before the Closing Date.
(e) Seller will allow the Buyer an opportunity to review and comment
upon the Tax Returns described in (c) and (d) above (including any amended
returns) to the extent that they relate to the Company and will take no position
on such returns that relate to the Company that would adversely affect the
Company after the Closing Date without the Buyer's consent, which consent shall
not be unreasonably withheld. For purposes of the preceding sentence with
respect to the Group Tax Returns, Seller need only provide Buyer with the
stand-alone "pro forma Tax information that was used by Seller as consolidating
entries on such Group Tax Returns, together with any such additional information
necessary to understand such Tax information as Buyer may reasonably request.
For purposes of preparing the Tax Returns described in (c) and (d) above, the
income of the Company will be apportioned to the period up to and including the
Closing Date and the period after the Closing Date by closing the books of the
Company as of the end of the Closing Date.
(f) Seller shall keep the Company and Buyer promptly advised as to the
status of any Tax audits and litigation involving any issues relating to any
Taxes pertaining to taxable periods on or prior to the Closing Date to the
extent that such issue would affect the Company after the Closing Date, and
shall provide such information pertaining to the Company as Buyer may reasonably
request in writing. Seller will allow the Company and its counsel to participate
(at the Company's own expense and upon the Company's written request) in any
audits of Seller's consolidated federal income Tax Returns (or state, local or
foreign combined or unitary Tax Returns) to the extent that such Returns relate
to the Company. The Company's participation will be limited to those issues
affecting the Company. Seller will not settle any such audit in a manner which
would adversely affect the Company after the Closing Date without the prior
written consent of the Buyer, which consent shall not unreasonably be withheld.
(g) Seller will immediately pay to the Buyer any Tax refund (or
reduction in Tax liability) resulting from a carryback of a post-acquisition Tax
attribute of the Company into the Seller's consolidated Tax return(or state,
local or foreign combined or unitary Tax Return), when such refund or reduction
is realized by the Seller's group. Seller will, at the Company's expense,
cooperate with the Company in obtaining such refunds (or reduction in Tax
liability), including through the filing of amended Tax returns or refund
claims. The Buyer agrees to indemnify Seller for any Taxes resulting from the
disallowance of such post-acquisition Tax attribute on audit or otherwise.
(h) No election shall be made under Code Section 338(g) and/or Code
Section 338 (h) (10) with respect to the purchase and sale of the Company's
stock hereunder. Notwithstanding anything to the contrary in this Agreement,
Seller shall indemnify and hold harmless the Buyer and the Company against any
Taxes arising from any actions taken by Seller or the Company on
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or before the Closing which causes (i) a deemed election under Code Section 338,
or (ii) the transaction to otherwise be treated as an asset acquisition for Tax
purposes.
(i) Each party shall provide the other party, promptly upon written
request, with such cooperation and assistance, documents, and other information
as may be reasonably requested by such party in connection with the preparation
and filing of any Tax Returns, the conduct of any audit or other examination or
any judicial or administrative proceeding involving Taxes. The party requesting
such assistance shall pay the reasonable costs of the party providing such
assistance.
(j) Seller agrees to indemnify and hold harmless Buyer and the Company
against any Taxes (including loss of Tax benefits) that arise should there be a
final determination that the total amount paid by Buyer for the licenses
pursuant to the License Agreement pursuant to Section 1.04 (b) (iv) should be
capitalized for Tax purposes without allowance for depreciation or amortization
thereof (it being understood that the Tax basis in the licenses pursuant to the
License Agreement that is recoverable only upon the sale, disposition or
abandonment of the licenses pursuant to the License Agreement shall not be
considered to give rise to an allowance for depreciation or amortization).
However, Buyer will reimburse Seller the amount of any payments made by Seller
pursuant to this paragraph to the extent Buyer actually receives a tax benefit
for the capitalized cost of the License Agreement through a taxable sale,
disposition or abandonment of the licenses on or before the date which ends five
years after the Closing Date.
