Agreement and Plan of Merger and Stock Purchase Agreement - Moody's Corp. and KMV Corp.
AGREEMENT AND PLAN OF MERGER
AND
STOCK PURCHASE AGREEMENT
BY AND AMONG
MOODY'S CORPORATION,
XYZ ACQUISITION LLC,
KMV LLC,
KMV CORPORATION
AND
THE PRINCIPAL MEMBERS OF KMV LLC AND
THE SHAREHOLDERS OF KMV CORPORATION
DATED AS OF FEBRUARY 10, 2002
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TABLE OF CONTENTS
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ARTICLE 1. Definitions......................................................................1
Section 1.1 Certain Defined Terms.................................................1
ARTICLE 2. The Merger and the Stock Purchase...............................................16
Section 2.1 The Merger...........................................................16
Section 2.2 Effective Time.......................................................16
Section 2.3 Effect of the Merger.................................................16
Section 2.4 Limited Liability Company Agreement..................................16
Section 2.5 Board and Officers...................................................16
Section 2.6 Stock Purchase.......................................................17
ARTICLE 3. Closing; Consideration..........................................................17
Section 3.1 Closing..............................................................17
Section 3.2 Conversion of Securities.............................................17
Section 3.3 Payment for Company Units and KMV Corporation Shares.................22
ARTICLE 4. Representations and Warranties of the Company and KMV Corporation...............23
Section 4.1 Organization and Related Matters.....................................23
Section 4.2 Subsidiaries.........................................................24
Section 4.3 Authority; No Violation..............................................24
Section 4.4 Consents and Approvals...............................................26
Section 4.5 Authorized Capitalization; Ownership of Company Units................26
Section 4.6 Financial Statements; Undisclosed Liabilities........................28
Section 4.7 Contracts............................................................29
Section 4.8 Intellectual Property Matters........................................30
Section 4.9 Employee Benefit Matters.............................................37
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Section 4.10 Labor and Other Employment Matters...................................40
Section 4.11 Tax Matters..........................................................41
Section 4.12 Legal Proceedings....................................................43
Section 4.13 Compliance with Applicable Law.......................................43
Section 4.14 Environmental Matters................................................44
Section 4.15 Properties...........................................................44
Section 4.16 Insurance............................................................45
Section 4.17 No Other Broker......................................................45
Section 4.18 Absence of Certain Changes or Events.................................45
Section 4.19 Sufficiency of and Title to Assets...................................46
Section 4.20 Filing of Documents..................................................46
Section 4.21 Transactions with Affiliates.........................................47
Section 4.22 Governmental Regulation..............................................47
Section 4.23 No Loss of Customers.................................................47
Section 4.24 Trading in Parent Common Stock.......................................47
Section 4.25 Disaster Recovery....................................................48
Section 4.26 Material Misstatements or Omissions..................................48
ARTICLE 5. Representations and Warranties of the Principal Members and the KMV
Corporation Shareholders.......................................................48
Section 5.1 Ownership of Company Units and KMV Corporation Shares................48
Section 5.2 Authority; No Violation..............................................49
Section 5.3 Consents and Approvals...............................................50
Section 5.4 No Brokers...........................................................50
Section 5.5 Trading in Parent Common Stock.......................................50
ARTICLE 6. Representations and Warranties of Parent and Merger Sub.........................50
Section 6.1 Organization and Related Matters.....................................50
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Section 6.2 Authority; No Violation..............................................51
Section 6.3 Consents and Approvals...............................................52
Section 6.4 No Other Broker......................................................52
Section 6.5 Investment Representation............................................52
Section 6.6 Filing of Documents..................................................52
Section 6.7 No Parent Material Adverse Effect....................................53
ARTICLE 7. Covenants and Additional Agreements.............................................53
Section 7.1 Conduct of Business by the Combined Company..........................53
Section 7.2 Access to Information; Confidentiality...............................56
Section 7.3 Regulatory Matters; Third-Party Consents.............................56
Section 7.4 Use of "KMV" Name and Company Trademarks.............................57
Section 7.5 Employees and Employee Benefit Matters...............................57
Section 7.6 Tax Matters..........................................................58
Section 7.7 Insurance............................................................61
Section 7.8 Notification of Certain Matters......................................62
Section 7.9 Further Assurances; Transfer of Omitted Assets.......................62
Section 7.10 Third-Party Matters..................................................63
Section 7.11 Restricted Covenants Related to the Sale of Goodwill.................64
Section 7.12 State and Foreign Takeover Statutes..................................66
Section 7.13 Efforts of Parties to Close..........................................66
Section 7.14 Accounting Matters...................................................66
Section 7.15 Expenses.............................................................66
Section 7.16 Waiver of Rights to Compensation.....................................66
Section 7.17 Distributions to Members.............................................67
Section 7.18 Final Closing Consideration Exhibit..................................67
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Section 7.19 Proprietary Rights Agreements and Other Matters......................67
ARTICLE 8. Conditions to the Consummation of the Merger and the Stock Purchase.............67
Section 8.1 Mutual Conditions....................................................67
Section 8.2 Conditions to Parent's and Merger Sub's Obligations..................68
Section 8.3 Conditions to the Obligations of the Company, KMV Corporation, the
Principal Members and the KMV Corporation Shareholders...............70
ARTICLE 9. Termination.....................................................................71
Section 9.1 Termination..........................................................71
Section 9.2 Survival after Termination...........................................72
ARTICLE 10. Indemnification................................................................72
Section 10.1 Survival of Representations, Warranties and Covenants; Exclusive
Monetary Remedies....................................................72
Section 10.2 Indemnification by the Principal Members and the KMV Corporation
Shareholders.........................................................73
Section 10.3 Indemnification by Parent............................................76
Section 10.4 Procedures for Third-Party Claims....................................76
Section 10.5 Termination of Indemnification.......................................78
Section 10.6 Limitations; Maximum Liability.......................................78
Section 10.7 Tax Indemnification..................................................79
Section 10.8 Calculation and Payment of Losses....................................80
ARTICLE 11. Miscellaneous..................................................................80
Section 11.1 Amendments; Waiver...................................................80
Section 11.2 Entire Agreement.....................................................81
Section 11.3 Interpretation.......................................................81
Section 11.4 Severability.........................................................81
Section 11.5 Notices..............................................................81
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Section 11.6 Binding Effect; Persons Benefiting; No Assignment....................83
Section 11.7 Counterparts.........................................................83
Section 11.8 Waiver of Jury Trial.................................................83
Section 11.9 Governing Law........................................................83
Section 11.10 Consent to Jurisdiction..............................................83
Exhibit A Voting Agreement
Exhibit B List of Non-Compete Members
Exhibit C Limited Liability Company Agreement of Merger Sub
Exhibit D Closing Consideration Exhibit
Exhibit E Companies
Exhibit F Schedule of Ownership of Company Units and KMV Corporation Shares
Exhibit G Schedule of Permitted Distributions to Members
Exhibit H Form of Opinion of Counsel to the Combined Company
Exhibit I List of Key Employees
Exhibit J Required Consents
Exhibit K Form of Opinion of Counsel to Parent
Exhibit L Allocable Shares
Exhibit M List of Company Persons with Knowledge
Exhibit N List of Parent Persons with Knowledge
Exhibit O List of Principal Members and KMV Corporation Shareholders
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TABLE OF DEFINED TERMS
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Cross Reference
Term in Agreement Page
---- --------------- ----
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1995 Act...........................................Section 1.1........................1
Acquisition Proposal...............................Section 7.10(a)...................63
Adjustment Amount Documents........................Section 3.2.4(a)..................20
Affiliate..........................................Section 1.1........................2
Aggregate Outstanding Claims.......................Section 3.2.3(b)(i)...............18
Agreement..........................................Preamble...........................1
Allocable Share....................................Section 10.2.3(b).................76
Ancillary Agreements...............................Section 1.1........................2
Applicable Law.....................................Section 1.1........................2
Applicable Sellers.................................Section 7.6(a)....................58
Benefit Plan.......................................Section 4.9(a)....................37
Beta Testing.......................................Section 1.1........................2
Budget.............................................Section 8.2(j)....................70
Business Day.......................................Section 1.1........................2
Cash Capital Amount................................Section 1.1........................2
Cash Capital Excess................................Section 1.1........................2
Cash Capital Shortfall.............................Section 1.1........................2
Certificate of Merger..............................Section 2.2.......................16
Closing Balance Sheet..............................Section 1.1........................3
Closing Consideration Exhibit......................Section 1.1........................3
Closing Date.......................................Section 3.1.......................17
Closing............................................Section 3.1.......................17
Code...............................................Section 1.1........................3
Combined Company...................................Section 1.1........................3
Combined Company Transaction Fees..................Section 1.1........................3
Company Appreciation Unit Consideration............Section 1.1........................3
Company Appreciation Units.........................Section 1.1........................3
Company Assets.....................................Section 4.19......................46
Company Balance Sheet..............................Section 4.6.......................29
Company Base Unit Consideration....................Section 1.1........................3
Company Base Units.................................Section 1.1........................4
Company Benefit Plan...............................Section 4.9(a)....................37
Company Business...................................Section 1.1........................4
Company Compiled Data..............................Section 1.1........................4
Company Copyrights.................................Section 1.1........................4
Company Disclosure Schedule........................Article 4.........................23
Company Employee...................................Section 1.1........................4
Company End User Agreements........................Section 1.1........................4
Company Financial Statements.......................Section 4.6.......................29
Company Group......................................Section 1.1........................4
Company Inbound License............................Section 1.1........................4
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Company Independent Contractor.....................Section 1.1........................4
Company Insurance Policies.........................Section 4.16......................45
Company Inventions.................................Section 1.1........................5
Company IP.........................................Section 1.1........................5
Company Licensed Copyrights........................Section 1.1........................5
Company Licensed IP................................Section 1.1........................5
Company Material Adverse Effect....................Section 1.1........................5
Company NDA........................................Section 1.1........................5
Company Operating Agreement........................Section 1.1........................5
Company Outbound License...........................Section 1.1........................5
Company Owned Copyrights...........................Section 1.1........................5
Company Owned IP...................................Section 1.1........................5
Company Owned Trademarks...........................Section 1.1........................6
Company Patents....................................Section 1.1........................6
Company Persons....................................Section 1.1........................6
Company PRC........................................Section 1.1........................6
Company............................................Preamble...........................1
Company Purchase Price Allocation Schedule.........Section 7.6(k)....................60
Company Software...................................Section 1.1........................6
Company Trade Secrets..............................Section 1.1........................6
Company Trademarks.................................Section 1.1........................6
Company Units......................................Section 1.1........................6
Company Voting Debt................................Section 4.5(a)....................27
Company's Back-Up System...........................Section 4.25(b)...................48
Company's Systems..................................Section 4.25(a)...................48
Compensation Submission............................Section 8.2(j)....................70
Compiled Data......................................Section 1.1........................6
Confidentiality Agreement..........................Section 1.1........................6
Contracts..........................................Section 1.1........................7
Control............................................Section 1.1........................7
Copyrights.........................................Section 1.1........................7
Current Company IP.................................Section 1.1........................7
Derivative Work....................................Section 1.1........................7
Differential.......................................Section 1.1........................7
Disagreement.......................................Section 3.2.4(b)..................20
Effective Time.....................................Section 2.2.......................16
Eligible Offer.....................................Section 8.2(j)....................70
Encumbrance........................................Section 1.1........................7
Environmental Laws.................................Section 1.1........................7
Environmental Permit...............................Section 1.1........................8
ERISA Affiliate....................................Section 1.1........................8
ERISA..............................................Section 1.1........................8
Escrow Account.....................................Section 3.2.3(a)..................18
Escrow Agent.......................................Section 3.2.3(a)..................18
Escrow Agreement...................................Section 3.2.3(a)..................18
Escrow Funds.......................................Section 3.2.3(a)..................18
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Exchange Act.......................................Section 1.1........................8
Expiration Date....................................Section 10.1(a)...................72
Foreign Benefit Plans..............................Section 4.9(e)....................39
Foreign Subsidiaries...............................Section 1.1........................8
Foreign Subsidiary Employees.......................Section 1.1........................8
Foreign Subsidiary Leased Properties...............Section 1.1........................8
Foreign Subsidiary Leases..........................Section 1.1........................8
Fungible IP........................................Section 1.1........................8
GAAP...............................................Section 1.1........................9
Governmental Authority.............................Section 1.1........................9
Hazardous Materials................................Section 1.1........................9
Holder.............................................Section 3.2.......................17
HSR Act............................................Section 1.1........................9
Income Taxes.......................................Section 1.1........................9
Indemnification Notice.............................Section 10.2.3(a).................75
Indemnified Party..................................Section 10.4(a)...................76
Independent Accounting Firm........................Section 1.1........................9
Infringe...........................................Section 1.1........................9
Infringement.......................................Section 1.1........................9
Intellectual Property..............................Section 1.1........................9
Inventions.........................................Section 1.1........................9
Investment Advisers Act............................Section 4.22......................47
Investment Company Act.............................Section 4.22......................47
Key Employees......................................Section 1.1.......................10
KMV Corporation Benefit Plan.......................Section 4.9(a)....................37
KMV Corporation....................................Preamble...........................1
KMV Corporation Purchase
Price Allocation Schedule.......................Section 7.6(k)....................60
KMV Corporation Share..............................Section 1.1.......................10
KMV Corporation Shareholder........................Section 1.1.......................10
KMV Corporation Voting Debt........................Section 4.5(b)....................28
Knowledge..........................................Section 1.1.......................10
Law................................................Section 1.1.......................10
Losses.............................................Section 10.2.1....................73
Member Representative..............................Section 3.2.3(c)(i)...............19
Member.............................................Section 1.1.......................10
Merger.............................................Preamble...........................1
Merger Sub.........................................Preamble...........................1
Moral Rights.......................................Section 1.1.......................11
Multiemployer Plan.................................Section 4.9(c)....................38
Non-Compete Members................................Section 1.1.......................11
Notice of Disagreement.............................Section 3.2.4(b)..................20
Notifying Person...................................Section 10.2.3(a).................75
Obsolete Company IP................................Section 1.1.......................11
Omitted Assets.....................................Section 1.1.......................11
Other Employees....................................Section 1.1.......................11
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Other Taxes........................................Section 7.6(e)....................59
Parent Common Stock................................Section 1.1.......................11
Parent Disclosure Schedule.........................Article 6.........................50
Parent Indemnitee First-Dollar Losses..............Section 1.1.......................11
Parent Indemnitees.................................Section 10.2.1....................73
Parent Material Adverse Effect.....................Section 1.1.......................12
Parent.............................................Preamble...........................1
Patents............................................Section 1.1.......................12
PAYE...............................................Section 1.1.......................12
Permits............................................Section 4.13(a)...................43
Permitted Encumbrance..............................Section 1.1.......................12
Person.............................................Section 1.1.......................12
Post-Closing Partial Period........................Section 10.7(b)...................79
Post-Closing Period................................Section 1.1.......................12
Pre-Closing Partial Period.........................Section 10.7(a)...................79
Pre-Closing Period.................................Section 1.1.......................12
Principal Members Disclosure Schedule..............Article 5.........................48
Principal Members..................................Section 1.1.......................12
Proceedings........................................Section 4.12......................43
Purchase Price Allocation Schedules................Section 7.6(k)....................60
Relevant Benefits..................................Section 4.9(g)....................39
Resolved Claim Notice..............................Section 10.2.3(a).................75
Restricted Business................................Section 7.11(a)...................65
Restrictive Period.................................Section 1.1.......................13
Scheduled Contracts................................Section 4.7.......................30
SEC................................................Section 1.1.......................13
Section 338 Forms..................................Section 1.1.......................13
Section 338(h)(10) Election........................Section 1.1.......................13
Securities Act.....................................Section 1.1.......................13
Securities Laws....................................Section 1.1.......................13
Securities.........................................Section 1.1.......................13
Seller Indemnitees.................................Section 10.3......................76
Seller Parties.....................................Section 7.10(a)...................63
Software...........................................Section 1.1.......................14
Standards Bodies...................................Section 1.1.......................14
Stock Purchase.....................................Preamble...........................1
Stock Purchase Price...............................Section 1.1.......................13
Straddle Period....................................Section 7.6(d)....................58
Subsidiary.........................................Section 1.1.......................14
Supplemental Closing Date..........................Section 3.2.4(e)..................21
Supplemental Closing...............................Section 3.2.4(e)..................21
Surviving Company..................................Section 2.1.......................16
Tax Return.........................................Section 1.1.......................14
Tax................................................Section 1.1.......................14
Taxing Authority...................................Section 1.1.......................14
Termination Date...................................Section 9.1(a)(vii)...............71
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Territory..........................................Section 7.11(a)...................65
Third-Party Claim..................................Section 10.4(a)...................76
Threshold Amount...................................Section 1.1.......................15
Tier 1 Trade Secrets...............................Section 1.1.......................15
Tier 2 Trade Secrets...............................Section 1.1.......................15
Trade Secrets......................................Section 1.1.......................15
Trademarks.........................................Section 1.1.......................15
Transaction Consideration..........................Section 1.1.......................15
Vested IP Rights...................................Section 4.8.13....................37
Voting Agreement...................................Section 1.1.......................15
Working Capital Amount.............................Section 1.1.......................15
Working Capital Excess.............................Section 1.1.......................16
Working Capital Holdback Amount....................Section 1.1.......................15
Working Capital Shortfall..........................Section 1.1.......................16
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AGREEMENT AND PLAN OF MERGER AND STOCK PURCHASE AGREEMENT, dated as of
February 10, 2002 (this "Agreement"), by and among Moody's Corporation, a
Delaware corporation ("Parent"), XYZ Acquisition LLC, a Delaware limited
liability company and a wholly owned subsidiary of Parent ("Merger Sub"), KMV
LLC, a Delaware limited liability company (the "Company"), KMV Corporation, a
California corporation ("KMV Corporation"), the Principal Members of the Company
(as defined below), and the KMV Corporation Shareholders (as defined below).
WHEREAS, each of the Board of Directors of Parent, Parent, as the sole
member of Merger Sub, and the Board (as defined in the Company Operating
Agreement) of the Company has approved and declared advisable the merger of
Merger Sub with and into the Company (the "Merger") upon the terms and subject
to the conditions of this Agreement and in accordance with the Limited Liability
Company Act of the State of Delaware, pursuant to which all of the Company Units
(as defined below), other than any Company Units held by KMV Corporation, which
shall remain outstanding as set forth in Section 3.2.1(b) of this Agreement,
shall be converted into the right to receive the consideration set forth in
Section 3.2.2 of this Agreement;
WHEREAS, each of the Board of Directors of Parent, Parent, as the sole
member of Merger Sub, and the Board of the Company have determined that the
Merger is in furtherance of and consistent with their respective business
strategies and is in the best interest of their respective stockholders and
members, as the case may be, and the Board of the Company has recommended that
the Members (as defined below) approve the Merger;
WHEREAS, each of the Board of Directors of Parent and the Board of
Directors of KMV Corporation has approved and declared advisable the sale of all
KMV Corporation Shares (as defined below) by the KMV Corporation Shareholders to
Parent (the "Stock Purchase") upon the terms and subject to the conditions of
this Agreement; and
WHEREAS, each of the Principal Members has executed and delivered the
Voting Agreement (as defined below) to Parent and Merger Sub.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth in this
Agreement and intending to be legally bound hereby, the parties hereto agree as
follows:
ARTICLE 1.
DEFINITIONS
Section 1.1 Certain Defined Terms. As used in this Agreement, the
following terms shall have the following meanings:
"1995 Act" shall mean the Landlord and Tenant (Covenants) Act of 1995.
"Acquisition Proposal" shall have the meaning set forth in Section
7.10(a) of this Agreement.
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"Adjustment Amount Documents" shall have the meaning set forth in
Section 3.2.4(a) of this Agreement.