10.05 PRESS RELEASES AND ANNOUNCEMENTS. Prior to the Closing Date, no
press releases related to this Agreement and the transactions contemplated
herein, or other announcements to the employees, customers or suppliers of the
Company will be issued without the mutual approval of all parties hereto, except
any public disclosure which any party in good faith believes is required by law
or regulation (in which case the disclosing party agrees to provide to the other
party reasonable notice of such disclosure and the opportunity to comment on the
form and content of such disclosure). After the Closing Date, no press releases
related to this Agreement and the transactions contemplated herein, or other
announcements to the employees, customers or suppliers of the Company will be
issued without Buyer's consent and Seller's consent (which shall not be
unreasonably withheld).
10.06 FURTHER TRANSFERS. Seller will execute and deliver such further
instruments of conveyance and transfer and take such additional action as Buyer
may reasonably request to effect, consummate, confirm or evidence the transfer
of the assets of the Division to the Company, the transfer to Buyer of the
Company Stock and the Business and any other transactions contemplated hereby.
10.07 NON-COMPETE; NON-SOLICITATION
(a) As a significant inducement to Buyer to enter into and to perform
its obligations under this Agreement, Seller agrees that, for a period of three
(3) years after the Closing, Seller shall not anywhere in the world, on its own
behalf, develop, license or sell a Competing Product. Seller further agrees
that, for a period of three (3) years after the Closing, Seller will not (1)
acquire more than 5% of the equity of any entity which recognizes 50% or more of
its net revenue
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from the license or sale of Competing Product (s) ; (2) acquire more than 10% of
the equity of any entity which recognizes more than 20% percent but less than
50% of its net revenue from the license or sale of Competing Product(s); or (3)
acquire more than 50% of the equity of any entity which recognizes less than or
equal to 20% of net revenue from the license or sale of Competing Products(s)
provided such 20% is greater than $5,000,000 annually for acquisitions during
the first year after the Closing Date, greater than $10,000,000 annually for
acquisitions during the second year after the Closing Date and greater than
$20,000,000 annually for acquisitions during the third year after the Closing
Date. "Competing Product" shall mean (i) financial information organized in
database products similar to any one of those offered by the Company as of the
Closing Date; (ii) business reference information organized in database products
substantially similar to any one of those offered by the Company as of the
Closing Date; or (iii) information organized in database products substantially
similar to any one of those described in Schedule 10.07A hereto, which product
the Company plans to offer in the future. "Competing Product" shall not include
information organized in database products substantially similar to any one of
those described in Schedule 10.07B hereto. For purposes of this Section 10.07,
the term "Seller" shall mean Lotus Development Corporation ("Lotus") and any
wholly owned subsidiary of Lotus as of the Closing Date.
(b) As a further such inducement to Buyer, Seller agrees that, for a
period of three (3) years after the Closing, if the Company offers consulting
services to the Company's customers on an ongoing basis, commencing no later
than six months after the Closing, Seller shall not anywhere in the world
provide consulting or customized application development services where more
than 20% of such consulting services (calculated on either an hourly or dollar
basis) under any services contract within a one year period would directly
enhance the value to the Company's customers of the financial and/or business
reference databases of the Company or any directly competitive financial and/or
business reference databases offered by third parties, including the Company's
suppliers.
(c) Seller agrees that (i) for a period of three years after the
Closing, it will not directly or indirectly solicit employment to any current
employee of the Company without the prior written consent of Buyer and (ii) for
a period of two years after the Closing it will not directly or indirectly hire
any current employee of the Company without the prior written consent of Buyer.
(d) If, at the time of enforcement of this Section 10.07 a court shall
hold that the duration, scope or area restrictions stated herein are
unreasonable under circumstances then existing, the parties agree that the
maximum duration, scope or area reasonable under such circumstances shall be
substituted for the stated duration, scope or area.
(e) The Company agrees that in the event of any breach of any
provisions of this Section 10.07, Buyer shall have the right, in addition to any
other rights and remedies existing in its favor, to enforce its rights and the
Company's obligations under this Section 10.07 not only by an action or actions
for damages but also by an action or actions for specific performance and/or
injunctive or other equitable relief in order to enforce or prevent any
violations of the provisions of this Section 10.07.