"Affiliate" shall mean any Person that directly, or indirectly through
one or more intermediaries, Controls, is Controlled by or is under common
Control with the Person specified. For purposes of this Agreement, (i) each of
the Principal Members and KMV Corporation Shareholders shall be deemed
Affiliates of the Company and KMV Corporation, and vice versa, prior to the
Closing and (ii) Parent shall be deemed an Affiliate of the Company and KMV
Corporation, and vice versa, after the Closing.
"Aggregate Outstanding Claims" shall have the meaning set forth in
Section 3.2.3(b)(i) of this Agreement.
"Agreement" shall have the meaning set forth in the preamble to this
Agreement.
"Allocable Share" shall have the meaning set forth in Section 10.2.3(b)
of this Agreement.
"Ancillary Agreements" shall mean the Escrow Agreement and the Voting
Agreements.
"Applicable Law" shall mean any Law applicable to the Company, KMV
Corporation, any of the Principal Members, any of the KMV Corporation
Shareholders or Parent or any of their respective Affiliates, properties,
assets, officers, directors, employees or agents, as the case may be.
"Applicable Sellers" shall have the meaning set forth in Section 7.6(a)
of this Agreement.
"Benefit Plan" shall have the meaning set forth in Section 4.9(a) of
this Agreement.
"Beta Testing" shall mean that the Company has successfully completed
its first internal or "alpha testing" of a pre-release product, and that the
Company is now testing a pre-release product both internally and on a limited
external basis.
"Business Day" shall mean any day that is not a Saturday, a Sunday or
other day on which banks are required or authorized by law to be closed in the
United States.
"Cash Capital Amount" shall mean (i) cash of the Combined Company
calculated in accordance with GAAP, consistent with the Combined Company's 2000
audited financial statements, less (ii) accrued bonus payable and retirement
plan payable each calculated in accordance with GAAP, consistent with the
Combined Company's 2000 audited financial statements, all as reflected on the
Closing Balance Sheet.
"Cash Capital Shortfall" shall equal the amount obtained by subtracting
$2,000,000 from the Cash Capital Amount as set forth in the final Adjustment
Amount Documents, provided that if such calculation results in a positive
number, such positive number shall be the "Cash Capital Excess. "
"Certificate of Merger" shall have the meaning set forth in Section 2.2
of this Agreement.
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"Closing Balance Sheet" shall mean the consolidated unaudited balance
sheet of the Combined Company as of the Closing Date prepared in accordance with
GAAP consistent with the Combined Company's 2000 audited financial statements.
"Closing Consideration Exhibit" shall mean the exhibit prepared and
delivered by the Company and attached as Exhibit D to this Agreement, as the
same may be amended and delivered prior to the Closing Date, that sets forth (i)
each Member's allocation of aggregate amounts of Company Base Unit Consideration
and Company Appreciation Unit Consideration, as applicable; (ii) each KMV
Corporation Shareholder's allocation of aggregate amounts of Share Purchase
Price; (iii) each Member's and KMV Corporation Shareholder's allocation of
Escrow Funds, if any, and of the Working/Cash Capital Holdback Amount; and (iv)
each Member's and KMV Corporation Shareholder's mailing address.
"Closing Date" shall have the meaning set forth in Section 3.1 of this
Agreement.
"Closing" shall have the meaning set forth in Section 3.1 of this
Agreement.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and the
rules and regulations of the Internal Revenue Service thereunder.
"Combined Company Transaction Fees" shall equal the aggregate amount of
all financial advisor, legal, accounting and any other transaction fees incurred
but not paid as of the Closing by the Combined Company in connection with this
Agreement, the Ancillary Agreements and the transactions contemplated hereby and
thereby, which fees shall be paid by Parent on behalf of the Combined Company at
the Closing.
"Combined Company" shall mean the Company, KMV Corporation and each of
their respective Subsidiaries, collectively.
"Company Appreciation Unit Consideration" shall equal, for any given
Company Appreciation Unit, the difference obtained by subtracting (a) the Strike
Price (as defined in the Company Operating Agreement) applicable to such Company
Appreciation Unit from (b) the Company Base Unit Consideration.
"Company Appreciation Units" shall mean all Appreciation Units (as
defined in the Company Operating Agreement) of the Company issued and
outstanding immediately prior to the Effective Time.
"Company Assets" shall have the meaning set forth in Section 4.19 of
this Agreement.
"Company Balance Sheet" shall have the meaning set forth in Section 4.6
of this Agreement.
"Company Base Unit Consideration" shall equal the sum of (a) the
quotient obtained by dividing (i) the Transaction Consideration by (ii) the
total number of Company Units issued and outstanding immediately prior to the
Effective Time, and (b) the quotient obtained by dividing (i) the sum of the
Strike Prices (as defined in the Company Operating Agreement) applicable to all
of the Company Appreciation Units issued and outstanding immediately prior to
the Effective
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Time by (ii) the total number of Company Units issued and outstanding
immediately prior to the Effective Time.
"Company Base Units" shall mean all Base Units (as defined in the
Company Operating Agreement) of the Company issued and outstanding immediately
prior to the Effective Time.
"Company Benefit Plan" shall have the meaning set forth in Section
4.9(a) of this Agreement.
"Company Business" shall mean the business and operations of the
Combined Company in the manner in which the same have been conducted prior to
the date hereof, are currently being conducted and are currently proposed by the
Combined Company to be conducted, whether conducted by the Company, KMV
Corporation or any of their respective Subsidiaries.
"Company Compiled Data" shall mean all Company IP that are Compiled
Data.
"Company Copyrights" shall mean all Company IP that are Copyrights.
"Company Disclosure Schedule" shall have the meaning set forth in the
introduction to Article 4 of this Agreement.
"Company Employee" shall mean any current or former employee of any
member of the Combined Company or any of its predecessors in interest.
"Company End User Agreements" shall mean the applicable standard form
then in effect of the non-exclusive license agreement used by the Combined
Company or its predecessors in interests with end-user clients.
"Company Financial Statements" shall have the meaning set forth in
Section 4.6 of this Agreement.
"Company Group" shall mean the Company, KMV Corporation, their
respective Subsidiaries and Affiliates, the Principal Members and the KMV
Corporation Shareholders.
"Company Inbound License" shall mean all license and other agreements
granting to any member of the Company Group any right in or to use or practice
any rights (including without limitation Intellectual Property rights) in or to
any Current Company IP (including, without limitation, Software and Compiled
Data) other than agreements relating to (a) data purchased on a one-time or a
non-recurring basis; or (b) standard desktop software applications used
generally in the Combined Company's operations (but not in any Company products)
and, in each case, that were purchased by the Company Group on or after January
1, 2000, for which the Company Group paid less than $25,000 individually
pursuant to written, "shrink wrap" or "click through" licenses for Fungible IP.
"Company Independent Contractor" shall mean any current independent
contractor of any member of the Combined Company or any of its predecessors in
interest identified as such in Section 4.10(a) of the Company Disclosure
Schedule.
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"Company Insurance Policies" shall have the meaning set forth in Section
4.16 of this Agreement.
"Company Inventions" shall mean all Company IP that are Inventions.
"Company IP" shall mean all Intellectual Property that is either Current
Company IP or Obsolete Company IP.
"Company Licensed Copyrights" shall mean Copyrights that are Company
Licensed IP and Current Company IP.
"Company Licensed IP" shall mean all Company IP that are licensed to or
used, but not owned, by the Combined Company.
"Company Material Adverse Effect" shall mean a material adverse effect
on the business, assets, properties, liabilities, financial condition or results
of operations of the Combined Company, taken as a whole, or on the ability of
the Company, KMV Corporation, any of the Members or any of the KMV Corporation
Shareholders to complete the Closing pursuant to the terms hereof and/or comply
with their respective obligations hereunder; provided, however, that a Company
Material Adverse Effect shall not be deemed to have occurred if such effect was
principally caused by, or as a result of, changes in events or circumstances
generally affecting the financial services industry which do not
disproportionately affect the Combined Company relative to other entities in the
financial services industry, or resulting from general United States or global
economic or debt market conditions which do not disproportionately affect the
Combined Company relative to other entities in the financial services industry.
"Company NDA" shall mean confidentiality agreements used by the Combined
Company or its predecessors in interest substantially in the standard form then
in effect.
"Company Operating Agreement" shall mean that certain Second Amended and
Restated Limited Liability Company Agreement of KMV LLC, dated as of December
31, 2000, as amended, governing the organization and operation of the Company,
as it may be further amended as permitted by this Agreement.
"Company Outbound License" shall mean all license and other agreements
under which any member of the Company Group grants licenses of Software or
Compiled Data or grants other rights in or to use or practice any rights
(including Intellectual Property rights) in or to any Current Company IP,
excluding solely those non-exclusive internal use licenses granted by the
Company to end user customers pursuant to Company End User Agreements that (i)
include confidentiality obligations and restrictions on use and (ii) relate to
sales or licenses of products or services for which the total amount payable to
the Company does not exceed $25,000 individually or in the aggregate for any one
customer, $100,000.
"Company Owned Copyrights" shall mean Copyrights that are Company Owned
IP and Current Company IP.
"Company Owned IP" shall mean all Company IP that is owned, or is held
out as being owned, by the Combined Company.
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"Company Owned Trademarks" shall mean all Company Owned IP that are
Company Trademarks.
"Company Patents" shall mean all Company Owned IP that are Patents.
"Company Persons" shall mean all Company Employees, Company Independent
Contractors and all other current and former consultants, contractors,
professional advisers, directors and agents of the Company Group and their
predecessors in interest.
"Company PRC" shall mean proprietary information, confidentiality and
assignment agreements used by the Combined Company or its predecessors in
interest substantially in the standard form then in effect.
"Company Purchase Price Allocation Schedule" shall have the meaning set
forth in Section 7.6(k) of this Agreement.
"Company Software" shall mean all Current Company IP that are Software.
"Company Trade Secrets" shall mean all Company IP that are Trade Secrets
(including, without limitation all Tier 1 Trade Secrets and Tier 2 Trade
Secrets).
"Company Trademarks" shall mean (a) all Company Owned IP that are
Current Company IP and Trademarks and (b) all other Trademarks currently used by
the Combined Company to market, or as a brand name for, any Company Software,
Compiled Data or other product or service offered or marketed by the Combined
Company or their predecessors in interest.
"Company Units" shall mean the Company Base Units and the Company
Appreciation Units.
"Company Voting Debt" shall have the meaning set forth in Section 4.5(a)
of this Agreement.
"Company" shall have the meaning set forth in the preamble to this
Agreement.
"Company's Back-Up System" shall have the meaning set forth in Section
4.25(b) of this Agreement.
"Company's Systems" shall have the meaning set forth in Section 4.25(a)
of this Agreement.
"Compiled Data" shall mean any work formed by (a) the selection,
collection and assembling of pre-existing materials or of data from another
Person or the public domain that are selected, collected, coordinated or
arranged in such a way that the resulting work constitutes an original work of
authorship or (b) a Derivative Work created from such materials or data.
"Confidentiality Agreement" shall mean that certain KMV LLC Mutual
Non-Disclosure Agreement dated as of February 8, 2001 by and between Parent and
the Company.
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"Contracts" shall mean all written or oral contracts, agreements,
evidences of indebtedness, guarantees, leases and executory commitments to which
the Combined Company is a party (jointly or severally, in whole or in part, with
others or solely) or by which any of the Company Assets are bound, or otherwise
related to the Company Business including Company Inbound Licenses and Company
Outbound Licenses.
"Control" shall mean the ability whether directly or indirectly to
direct the affairs of another by means of ownership of assets or voting
securities, or by contract.
"Copyrights" shall mean all copyrights, mask works and rights protecting
databases and other general intangibles of like nature (including without
limitation any Compiled Data) and any registrations and applications therefor
(including any extensions, modifications or renewals thereof and whether
registered or unregistered), together with all goodwill related to the
foregoing.
"Current Company IP" shall mean all Intellectual Property (a) owned or
used by or licensed to the Combined Company or any of their predecessors in
interest (jointly or severally, in whole or in part, with others or solely) and
(b) used in or necessary to the Company Business.
"Derivative Work" shall mean a work that is based upon one or more
preexisting works, such as a revision, enhancement, modification, abridgement,
condensation, expansion or any other form in which such preexisting works may be
recast, transformed or adapted, and which, if prepared without authorization of
the owner of the Copyright in such preexisting work, would constitute a
Copyright Infringement, and shall also include any compilation that incorporates
such a preexisting work as well as translation from one human language to
another and from one type of code to another.
"Differential" shall mean (1) if both a Cash Capital Shortfall and a
Working Capital Shortfall shall exist, the "Differential" shall be the larger of
such two negative numbers (i.e. the number whose mathematical absolute value is
the largest), (2) if a Cash Capital Shortfall exists and a Working Capital
Excess shall exist, the "Differential" shall be the negative number equal to the
Cash Capital Shortfall, (3) if a Working Capital Shortfall exists and a Cash
Capital Excess shall exist, the "Differential" shall be the negative number
equal to the Working Capital Shortfall, and (4) if both a Cash Capital Excess
and a Working Capital Excess shall exist, the "Differential" shall be the
smaller of such two positive numbers.
"Disagreement" shall have the meaning set forth in Section 3.2.4(b) of
this Agreement.
"Effective Time" shall have the meaning set forth in Section 2.2 of this
Agreement.
"Encumbrance" shall mean any lien, pledge, mortgage, security interest,
claim, charge, easement, limitation, commitment, encroachment, restriction
(other than a restriction on transferability imposed by federal or state
securities laws) or other encumbrance of any kind or nature whatsoever (whether
absolute or contingent).
"Environmental Laws" shall mean any and all federal, state, local and
foreign statutes, laws, regulations, ordinances or rules in existence on or
prior to the Closing Date relating to the protection of the environment or
natural resources, occupational safety and health; the effect of
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the environment or Hazardous Materials on human health; or emissions, discharges
or releases of Hazardous Materials into the environment, including, without
limitation, ambient air, surface water, groundwater or land; or otherwise
relating to the handling of Hazardous Materials or the investigation, clean-up
or other remediation or analysis thereof.
"Environmental Permit" shall mean any permit, approval, identification
number, license and other authorization required under any applicable
Environmental Law.
"ERISA Affiliate" shall mean any entity or trade or business (whether or
not incorporated) other than the Company or KMV Corporation, as the case may be,
that together with the Company or KMV Corporation, as the case may be, is
considered under common control and treated as a single employer under Section
414(b), (c), (m) or (o) of the Code.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended, and the regulations promulgated thereunder.
"Escrow Account" shall have the meaning set forth in Section 3.2.3(a) of
this Agreement.
"Escrow Agent" shall have the meaning set forth in Section 3.2.3(a) of
this Agreement.
"Escrow Agreement" shall have the meaning set forth in Section 3.2.3(a)
of this Agreement.
"Escrow Funds" shall have the meaning set forth in Section 3.2.3(a) of
this Agreement.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the SEC thereunder.
"Expiration Date" shall have the meaning set forth in Section 10.1 of
this Agreement.
"Foreign Benefit Plans" shall have the meaning set forth in Section
4.9(e) of this Agreement.
"Foreign Subsidiaries" shall mean KMV Asia KK and KMV Europe Limited,
both of which are Subsidiaries of the Company on the date of this Agreement.
"Foreign Subsidiary Employees" shall mean all Company Employees employed
by a Foreign Subsidiary.
"Foreign Subsidiary Leased Properties" shall mean the properties leased
pursuant to each of the Foreign Subsidiary Leases.
"Foreign Subsidiary Leases" shall mean those leases listed in Section
4.15(b) of the Company Disclosure Schedule.
"Fungible IP" shall mean Intellectual Property licensed to the Combined
Company for which a substitute, with substantially similar or better
functionality, can be readily obtained on similar or better terms.
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"GAAP" shall mean generally accepted accounting principles, consistently
applied, as used in the United States of America as in effect at the time any
applicable financial statements were or are prepared or any act requiring the
application of GAAP was or is performed.
"Governmental Authority" shall mean any United States or foreign
government, any state or other political subdivision thereof, any entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government, including the SEC or any other United
States or foreign government authority, agency, department, board, commission or
instrumentality of the United States, any state of the United States or any
political subdivision thereof or any foreign jurisdiction, and any court,
tribunal or arbitrator(s) of competent jurisdiction, and any United States or
foreign governmental or non-governmental self-regulatory organization, agency or
authority (including the NYSE).
"Hazardous Materials" shall mean (i) any petroleum, petroleum products,
byproducts or breakdown products, radioactive materials, asbestos-containing
materials or polychlorinated biphenyls or (ii) any chemical, material or other
substance defined or regulated as toxic or hazardous or as a pollutant or
contaminant or waste under any applicable Environmental Law.
"Holder" shall have the meaning set forth in Section 3.2 of this
Agreement.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the rules and regulations promulgated thereunder.
"Income Taxes" shall mean all Taxes, charges, fees, levies or other
assessments imposed by any Taxing Authority and based on or measured solely with
respect to income or profits including any interest, penalties or additions
attributable or imposed with respect thereto.
"Indemnification Notice" shall have the meaning set forth in Section
10.2.3(a) of this Agreement.
"Indemnified Party" shall have the meaning set forth in Section 10.4(a)
of this Agreement.
"Independent Accounting Firm" shall mean an independent accounting firm
mutually agreed to in writing by Parent and the Member Representative.
"Infringe" or "Infringement" shall mean infringe, misappropriate,
dilute, violate or make other unauthorized use of.
"Intellectual Property" shall mean, collectively, Trademarks, Patents,
Copyrights, Moral Rights and Trade Secrets and all other intellectual property
rights of any kind or nature.
"Inventions" shall mean all inventions, discoveries, ideas, formulas,
patterns, know-how, algorithms, compilations, compositions, programs, devices,
methods, techniques, processes and other general intangibles of like nature
(including software or other computer programs) and any derivations thereof
(whether patentable or unpatentable), together with all goodwill related to the
foregoing.
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"Investment Advisers Act" shall have the meaning set forth in Section
4.22 of this Agreement.
"Investment Company Act" shall have the meaning set forth in Section
4.22 of this Agreement.
"Key Employees" shall mean the Company Employees identified as Key
Employees on Exhibit I to this Agreement.
"KMV Corporation" shall have the meaning set forth in the preamble to
this Agreement.
"KMV Corporation Benefit Plan" shall have the meaning set forth in
Section 4.9(a) of this Agreement.
"KMV Corporation Purchase Price Allocation Schedule" shall have the
meaning set forth in Section 7.6(k) of this Agreement.
"KMV Corporation Share" shall mean each issued and outstanding share of
common stock of KMV Corporation.
"KMV Corporation Shareholder" shall mean each owner of a KMV Corporation
Share.
"KMV Corporation Voting Debt" shall have the meaning set forth in
Section 4.5(b) of this Agreement.
"Knowledge" of (a) the Company Group shall mean actual knowledge after
reasonable inquiry of any of the Persons specified on Exhibit M to this
Agreement or any of the Principal Members or any of the KMV Corporation
Shareholders and (b) Parent shall mean actual knowledge after reasonable inquiry
by any of the Persons specified on Exhibit N to this Agreement.
"Law" shall mean any domestic or foreign federal, state or local
statute, law (whether statutory or common law), ordinance, rule, administrative
interpretation, regulation, order, writ, injunction, directive, judgment,
decree, policy, guideline or other requirement or arbitration award or finding
(including those of the NYSE or any other applicable self-regulatory
organization).
"Losses" shall have the meaning set forth in Section 10.2.1 of this
Agreement.
"Member Representative" shall have the meaning set forth in Section
3.2.3(c)(i) of this Agreement.
"Member" shall mean any member of the Company.
"Merger Sub" shall have the meaning set forth in the preamble to this
Agreement.
"Merger" shall have the meaning set forth in the preamble to this
Agreement.
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"Moral Rights" shall mean the rights granted under Chapter IV of the
United Kingdom Copyright, Design and Patent Acts 1988, and any other analogous
rights in any other jurisdiction.
"Multiemployer Plan" shall have the meaning set forth in Section 4.9(c)
of this Agreement.
"Non-Compete Members" shall mean the Persons listed on Exhibit B to this
Agreement.
"Notice of Disagreement" shall have the meaning set forth in Section
3.2.4(b) of this Agreement.
"Obsolete Company IP" shall mean all Intellectual Property owned or used
by or licensed to or by the Combined Company or any of their predecessors in
interest (jointly or severally, in whole or in part, with others or solely) or
otherwise used in Company Business solely to the extent that such Intellectual
Property is no longer used in or in any way necessary for the conduct of the
Company Business.
"Omitted Assets" shall mean all Contracts, Company Assets (including
without limitation all Current Company IP) or any other assets (a) necessary to
enable the Company (prior to the Closing) and Parent and the Surviving Company
(after the Closing) to conduct the Company Business as currently conducted and
(b) that are not owned by and are not otherwise licensed to the Combined
Company.
"Other Employees" shall mean all current Company Employees and current
Company Independent Contractors who are not Key Employees.
"Other Taxes" shall have the meaning set forth in Section 7.6(e) of this
Agreement.
"Parent" shall have the meaning set forth in the preamble to this
Agreement.
"Parent Common Stock" shall mean the common stock, par value $0.0001 per
share, of Parent.
"Parent Disclosure Schedule" shall have the meaning set forth in the
introduction to Article 6 of this Agreement.
"Parent Indemnitee First-Dollar Losses" shall mean any Losses
indemnifiable pursuant to (x) Section 10.7, (y) Sections 10.2.1(a) or 10.2.2 of
this Agreement for breaches of the representations and warranties contained in
Sections 4.1(a), 4.1(b), 4.3, 4.5, 4.11, 4.17, 5.1, 5.2 or 5.4 of this
Agreement; provided, however, that Losses indemnifiable pursuant to Section
10.2.1(a) of this Agreement for breaches of the representations and warranties
contained in Section 4.3(c)(ii) of this Agreement shall only constitute Parent
Indemnitee First-Dollar Losses if and to the extent that the breach of Section
4.3(c)(ii) of this Agreement giving rise to such Losses (i) resulted in the
unenforceability of this Agreement or any of the Ancillary Agreements or (ii)
prevented Parent from consummating the Merger, the Stock Purchase or any of the
other transactions contemplated by this Agreement or the Ancillary Agreements,
and (z) Replacement Costs under Section 10.2.1(d).
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"Parent Indemnitees" shall have the meaning set forth in Section 10.2.1
of this Agreement.
"Parent Material Adverse Effect" shall mean a material adverse effect on
the ability of Parent to complete the Closing pursuant to the terms hereof
and/or comply with its obligations hereunder.
"Patents" shall mean all patents and patent applications (including any
continuations, continuations-in-part, divisionals, reissues, renewals,
extensions or modifications for any of the foregoing), together with all
goodwill related to the foregoing.
"PAYE" shall mean the PAYE Regulations made under Section 203 of the
Income and Corporation Taxes Act of 1988.
"Permits" shall have the meaning set forth in Section 4.13(a) of this
Agreement.
"Permitted Encumbrance" shall mean (i) liens reflected on the Company
Balance Sheet; (ii) liens imposed by operation of law and not for borrowed
money, such as materialmen's, mechanics', workers', repairmen's, employees',
carriers', vendors' warehousemen's and other like liens that are insignificant,
individually and in the aggregate, to the operation of the Company Business and
(iii) liens incurred in the ordinary course of business and not for borrowed
money that are insignificant, individually and in the aggregate, to the
operation of the Company Business.
"Person" shall mean any individual, corporation, company, partnership
(limited or general), limited liability company, joint venture, association,
trust or other business entity.
"Post-Closing Partial Period" shall have the meaning set forth in
Section 10.7(b) of this Agreement.
"Post-Closing Period" shall mean any Taxable period that begins on or
after the Closing Date.
"Pre-Closing Partial Period" shall have the meaning set forth in Section
10.7(a) of this Agreement.
"Pre-Closing Period" shall mean any Taxable period that ends on or
before the Closing Date.
"Principal Members Disclosure Schedule" shall have the meaning set forth
in the introduction to Article 5 of this Agreement.
"Principal Members" shall mean the Persons set forth on Exhibit O to
this Agreement.
"Proceedings" shall have the meaning set forth in Section 4.12 of this
Agreement.
"Purchase Price Allocation Schedules" shall have the meaning set forth
in Section 7.6(k) of this Agreement.
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"Relevant Benefits" shall have the meaning set forth in Section 4.9(g)
of this Agreement.
"Resolved Claim Notice" shall have the meaning set forth in Section
10.2.3(a) of this Agreement.
"Restricted Business" shall have the meaning set forth in Section
7.11(a)(i) of this Agreement.
"Restrictive Period" shall mean, for any given Non-Compete Member, the
period beginning on the Closing Date and ending on the date indicated opposite
such Non-Compete Member's name on Exhibit B to this Agreement.
"Scheduled Contracts" shall have the meaning set forth in Section 4.7 of
this Agreement.
"SEC" shall mean the Securities and Exchange Commission, and any
successor thereto.
"Section 338 Forms" shall mean all returns, documents, statements, and
other forms that are required to be submitted to any federal, state, county or
other local Taxing Authority in connection with a Section 338(h)(10) Election.
"Section 338 Forms" shall include any "statement of Section 338 Election" and
United States Internal Revenue Service Form 8023 (together with any schedules or
attachments thereto) that are required pursuant to Treasury Regulations Section
1.338-1 or Treasury Regulations Section 1.338(h)(10)-1.
"Section 338(h)(10) Election" shall mean an election described in
Section 338(h)(10) of the Code with respect to the KMV Corporation Shareholders'
sale of KMV Corporation to Parent pursuant to this Agreement. "Section
338(h)(10) Election" shall include any corresponding election under any other
relevant Tax Laws for which a separate election is permissible with respect to
Parent's acquisition of KMV Corporation Shares from the KMV Corporation
Shareholders' pursuant to this Agreement.
"Securities Act" shall mean the Securities Act of 1933, as amended, and
the rules and regulations of the SEC thereunder.
"Securities Laws" shall mean the Securities Act, the Exchange Act, the
Investment Company Act, the Investment Advisers Act, all applicable state "blue
sky" laws, all applicable foreign securities laws, and the rules and regulations
promulgated thereunder.
"Securities" shall mean any securities as defined in the Securities Act.
"Seller Indemnitees" shall have the meaning set forth in Section 10.3 of
this Agreement.
"Seller Parties" shall have the meaning set forth in Section 7.10(a) of
this Agreement.
"Share Purchase Price" shall equal the quotient obtained by dividing (a)
the product of (i) the Company Base Unit Consideration and (ii) the total number
of Company Units held by KMV Corporation immediately prior to the Closing by (b)
the total number of KMV Corporation Shares issued and outstanding immediately
prior to the Closing.
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"Software" shall mean individually each, and collectively all, of the
computer programs, including interfaces and any embedded software programs,
applications, or modules owned or licensed by any member of the Company Group or
otherwise included as a Company Asset or used in (whether internally or
commercially) or necessary to operate the Company Business, including as to each
program, the processes, routines and scripts used in the processing of data, the
object code, look and feel, user interface, source code (as to third-party
source code, when rights to the source code may be obtained), tapes, disks, and
all derivative works, improvements, modifications, enhancements, versions and
releases relating thereto and other general intangibles of like nature, together
with all goodwill related to the foregoing.
"Standards Bodies" shall mean private organizations or trade groups who
establish industry standards.
"Stock Purchase" shall have the meaning set forth in the preamble to
this Agreement.
"Straddle Period" shall have the meaning set forth in Section 7.6(d) of
this Agreement.
"Subsidiary" of a Person shall mean any other Person more than 50% of
the voting stock (or of any other form of other voting or controlling equity
interest in the case of a Person that is not a corporation) of which is
beneficially owned by the Person directly or indirectly through one or more
other Persons.
"Supplemental Closing Date" shall have the meaning set forth in Section
3.2.4(e) of this Agreement.
"Supplemental Closing" shall have the meaning set forth in Section
3.2.4(e) of this Agreement.
"Surviving Company" shall have the meaning set forth in Section 2.1 of
this Agreement.
"Tax Return" shall mean any and all returns, reports, declarations,
information statements, schedules or other documents required to be provided by
the Company, KMV Corporation or any of their respective Subsidiaries with
respect to Taxes to any Governmental Authority or Tax authority or agency,
whether domestic or foreign.
"Tax" shall mean all federal, provincial, territorial, state, municipal,
local, foreign or other taxes, imposts, rates, levies, assessments and other
similar charges (and all interest and penalties thereon and additions thereto
imposed by any Governmental Authority), including, without limitation, all
income, excise, franchise, gains, capital, real property, goods and services,
transfer, value added, gross receipts, windfall profits, severance, ad valorem,
personal property, production, sales, use, license, stamp, documentary stamp,
mortgage recording, employment, payroll, social security, unemployment,
disability, estimated or withholding taxes, and all customs and import duties.
"Taxing Authority" shall mean any government authority, domestic or
foreign, having jurisdiction over the assessment, determination, collection, or
other imposition of Taxes.
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"Termination Date" shall have the meaning set forth in Section
9.1(a)(vii) of this Agreement.
"Third-Party Claim" shall have the meaning set forth in Section 10.4(a)
of this Agreement.
"Threshold Amount" shall equal $3,500,000.
"Tier 1 Trade Secrets" shall mean those categories of Company Trade
Secrets expressly identified as Tier 1 Trade Secrets in Section 4.8.1 of the
Company Disclosure Schedule.
"Tier 2 Trade Secrets" shall mean those categories of Company Trade
Secrets expressly identified as Tier 2 Trade Secrets in Section 4.8.1 of the
Company Disclosure Schedule.
"Trade Secrets" shall mean all business, financial, customer, supplier,
research, development, pricing, cost, marketing, technical, confidential or
proprietary information and data (including all Inventions not subject to the
protection of an approved Patent), and any other information or any other
intangible or right of like nature that derives independent economic value
(actual or potential) from not being generally known to the public or any other
Person who can obtain economic value from its disclosure or use, together with
all goodwill related to the foregoing.
"Trademarks" shall mean all trademarks, service marks, logos, corporate
names, trade names, trade dress, brands and brand names, designs, domain names,
other indications of origin and general intangibles of like nature (whether
registered or unregistered), together with all goodwill related to the
foregoing.
"Transaction Consideration" shall equal the amount obtained by
subtracting (a) the Combined Company Transaction Fees from (b) $210,000,000.
"Vested IP Rights" shall have the meaning set forth in Section 4.8.13 of
this Agreement.
"Voting Agreement" shall mean the Voting Agreement attached as Exhibit A
to this Agreement.
"Working Capital Amount" shall mean (i) all current assets of the
Combined Company including cash calculated in accordance with GAAP, consistent
with the Combined Company's 2000 audited financial statements, less (ii) all
current liabilities of the Combined Company in accordance with GAAP, consistent
with the Combined Company's 2000 audited financial statements, all as reflected
on the Closing Balance Sheet; provided, however, that current liabilities shall
not include Combined Company Transaction Fees if and to the extent that such
Combined Company Transaction Fees have been paid by Parent on behalf of the
Combined Company at the Closing and were taken into account when calculating the
Transaction Consideration.
"Working/Cash Capital Holdback Amount" shall equal $2,000,000.
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"Working Capital Shortfall" shall equal the amount obtained by
subtracting negative $8,500,000 from the Working Capital Amount as set forth in
the final Adjustment Amount Documents, provided that if such calculation results
in a positive number, such positive number shall be the "Working Capital
Excess."
ARTICLE 2.
THE MERGER AND THE STOCK PURCHASE
Section 2.1 The Merger. Upon the terms and subject to satisfaction or
waiver of the conditions set forth in this Agreement, and in accordance with the
Limited Liability Company Act of the State of Delaware, at the Effective Time,
Merger Sub shall be merged with and into the Company. As a result of the Merger,
the separate limited liability company existence of Merger Sub shall cease at
the Effective Time and the Company shall continue as the surviving limited
liability company of the Merger (the "Surviving Company").
Section 2.2 Effective Time. As soon as practicable after the
satisfaction or, if permissible, waiver of the conditions set forth in Article 8
hereof, the parties hereto shall cause the Merger to be consummated by filing a
certificate of merger (the "Certificate of Merger") with the Secretary of State
of the State of Delaware, in such form as required by, and executed in
accordance with the relevant provisions of, the Limited Liability Company Act of
the State of Delaware (the date and time of such filing, or if another date and
time is permissible under the Limited Liability Company Act, agreed to by Parent
and the Company, and specified in such filing, such specified date and time,
being the "Effective Time").
Section 2.3 Effect of the Merger. At the Effective Time, the effect of
the Merger shall be as provided in the applicable provisions of the Limited
Liability Company Act of the State of Delaware. Without limiting the generality
of the foregoing, at the Effective Time, except as otherwise provided herein,
all the property, rights, privileges, powers and franchises of the Company and
Merger Sub shall vest in the Surviving Company, and all debts, liabilities and
duties of the Company and Merger Sub shall become the debts, liabilities and
duties of the Surviving Company.
Section 2.4 Limited Liability Company Agreement. At the Effective Time,
the Company Operating Agreement shall be amended in its entirety to contain the
provisions set forth in the Limited Liability Company Agreement of Merger Sub
set forth in Exhibit C to this Agreement, as in effect immediately prior to the
Effective Time.
Section 2.5 Board and Officers. The board of directors of Merger Sub
immediately prior to the Effective Time shall be the initial board of directors
of the Surviving Company, each to hold office in accordance with the certificate
of formation and Limited Liability Company Agreement of the Surviving Company
until the earlier of their resignation or removal, or until their respective
successors are duly elected and qualified, as the case may be. The officers of
Merger Sub immediately prior to the Effective Time shall be the initial officers
of the Surviving Company, each to hold office in accordance with the certificate
of formation and Limited Liability Company Agreement of the Surviving Company
until the earlier of their resignation or removal, or until their respective
successors are duly elected and qualified, as the case may be.
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Section 2.6 Stock Purchase. At the Closing, subject to the terms and
conditions of this Agreement, each KMV Corporation Shareholder hereby agrees to
sell to Parent, and Parent hereby agrees to purchase from each KMV Corporation
Shareholder, each KMV Corporation Share owned by each such KMV Corporation
Shareholder, at a per share purchase price equal to the Share Purchase Price.
ARTICLE 3.
CLOSING; CONSIDERATION
Section 3.1 Closing. Unless this Agreement shall have been earlier
terminated, the consummation of the transactions contemplated by this Agreement
(the "Closing") shall, subject to the satisfaction or waiver (by the parties
entitled to the benefits thereof) of the conditions set forth in Article 8
hereof, take place at the offices of Gibson, Dunn & Crutcher, San Francisco,
California, on the third (3rd) Business Day after all of the conditions set
forth in Article 8 hereof have been satisfied or waived by the parties entitled
to the benefits thereof (other than the conditions that relate to actions to be
taken at the Closing) or at such other date, time and place as Parent, Merger
Sub and the Company shall mutually agree in writing (the date on which the
Closing takes place, the "Closing Date").
Section 3.2 Conversion of Securities. At the Effective Time, by virtue
of the Merger and without any action on the part of Merger Sub, Parent, the
Company or the holders of any of the following Securities (each, a "Holder"):
Section 3.2.1 Membership Interests of Merger Sub and Company
Units Held By KMV Corporation
(a) Each membership interest of Merger Sub issued and outstanding
immediately prior to the Effective Time shall be converted into and be exchanged
for one newly and validly issued, fully paid and nonassessable membership
interest of the Surviving Company.
(b) Each Company Unit held by KMV Corporation outstanding immediately
prior to the Effective Time shall remain outstanding as a validly issued, fully
paid and nonassessable membership interest of the Surviving Company and shall be
unaffected by the Merger.
Section 3.2.2 Conversion of Company Base Units and Company
Appreciation Units.
(a) Each Company Base Unit outstanding immediately prior to the
Effective Time (other than any Company Base Units held by KMV Corporation, which
shall remain outstanding as provided in Section 3.2.1(b) of this Agreement)
shall be converted into the right to receive an amount of cash equal to the
Company Base Unit Consideration. All Company Base Units converted pursuant to
this Section 3.2.2(a) shall no longer be outstanding and shall automatically be
cancelled and retired and shall cease to exist after the Effective Time.
(b) Each Company Appreciation Unit outstanding immediately prior to the
Effective Time shall be converted, into the right to receive an amount of cash
equal to the Company Appreciation Unit Consideration. All Company Appreciation
Units shall no longer be
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outstanding and shall automatically be cancelled and retired and shall cease to
exist after the Effective Time.
Section 3.2.3 Escrow; Working/Cash Capital Holdback.
(a) Escrow Funds. At the Closing, Parent shall deliver, and the
Principal Members and the KMV Corporation Shareholders shall be deemed to have
received and deposited, pro rata in accordance with their respective ownership
percentages set forth on the Closing Consideration Exhibit, cash in the amount
of $45,000,000 (the "Escrow Funds") to an escrow account (the "Escrow Account")
to be established by Parent with Citibank N.A., or an escrow agent to be
designated by Parent and approved by the Member Representative (which approval
shall not be unreasonably withheld) prior to the Closing (the "Escrow Agent") to
be held by the Escrow Agent, pursuant to the terms of an escrow agreement,
consistent with the provisions of this Agreement and otherwise in form and
substance reasonably satisfactory to Parent, the Company and the Member
Representative (the "Escrow Agreement"), to provide for the satisfaction of
claims for indemnification made by Parent pursuant to Article 10 of this
Agreement. Any fees and expenses of the Escrow Agent shall be paid by Parent.
The Escrow Funds shall be retained in the Escrow Account until released pursuant
to Section 3.2.3(b) below. During the period in which the Escrow Funds are
retained in the Escrow Account, they will be held for the benefit of the
Principal Members and KMV Corporation Shareholders (pro rata as provided above),
and such Persons shall be entitled to receive the economic benefit of any
interest earned on the Escrow Funds unless and until and to the extent it has
been determined that Parent is entitled to retain any of the Escrow Funds in
respect of indemnification claims pursuant to Section 10.2.3 of this Agreement
(it being understood that any interest on such Escrow Funds shall be distributed
monthly to the Principal Members and KMV Corporation Shareholders, except for
interest accrued on the amount of a Resolved Claim Notice (as defined in Section
10.2.3(a) of this Agreement) from the date of the Escrow Agent's receipt of such
Resolved Claim Notice until payment thereof to Parent, which interest shall be
payable to Parent). The parties to this Agreement hereby agree that the
treatment described above shall apply for United States federal income tax
purposes and to file all Tax Returns on a basis consistent with such treatment.
(b) Release of Escrow Funds.
(i) Within five (5) Business Days following the Expiration Date, the
Escrow Agent shall (x) retain Escrow Funds equal to the sum of the Aggregate
Outstanding Claims (as defined below) at such time, if any, and (y) remit
immediately available funds to the Principal Members and the KMV Corporation
Shareholders, pro rata in accordance with their respective ownership percentages
set forth on the Closing Consideration Exhibit, in an aggregate amount equal to
the remaining Escrow Funds, together with all interest thereon, by wire transfer
to each such account as they shall have notified to the Escrow Agent for such
purpose and otherwise by mailing a check in such amount to their respective
addresses set forth on the Closing Consideration Exhibit (or such other
addresses furnished by the Principal Members and the KMV Corporation
Shareholders to the Escrow Agent in writing from time to time after the Closing
Date). For purposes of this Agreement, the term "Aggregate Outstanding Claims"
shall mean the aggregate amount of indemnification claims in U.S. dollars made
by Parent pursuant to Section 10.2 hereof which shall be outstanding and
unresolved, or resolved but not yet paid.