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(f) As consideration for the non-compete agreement set forth in this
Section 10.07, Buyer will pay to Seller at the closing an amount equal to
$3,000,000 (the "NON-COMPETE PRICE").
10.08 SPECIFIC PERFORMANCE. Seller acknowledges that the Company's
business is unique and recognizes and affirms that in the event of a breach of
this Agreement by Seller, money damages may be inadequate and Buyer may have no
adequate remedy at law. Accordingly, Seller agrees that Buyer shall have the
right, in addition to any other rights and remedies existing in its favor, to
enforce its rights and Seller's obligations hereunder not only by an action or
actions for damages but also, where money damages are inadequate, by an action
or actions for specific performance, injunctive and/or other equitable relief.
10.09 TRANSITION ASSISTANCE. Seller will not in any manner take any
action which is designed or intended to have the effect of discouraging
customers, suppliers, lessors, licensors and other business associates from
maintaining the same business relationships with the Company after the date of
this Agreement as were maintained with the Company prior to the date of this
Agreement.
10.10 INVESTIGATION AND CONFIDENTIALITY.
(a) Prior to the Closing Date, Buyer may make or cause to be made upon
reasonable notice such investigation of the business and properties of the
Company as it deems necessary or advisable to familiarize itself therewith.
Seller and the Company agrees to permit Buyer, its authorized representatives
and representatives of the financial institutions which are considering
participation in the financing of this transaction upon reasonable notice to (i)
have full access to the premises, books and records of the Company at reasonable
hours, (ii) visit and inspect any of the properties of the Company, and (iii)
discuss the affairs, finances and accounts of the Company with the directors,
officers, key employees, key customers, key sales representatives, key suppliers
and independent accountants of the Company.
(b) If the transactions contemplated by this Agreement are not
consummated, Buyer will not disclose or use at any time any information and
materials reasonably designated by Seller as confidential, and Buyer and its
representatives will return to Seller originals of and destroy copies of all
memoranda, notes, plans, records, documentation and other materials obtained
from Seller in connection with the transactions contemplated by this Agreement
which Buyer may then possess or have under its control. Whether or not the
transactions contemplated hereby are consummated, Seller will maintain the
confidentiality of all information and materials regarding Buyer and its
affiliates reasonably designated by Buyer as confidential. If the transactions
contemplated by this Agreement are consummated, Seller will maintain the
confidentiality of, and will not use for any purpose, all proprietary and other
nonpublic information regarding the Company (including, without limitation, any
of same included in the Proprietary Rights), except as necessary to file tax
returns and other reports to governmental agencies or as required by law or in
connection with any litigation with the consent of Buyer (which consent will not
unreasonably be withheld) or in connection with the litigation between Seller
and Disclosure Incorporated, and to turn over to Buyer at the Closing copies of
all such
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materials they have in their possession. In the event of the breach of any of
the provisions of this Section 10.10, the non-breaching party, in addition and
supplementary to other rights and remedies existing in its favor, may apply to
any court of law or equity of competent jurisdiction for specific performance
and/or injunctive or other relief (without the posting of bond or other
security) in order to enforce or prevent any violations of the provisions
hereof. This Section 10.10 shall survive any expiration or termination of this
Agreement.
10.11 EXPENSES. Except as otherwise provided herein, Buyer and Seller
will pay all of their own expenses (including fees and expenses of legal
counsel, investment bankers, brokers or other representatives and consultants
and appraisal fees and expenses) incurred in connection with the negotiation of
this Agreement, the performance of its obligations hereunder, and the
consummation of the transactions contemplated hereby; it being understood that
Seller will pay the fees and expenses of the Company and that the Company will
not pay any of Seller's costs and expenses (including legal and accounting)
arising in connection with the transactions contemplated thereby if the
transactions are consummated. All real estate taxes applicable to any parcel of
real property identified as leased by the Company on the Leases Schedule and for
which the Company is obligated to pay shall be prorated between Seller and Buyer
as of the Closing Date.