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(ii) In the event and to the extent that after the Expiration Date
any outstanding indemnification claim made by Parent pursuant to Section 10.2
hereof is resolved against Parent, the Escrow Agent shall forthwith remit the
portion of Escrow Funds then held in respect thereof, together with all interest
thereon, to the Principal Members and the KMV Corporation Shareholders in the
manner set forth in Section 3.2.3(b)(i). In the event and to the extent that
after the Expiration Date any outstanding claim for indemnification made by
Parent pursuant to Section 10.2 hereof is resolved in favor of Parent, Parent
shall be entitled to offset pursuant to Section 10.2.3 hereof.
(c) Member Representative.
(i) Robert Rudy is hereby appointed and constituted the "Member
Representative" under this Agreement, and as such shall serve as agent for and
have all powers as attorney-in-fact of each Member (solely with respect to the
matters set forth in clause (y) of this subsection (c)(i)) and each Principal
Member and each KMV Corporation Shareholder, for and on behalf of each Member
(solely with respect to the matters set forth in clause (y) of this subsection
(c)(i)) and each Principal Member and each KMV Corporation Shareholder, to take
the following actions in connection with the negotiation, settlement and
compromise of (y) Disagreements pursuant to Section 3.2.4 of this Agreement and
the release of the Working/Cash Capital Holdback Amount in connection therewith
and (z) indemnification claims pursuant to Article 10 of this Agreement and the
release of Escrow Funds in connection therewith: to give and receive notices of
communications; to agree to, negotiate or enter into settlements and compromises
of and comply with orders of courts with respect to any disputes involving any
claims made by Parent, the Surviving Company, the Members (solely with respect
to the matters set forth in clause (y) of this subsection (c)(i)), Principal
Members or the KMV Corporation Shareholders under this Agreement; to sign
receipts, consents or other documents to effect any of the transactions
contemplated by this Agreement or the Ancillary Agreements; and to take all
actions necessary or appropriate in the judgment of the Member Representative in
connection with the foregoing.
(ii) If the Member Representative elects to resign as Member
Representative for any reason, the Member Representative shall notify Parent of
his or her intent to resign, and the Principal Members and the KMV Corporation
Shareholders shall, by written notice to Parent, appoint a successor Member
Representative within five (5) Business Days thereafter.
(iii) Notice or communications to or from the Member Representative
pursuant to this Section 3.2.3 shall constitute notice to or from each of the
Members (solely with respect to the matters set forth in clause (y) of
subsection (c)(i) above), the Principal Members and KMV Corporation
Shareholders.
(iv) A decision, act, consent or instruction of the Member
Representative pursuant to this Section 3.2.3 shall constitute a decision, act,
consent or instruction of each and all of the Principal Members and KMV
Corporation Shareholders, and shall be final, binding and conclusive upon each
and all of the Members (solely with respect to the matters set forth in clause
(y) of subsection (c)(i) above), the Principal Members and KMV Corporation
Shareholders, and each of Parent and the Surviving Company shall be entitled to
rely upon any decision, act, consent or instruction of the Member Representative
as being the decision, act,
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consent or instruction of each and all of the Members (solely with respect to
the matters set forth in clause (y) of subsection (c)(i) above), the Principal
Members and KMV Corporation Shareholders, and each of Parent and the Surviving
Company shall be relieved from any liability to any Person for any acts done by
them in accordance with such decision, act, consent or instruction.
(v) The Member Representative shall not be liable for any act done
or omitted hereunder as Member Representative except for the commission of
actual fraud or willful misconduct. The Principal Members and KMV Corporation
Shareholders on whose behalf the Escrow Funds were deposited into the Escrow
Account shall severally indemnify the Member Representative and hold the Member
Representative harmless against any Loss or expense incurred without bad faith
on the part of the Member Representative and arising out of or in connection
with the acceptance or administration of the Member Representative's duties
hereunder, including the reasonable fees and expenses of any legal counsel
retained by the Member Representative.
(d) Working/Cash Capital Holdback. At the Closing, Parent shall retain
the Working/Cash Capital Holdback Amount from the Transaction Consideration that
the Members and the KMV Corporation Shareholders are entitled to receive
pursuant to this Agreement in exchange for their Company Units and KMV
Corporation Shares, respectively, pro rata in accordance with their respective
ownership percentages set forth on the Closing Consideration Exhibit. The
Working/Cash Capital Holdback Amount shall be retained by Parent or distributed
to the Members and the KMV Corporation Shareholders, as the case may be, in
accordance with the provisions of Section 3.2.4(e) hereof.
Section 3.2.4 Post-Closing Working Capital Adjustment.
(a) As soon as reasonably practicable following the Closing Date, and in
no event more than forty-five (45) Business Days thereafter, Parent shall
prepare and deliver to the Member Representative the Closing Balance Sheet,
together with schedules calculating each of the Cash Capital Amount and the
Working Capital Amount, including a separate listing, by account, of the total
accounts receivable of the Combined Company outstanding as of the Closing, and
setting forth such calculations in reasonable detail (collectively, the
"Adjustment Amount Documents"). The parties shall consult with one another and
cooperate with each other in the preparation of the Adjustment Amount Documents
in accordance with this Section 3.2.4, and Parent shall provide access to such
working papers and information relating to the preparation thereof as reasonably
requested by the Member Representative.
(b) Within fifteen (15) Business Days after delivery to the Member
Representative of the Adjustment Amount Documents, the Member Representative may
dispute all or a portion of such Adjustment Amount Documents by giving written
notice (a "Notice of Disagreement") to Parent setting forth in reasonable detail
the basis for any such dispute (any such dispute a "Disagreement"). The parties
shall promptly commence good faith negotiations with a view to resolving all
such Disagreements. If the Member Representative does not provide a Notice of
Disagreement within the 15-Business Day period set forth in this Section 3.2.4,
the Member Representative and the Members shall be deemed to have accepted such
Adjustment Amount Documents in the form delivered to them by Parent.
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(c) If Parent does not dispute all or any portion of such Notice of
Disagreement by giving written notice to the Member Representative, setting
forth in reasonable detail the basis for such dispute within fifteen (15)
Business Days following the delivery of such Notice of Disagreement, Parent
shall be deemed to have irrevocably accepted the Adjustment Amount Documents as
modified in the manner described in such Notice of Disagreement.
(d) If (i) the Member Representative delivers a Notice of Disagreement
within the 15-Business Day period set forth in Section 3.2.4(b) and (ii) Parent
shall dispute a Notice of Disagreement delivered by the Member Representative
within the 15-Business Day period set forth in Section 3.2.4(c), and within
fifteen (15) Business Days following the delivery by Parent to the Member
Representative of the notice of such dispute, the parties do not resolve the
Disagreement (as evidenced by a written agreement between them), such
Disagreement shall thereafter be referred to the Independent Accounting Firm for
a resolution of such Disagreement in accordance with the terms of this
Agreement. The determinations of the Independent Accounting Firm with respect to
any Disagreement shall be rendered within fifteen (15) Business Days after
referral of the Disagreement to the Independent Accounting Firm or as soon
thereafter as reasonably practicable, shall be final and binding upon the
parties, the amount so determined shall be used to complete the final Adjustment
Amount Documents and the parties agree that the procedures set forth in this
Section 3.2.4 shall be the sole and exclusive remedy with respect to the
determination of the Adjustment Amount Documents and the amount of any payment
under this Section 3.2.4. Each of Parent, on the one hand, and the Member
Representative, on the other hand, shall cooperate with the Independent
Accounting Firm and provide the Independent Accounting Firm with access to the
books, records, personnel and representatives of it and such other information
as the Independent Accounting Firm may require in order to render its
determination. All of the fees and expenses of the Independent Accounting Firm
retained pursuant to this Section 3.2.4(d) shall be paid 50% by Parent and 50%
by the Principal Members and the KMV Corporation Shareholders. Parent shall be
entitled but not required to deduct from the Working/Cash Capital Holdback
Amount any such fees to be paid by the Principal Members and the KMV Corporation
Shareholders, which amount Parent shall pay to the Independent Accounting Firm.
(e) Promptly after the Adjustment Amount Documents have been finally
determined in accordance with this Section 3.2.4 (including by means of a deemed
acceptance of such documents by Parent or the Member Representative as provided
in Section 3.2.4(b) and (c), respectively), but in no event later than five (5)
Business Days following such final determination (the "Supplemental Closing
Date"), the parties hereto shall hold a supplemental closing (the "Supplemental
Closing"), either by telephone or in person at a mutually convenient location.
If the Differential is a negative number Parent shall (i) deduct from the
Working/Cash Capital Holdback Amount on the Supplemental Closing Date an amount
in cash equal to the absolute value of such Differential, which deducted amount
Parent shall be entitled to retain and (ii) deliver each Member's and KMV
Corporation Shareholder's portion, pro rata in accordance with their respective
ownership percentages set forth on the Closing Consideration Exhibit, of the
remainder of the Working/Cash Capital Holdback Amount, if any, as set forth in
instructions from the Member Representative. If such Differential exceeds the
Working/Cash Capital Holdback Amount, then such excess shall be deemed to be
Losses pursuant to Section 10.2 of this Agreement; provided, however, that such
Losses shall not be subject to the Threshold Amount but rather Parent shall be
immediately entitled to offset pursuant to Section 10.2.3 of
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this Agreement to the full extent of such Losses and recover such amounts
immediately from the Escrow Account. If the Differential is a positive number,
Parent shall (x) deliver each Member's and KMV Corporation Shareholder's
portion, pro rata in accordance with their respective ownership percentages set
forth on the Closing Consideration Exhibit, of the Working/Cash Capital Holdback
Amount (less any amounts deducted from the Working/Cash Capital Holdback Amount
by Parent pursuant to the last sentence of Section 3.2.4(d) of this Agreement to
pay the Principal Members' and KMV Corporation Shareholders' 50% share of the
fees of the Independent Accounting Firm) as set forth in instructions from the
Member Representative and (y) deliver each Member's and KMV Corporation
Shareholder's portion, pro rata in accordance with their respective ownership
percentages set forth on the Closing Consideration Exhibit, of the aggregate
amount of cash equal to the Differential as set forth in instructions from the
Member Representative.
Section 3.3 Payment for Company Units and KMV Corporation Shares.
(a) Payments. As of the Effective Time, Parent shall remit to each
Member (other than KMV Corporation) and KMV Corporation Shareholder in
immediately available funds the amount of the Transaction Consideration due to
such Member or KMV Corporation Shareholder, less the applicable portion of the
Escrow Funds, if applicable, and Working/Cash Capital Holdback, all in
accordance with the Closing Consideration Exhibit, by wire transfer to such
respective account as such Member or KMV Corporation Shareholder shall have
notified to Parent for such purpose at least seven (7) Business Days prior to
the Closing Date and otherwise by mailing a check in such amount to their
respective addresses set forth on the Closing Consideration Exhibit (or such
other address furnished by the Principal Members and the KMV Corporation
Shareholders to the Parent in writing at least seven (7) Business Days prior to
the Closing Date), provided, however that each Member and KMV Corporation
Shareholder shall have furnished a W-9 or W-8 (if applicable) and, in the case
of KMV Corporation Shareholders, each such KMV Corporation Shareholder shall
have delivered to Parent at the Closing (x) the certificate(s) evidencing its
KMV Corporation Shares duly endorsed in blank or accompanied by stock powers
duly executed in blank, in such form as is reasonably acceptable to Parent, or
(y) such duly executed assignment and indemnification agreements in connection
with any lost, destroyed or mutilated certificate(s) as may be reasonably
required by Parent in connection with any KMV Corporation Shareholder whose
certificate(s) for KMV Corporation Shares have been lost, destroyed or
mutilated. Any KMV Corporation Shares that are not so surrendered and purchased
at the Closing shall be deemed at any time after the Effective Time to represent
only the right to receive upon such surrender the cash to which such holder is
entitled pursuant to this Section 3.3 of this Agreement, promptly upon surrender
of the foregoing documents to the Parent. The Parent's obligations with respect
to any KMV Corporation Shares that are not so surrendered at the Closing shall
be subject to the effect of abandoned property, escheat or similar applicable
laws, and neither Parent nor the Surviving Company shall be liable to any holder
of KMV Corporation Shares in respect of payments due hereunder that are
delivered to a public official pursuant to any abandoned property, escheat or
similar law.
(b) Withholding. Parent shall be entitled to deduct and withhold from
the consideration otherwise payable pursuant to this Agreement to any holder of
Company Units or KMV Corporation Shares such amounts as Parent is required to
deduct and withhold under the Code, or any provision of state, local or foreign
tax law, with respect to the making of such
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payment. To the extent that amounts are so withheld by Parent, such withheld
amounts shall be treated for all purposes of this Agreement as having been paid
to the holder of Company Units or KMV Corporation Shares in respect of whom such
deduction and withholding was made by Parent, and Parent shall provide receipts
or similar evidence of such withholding to such holders of Company Units and KMV
Corporation Shares, as applicable.
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND KMV CORPORATION
Except as set forth in the disclosure schedule delivered by the Company
to Parent prior to the execution of this Agreement (the "Company Disclosure
Schedule"), which identifies exceptions by specific subsection references
(provided, however, that the disclosure of an item in one Section of the Company
Disclosure Schedule shall be deemed a disclosure in another Section or Sections
of the Company Disclosure Schedule if and to the extent that such information is
readily apparent to be so applicable to such other Section or Sections), the
Company and KMV Corporation, jointly and severally, hereby represent and warrant
to Parent and Merger Sub as follows:
Section 4.1 Organization and Related Matters.
(a) The Company is a limited liability company, duly formed, validly
existing and in good standing under the laws of the State of Delaware, and each
of its Subsidiaries is a corporation or other business entity duly organized,
validly existing and in good standing under the laws of its jurisdiction of
organization. The Company has the limited liability company power and authority
and each of its Subsidiaries has the corporate or other applicable power and
authority necessary to carry on their respective businesses in the manner as
they are now being conducted and to own, lease and operate all of their
respective properties and assets. The copy of the Company Operating Agreement
delivered to Parent prior to the execution of this Agreement is a complete and
correct copy of such instrument as in effect on the date hereof.
(b) KMV Corporation is a corporation, duly incorporated, validly
existing and in good standing under the laws of the State of California, and
each of its Subsidiaries is a corporation or other business entity duly
organized, validly existing and in good standing under the laws of its
jurisdiction of organization. KMV Corporation has the corporate power and
authority and each of its Subsidiaries has the corporate or other applicable
power and authority necessary to carry on their respective businesses in the
manner as they are now being conducted and to own, lease and operate all of
their respective properties and assets. The copy of the Articles of
Incorporation and Bylaws of KMV Corporation delivered to Parent prior to the
execution of this Agreement is a complete and correct copy of such instrument as
in effect on the date hereof.
(c) Each of the Company, KMV Corporation and their respective
Subsidiaries is duly licensed or qualified to do business in each jurisdiction
in which the nature of the business conducted by it or the character or location
of the properties and assets owned, leased or operated by it makes such
qualification or licensing necessary except in jurisdictions where the failure
of such license or qualification would not individually or in the aggregate have
a Company Material Adverse Effect.
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Section 4.2 Subsidiaries.
(a) Section 4.2 of the Company Disclosure Schedule lists each Subsidiary
of the Company and each Subsidiary of KMV Corporation and their respective
jurisdictions of incorporation or organization and the outstanding shares of
capital stock and other ownership interests, if any, of such Subsidiary, and the
record owner thereof. All the outstanding shares of capital stock of, or other
equity interests in, each such Subsidiary of the Company and KMV Corporation
have been validly issued and are fully paid and nonassessable and such shares or
interests owned directly or indirectly by the Company or KMV Corporation, as
applicable, are free and clear of all Encumbrances and free of any restriction
on the right to vote, sell or otherwise dispose of such capital stock or other
ownership interests. Each of the Subsidiaries of the Company or KMV Corporation,
as applicable, is wholly owned by the Company or KMV Corporation, as applicable,
or a wholly owned Subsidiary of the Company or KMV Corporation, as applicable.
Except for the capital stock or other ownership interests of their respective
Subsidiaries as set forth on Section 4.2 of the Company Disclosure Schedule,
neither the Company nor KMV Corporation beneficially owns directly or indirectly
any capital stock, membership interest, partnership interest, joint venture
interest or other equity interest in any Person.
(b) Section 4.2(b) of the Company Disclosure Schedule contains a
narrative description of the respective businesses conducted by each of the
Foreign Subsidiaries. Neither of the Foreign Subsidiaries engages in or conducts
or has ever engaged in or conducted any business other than (x) as expressly set
forth in Section 4.2(b) of the Company Disclosure Schedule, (y) in connection
with incorporation, change of corporate name, appointment of officers or
directors or the filing of corporate documents pursuant to Applicable Law, or
(z) the employment of the Foreign Subsidiary Employees and the execution,
delivery and performance of the Foreign Subsidiary Leases. Neither of the
Foreign Subsidiaries (i) has ever incurred any mortgages, securities, charges or
guarantees other than in connection with Foreign Subsidiary Leases; (ii) has
ever given any power of attorney or (iii) beneficially owns directly or
indirectly any capital stock, membership interest, partnership interest, joint
venture interest or other equity interest in any Person. Neither of the Foreign
Subsidiaries has taken any action or commenced or threatened any legal
proceeding for the administration, winding-up or provisional winding-up or
dissolution of either of the Foreign Subsidiaries or seeking to enter into any
arrangement or composition for the benefit of creditors, or for the appointment
of a receiver, administrator, administrative receiver, trustee or similar
officer of any of the properties, revenues, undertakings or assets of either of
the Foreign Subsidiaries, nor have any orders been made for any of the
foregoing.
Section 4.3 Authority; No Violation.
(a) The Company has full limited liability company power and authority
to execute and deliver this Agreement and the Ancillary Agreements to which it
is a party, to perform its obligations hereunder and thereunder and to
consummate the Merger and the other transactions contemplated hereby and
thereby. Prior to the Closing, the execution and delivery of this Agreement and
the Ancillary Agreements to which it is a party and the consummation of the
Merger and the other transactions contemplated hereby and thereby shall be duly
and validly approved by all requisite limited liability company action on the
part of the Company, and no
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other limited liability company proceedings on the part of the Company are
necessary to approve this Agreement or the Ancillary Agreements to which it is a
party or to authorize or consummate the Merger or the other transactions
contemplated hereby or thereby. The affirmative vote of the holders of
two-thirds of the Company Units issued and outstanding on the record date set
for the Members' approval of this Agreement, the Ancillary Agreements, the
Merger and the other transactions contemplated by this Agreement and the
Ancillary Agreements are the only votes of the holders of any Securities of the
Company necessary to approve this Agreement, the Merger and the other
transactions contemplated by this Agreement and the Ancillary Agreements. This
Agreement and the Ancillary Agreements to which it is a party have been duly and
validly executed and delivered by the Company (except for those Ancillary
Agreements that are not dated the date hereof, which Ancillary Agreements shall
be duly and validly executed and delivered prior to the Closing) and (assuming
the due authorization, execution and delivery of this Agreement and the
Ancillary Agreements by the other parties hereto and thereto) constitute valid
and binding obligations of the Company (except for those Ancillary Agreements
that are not dated the date hereof, which Ancillary Agreements shall constitute
valid and binding obligations of the Company at the Closing), enforceable
against the Company in accordance with their terms, except as the enforceability
thereof may be subject to or limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws relating to or affecting the rights of creditors
generally and the availability of equitable relief (whether in proceedings at
law or in equity).
(b) KMV Corporation has full corporate power and authority to execute
and deliver this Agreement and the Ancillary Agreements to which it is a party,
to perform its obligations hereunder and thereunder and to consummate the Merger
and the other transactions contemplated hereby and thereby. The execution and
delivery of this Agreement and the Ancillary Agreements to which it is a party
and the consummation of the Merger and the other transactions contemplated
hereby and thereby have been duly and validly approved by all requisite
corporate action on the part of KMV Corporation, and no other corporate or
shareholder proceedings on the part of KMV Corporation are necessary to approve
this Agreement or the Ancillary Agreements to which it is a party or to
authorize or consummate the Merger, the Stock Purchase or the other transactions
contemplated hereby or thereby. This Agreement and the Ancillary Agreements to
which it is a party have been duly and validly executed and delivered by KMV
Corporation (except for those Ancillary Agreements that are not dated the date
hereof, which Ancillary Agreements shall be duly and validly executed and
delivered prior to the Closing) and (assuming the due authorization, execution
and delivery of this Agreement and the Ancillary Agreements by the other parties
hereto and thereto) constitute valid and binding obligations of KMV Corporation
(except for those Ancillary Agreements that are not dated the date hereof, which
Ancillary Agreements shall constitute valid and binding obligations of KMV
Corporation at the Closing), enforceable against KMV Corporation in accordance
with their terms, except as the enforceability thereof may be subject to or
limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
relating to or affecting the rights of creditors generally and the availability
of equitable relief (whether in proceedings at law or in equity).
(c) Neither the execution and delivery of this Agreement or the
Ancillary Agreements to which it is a party by the Company or KMV Corporation
nor the consummation by the Company or KMV Corporation of any of the
transactions contemplated hereby or thereby to be
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performed by them, nor compliance by the Company or KMV Corporation with any of
the terms or provisions hereof or thereof, will (i) violate any provision of the
Company Operating Agreement, the Articles of Incorporation or bylaws of KMV
Corporation or the articles of incorporation, charter or bylaws or comparable
organizational documents of the Company's or KMV Corporation's Subsidiaries or
(ii) assuming that the consents and approvals referred to in Sections 4.4 and
4.8.10 hereof are duly obtained, (x) violate, conflict with or require any
notice, filing, consent, waiver or approval under any Applicable Law to which
the Company, KMV Corporation or their respective Subsidiaries or any of their
respective properties, Contracts or assets are subject, or (y) violate, conflict
with, result in a breach of any provision of or the loss of any benefit under,
constitute a default (or an event which, with or without notice or lapse of
time, or both, would constitute a default) under, result in the termination of
or a right of termination or cancellation under, accelerate or result in a right
of acceleration of the performance required by, result in the creation of any
liability under, result in the creation of any Encumbrance upon the Company
Units, the KMV Corporation Shares or any Encumbrance other than any Permitted
Encumbrance upon the properties, Contracts or assets of the Company, KMV
Corporation or their respective Subsidiaries under, or require any notice,
approval, waiver or consent under, any note, bond, mortgage, indenture, deed of
trust, license, lease, agreement or other instrument or obligation to which the
Company, KMV Corporation or their respective Subsidiaries is a party, or by
which the Company, KMV Corporation or their respective Subsidiaries or any of
their properties or assets may be bound or affected.
Section 4.4 Consents and Approvals. Except (x) for compliance with and
filings under the Securities Laws as may be required in connection with this
Agreement and the Ancillary Agreements and the transactions contemplated hereby
and thereby, (y) the filing of the Certificate of Merger and (z) for the
applicable filings under the HSR Act and any other applicable antitrust or
competition laws, no consents or approvals of or filings, declarations or
registrations with any Governmental Authority, any third party or any other
Person are necessary in connection with (i) the execution and delivery by the
Company, KMV Corporation and their respective Affiliates of this Agreement or
the Ancillary Agreements and (ii) the consummation by the Company and KMV
Corporation of the Merger, the Stock Purchase or the other transactions
contemplated by this Agreement or the Ancillary Agreements so as to permit the
Combined Company to continue the Company Business after the Closing Date in
substantially the same manner as conducted on the date hereof and as currently
proposed to be conducted by the Combined Company.
Section 4.5 Authorized Capitalization; Ownership of Company Units.
(a) Section 4.5(a) of the Company Disclosure Schedule sets forth all
interests of each Member in the Company, including all Company Base Units and
Company Appreciation Units (and the Strike Prices associated therewith). There
are no Company Units or other membership (or other ownership) interests in the
Company issued, reserved for issuance or outstanding other than those listed in
Section 4.5(a) of the Company Disclosure Schedule. All of the Company Units are
duly authorized, validly issued, fully paid, nonassessable and free of any
preemptive rights and, except as set forth in Sections 6.2(b), 7.1 through 7.3
and 7.5 of the Company Operating Agreement, are not subject to any voting trust
agreement (or similar agreement) or other Contract restricting or otherwise
relating to the voting, dividend rights or disposition of the Company Units to
which the Company or KMV Corporation is a party, or, to the Knowledge of
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the Company Group, to which any of the Members, any of the KMV Corporation
Shareholders or any other Person is a party. There is no outstanding option,
warrant, convertible or exchangeable security, right, subscription, call, right
of first refusal, legally binding commitment, preemptive right or other
agreement or right of any kind to purchase or otherwise acquire (including by
exchange or conversion) any Company Unit from the Company or KMV Corporation or,
to the Knowledge of the Company Group, any of the Members, any of the KMV
Corporation Shareholders or any other Person. There are no outstanding
obligations of the Company, KMV Corporation or any of their respective
Subsidiaries or, to the Knowledge of the Company Group, any of the Members, any
of the KMV Corporation Shareholders or any other Person to redeem, repurchase or
otherwise acquire any of the Company Units or any shares of capital stock (or
other ownership interests) of any of the Company's Subsidiaries, except as set
forth in Section 7.2 of the Company Operating Agreement. There are no bonds,
debentures, notes or other indebtedness generally having the right to vote (or
convertible into, or exchangeable for, Securities having the right to vote) on
any matters that holders of Company Units may consent or vote ("Company Voting
Debt"). There are no options, warrants, rights, convertible or exchangeable
Securities, "phantom" interests (or similar "phantom" Securities), or other
ownership interest appreciation rights, partnership or limited liability company
(or other ownership) interest performance units, commitments, Contracts,
arrangements or undertakings of any kind to which the Company, KMV Corporation
or any of their respective Subsidiaries or, to the Knowledge of the Company
Group, any of the Members or any of the KMV Corporation Shareholders is a party
or by which any of them is bound (i) obligating the Company, KMV Corporation or
any of their respective Subsidiaries or, to the Knowledge of the Company Group,
any of the Members, any of the KMV Corporation Shareholders or any other Person
to issue, deliver or sell, or cause to be issued, delivered or sold, existing or
additional membership interests of the Company or capital stock (or other
ownership interests) of its Subsidiaries, or any security convertible into or
exercisable or exchangeable for any of the foregoing or for Company Voting Debt,
(ii) obligating the Company, KMV Corporation or any of their respective
Subsidiaries or, to the Knowledge of the Company Group, any of the Members, any
of the KMV Corporation Shareholders or any other Person to issue, grant, extend
or enter into any such option, warrant, call, right, security commitment,
Contract, arrangement or undertaking, (iii) that give any Person the right to
receive any economic benefit or right similar to or derived from the economic
benefits and rights accruing to holders of the Company Units or capital stock
(or other ownership interests) of the Company's Subsidiaries or (iv) that give
rise to a right to receive any payment upon the execution of this Agreement or
the consummation of the Merger, the Stock Purchase or any of the other
transactions contemplated hereby.
(b) Section 4.5(b) of the Company Disclosure Schedule sets forth all
record holders of the capital stock of KMV Corporation and the number and
class(es) of shares of capital stock held by each such holder. There are no
shares of capital stock of KMV Corporation or other ownership interests in KMV
Corporation issued, reserved for issuance or outstanding other than the KMV
Corporation Shares listed in Section 4.5(b) of the Company Disclosure Schedule.
All of the shares of capital stock of KMV Corporation are duly authorized,
validly issued, fully paid, nonassessable and free of any preemptive rights and
are not subject to any voting trust agreement (or similar agreement) or other
Contract restricting or otherwise relating to the voting, dividend rights or
disposition of such shares to which the Company or KMV Corporation is a party,
or, to the Knowledge of the Company Group, to which any of the Members, any of
the KMV Corporation Shareholders or any other Person is a party. There is no
outstanding option, warrant,
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convertible or exchangeable security, right, subscription, call, right of first
refusal, legally binding commitment, preemptive right or other agreement or
right of any kind to purchase or otherwise acquire (including by exchange or
conversion) from the Company or KMV Corporation or, to the Knowledge of the
Company Group, any of the Members, any of the KMV Corporation Shareholders or
any other Person any shares of capital stock of KMV Corporation. There are no
outstanding obligations of the Company, KMV Corporation or any of their
respective Subsidiaries or, to the Knowledge of the Company Group, any of the
Members, any of the KMV Corporation Shareholders or any other Person to redeem,
repurchase or otherwise acquire any of the shares of capital stock of KMV
Corporation or any shares of capital stock (or other ownership interests) of any
of the KMV Corporation's Subsidiaries. There are no bonds, debentures, notes or
other indebtedness generally having the right to vote (or convertible into, or
exchangeable for, Securities having the right to vote) on any matters that
holders of shares of capital stock of KMV Corporation may consent or vote ("KMV
Corporation Voting Debt"). There are no options, warrants, rights, convertible
or exchangeable Securities, "phantom" interests (or similar "phantom"
Securities), other ownership interest appreciation rights, commitments,
Contracts, arrangements or undertakings of any kind to which the Company, KMV
Corporation or any of their respective Subsidiaries or, to the Knowledge of the
Company Group, any of the Members or any of the KMV Corporation Shareholders is
a party or by which any of them is bound (i) obligating the Company, KMV
Corporation or any of their respective Subsidiaries or, to the Knowledge of the
Company Group, any of the Members, any of the KMV Corporation Shareholders or
any other Person to issue, deliver or sell, or cause to be issued, delivered or
sold, existing or additional shares of capital stock of KMV Corporation or
capital stock (or other ownership interests) of its Subsidiaries, or any
security convertible into or exercisable or exchangeable for any of the
foregoing or for KMV Corporation Voting Debt, (ii) obligating the Company, KMV
Corporation or any of their respective Subsidiaries or, to the Knowledge of the
Company Group, any of the Members, any of the KMV Corporation Shareholders or
any other Person to issue, grant, extend or enter into any such option, warrant,
call, right, security commitment, Contract, arrangement or undertaking, (iii)
that give any Person the right to receive any economic benefit or right similar
to or derived from the economic benefits and rights accruing to holders of the
shares of capital stock of KMV Corporation or capital stock (or other ownership
interests) of its Subsidiaries or (iv) that give rise to a right to receive any
payment upon the execution of this Agreement or the consummation of the Merger,
the Stock Purchase or any of the other transactions contemplated hereby.
Section 4.6 Financial Statements; Undisclosed Liabilities.
Section 4.6 of the Company Disclosure Schedule sets forth true and
correct copies of (i) the audited consolidated balance sheet of the Combined
Company as of December 31, 2000 and the related consolidated statements of
income, changes in owners' equity and cash flows for the year ended December 31,
2000; (ii) the unaudited consolidated balance sheet of the Combined Company as
of December 31, 1999 and the related consolidated statements of income, changes
in owners' equity and cash flows for the year ended December 31, 1999; (iii) the
unaudited consolidated balance sheet of the Combined Company as of December 31,
2001 and the related consolidated statements of income, changes in owners'
equity and cash flows for the year ended December 31, 2001; and (iv) a schedule
of the deferred revenue of the Combined Company as of January 31, 2002 that
indicates new sales, cancellations, revenue earned and ending balance by client
since December 31, 2001 (the statements referred to in the foregoing clauses (i)
through
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(iv), the "Company Financial Statements" and the unaudited balance sheet as of
December 31, 2001, the "Company Balance Sheet"). The Company Financial
Statements (including the related notes thereto, where applicable) present
fairly in all material respects the consolidated financial position of the
Combined Company and the results of the Combined Company's consolidated
operations and cash flows for the fiscal periods therein set forth in accordance
with GAAP with respect thereto (except as indicated in the related notes
thereto, if any), and are consistent with the books and records of the Combined
Company (except as indicated in the related notes thereto, if any). The accounts
receivable reflected in the Company Financial Statements and all accounts
receivable arising since December 31, 2001 represent bona fide claims against
debtors for sales, services performed or other charges invoiced on or before the
Closing Date. As of December 31, 2001, the accounts receivable reflected in the
Company Financial Statements are collectible in the normal course of business
and, therefore, no reserve for uncollectible accounts was necessary as of
December 31, 2001 and therefore none is reflected in the 2001 Financial
Statements, provided that the foregoing does not constitute a guaranty of the
collectibility of such accounts receivable. The Combined Company does not have
any liabilities or obligations of any nature, whether absolute, accrued,
contingent or otherwise and whether due or to become due, which are of a type
that would be required to be shown on an audited balance sheet (or described in
the notes thereto) prepared in accordance with GAAP, except for (x) liabilities
that are fully reflected or reserved against on the Company Balance Sheet or
disclosed in the notes related thereto, and (y) liabilities incurred in the
ordinary course of business consistent with past practice since the date of the
Company Balance Sheet and which are not material, taken as a whole.
Section 4.7 Contracts. Except for those Contracts listed in Section 4.8,
Section 4.9 and Section 4.15 of the Company Disclosure Schedule, Section 4.7 of
the Company Disclosure Schedule sets forth a complete and accurate list or
description, as of the date of this Agreement, of all Contracts: (s) that are
between the Company, KMV Corporation or any of their respective Subsidiaries, on
the one hand, and any Person listed on Exhibit E hereto or any Person who, to
the Combined Company's Knowledge is a Subsidiary of any Person listed on Exhibit
E on the other hand, (t) which constitute Contracts with current clients or data
vendors providing data on a recurring basis; (u) which constitute nondisclosure
agreements or confidentiality agreements which could reasonably be expected to
have a significant effect on the conduct of the Company Business or the business
of Parent; (v) pursuant to which the Company, KMV Corporation or any of their
respective Subsidiaries are either obligated to pay or entitled to receive in
excess of $25,000 in any year that is not otherwise required to be disclosed
pursuant to subsections (t), (u), (w), (x), (y) or (z) of this Section 4.7;
provided, however, that Section 4.7 of the Company Disclosure Schedule does not
omit any Contracts pursuant to which, when viewed collectively, the Company, KMV
Corporation or any of their respective Subsidiaries are either obligated to pay
or entitled to receive in excess of $1,500,000 in any year in the aggregate; (w)
that constitute joint venture or outbound third-party redistribution
arrangements which are not terminable by the Company, KMV Corporation or any of
their respective Subsidiaries within ninety (90) days from the date of this
Agreement without penalty or further obligation on the part of the Company, KMV
Corporation or any of their respective Subsidiaries; (x) involve payments based
on profits or revenues of the Company, KMV Corporation or any of their
respective Subsidiaries; (y) are employment, management, consulting or severance
agreements with any of the current Company Employees or current Company
Independent Contractors or (z) include any noncompetition or nonsolicitation
covenant or any exclusive dealing or similar arrangement that
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limits the ability of the Company, KMV Corporation or any of their respective
Subsidiaries to compete (geographically or otherwise) in any line of business or
which would so limit the Surviving Company or Parent or any of their respective
Subsidiaries after the Effective Time (collectively, the "Scheduled Contracts").
As of the date hereof, each of the Contracts is a legal, valid and binding
obligation of the Company, KMV Corporation or their respective Subsidiaries
(assuming the due authorization, execution and delivery by the other parties
thereto) and is in full force and effect and enforceable in accordance with its
terms, except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and similar laws relating to or affecting creditors
generally and by the availability of equitable remedies (whether in proceedings
at law or in equity). As of the date of this Agreement, neither the Company, KMV
Corporation nor any of their respective Subsidiaries has received written notice
of cancellation of or default under or intent to cancel or call a default under
any of the Contracts nor, to the Knowledge of the Company Group, has the
Company, KMV Corporation or any of their respective Subsidiaries received verbal
notice of cancellation of or default under any of the Contracts. The Company,
KMV Corporation and each of their respective Subsidiaries have performed all
significant obligations (individually or in the aggregate) required to be
performed by it prior to the Closing under the Contracts, and assuming receipt
of the consents and approvals set forth in Section 4.4 and 4.8.10 hereof, there
exists no event or condition which with or without notice or lapse of time or
both would be a breach or a default of such significant obligations
(individually or in the aggregate) on the part of the Company, KMV Corporation
or any of their respective Subsidiaries or, to the Knowledge of the Company
Group, on the part of the other party to such Contracts, other than such
breaches and defaults that are not, individually or in the aggregate, reasonably
expected to have a Company Material Adverse Effect.
Section 4.8 Intellectual Property Matters.
Section 4.8.1 General. Section 4.8.1 of the Company Disclosure
Schedule sets forth a true, complete and accurate general description of all
Current Company IP by the following categories: Patents, Trademarks, Copyrights,
Compiled Data, Moral Rights, Tier One Trade Secrets and Tier Two Trade Secrets.
Section 4.8.1 of the Company Disclosure Schedule also sets forth a true,
complete and accurate list of all (a) Company Patents, Company Trademarks,
registered Company Owned Copyrights and significant unregistered Copyrights,
Company Inbound Licenses and Company Outbound Licenses; and (b) all
applications, negotiations and other filings with any Governmental Authority
relating to all Company Owned IP (whether in process or complete), indicating
for each the applicable jurisdiction, Governmental Authority, registration,
application or filing number and date issued or filed.
Section 4.8.2 Trademarks.
Section 4.8.2.1 All Company Owned Trademarks that are registered
or for which an application for trademark registration has been filed are
currently in compliance with all Applicable Law (including payment of filing,
examination and maintenance fees and the timely post-registration filing of
affidavits of use and incontestability and renewal applications) other than any
requirement that, if not satisfied, would not result in a cancellation of any
such registration or otherwise affect the use, priority or enforceability of the
Trademark in question. No registered Company Owned Trademark has been or is now
involved in any opposition or cancellation proceeding in the United States
Patent and Trademark Office or any
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comparable foreign agency. No such action has been threatened in writing, or to
the Knowledge of the Company Group, orally. To the Knowledge of the Company
Group, there has been no prior use of any Company Trademark by any third party
that confers upon said third party rights in any such Trademark.
Section 4.8.2.2 The Company is the owner of all right, title and
interest in and to all of the Company Owned Trademarks, in each case free and
clear of any and all Encumbrances, covenants, conditions and restrictions or
other adverse claims or interests of any kind or nature, and the Combined
Company has not received any written notice or claim or, to the Knowledge of the
Company Group, any oral notice or claim, challenging the Company's complete and
exclusive ownership of the Company Owned Trademarks or suggesting that any other
Person has any claim of legal or beneficial ownership with respect thereto.
There is no agreement, decree, arbitral award or other provision or contingency
which obligates the Company Group to grant licenses in future Trademarks. No
such action has been threatened in writing or, to the Company Group's Knowledge,
orally. To the Knowledge of the Company Group, no circumstances exist which
could give rise to such a threat or action.
Section 4.8.2.3 To the Company Group's Knowledge, no other
Person uses any Trademark that is the same as or confusingly similar to a
Company Owned Trademark. The Company Group has not taken any action or failed to
take any action or used or enforced any Company Owned Trademark in any manner
that would result in the abandonment or unenforceability of any Company Owned
Trademark.
Section 4.8.3 Patents.