10.12 EXCLUSIVITY. Until this Agreement is terminated by its terms,
Seller will not (and Seller will not cause or permit any affiliate, director,
officer, employee or agent of the Company and its affiliates to), (a) solicit,
initiate or encourage the submission of any proposal or offer from any person or
entity (including any of them) relating to any (i) liquidation, dissolution or
recapitalization of, (ii) merger or consolidation with or into, (iii)
acquisition or purchase of assets of or any equity interest in or (iv) similar
transaction or business combination involving the Company or (b) participate in
any discussions or negotiations regarding, furnish any information with respect
to, assist or participate in, or facilitate in any other manner any effort or
attempt by any other person to do or seek any of the foregoing. Until the
earlier of (a) the time this Agreement is terminated by its terms or (b) the
Closing Date, Seller shall notify Buyer immediately if any person makes any
proposal, offer, inquiry or contact with respect to any of the foregoing.
10.13 BOOKS AND RECORDS. Unless otherwise consented to in writing by
Seller or Buyer (as the case may be), Buyer and Seller will not, for a period of
seven (7) years following the date hereof, destroy, alter or otherwise dispose
of any of the books and records of the Company acquired by Buyer hereunder or
retained by Seller without first offering to surrender to Seller or Buyer such
books and records or any portion thereof of which Seller or Buyer may intend to
destroy, alter or dispose. Buyer and Seller will allow the other party's
representatives, attorneys and accountants access to such books and records,
upon reasonable request and during such party's normal business hours, for the
purpose of examining and copying the same in connection with any matter whether
or not relating to or arising out of this Agreement or the transactions
contemplated hereby.
10.14 LOTUS UK TRANSFERS. Seller hereby agrees to take all actions as
are necessary or reasonably requested by Buyer to transfer in accordance with
this Section 10.14 and prior to the
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Closing all of the assets of the Division (the "LOTUS UK ASSETS") held by Lotus
Development UK Ltd., a United Kingdom corporation ("LOTUS UK") (including,
without limitation, those assets set forth on Schedule 10.14 attached hereto
(the "UK OneSource Assets Schedule")) to the Company. Seller agrees to
accomplish such transfer prior to the Closing by first causing Lotus UK to form
a new corporation that is a wholly owned subsidiary of Lotus UK ("UK SUB"), then
transferring all of the Lotus UK assets to the UK Sub, then selling all of the
capital stock of the UK Sub to Seller, and then causing Seller to transfer all
of the capital stock of the UK Sub to the Company in the form of a capital
contribution. To the extent that the transactions contemplated by this Section
10.14 give rise to a charge pursuant to Section 178 or Section 179 of Taxation
of Chargeable Gains Act 1992 (the "Charge"), Seller shall reimburse the Company
or the UK Sub for the full amount of such Charge incurred by the Company or the
UK Sub. Buyer agrees that the Company or UK Sub will notify the Seller if the
Charge issue is raised by the UK Tax Authorities in their examination of the
Company or UK Sub. Buyer further agrees that the Company and the UK Sub will
allow the Seller and its counsel to participate (at the Seller's own expense and
upon the Seller's written request) in any audits of the Company's or UK Sub's
U.K. income Tax Returns to the extent that such audits relate to the Charge.
Buyer agrees that the Company and the UK Sub will not settle any such audit in a
manner which will result in a Charge reimbursable by the Seller to the Company
or the UK Sub without the prior written consent of the Seller, which consent
shall not unreasonably be withheld.