Section 4.8.3.1 All Company Patents are currently in compliance
with all Applicable Law (including payment of filing, examination, and
maintenance fees and proofs of working or use) and the Company Group has not
taken any action or failed to take any action (including a failure to disclose
prior art in connection with the prosecution of any Patent), or used or enforced
(or failed to use or enforce) any of the Company Patents in a manner that would
result in the abandonment or unenforceability of any of the Company Patents.
Section 4.8.3.2 No Company Patent has been or is now involved in
any interference, reissue, reexamination or opposition proceeding in the United
States Patent and Trademark Office or any foreign patent office. No such action
has been threatened in writing, or to the Knowledge of the Company Group, orally
and, to the Knowledge of the Company Group, no circumstances exist which could
give rise to such a threat.
Section 4.8.3.3 To the Knowledge of the Company Group, there is
no Patent of any Person that claims the same subject matter as any Company
Patent or any other Patent licensed to the Combined Company (and its
predecessors in interest) or otherwise used in the Company Business and no prior
art invalidates any claim of any Company Patent.
Section 4.8.3.4 The Company is the owner of all right, title and
interest in and to all of the Company Patents, in each case free and clear of
any and all Encumbrances, covenants, conditions and restrictions or other
adverse claims or interests of any kind or nature, and the Company Group has not
received any notice or claim (whether written
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or, to the Knowledge of the Company Group, oral) challenging the Combined
Company's complete and exclusive ownership of the Company Patents or suggesting
that any other Person has any claim of legal or beneficial ownership with
respect thereto. There is no agreement, decree, arbitral award or other
provision or contingency which obligates the Combined Company to grant licenses
in future Patents. No such action has been threatened in writing or, to the
Company Group's Knowledge, orally and, to the Knowledge of the Company Group, no
circumstances exist which could give rise to such a threat.
Section 4.8.3.5 The Inventions disclosed in the Company Patents
may be practiced by the Company without infringing any other Patents or other
Intellectual Property Rights owned by any Person and, to the Knowledge of the
Company Group, there are no circumstances or facts that would give rise to any
claim of Infringement, provided that the foregoing "Knowledge of the Company
Group" qualification shall not apply where such an Infringement would,
individually, or in the aggregate, have a material impact upon the Company
Business.
Section 4.8.3.6 The Company Group has not granted to any Person
any right, license or permission to practice any of the Inventions claimed in
the Company Patents.
Section 4.8.4 Copyrights and Moral Rights.
Section 4.8.4.1 The Company is the owner of all right, title and
interest in and to each of the Company Owned Copyrights, free and clear of any
and all Encumbrances, covenants, conditions and restrictions or other adverse
claims or interests of any kind or nature, and each member of the Combined
Company has the right to use all Company Licensed Copyrights as used in the
operation of the Company Business and shall continue to have such rights after
the Closing on the same terms and conditions as in existence prior to the
Closing. The Company Group has not received any notice or claim (whether written
or, to the Knowledge of the Company Group, oral) challenging the Combined
Company's complete and exclusive ownership of the Company Owned Copyrights or
right to use all Company Licensed Copyrights used in the operation of the
Company Business or claiming that any other Person has any claim of legal or
beneficial ownership with respect thereto.
Section 4.8.4.2 The Company Group has not received any written
notice or claim challenging or questioning the validity or enforceability of any
of the Company Copyrights or threatening on the part of any Person to bring a
claim that any Company Copyright is invalid, is unenforceable or has been
misused. To the Knowledge of the Company Group, the Company Group has not
received any oral notice or claim specifically challenging or questioning the
validity or enforceability of any of the Company Copyrights. No circumstances
exist which could give rise to a challenge or threat to any Company Copyright
that is significant to the operation of the Company Business.
Section 4.8.4.3 The Company Group has not taken any action, or
failed to take any action (including a failure to disclose required information
to the United States Copyright Office or any comparable foreign agency in
connection with a registered Company Owned Copyright), or used or enforced (or
failed to use or enforce) any of the Company Owned
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Copyrights, in each case in a manner that would result in the unenforceability
of any of the Company Owned Copyrights. The Company has taken all reasonable
steps to protect the Company Group's rights in and to the Company Owned
Copyrights. To the Knowledge of the Company Group, no other Person has infringed
or is infringing in any significant respect any of the Company Copyrights.
Section 4.8.4.4 No Moral Rights have been claimed (whether
written or, to the Knowledge of the Company Group, oral) in relation to any
Company Copyrights and/or other Company IP. All Moral Rights in relation to
Company Owned IP have been waived by the respective owners thereof.
Section 4.8.5 Trade Secrets.
Section 4.8.5.1 The Company is the owner of all right, title and
interest in and to all of the Tier 1 Trade Secrets, and, to the Knowledge of the
Company, the Tier 2 Trade Secrets, in each case free and clear of any and all
Encumbrances, covenants, conditions and restrictions or other adverse claims or
interests of any kind or nature, and the Company Group has not received any
notice or claim (whether written or, to the Knowledge of the Company Group,
oral) challenging the Combined Company's complete and exclusive ownership of the
Tier 1 Trade Secrets or Tier 2 Trade Secrets, or suggesting that any other
Person has any claim of legal or beneficial ownership with respect thereto,
provided that this representation is true and correct without regard to
Knowledge where non-ownership of Tier 2 Trade Secrets would, individually, or in
the aggregate, have a material impact upon the Company Business.
Section 4.8.5.2 The Company Group has taken all necessary steps
to protect Tier 1 Trade Secrets and all reasonable steps to protect Tier 2 Trade
Secrets and the Trade Secrets of any other Person to which it has a written,
fiduciary or legal obligation of confidentiality.
Section 4.8.5.3 Except pursuant to terms of written proprietary
rights and confidential information agreements that appropriately protect the
Company Trade Secrets, there have been no disclosures by the Company Group,
Company Employees or Company Independent Contractors, of the Company Trade
Secrets or the Trade Secrets of any other Person to which the Company Group has
a written, fiduciary or legal obligation of confidentiality. No actions have
been taken by the Company Group, Company Employees or Company Independent
Contractors, which would adversely affect the Company Group's ability to obtain
U.S. or foreign protection (other than Patent protection) for any Company Trade
Secrets owned by the Combined Company or, to the Knowledge of the Company Group,
the ability of any other Person to obtain U.S. or foreign protection (other than
Patent protection) for any Company Trade Secrets that are not Company Owned IP.
Section 4.8.6 License Agreements.
Section 4.8.6.1 Section 4.8.6.1(a) of the Company Disclosure
Schedule sets forth a complete and accurate list of all Company Inbound
Licenses, indicating for each the title and the parties thereto. Section 4.8.6.1
(b) of the Company Disclosure
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Schedule sets forth a complete and accurate list of all Company Outbound
Licenses, indicating for each the title and the parties thereto.
Section 4.8.6.2 There are no delinquent fees, penalties,
shortfall payments, bill backs or other amounts outstanding under any Company
Outbound License or Company Inbound License, other than those disclosed on the
Company Balance Sheet. No member of the Company Group has received any written
notice from the other party to a Company Outbound License or Company Inbound
License to the effect that such Person will not accept business from or supply
business to, as the case may be, the Combined Company, Parent or the Surviving
Company on such terms, conditions and quantities consistent with past practices.
To the Knowledge of the Company Group, no event has occurred which would give
rise to such notice. To the Knowledge of the Company Group, no member of the
Company Group has received any oral notice from the other party to a Company
Outbound License or Company Inbound License to the effect that such Person will
not accept business from or supply business to, as the case may be, the Combined
Company, Parent or the Surviving Company on such terms, conditions and
quantities consistent with past practices. No licenses or rights have been
granted by any member of the Company Group or by any other Person to distribute
or otherwise use the source code of or create Derivative Works of or from any
Company Owned IP. No Company IP source code has been disclosed by the Company
Group to any Person other than a Company Employee who has executed a Company NDA
or Company Independent Contractor who has executed a Company PRC and each of
whom has or had a business need to access such source code. As of the date
hereof and the Closing Date, no non-Combined Company Person has any exclusive
right, license or permission to exercise any rights under any of the Current
Company IP. The Combined Company has provided Parent with copies of each form of
Company End User Agreement currently in effect. Section 4.8.6.2 of the Company
Disclosure Schedule describes the Combined Company's current policy with regard
to entering into Company Outbound License Agreements and Company End User
Agreements.
Section 4.8.6.3 There is no outstanding or, to the Company
Group's Knowledge, threatened dispute or disagreement with respect to any
Company Inbound License or any Company Outbound License which dispute or
disagreement would result in the termination of, or suspension of, or otherwise
adversely impact, such license(s). To the Knowledge of the Company Group, no
circumstances exist which could give rise to such a dispute or disagreement. The
foregoing "Knowledge of the Company Group" qualifications in this Section
4.8.6.3 shall not apply where a dispute or disagreement would, individually, or
in the aggregate, have a material impact upon the Company Business. Correct and
complete executed copies of all Company Inbound Licenses and Company Outbound
Licenses have been made available to Parent.
Section 4.8.7 Ownership; Sufficiency of Intellectual Property. The
Company owns the entire right, title and interest in and to all Company Owned
IP, free and clear of Encumbrances, orders and arbitration awards. The Company
has a license or other right to use all Company Licensed IP that is Current
Company IP, to the Knowledge of Company Group, free and clear of Encumbrances,
orders and arbitration awards, provided that the foregoing "Knowledge of the
Company Group" qualification shall not apply where an Encumbrance, order or
arbitration award would, individually, or in the aggregate, have a material
impact upon the Company Business. The Company owns or otherwise has the right to
use all Current Company
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IP as such Current Company IP is used in the Company Business. The Current
Company IP constitutes all the Intellectual Property rights used in the
operation of the Company Business and are all such Intellectual Property rights
necessary to operate the Company Business after the Effective Time in
substantially the same manner the Company Business has been operated by the
Combined Company prior to the Effective Time. No member of the Company Group nor
any Company Person has made any submission to, and is not subject to any
agreement with, Standards Bodies, Governmental Authorities or other entities
which would obligate any member of the Company Group to grant licenses (other
than pursuant to the Company End User Agreements) to or otherwise impair the
Company's ownership, use or control of any Current Company IP.
Section 4.8.8 No Infringement by the Company Group or Company
Person. The Company Owned IP (excluding the Company Owned Trademarks), the
operation of the Company Business and, to the Knowledge of the Company Group,
the Company Owned Trademarks and the Company Licensed IP when used in the
Company Business did not and does not Infringe upon, violate or constitute the
unauthorized use of any rights owned or controlled by any third party, including
any Intellectual Property of any other Person, provided that the foregoing
"Knowledge of the Company Group" qualification shall not apply to Company
Licensed IP where such an Infringement or unauthorized use, individually or in
the aggregate, would have a material impact upon the Company Business. No
litigation is now or has ever been pending and no notice or claim (whether
written or, to the Knowledge of the Company Group, oral) has been received by
the Company Group, (A) alleging that any member of the Company Group has engaged
in any activity or conduct that Infringes upon, violates or constitutes the
unauthorized use of the Intellectual Property rights of any other Person,
including any contamination or misappropriation of Trade Secrets claims, or (B)
challenging the ownership, use, validity or enforceability of any Company Owned
IP or, to the Knowledge of the Company Group, any Company Licensed IP. No
Company Owned IP or, to the Knowledge of the Company Group, any Company Licensed
IP is subject to any outstanding order, judgment, decree, stipulation or
agreement (other than pursuant to the express terms of each Company Inbound
License Agreement or Company Outbound License Agreement) restricting the use
thereof by any member of the Company Group or, in the case of Company Owned IP
licensed by any member of the Company Group to others, restricting the sale,
transfer, assignment or licensing thereof by any member of the Company Group to
any Person. To the Knowledge of the Company Group, no circumstances exist which
could give rise to any of the foregoing.
Section 4.8.9 No Infringement by Third Parties. To the Knowledge of
the Company Group, no third party is infringing any Company IP. No claims for
Infringement have been brought against any third party by any member of the
Company Group (whether written or, to the Knowledge of the Company Group, oral).
The Company Group has taken, at a minimum, all reasonable steps to protect all
Current Company IP or any other Intellectual Property or confidential or
proprietary information of any other Person to whom any member of the Company
Group has a legal, fiduciary, contractual or other obligation of confidentiality
or non-disclosure.
Section 4.8.10 Assignment; Change of Control. The execution,
delivery and performance by each member of the Company Group of this Agreement
and each of the Ancillary Agreements to which it is a party, and the
consummation of the transactions
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contemplated hereby and thereby, will not result in or give rise to (i) any
right of termination or other right to impair or limit any of the Combined
Company's rights to own or license any of the Current Company IP, pursuant to
the terms of any Company Inbound License or Company Outbound License, or (ii)
the inability (for any period of time) for the Combined Company to transfer such
rights to Parent or the Surviving Company pursuant to the terms of this
Agreement and the Ancillary Agreements. Nor will such transactions or
assignments require the consent of any Governmental Authority, third party or
other Person in respect of any such Intellectual Property.
Section 4.8.11 Software and Compiled Data. All Company Software,
Company Compiled Data and other Company Owned IP: (i) was developed by Company
Employees acting within the scope of their employment and such Company Software,
Company Compiled Data and other Company Owned IP is owned by the Combined
Company by operation of Law, or pursuant to the terms of a Company NDA; (ii) was
developed by Company Independent Contractors or other Company Persons who have
expressly assigned and waived their rights in writing to the Company; (iii) was
otherwise acquired by the Company from a Person who expressly assigned and
waived in writing all Intellectual Property rights in the Software; or (iv) is
subject to a Company Inbound License Agreement or other Contract. None of the
Company Software is, in whole or in part, subject to the provisions of any open
source or quasi-open source license agreement entered into by the Combined
Company after January 1, 2000 or to the knowledge of the Company Group, before
such date.
Section 4.8.12 Existing Products. All Company Software, Company
Compiled Data and other products, in each case as offered by the Combined
Company perform, free of any bugs, viruses or programming errors that would
individually or in the aggregate significantly affect its or their functionality
(either individually or in the aggregate), the functions or functionality
required by any Governmental Authority or described in any agreed specifications
or end user documentation including all representations and warranties contained
in any Company End User Agreements. No member of the Company Group has been
notified, either in writing or (to the Knowledge of the Company Group, orally),
that such Software, Compiled Data or products do not perform as set forth above
or violate any such representations and warranties. No Company Software or other
products, in each case offered by the Combined Company are currently in Beta
Testing with customers or potential customers of the Combined Company.
Section 4.8.13 Intellectual Property Documents. Without limiting the
generality of Section 4.8.5.2, the Company Group enforces a policy of requiring
(a) each Company Employee to execute and deliver to the Combined Company a valid
Company NDA and (b) each other Company Person involved in the development of
Company IP to execute and deliver to the Combined Company a valid Company PRC.
All Current Company Employees have executed a Company NDA. Copies of all Company
NDAs and Company PRCs for Current Company Employees and Current Company
Independent Contractors have been made available to Parent. The Company NDAs,
the Company PRCs and/or Applicable Law (a) appropriately protect the Company IP
and all Intellectual Property and confidential or proprietary information of any
other Person to whom the Company Group has a legal, fiduciary, contractual or
other obligation of confidentiality or non-disclosure and (b) assign to the
Combined Company and waive all rights in and to any Company IP that are
developed by any Company Persons. Without
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limiting the generality of Section 4.8.5.2, all Intellectual Property and other
rights in and to all Company IP developed or otherwise created or conceived by
each Company Person (including without limitation all Company Employees) in the
course of his, her or its employment with or engagement by the Combined Company
or any of its predecessors in interest have vested in or been fully assigned to
the Combined Company and waived by the Company Person, either by operation of
Law or pursuant to a valid Company PRC ("Vested IP Rights"). Any and all
documents (other than Company NDAs or Company PRCs) purporting to perfect such
assignments and waivers have been completed, made available to Parent and, with
respect to Company Patents, filed by the Combined Company with the appropriate
Governmental Authorities. Upon consummation of the transactions contemplated
hereby and in the Ancillary Agreements, Parent or the Merger Sub (without
consent or the creation of any Encumbrance) shall have full right to all of the
Combined Company's rights in and to and arising under any Vested IP Rights), and
full right to enforce the terms of any Company NDA or Company PRC. The
consummation of the Merger, the Stock Purchase and the transactions contemplated
by this Agreement and the Ancillary Agreements will not materially alter or
impair the Combined Company's rights to and interests in any Company IP
(including all Vested IP Rights or any other rights under any Company PRC or
Company NDA. There are no intervening assignments, Encumbrances, security
interests, mortgages, or other rights of other Persons that do or may in any way
impact the ownership, scope or breadth of any claims in any Company IP
(including, without limitation, Vested IP Rights).
Section 4.9 Employee Benefit Matters.
(a) Section 4.9(a) of the Company Disclosure Schedule sets forth a true
and complete list of each "employee benefit plan" as defined in Section 3(3) of
ERISA and any other plan, policy, program, practice, agreement, understanding or
arrangement (whether written or oral) providing any present or future right to
benefits to any current or former director, officer, employee or consultant (or
to any dependent or beneficiary thereof) of the Company, KMV Corporation or any
ERISA Affiliate, which are now, or were within the past six years, maintained,
sponsored or contributed to by KMV Corporation, the Company or any ERISA
Affiliate, or under which KMV Corporation, the Company or any ERISA Affiliate
has had or has any present or future obligation or liability, whether actual or
contingent, including, without limitation, all incentive, bonus, deferred
compensation, change-in-control, fringe benefit, vacation, holiday, cafeteria,
medical, disability, stock purchase, stock option, stock appreciation, phantom
stock, restricted stock or other stock-based compensation plans, policies,
programs, practices or arrangements. Each such plan, agreement, program, policy
and arrangement shall be referred to as a "Benefit Plan". Each Benefit Plan is
further designated in Section 4.9(a) of the Company Disclosure Schedule as
either currently or formerly maintained, sponsored or contributed to by the
Company (a "Company Benefit Plan") by KMV Corporation (a "KMV Corporation
Benefit Plan") or by any other entity (in which case such entity is set forth).
Neither the Company, KMV Corporation or any ERISA Affiliate, nor to the
Knowledge of the Company Group, any other Person, has any express or implied
commitment, whether legally enforceable or not, to modify, change or terminate
any Company Plan, other than with respect to a modification, change or
termination required by ERISA or the Code.
With respect to each Benefit Plan, the Company has delivered to Parent
true, current, correct and complete copies of (A) each Benefit Plan (or, if not
written, a written summary of its
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material terms), including without limitation all plan documents, adoption
agreements, trust agreements, insurance Contracts or other funding vehicles and
all amendments thereto, (B) all summaries and summary plan descriptions,
including any summary of material modifications or Form 5305-SEP distributed to
Benefit Plan participants, (C) the most recent annual reports (Form 5500 series)
filed with the IRS with respect to such Benefit Plan (and, if the most recent
annual report is a Form 5500R, the most recent Form 5500C filed with respect to
such Benefit Plan) and any attached schedules, (D) the most recent actuarial
report or other financial statement relating to such Benefit Plan, as
applicable, (E) the most recent determination or opinion letter, if any, issued
by the IRS with respect to any Benefit Plan and any pending request for such a
determination letter, (F) the most recent nondiscrimination tests performed
under the Code (including 401(k) and 401(m) tests) for each Benefit Plan, (G) a
description of any amendments to a Benefit Plan that are materially different
from the terms of the Benefit Plan in existence at the time the determination or
opinion letter was obtained, and (H) all filings made with any Governmental
Authorities, including but not limited any filings under the Voluntary
Compliance Resolution or Closing Agreement Program or the Department of Labor
Delinquent Filer Program.
(b) Each Benefit Plan has been administered in material compliance with
its terms and all Applicable Laws, including ERISA and the Code, and
contributions required to be made under the terms of any of the Benefit Plans as
of the date of this Agreement have been timely made or, if not yet due, have
been properly reflected on the Company Balance Sheet. With respect to the
Benefit Plans, to the Knowledge of the Company Group, no event has occurred and
there exists no condition or set of circumstances in connection with which the
Company could be subject to any liability (other than for liabilities to pay
benefits) under the terms of, or with respect to, such Benefit Plans, ERISA, the
Code or any other Applicable Law.
(c) Except as disclosed in Section 4.9(c) of the Company Disclosure
Schedule: (A) each Benefit Plan which is intended to qualify under Section
401(a), Section 401(k), Section 401(m), Section 408 or Section 4975(e)(6) of the
Code has either received a favorable determination letter from the IRS as to its
qualified status or the remedial amendment period for such Benefit Plan has not
yet expired, and each trust established in connection with any Benefit Plan
which is intended to be exempt from federal income taxation under Section 501(a)
of the Code is so exempt, and to the Knowledge of the Company Group, no fact or
event has occurred that would be reasonably likely to adversely affect the
qualified status of any such Benefit Plan or the exempt status of any such
trust, (B) to the Knowledge of the Company Group, there has been no prohibited
transaction (within the meaning of ERISA or the Code and other than a
transaction that is exempt under a statutory or administrative exemption) with
respect to any Benefit Plan that could result in liability to KMV Corporation,
the Company or any ERISA Affiliate, (C) each Benefit Plan can be amended,
terminated or otherwise discontinued after the Effective Time in accordance with
its terms, without liability (other than liability for ordinary administrative
expenses typically incurred in a termination event), (D) no suit, administrative
proceeding, action or other litigation has been brought or, to the Knowledge of
the Company Group, is threatened, against or with respect to any such Benefit
Plan, including any audit or inquiry by the IRS or United States Department of
Labor or pursuant to Section 502 of ERISA (other than routine benefits claims),
(E) no Benefit Plan is a multiemployer pension plan (as defined in Section 3(37)
of ERISA) ("Multiemployer Plan") or other pension plan subject to Title IV of
ERISA or Section 412 of the Code and neither KMV Corporation, the Company nor
any
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ERISA Affiliate has ever sponsored or contributed to or been required to
contribute to a Multiemployer Plan or other pension plan subject to Title IV of
ERISA or Section 412 of the Code, (F) all tax, annual reporting and other
governmental filings required by ERISA and the Code have been timely filed with
the appropriate Governmental Authority and all notices and disclosures have been
timely provided to participants, (G) all prior contributions and payments to
such Benefit Plan have been deductible under Code Sections 162 or 404, (H) no
amount is subject to Tax as unrelated business taxable income under Section 511
of the Code, and (I) no excise tax could be imposed upon the Company under
Chapter 43 of the Code.
(d) Except as required by Law, no Benefit Plan provides any retiree or
post-employment welfare benefits to any Person. No Benefit Plan is a voluntary
employee benefit association under Section 501(c)(9) of the Code. KMV
Corporation, the Company and each of its ERISA Affiliates are in material
compliance with (i) the requirements of the applicable health care continuation
and notice provisions of the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended, and the regulations thereunder and any similar state law and
(ii) the applicable requirements of the Health Insurance Portability and
Accountability Act of 1996, as amended, and the regulations thereunder.
(e) Section 4.9(e) of the Company Disclosure Schedule sets forth a true
and complete list of each Benefit Plan providing incentive compensation or other
benefits, which plan, program or arrangement is subject to the laws of any
jurisdiction outside of the United States ("Foreign Benefit Plans"): (A) the
Foreign Benefit Plans have been maintained in all material respects in
accordance with all applicable requirements and all Applicable Law, (B) if they
are intended to qualify for special tax treatment, the Foreign Benefit Plans
meet all requirements for such treatment, (C) if they are intended to be funded
and/or book-reserved are fully funded and/or book reserved, as appropriate,
based upon reasonable actuarial assumptions, and (D) no material liability
exists or reasonably could be imposed upon the assets of the Company or any
Subsidiary by reason of such Foreign Benefit Plans other than for benefits due
under the terms of any final plan.
(f) There is no Foreign Benefit Plan or other plan, scheme or
arrangement to which the Company, KMV Corporation or any of their respective
Subsidiaries contributes or may become liable to contribute under which benefits
of any kind are payable to or in respect of any of the Foreign Subsidiary
Employees on retirement or death or in the event of disability or sickness or in
other similar circumstances. No such undertaking or assurance has been or will
be given to any Foreign Subsidiary Employee from or on behalf of the Combined
Company.
(g) Neither the Company, KMV Corporation nor any of their respective
Subsidiaries is under any obligation to pay, provide, procure the provision of
or contribute towards any relevant benefit within the meaning of Section 612 of
the Income and Corporation Taxes Act of 1988 in the United Kingdom or any other
Applicable Law ("Relevant Benefits") for or in respect of the Foreign Subsidiary
Employees.
(h) No Benefit Plan exists, and no other payment shall be made that, as
a result of the execution of this Agreement or the transactions contemplated by
this Agreement (whether alone or in connection with a subsequent event), could
result in the payment to any Company Group Employee of any money or other
property or could result in the increase, acceleration or
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provision of any payments, other rights or benefits to any Company Group
Employee, whether or not any such payment, right or benefit would constitute a
parachute payment within the meaning of Code Section 280G.
Section 4.10 Labor and Other Employment Matters.
(a) Section 4.10(a) of the Company Disclosure Schedule sets forth a
complete and accurate list (giving name, job title, credited service, current
annual compensation (including a separate statement of base salary, bonus and
benefits for each individual)) of each current Company Employee and current
Company Independent Contractor and designates which member of the Combined
Company employs or retains each current Company Employee and current Company
Independent Contractor. Each Company Employee is an "at will" employee (whose
employment may be terminated at any time by the relevant member of the Combined
Company or such employee) and has the right to work for the Company, and none of
the Company Employees is in the final stages of any disciplinary process. Each
of the Company Independent Contractors may be terminated on 30 days' notice.
None of the members of the Combined Company is or has ever been delinquent in
payments to any Company Employees or Company Independent Contractors or other
Company Persons (other than professional advisers) for any wages, salaries,
commissions, bonuses or other direct compensation for any services performed for
it or amounts required to be reimbursed to such employee. The members of the
Combined Company are and have always been in compliance with all Applicable Law
respecting labor, employment, immigration, fair employment practices, terms and
conditions of employment, workers' compensation, occupational safety, plant
closings, wages and hours and any other Law applicable to any of the Company
Employees, Company Independent Contractors or other Company Persons. Each member
of the Combined Company has withheld all amounts required by Applicable Law or
by agreement to be withheld from the wages, salaries, and other payments to
employees, and no member of the Combined Company is or has ever been liable for
any arrears of wages or any Taxes or any penalty for failure to comply with any
of the foregoing. No member of the Combined Company is or has ever been liable
for any payment to any trust or other fund or to any Governmental Authority with
respect to unemployment compensation benefits, social security or other benefits
or obligations for employees (other than routine payments to be made in the
ordinary course of business and consistent with past practice).
(b) There are no pending claims against the Combined Company under any
Benefit Plan or Foreign Benefit Plan or under any workers' compensation plan or
policy or for long-term disability (other than regular claims for benefits in
accordance with such Plans and policies). There are no controversies pending or,
to the Knowledge of the Company Group, threatened between the Combined Company
and any Company Employee or Company Independent Contractor, which controversies
have or could reasonably be expected to result in an action, suit, proceeding,
claim, arbitration or investigation before any Governmental Authority.
(c) To the Knowledge of the Company Group, no Company Employee, Company
Independent Contractor or any other Company Person is or has ever been in
violation of any term of any employment Contract, non-disclosure agreement,
noncompetition agreement, or any restrictive covenant to a former employer
relating (i) to the right of any such Person to be employed or retained by the
Combined Company because of the nature of the business conducted or presently
proposed to be conducted by the Combined Company or (ii) to the use by
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or for the benefit of any member of the Combined Company of Trade Secrets,
Intellectual Property or confidential proprietary information of others. No
Company Employee, Company Independent Contractor or any other Company Person is
or has ever been in violation of any term of any employment Contract,
non-disclosure agreement, noncompetition agreement or restrictive covenant
relating to the Company Business, except for such violations which have been
cured prior to the date of this Agreement.
(d) As of the date of this Agreement, no current Company Employee or
Company Independent Contractor has given notice to the Combined Company, nor
does the Company Group otherwise have any Knowledge, that any such Person
intends to terminate his or her employment or independent contractor
relationship with the Combined Company. The Combined Company is in compliance
with all Laws concerning the classification of employees and independent
contractors and has properly classified all such persons for purposes of
participation in the Benefit Plans, Foreign Benefit Plans and Relevant Benefits.
(e) The Combined Company has provided Parent with copies of all
Contracts listed under Section 4.7(y) of the Company Disclosure Schedule,
including any amendments thereto. Other than as expressly set forth in such
Contracts or amendments or as expressly described in Section 4.10(a) of the
Company Disclosure Schedule, there have been no changes to the remuneration or
benefits of any kind payable or due to any Company Employee or Company
Independent Contractor.
(f) No member of the Combined Company has recognized any trade union nor
has it entered into any kind of collective bargaining agreement or arrangement.
Section 4.11 Tax Matters.
(a) All Tax Returns of KMV Corporation, the Company and their respective
Subsidiaries required to be filed on or before the Closing Date have been duly
and timely filed (taking into account all proper extensions) with the
appropriate Taxing authorities. All such Tax Returns were complete, correct and
accurate in all material respects. All allocations, distributions and
contributions to and from each Member reported in each Tax Return properly
reflect the provisions of the Company Operating Agreement. All material Taxes
owed by KMV Corporation, the Company or their respective Subsidiaries (whether
or not shown on any Tax Return) have been paid. The unpaid Taxes of KMV
Corporation, the Company and their respective Subsidiaries did not, as of the
date of the Company Financial Statements, exceed the reserve for Tax liability
set forth on the face of the Company Financial Statements.
(b) Neither KMV Corporation, the Company nor any of their respective
Subsidiaries has received any written notice of deficiency or assessment from
any Taxing authority with respect to liabilities for Taxes of the Company or any
of its Subsidiaries which have not been paid or finally settled. To the
Knowledge of the Company Group, no claim has ever been made in writing by an
authority in a jurisdiction where KMV Corporation, the Company or any of their
respective Subsidiaries do not file Tax Returns that such entity is or may be
subject to taxation by that jurisdiction. No audit of any Tax Return concerning
KMV Corporation, the Company or any of their respective Subsidiaries is pending,
being conducted, or to the Knowledge of the Company Group, threatened to be
instituted by a Taxing authority. Neither KMV Corporation,
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the Company nor any of their respective Subsidiaries has in effect a waiver of
any statute of limitation in respect of Taxes or agreed to any extension of time
with respect to a Tax assessment or deficiency that will be in effect as of the
Closing Date. There are no outstanding powers of attorney enabling any party to
represent KMV Corporation, the Company or any of their respective Subsidiaries
with respect to Tax matters.
(c) There are no liens for Taxes on any assets of KMV Corporation, the
Company or any of their respective Subsidiaries other than liens for current
Taxes not yet due and payable.
(d) KMV Corporation has at all times during its existence had in effect
a valid election under Section 1362 of the Code to be treated as an "S
corporation" within the meaning of Section 1361 of the Code, and has also had in
effect a valid corresponding election for purposes of each state in which the
Combined Company engages in business (to the extent such state permits
corporations to make such an election).
(e) Each of the Company and its domestic Subsidiaries is, and has been
at all times since its formation, properly treated as a partnership for United
States federal income and applicable state income tax purposes.
(f) Neither KMV Corporation, the Company nor any of their respective
Subsidiaries has agreed, or is required, to make any adjustment under Section
481(a) of the Code by reason of a change in accounting method or otherwise.
Neither KMV Corporation, the Company nor their respective Subsidiaries has made
an election, or is required, to treat any asset of it as owned by another Person
pursuant to the provisions of former Section 168(f)(8) of the Internal Revenue
Code of 1954 or as "tax exempt use property" or "tax exempt bond financed
property" within the meaning of Section 168 of the Code.
(g) Neither KMV Corporation, the Company nor any of their respective
Subsidiaries has any liability for the Taxes of any other Person as a transferee
or successor, by Contract or otherwise.
(h) There are no Tax sharing or Tax indemnity agreements or similar
arrangements with respect to or involving KMV Corporation, the Company or any of
their respective Subsidiaries.
(i) Each of KMV Corporation, the Company and their respective
Subsidiaries has complied in all material respects with all applicable
governmental rules relating to the payment and withholding of Taxes and has,
within the time and the manner prescribed by law, paid over to the proper
Governmental Authorities all amounts withheld.
(j) Each of the Foreign Subsidiaries has duly and punctually made all
such deductions as are required by Applicable Law from all payments made or
deemed to be made or treated as made by each of them, respectively, or on their
behalf and has duly accounted to the relevant Taxing Authority for all Tax
deducted by it and proper records have been maintained in respect of such
matters. Each of the Foreign Subsidiaries has complied promptly and in full with
all legislation and regulations relating to national insurance, pension and
other employee benefits contributions and the taxation of employee benefits
(including, without limitation, PAYE in the
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United Kingdom) and no circumstances exist as a result of which either of the
Foreign Subsidiaries is or may directly or indirectly become liable for any Tax
in connection therewith.
Section 4.12 Legal Proceedings. There are no legal, administrative,
arbitral or other proceedings (including disciplinary proceedings), claims,
suits, actions or governmental or regulatory investigations of any nature
whether domestic or foreign (collectively, "Proceedings") that are pending or,
to the Knowledge of the Company Group, threatened (i) against the Company, KMV
Corporation or any of their respective Subsidiaries or any of their respective
directors or officers (in their capacity as such) or any of the Company Assets
or the Company Business or that challenge the validity or propriety of the
transactions contemplated by this Agreement or by any of the Ancillary
Agreements; (ii) to the Knowledge of the Company Group, involving any of the
products of the Company, KMV Corporation or any of their respective
Subsidiaries; or (iii) to the Knowledge of the Company Group, challenging the
right of the Company, KMV Corporation or any of their respective Subsidiaries to
use any products owned or licensed by any of the Combined Company's vendors
("Company Vendor Lawsuits"), provided that the foregoing "Knowledge of the
Company Group" qualification shall not apply with respect to any Company Vendor
Lawsuits that if adversely determined would be reasonably expected to have a
significant adverse impact (either individually or in the aggregate) on Parent's
ability to conduct the Company Business. There is no injunction, order, judgment
or decree imposed upon the Company, KMV Corporation or any of their respective
Subsidiaries, any of the Company Assets or the Company Business.
Section 4.13 Compliance with Applicable Law.
(a) The Company, KMV Corporation and each of their respective
Subsidiaries holds, and at all times has held, and at Closing will hold, all
licenses, franchises, decrees, permits and authorizations required under
Applicable Law (collectively, "Permits") for the lawful ownership, operation and
use of the Company Assets and the conduct of the Company Business, and has
complied with each, and none of the Company, KMV Corporation or any of their
respective Subsidiaries is in default under any Applicable Law relating to the
Company, KMV Corporation or any of their respective Subsidiaries or any of their
respective assets, properties or operations, and there are no outstanding
violations of any of the above, and none of the Company, KMV Corporation or any
of their respective Subsidiaries has received notice asserting any such
violation. The Company, KMV Corporation and each of their respective
Subsidiaries have been and are in compliance with all Permits. Section 4.13(a)
of the Company Disclosure Schedule sets forth a true and complete list of all
Permits currently held by the Company, KMV Corporation and each of their
respective Subsidiaries required to operate the Company Business as currently
conducted.
(b) Except for normal examinations conducted by any Governmental
Authority in the regular course of the business of the Company, KMV Corporation
and their respective Subsidiaries, since December 31, 1998 no Governmental
Authority has initiated, and no Governmental Authority has provided written
notice to any member of the Company Group of any threatened proceeding or
investigation into the business or operations of the Company, KMV Corporation or
any of their respective Subsidiaries or any of their members, officers,
directors or employees in their capacity as such with the Company, KMV
Corporation or any of their respective Subsidiaries and, to the Knowledge of the
Company Group, no such proceedings or
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investigations are contemplated. There is no unresolved deficiency, violation or
exception claimed or asserted by any Governmental Authority with respect to any
examination of any of the Company, KMV Corporation or any of their respective
Subsidiaries.
Section 4.14 Environmental Matters. The Company, KMV Corporation and
each of their respective Subsidiaries (v) are in compliance with all, and are
not subject to any liability, in each case with respect to any, applicable
Environmental Laws; (w) hold or have applied for all Environmental Permits
necessary to conduct their current operations and (x) are in compliance with
their respective Environmental Permits. Neither the Company, KMV Corporation nor
any of their respective Subsidiaries has received any written notice, demand,
letter, claim or request for information alleging that the Company, KMV
Corporation or any of their respective Subsidiaries may be in violation of, or
liable under, any Environmental Law. Neither the Company, KMV Corporation nor
any of their respective Subsidiaries (y) has entered into or agreed to any
consent decree or order or is subject to any judgment, decree or judicial order
relating to compliance with Environmental Laws, Environmental Permits or the
investigation, sampling, monitoring, treatment, remediation, removal or cleanup
of Hazardous Materials and no investigation, litigation or other proceeding is
pending or, to the Knowledge of the Company Group, threatened with respect
thereto or (z) is an indemnitor or has assumed liability in connection with any
pending claim, or to the Knowledge of the Company Group, any claim threatened,
by or against any third-party for any liability under any Environmental Law or
relating to any Hazardous Materials. None of the real property owned or leased
or operated by the Company, KMV Corporation or any of their respective
Subsidiaries is listed or, to the Knowledge of the Company Group, proposed for
listing on the "National Priorities List" under CERCLA, as updated through the
date hereof, or any similar state or foreign list of sites requiring
investigation or cleanup.
Section 4.15 Properties.
(a) The Company, KMV Corporation and each of their respective
Subsidiaries has good and marketable title to, or valid leasehold interests in,
all of its properties and tangible assets. All such assets and properties, other
than assets and properties in which the Company, KMV Corporation or any of their
respective Subsidiaries has a leasehold interest, are free and clear of all
Encumbrances other than Permitted Encumbrances. Each of the Company, KMV
Corporation and their respective Subsidiaries has complied with the terms of all
leases to which it is a party and under which it is in occupancy, and all such
leases are in full force and effect. Each of the Company, KMV Corporation and
their respective Subsidiaries has quiet enjoyment under all such leases. None of
the Company, KMV Corporation or any of their respective Subsidiaries holds any
fee or other ownership interest in any real property. Section 4.15(a) of the
Company Disclosure Schedule sets forth a true and complete list of all real
property and interests in real property leased by the Company, KMV Corporation
or any of their respective Subsidiaries and the lease agreements with respect
thereto and a true and complete list of all personal property, equipment and
fixtures (other than items having a book value of less than $1,000 individually)
owned by the Company or KMV Corporation, all of which personal property,
equipment and fixtures are in good condition and repair, normal wear and tear
excepted.
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(b) Section 4.15(b) of the Company Disclosure Schedule sets forth a true
and complete list of all of the Foreign Subsidiary Leases and all of the Foreign
Subsidiary Leased Properties. With respect to the Foreign Subsidiary Leases and
the Foreign Subsidiary Leased Properties in the United Kingdom (i) the landlord
is entitled to elect that supplies under each Foreign Subsidiary Lease should be
standard rated for VAT purposes and has done so; (ii) the Combined Company has
not released any Person from its obligation as landlord under any Foreign
Subsidiary Lease, whether pursuant to Section 6 or 7 of the 1995 Act or
otherwise, nor has the Combined Company received any application from any such
Person for any such release and (iii) the deeds and documents relating to the
Foreign Subsidiary Leased Properties listed in Section 4.15(b) of the Company
Disclosure Schedule comprise the entire agreement between the Combined Company
and the landlords thereof and no variations, formal or informal, of such
agreement exist.