10.15 BONUSES. The Company and Seller acknowledge that the persons
listed on Schedule 10.15 (the "Holders") hold options to acquire Seller's common
stock in the amounts set forth opposite such Holder's name on Schedule 10.15
which have not vested pursuant to their terms and which will expire upon the
Closing (the "Unvested Options"). The exercise prices of such Unvested Options
are set forth on Schedule 10.15. The Company hereby covenants and agrees that so
long as a Holder remains employed by the Company on the date which Unvested
options would have vested had such Holder been employed by Seller, the Company
will pay a bonus (a "Bonus") to such Holder equal to (a) 65%, multiplied by (b)
the number of Unvested Options which would have vested on such date, multiplied
by (c) the difference between the closing price of Seller's common stock on the
Closing Date and the exercise price of the Unvested options which would have
vested on such date (the "Spread"). At Closing, Seller agrees that it will pay
to the Company an amount equal to (i) 50%, multiplied by (ii) the total Unvested
Options, multiplied by (iii) the Spread with respect to the Unvested options.
The Company agrees to use such funds to pay Bonuses. In the event that a
Holder's employment with the Company terminates prior to the time all of his or
her Unvested Options would have vested had such Holder been employed by Seller
until such date, the Company agrees that it will pay to Seller an amount equal
to (A) 50%, multiplied by (B) the number of Unvested Options which would have
remained unvested had such Holder been employed by Seller until such date,
multiplied by (C) the aggregate Spread with respect to such Unvested Options.
Any amounts payable to Seller by the Company pursuant to the immediately
preceding sentence shall be determined for each calendar year period following
the closing and paid by the Company in an annual lump sum on each March 31
following each such calendar year period. Buyer and Seller hereby agree that
Schedule 10.15 shall be delivered by Seller to Buyer at least 5 business days
prior to the Closing.
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10.16 LOTUS 401(k) PLAN. Prior to the Closing Date and effective as of
the Closing Date, Seller shall amend the Lotus Profit Sharing and 401(k) Plan
(the "Plan") to provide that all employees of the Business who are participants
in the Plan shall be fully vested in all of their account balances in the Plan.
Following the Closing Date, Seller shall permit such participants to leave such
fully vested account balances in the Plan or to roll over such account balances
(including earnings thereon as of the date of transfer), in accordance with the
terms of the Plan, to an individual retirement account or another qualified
defined contribution plan (including such a plan established by the Company). In
the alternative, and at Seller's sole discretion, Seller agrees to pay to each
such employee an amount which represents the unvested portion of each such
employee's account balance under the Plan as of the Closing Date. Such payment
shall be made as soon as possible following the Closing Date.
ARTICLE XI
MISCELLANEOUS
11.01 AMENDMENT AND WAIVER. This Agreement may be amended and any
provision of this Agreement may be waived, provided that any such amendment or
waiver will be binding upon a party only if such amendment or waiver is set
forth in a writing executed by Buyer and Seller. No course of dealing between or
among any persons having any interest in this Agreement will be deemed effective
to modify, amend or discharge any part of this Agreement or any rights or
obligations of any party under or by reason of this Agreement.
11.02 NOTICES. All notices, demands and other communications given or
delivered under this Agreement will be in writing and will be deemed to have
been given when personally delivered, mailed by first class mail, return receipt
requested, or delivered by express courier service or telecopied. Notices,
demands and communications to the Company, Seller and Buyer will, unless another
address is specified in writing, be sent to the address indicated below:
NOTICES TO SELLER:
Lotus Development Corporation
55 Cambridge Parkway
Cambridge, MA 02142
Attn: General Counsel
NOTICES TO BUYER:
Datext Holding Corporation
c/o Information Partners Capital Fund, L.P.
Two Copley Place
Boston, MA 02116
Attention: David Dominik
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WITH A COPIES TO:
William Blair Venture Partners
135 South LaSalle
Chicago, IL 60603
Attention: Gregg Newmark
AND
Kirkland & Ellis
200 East Randolph Drive
Chicago, IL 60601
Attention: Karl E. Lutz, P.C.
James L. Learner
11.03 BINDING AGREEMENT: ASSIGNMENT.
(a) This Agreement and all of the provisions hereof will be binding
upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns, but neither this Agreement nor any of the
rights, interests or obligations hereunder may be assigned by Seller without the
prior written consent of Buyer or by Buyer (except as otherwise provided in this
Agreement) without the prior written consent of Seller.
(b) Buyer may (at any time prior to the Closing), at its sole
discretion, assign, in whole or in part, its rights and obligations pursuant to
this Agreement to one or more of its wholly-owned Subsidiaries; provided that in
the event of any such assignment, Buyer will guarantee the obligations of any
such assignee under this Agreement (such guarantee to be in form and substance
reasonably satisfactory to Seller). Buyer's "wholly-owned Subsidiaries" include
Subsidiaries which may be organized subsequent to the date hereof.
(c) Buyer may assign its rights under this Agreement for collateral
security purposes to the lenders providing financing for the transactions
contemplated hereby and all extensions, renewals, replacements, refinancings and
refundings thereof in whole or in part.
11.04 SEVERABILITY. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be prohibited by or
invalid under applicable law, such provision will be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provisions or the remaining provisions of this Agreement.
11.05 NO STRICT CONSTRUCTION. The language used in this Agreement will
be deemed to be the language chosen by the parties hereto to express their
mutual intent, and no rule of strict construction will be applied against any
person.
11.06 CAPTIONS. The captions used in this Agreement are for convenience
of reference only and do not constitute a part of this Agreement and will not be
deemed to limit, characterize
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or in any way affect any provision of this Agreement, and all provisions of this
Agreement will be enforced and construed as if no caption had been used in this
Agreement.
11.07 ENTIRE AGREEMENT. This Agreement and the documents referred to
herein contain the entire agreement between the parties and supersede any prior
understandings, agreements or representations by or between the parties, written
or oral, which may have related to the subject matter hereof in any way.
11.08 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which taken
together will constitute one and the same instrument.
11.09 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the domestic laws of the Commonwealth of Massachusetts,
without giving effect to any choice of law or conflict of law provision (whether
of the Commonwealth of Massachusetts or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the Commonwealth of
Massachusetts.
11.10 PARTIES IN INTEREST. Nothing in this Agreement, express or
implied, is intended to confer on any person other than the parties and their
respective successors and assigns any rights or remedies under or by virtue of
this Agreement.
* * * *
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
DATEXT HOLDING CORPORATION
By: /s/ David Dominik
------------------------------
Its: President
------------------------------
LOTUS DEVELOPMENT CORPORATION
By: /s/ David B. Fischer
------------------------------
Its: Vice President
------------------------------
DATEXT, INC.
By: /s/ Daniel Schimmel
------------------------------
Its: President
------------------------------
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LIST OF EXHIBITS
Exhibit A - Note
Exhibit B - Warrant
Exhibit C - License Agreement
Exhibit D - Transition Agreement
Exhibit E - Assignment and Assumption Agreement
Exhibit F - Opinion of Seller's Counsel
Exhibit G - Officer's Certificate of the Company
Exhibit H - Opinion of Buyer's Counsel
Exhibit I - Officer's Certificate of Buyer
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LIST OF SCHEDULES
Schedule 2.01(d) - Consents Schedule
Schedule 3.02(f) - Managers Schedule
Schedule 4.01 - Qualifications Schedule
Schedule 4.04 - Subsidiaries Schedule
Schedule 4.05 - Restrictions Schedule
Schedule 4.09 - Developments Schedule
Schedule 4.10(a) - Assets Schedule
Schedule 4.10(c) - Encumbrances Schedule
Schedule 4.11 - Accounts Receivable Schedule
Schedule 4.12 - Taxes Schedule
Schedule 4.13 - Contracts Schedule
Schedule 4.14 - Proprietary Rights Schedule
Schedule 4.15 - Litigation Schedule
Schedule 4.16 - Brokerage Schedule
Schedule 4.17 - Licenses Schedule
Schedule 4.18 - Employee Schedule
Schedule 4.19 - Employee Benefit Plans Schedule
Schedule 4.20 - Insurance Schedule
Schedule 4.21 - Officers and Directors Schedule
Schedule 4.22 - Affiliate Transaction Schedule
Schedule 4.24 - Product Warranty Schedule
Schedule 10.07A - Non-Compete - Prohibited Activities
Schedule 10.07B - Non-Compete - Permitted Activities
Schedule 10.14 - UK OneSource Assets Schedule
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SCHEDULE 10.07A - PROHIBITED ACTIVITIES
(a) In reference to paragraph (a) (iii) of Section 10.07, "Competing
Product" shall mean any of the following specific databases:
Thomas' Register
Computer Intelligence Installed Computer
Hardware/Software Database
Dun's Market Identifiers Database
The Economists' Intelligence Unit Country Information
Database
(b) The parties agree that, at the expiration of 18 months after the
Closing Date, this Schedule 10.07A shall be automatically revised to contain
only those items listed above with respect to which the Company then sells a
commercial product to its customers.
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SCHEDULE 10.07B PERMITTED ACTIVITIES
General, business, financial (including stock quotes) and/or consumer
news information generally available in widely circulated publications, with the
exception of archival compilations of such information which would constitute a
Competing Product as defined in Sections 10.07(a) (i), (ii) and (iii).
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FIRST AMENDMENT TO STOCK PURCHASE AGREEMENT
THIS FIRST AMENDMENT TO STOCK PURCHASE AGREEMENT ("First Amendment") is
made and entered into as of September 8, 1993, by and among Lotus Development
Corporation, a Delaware corporation ("SELLER"), OneSource Information Services,
Inc. (formerly known as Datext, Inc.), a Delaware corporation (the "COMPANY"),
and OneSource Holding Corporation (formerly known as Datext Holding
Corporation), a Delaware corporation ("BUYER").
Seller, Buyer and the Company are parties to that certain Stock
Purchase Agreement dated as of August 3, 1993 (the "STOCK PURCHASE AGREEMENT").
Capitalized terms used but not otherwise defined herein shall have the meanings
ascribed to them in the Stock Purchase Agreement.
The parties hereto desire to amend the Stock Purchase Agreement to
modify the calculation of the Purchase Price thereunder.
NOW, THEREFORE, the parties hereto agree as follows:
1. AMENDMENTS TO STOCK PURCHASE AGREEMENT. Upon the Effective Date, the
Stock Purchase Agreement shall be amended as follows:
(a) The first sentence of Section 1.02(b) of the Stock Purchase
Agreement shall be amended by replacing the reference to "the day immediately
preceding the Closing Date" therein with a reference to "August 28, 1993".
(b) Section 1.02(c) of the Stock Purchase Agreement shall be amended
in its entirety to read as follows:
"(c) Seller will notify Buyer in writing of its good faith
estimate of the Company's Closing Date Asset Value as of August 28,
1993 (the "Estimated Closing Date Asset Value") by delivering to Buyer
at the Closing a detailed balance sheet for the Company as of the close
of business on August 28, 1993. The "ESTIMATED PURCHASE PRICE" will be
equal to $8,439,000, reduced (or increased) by the amount by which the
Estimated Closing Date Asset Value is less (or greater) than
$15,921,000. The Estimated Purchase Price shall be paid as follows:
(i) $5,000,000 will be paid by Buyer to Seller by
issuance of a subordinated promissory note of Buyer in the
form of EXHIBIT A attached hereto (the "NOTE"); and
(ii) an amount equal to the Estimated Purchase Price
less $5,000,000 will be paid by Buyer to Seller in cash by wire transfer of
immediately available funds.
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In addition, Buyer will issue to Seller a warrant to initially
purchase 100,000 shares of Buyer's common stock in the form of EXHIBIT
B attached hereto (the "WARRANT"). The Note, the Warrant and the common
stock issued or issuable pursuant to the Warrant are referred to herein
as the "BUYER SECURITIES."
(c) The first sentence of Section 1.03 shall be amended by replacing
the reference to "the day immediately preceding the Closing Date" therein with a
reference to "August 28, 1993".
(d) Clause (ii) of Section 1.04(b) of the Stock Purchase Agreement
shall be amended by replacing the reference to "3,439,000" therein with a
reference to "the amount specified in clause (ii) of Section 1.02(c)".
(e) The following shall be added as Section 5.07 of the Stock Purchase
Agreement:
"5.07 UK SUBSIDIARY. The UK Sub formed pursuant to Section
10.14 is duly organized, validly existing and in good standing under the laws of
the United Kingdom. The UK Sub has no obligations or liabilities (whether
accrued, absolute, contingent, unliquidated or otherwise, whether or not known,
whether due or to become due and regardless of when asserted) arising out of
transactions entered into at or prior to the Closing, or any action or inaction
at or prior to the Closing, or any state of facts existing at or prior to the
Closing, including taxes with respect to or based upon transactions or events
occurring on or before the Closing, except as reflected on the balance sheet
attached hereto.
(f) Section 6.03 of the Stock Purchase Agreement shall be amended in
its entirety to read as follows:
"6.03 CAPITALIZATION. On the Closing Date, the
authorized capital stock of Buyer will consist of (a) 1,500,000 shares
of common stock, par value $.0l per share, of which 729,000 shares are
issued and outstanding, 100,000 shares are reserved for issuance upon
exercise of the Warrant and 10,101 shares are reserved for issuance
upon exercise of the warrants issued to Silicon Valley Bank and (b)
100,000 shares of Class P common stock, par value $.0l per share, of
which 81,000 shares are issued and outstanding on the Closing Date, all
of the issued and outstanding shares of capital stock of Buyer will be
duly authorized, validly issued, fully paid and nonassessable, and
neither subject to, nor issued in violation of, any preemptive rights."
(g) Clause (c) of the third sentence of Section 10.15 of the Stock
Purchase Agreement shall be amended to read as follows:
"(c) the difference between the last traded price of
Seller's common stock on the Closing Date and the exercise price of the
Unvested Options which would have vested on such date (the "Spread")."
(h) The following shall be added as Section 10.17 to the Stock Purchase
Agreement:
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"10.17 OPERATION FOR BUYER'S BENEFIT. On and after
August 28, 1993, the Company shall be deemed to be operated for Buyer's
benefit. Accordingly, all items of income, expense, gain and loss shall
be for Buyer's and the Company's account. In addition, in order to give
effect to the foregoing, and in addition to the general provisions set
forth in Sections 3.01 and 3.02, Seller agrees that all cash, cash
equivalents, accounts receivable and other assets received or accrued
by the Company from and including August 28, 1993 through the Closing
Date are solely for Buyer's and the Company's account, and are not for
the benefit of Seller. Seller shall, and shall cause the Company to,
take all actions necessary or reasonably requested by Buyer in order to
effectuate the foregoing, including without limitation reimbursing the
Company or Buyer promptly, but in any event no later than five (5) days
after the Closing, all cash and other property received by Seller on
behalf of the Company on or prior to the Closing net of expenses paid
by Seller on behalf of the Company and not previously taken into
account in determining the Estimated Purchase Price."
2. EFFECTIVENESS. This First Amendment shall become effective at the
time (the "EFFECTIVE DATE") at which Seller, Buyer and the Company have executed
counterparts of this First Amendment (for purposes of which, receipt of a
telecopied copy of a counterpart executed by such party shall be deemed receipt
of such executed counterpart).
3. NO FURTHER EFFECT. Except as expressly affected by this First
Amendment, the terms of the Stock Purchase Agreement shall continue in full
force and effect.
4. MISCELLANEOUS. This First Amendment may be executed in multiple
counterparts, all of which taken together shall constitute one agreement, and
any of the parties hereto may execute this First Amendment by signing any such
counterpart.
* * * * * *
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be signed as of the date first above written.
ONESOURCE HOLDING CORPORATION
By: ______________________________
Its:______________________________
LOTUS DEVELOPMENT CORPORATION
By: ______________________________
Its:______________________________
ONESOURCE INFORMATION SERVICES, INC.
By: ______________________________
Its:______________________________
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