Section 4.16 Insurance. Section 4.16 of the Company Disclosure Schedule
includes a list of all policies of fire, liability, product liability, workmen's
compensation, health and other forms of insurance presently in effect with
respect to the Company Business (the "Company Insurance Policies"), including
the named insured(s) and all beneficiaries thereunder, true and complete copies
of which have been delivered to, or made available for review by, Parent. All
Company Insurance Policies are valid, outstanding and enforceable policies and
provide insurance coverage for the Company Assets and operation of the Company
Business, of the kinds, in the amounts and against the risks required to
materially comply with Applicable Law and/or any contractual or other
obligations, and such policies are sufficient to protect the Company Assets and
operation of the Company Business against the risks of the sort normally insured
by similar businesses. Neither the Company, KMV Corporation, nor any of their
respective Subsidiaries has been refused any insurance with respect to any
aspect of the operations of its business, nor has its coverage been rescinded by
any insurance carrier to which it has applied for insurance or with which it has
carried insurance. No notice of cancellation or termination has been received
with respect to any such policy. The activities and operations of the Company,
KMV Corporation and each of their respective Subsidiaries have been conducted in
a manner so as to conform to all material provisions of the Company Insurance
Policies.
Section 4.17 No Other Broker. Other than Lazard Freres & Co., the fees
and expenses which have been previously disclosed to Parent, no broker, finder
or similar intermediary has acted for or on behalf of, or is entitled to any
broker's, finder's or similar fee or other commission from or as a result of
engagement by, the Company, KMV Corporation or any of their respective
Affiliates in connection with this Agreement, the Ancillary Agreements or the
transactions contemplated hereby or thereby.
Section 4.18 Absence of Certain Changes or Events. Since December 31,
2001, (x) the Company, KMV Corporation and their respective Subsidiaries have
conducted their respective businesses only in the ordinary course, consistent
with past practice, and (y) there has not been (i) any Company Material Adverse
Effect or any event or development that could, individually or in the aggregate,
reasonably be expected to have a Company Material Adverse Effect; provided,
however, that if between the date of this Agreement and the Closing, the
Company, KMV Corporation or any of their respective Subsidiaries receives any
notice of cancellation or intent to cancel any of the Contracts with its
customers which would not constitute a breach hereof as of the date of this
Agreement, that event shall be deemed to
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constitute at the Closing Date a breach of this subsection (y)(i) (it being
agreed and understood, however, that the foregoing proviso shall have no effect
on any rights Parent or Merger Sub may have under Section 8.2 of this
Agreement); and provided, further, that neither the failure of any Other
Employee to whom Parent extends an offer of employment to accept such offer of
employment nor the termination of any Key Employee's or Other Employee's
employment with the Combined Company after the date of this Agreement and prior
to the Closing Date which would not constitute a breach hereof as of the date of
this Agreement shall not be deemed to constitute at the Closing Date a breach of
this subsection (y)(i) (it being agreed and understood, however, that the
foregoing proviso shall have no effect on any rights Parent or Merger Sub may
have under Section 8.2 of this Agreement); (ii) to the Knowledge of the Company
Group, there has not occurred any event or development that would, individually
or in the aggregate, reasonably be expected to prevent the consummation of the
Merger or the Stock Purchase or the performance by the Company, KMV Corporation,
any of their respective Subsidiaries or any Member or any KMV Corporation
Shareholder of its obligations under this Agreement or any of the Ancillary
Agreements to which it is a party; or (iii) any action taken by the Company, KMV
Corporation or any of their respective Subsidiaries during the period from
December 31, 2001 through the date of this Agreement that, if taken during the
period from the date of this Agreement through the Effective Time, would
constitute a breach of Section 7.1 of this Agreement.
Section 4.19 Sufficiency of and Title to Assets. The Combined Company
owns or licenses, and upon the consummation of the Merger and the Stock Purchase
Parent or the Surviving Company will own or license, all right, title and
interest in and to all of the properties, assets, Contracts and rights of any
kind, whether tangible or intangible, real or personal (including, without
limitation, the Company IP), necessary to enable the Company (prior to the
Closing) and Parent and the Surviving Company (after the Closing) to conduct the
Company Business as presently conducted (the "Company Assets"), free and clear
of any Encumbrances other than Permitted Encumbrances. Except as expressly set
forth in Section 4.8 or Section 4.15 of the Company Disclosure Schedule (and
except as to matters not required to be disclosed by the express terms of
Section 4.8) , the Combined Company owns all of the Company Assets. Except as
expressly set forth in Section 4.8 or Section 4.15 of the Company Disclosure
Schedule (and except as to matters not required to be disclosed by the express
terms of Section 4.8), no licenses or consents from, or payments to, any Person
are or will be necessary for Parent to use any of the Company Assets in
substantially the manner in which the Combined Company is using the Company
Assets. Except as expressly set forth in Section 4.8 or Section 4.15 of the
Company Disclosure Schedule (and except as to matters not required to be
disclosed by the express terms of Section 4.8), no restrictions will exist on
Parent's right (i) to sell, resell, license or sublicense any of the Company
Assets that the Combined Company currently sells, resells, licenses, sublicenses
or otherwise distributes or (ii) engage in the Company Business, nor will any
such restrictions be placed on Parent as a consequence of the Merger, the Stock
Purchase or any of the other transactions contemplated by this Agreement or any
of the Ancillary Agreements. The Combined Company has sole right, title and
interest in and to all of the assets on the Company Balance Sheet, free and
clear of any Encumbrances other than Permitted Encumbrances.
Section 4.20 Filing of Documents. None of the information regarding any
of the Company, KMV Corporation or any of their respective Subsidiaries supplied
or to be
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supplied by the Company, KMV Corporation or any of their respective Subsidiaries
prior to the Closing expressly for inclusion in any documents to be filed with
any Governmental Authority prior to the Closing in connection with the
transactions contemplated hereby will, at the respective times such information
is supplied by the Company, KMV Corporation or any of their respective
Subsidiaries, contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
Section 4.21 Transactions with Affiliates. Except for this Agreement,
the Ancillary Agreements and the other agreements contemplated to be entered
into in connection with the transactions contemplated hereby and thereby, no
Contract, understanding or arrangement between KMV Corporation, the Company or
any of their respective Subsidiaries, on the one hand, and any of the KMV
Corporation Shareholders or the Members (other than KMV Corporation) or any of
their respective Subsidiaries or Affiliates, on the other hand, will continue in
effect subsequent to the Closing Date. None of the KMV Corporation Shareholders
or the Members (other than KMV Corporation) or any of their respective
Subsidiaries (other than the Company) or Affiliates has any interest in any
Company Asset. None of the KMV Corporation Shareholders or the Members (other
than KMV Corporation) or any of their Subsidiaries or Affiliates provide any
material services to KMV Corporation, the Company or any of their respective
Subsidiaries other than services rendered to KMV Corporation, the Company or any
of their respective Subsidiaries in their capacity as employees of KMV
Corporation, the Company or any of their respective Subsidiaries.
Section 4.22 Governmental Regulation. None of KMV Corporation, the
Company or any of their respective Subsidiaries is an "investment company"
within the meaning of the Investment Company Act of 1940, as amended (the
"Investment Company Act"), which is required to be registered under the
Investment Company Act in order to engage in the transactions described in
Section 7 of that Act. None of KMV Corporation, the Company or any of their
respective Subsidiaries is an investment adviser under the Investment Advisers
Act of 1940, as amended (the "Investment Advisers Act"). None of KMV
Corporation, the Company or any of their respective Subsidiaries is a "broker"
or "dealer" within the meaning of the Exchange Act. None of KMV Corporation, the
Company or any of their respective Subsidiaries acts as investment adviser or
subadviser to any "investment company," as defined in the Investment Company
Act, which is registered under such Act.
Section 4.23 No Loss of Customers. From January 1, 2001 through the
Business Day immediately preceding the date of this Agreement, none of the
Company, KMV Corporation or any of their respective Subsidiaries has had any
customer or customers which have canceled, terminated or failed to renew their
Contracts with such entity.
Section 4.24 Trading in Parent Common Stock. None of the Company, KMV
Corporation or any of their respective Subsidiaries have, during the period
constituting the sixty (60) Business Days prior to the date hereof, either
directly or indirectly, bought or sold, or otherwise effected any trade in any
shares of Parent Common Stock, or any Security derivative of Parent Common
Stock.
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Section 4.25 Disaster Recovery.
(a) The Company, KMV Corporation and each of their respective
Subsidiaries maintains their respective computer systems and related data (the
"Company's Systems") so that the Company Business can "promptly recover" from
any interruption in system service that is the result of forces beyond the
Company's control, including, without limitation, natural disasters, power
outages and malicious attack. As used in this Section 4.25, "promptly recover"
means that the Company, KMV Corporation and each of their respective
Subsidiaries can conduct its operations without interruption in the Company
Business.
(b) The Company maintains archive or back-up copies of all system data
and user data used with or related to the Company's Systems at a remote site
(the "Company's Back-Up System"), which archive or back-up copies are updated at
least weekly.
(c) The Company tests the Company's Back-Up System at least once per
calendar year to verify that the Company's Systems can be brought up from the
Company's Back-Up System without interruption in the Company Business, loss of
data or other material errors.
(d) Each time the Company has tested the Company's Back-Up System, the
Company has successfully brought up the Company's Systems from the Company's
Back-Up System without any interruption in the Company Business, loss of data or
other material errors.
Section 4.26 Material Misstatements or Omissions. No representations or
warranties by the Company or KMV Corporation in this Agreement, any Ancillary
Agreement nor any exhibit, certificate or schedule furnished to Parent pursuant
hereto, contains any untrue statement of a material fact, or omits to state any
material fact necessary to make the statements or facts contained therein not
misleading.
ARTICLE 5.
REPRESENTATIONS AND WARRANTIES OF THE PRINCIPAL MEMBERS AND THE KMV
CORPORATION SHAREHOLDERS
Except as set forth in the disclosure schedule delivered by the
Principal Members and the KMV Corporation Shareholders to Parent prior to the
execution of this Agreement (the "Principal Members Disclosure Schedule"), which
shall identify exceptions by specific subsection references:
Section 5.1 Ownership of Company Units and KMV Corporation Shares.
(a) Each of the Principal Members (other than KMV Corporation),
severally, for itself, himself or herself, represents and warrants to Parent
that such party owns beneficially and of record, and has good and valid title
to, all of the Company Units listed as owned by such party on Exhibit F to this
Agreement, free and clear of any Encumbrances. Each of the Principal Members
(other than KMV Corporation), severally, for itself, himself or herself,
represents and warrants to Parent that no transfer taxes are or will be due as a
result of the transfer of the Company Units pursuant to this Agreement other
than those that will be paid by such Principal Member.
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(b) Each of the KMV Corporation Shareholders, severally, for itself,
himself or herself, represents and warrants to Parent that such party owns
beneficially and of record, and has good and valid title to, all of the KMV
Corporation Shares listed as owned by such party on Exhibit F to this Agreement,
free and clear of any Encumbrances. Each of the KMV Corporation Shareholders,
severally, for itself, himself or herself, represents and warrants to Parent
that no transfer taxes are or will be due as a result of the transfer of the KMV
Corporation Shares pursuant to this Agreement other than those that will be paid
by such KMV Corporation Shareholder.
Section 5.2 Authority; No Violation.
(a) Each of the Principal Members (other than KMV Corporation) and the
KMV Corporation Shareholders, severally, for itself, himself or herself,
represents and warrants to Parent that such party has the capacity to execute
and deliver this Agreement and each of the Ancillary Agreements to which such
party is a party, to perform its obligations hereunder and thereunder and to
consummate the Merger, the Stock Purchase and the other transactions
contemplated hereby and thereby. This Agreement and the Ancillary Agreements to
which each of the Principal Members (other than KMV Corporation) and the KMV
Corporation Shareholders is a party have been duly and validly executed and
delivered by such party (except for those Ancillary Agreements that are not
dated the date hereof, which Ancillary Agreements shall be duly and validly
executed and delivered prior to the Closing) and (assuming the due
authorization, execution and delivery of this Agreement and the Ancillary
Agreements by the other parties hereto and thereto) constitute valid and binding
obligations of such party (except for those Ancillary Agreements that are not
dated the date hereof, which Ancillary Agreements shall constitute valid and
binding obligations of such party at the Closing), enforceable against such
party in accordance with their terms, except as the enforceability thereof may
be subject to or limited by bankruptcy, insolvency, reorganization, moratorium
or similar laws relating to or affecting the rights of creditors generally and
the availability of equitable relief (whether in proceedings at law or in
equity).
(b) Each of the Principal Members (other than KMV Corporation) and the
KMV Corporation Shareholders, severally, for itself, himself or herself,
represents and warrants to Parent that neither the execution and delivery by
such party of this Agreement or any of the Ancillary Agreements to which it is a
party nor the consummation by such party of any of the transactions contemplated
hereby or thereby to be performed by them, nor compliance by such party with any
of the terms or provisions hereof or thereof, will (i) violate any provision of
the articles of incorporation, charter or bylaws, trust or partnership
agreements or comparable organizational documents, as applicable, of such party
(if any) or (ii) assuming that the consents and approvals referred to in Section
5.3 hereof are duly obtained, (x) violate, conflict with or require any notice,
filing, consent, waiver or approval under any Applicable Law to which such party
or any of its properties, contracts or assets are subject, or (y) violate,
conflict with, result in a breach of any provision of or the loss of any benefit
under, constitute a default (or an event which, with or without notice or lapse
of time, or both, would constitute a default) under, result in the termination
of or a right of termination or cancellation under, accelerate or result in a
right of acceleration of the performance required by, result in the creation of
any Encumbrance upon such party's Company Units or KMV Corporation Shares, as
applicable, or the properties, contracts or assets of such party under, or
require any notice, approval, waiver or consent under,
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any note, bond, mortgage, indenture, deed of trust, license, lease, agreement or
other instrument or obligation to which such party is a party, or by which such
party or any of its properties or assets, may be bound or affected.
Section 5.3 Consents and Approvals. Each of the Principal Members (other
than KMV Corporation) and the KMV Corporation Shareholders, severally, for
itself, himself or herself, represents and warrants to Parent that except for
(x) compliance with and filings under the Securities Laws as may be required in
connection with this Agreement, the Ancillary Agreements and the transactions
contemplated hereby and thereby and (y) the applicable filings under the HSR Act
and any other applicable antitrust or competition laws, no consents or approvals
of or filings, declarations or registrations with any Governmental Authority,
any third party or any other Person are necessary in connection with the
execution and delivery by such party of this Agreement and the Ancillary
Agreements to which it is a party and the consummation by such party of the
transactions contemplated hereby or thereby.
Section 5.4 No Brokers. Each of the Principal Members (other than KMV
Corporation) and the KMV Corporation Shareholders, severally, for itself,
himself or herself, represents and warrants to Parent that no broker, finder or
similar intermediary has acted for or on behalf of, or is entitled to any
broker's, finder's or similar fee or other commission from or as a result of
engagement by, such party in connection with this Agreement, the Ancillary
Agreements or the transactions contemplated hereby or thereby.
Section 5.5 Trading in Parent Common Stock. Each of the Principal
Members (other than KMV Corporation) and the KMV Corporation Shareholders,
severally, for itself, himself or herself, represents and warrants to Parent
that such party has not, during the period constituting the sixty (60) Business
Days prior to the date hereof, either directly or indirectly, bought or sold, or
otherwise effected any trade in any shares of Parent Common Stock, or any
Security derivative of Parent Common Stock, other than by virtue of such party's
passive investment in mutual funds or other pooled investment vehicles, in each
case over which such party does not exercise investment control.
ARTICLE 6.
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Except as set forth in the disclosure schedule delivered by Parent and
Merger Sub to the Company prior to the execution of this Agreement (the "Parent
Disclosure Schedule"), which shall identify exceptions by specific subsection
references (provided, however, that the disclosure of an item in one Section of
the Parent Disclosure Schedule shall be deemed a disclosure in another Section
or Sections of the Parent Disclosure Schedule if and to the extent that such
information is readily apparent to be so applicable to such other Section or
Sections), Parent and Merger Sub, jointly and severally, hereby represent and
warrant to the Company, KMV Corporation, each Principal Member and each KMV
Corporation Shareholder as follows:
Section 6.1 Organization and Related Matters. Parent is a corporation,
duly organized, validly existing and in good standing under the laws of the
State of Delaware. Merger Sub is a limited liability company, duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Each of Parent and Merger Sub has the corporate or limited
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liability company power and authority to carry on their respective business as
they are now being conducted and to own, lease and operate all of their
respective properties and assets.
Section 6.2 Authority; No Violation.
(a) Each of Parent and Merger Sub has full power and authority to
execute and deliver this Agreement and the Ancillary Agreements to which each is
a party and to consummate the Merger, the Stock Purchase and the other
transactions contemplated hereby and thereby. The execution and delivery of this
Agreement and the Ancillary Agreements to which each is a party and the
consummation of the Merger, the Stock Purchase and the other transactions
contemplated hereby and thereby have been duly authorized by all necessary
corporate action on the part of Parent and all necessary limited liability
company action on the part of Merger Sub, and no other corporate action on the
part of Parent and no other limited liability company action on the part of
Merger Sub is necessary to approve this Agreement or the Ancillary Agreements to
which each is a party or authorize or consummate the Merger, the Stock Purchase
or the other transactions contemplated hereby and thereby. This Agreement and
the Ancillary Agreements to which each is a party have been duly and validly
executed and delivered by Parent and Merger Sub (except for those Ancillary
Agreements that are not dated the date hereof, which Ancillary Agreements shall
be duly and validly executed and delivered prior to the Closing) and (assuming
the due authorization, execution and delivery of this Agreement and the
Ancillary Agreements by the other parties hereto and thereto) constitute valid
and binding obligations of each of Parent and Merger Sub (except for those
Ancillary Agreements that are not dated the date hereof, which Ancillary
Agreements shall constitute valid and binding obligations of each of Parent and
Merger Sub at the Closing), enforceable against each of Parent and Merger Sub in
accordance with their terms, except as the enforceability thereof may be subject
to or limited by bankruptcy, insolvency, reorganization, moratorium or similar
laws relating to or affecting the rights of creditors generally and the
availability of equitable relief (whether in proceedings at law or in equity).
(b) Neither the execution and delivery of this Agreement or the
Ancillary Agreements to which each is a party by Parent or Merger Sub nor the
consummation by Parent or Merger Sub of the Merger, the Stock Purchase or the
other transactions contemplated hereby or thereby to be performed by either
Parent or Merger Sub, nor compliance by Parent or Merger Sub with any of the
terms or provisions hereof or thereof, will (i) violate any provision of the
certificate of incorporation or bylaws of Parent or any provision of the
operating agreement of Merger Sub, (ii) assuming that the consents and approvals
referred to in Section 6.3 hereof are duly obtained, (x) violate, conflict with
or require any notice, filing, consent or approval under any Applicable Law to
which Parent, Merger Sub or any of their respective Subsidiaries or any of their
respective properties, contracts or assets are subject, or (y) violate, conflict
with, result in a breach of any provision of or the loss of any benefit under,
constitute a default (or an event which, with or without notice or lapse of
time, or both, would constitute a default) under, result in the termination of
or a right of termination or cancellation under, accelerate or result in a right
of acceleration of the performance required by, result in the creation of any
Encumbrance upon the properties, contracts or assets of Parent or Merger Sub
under, or require any notice, approval or consent under, any note, bond,
mortgage, indenture, deed of trust, license, lease, agreement or other
instrument or obligation to which Parent, Merger Sub or any of their respective
Subsidiaries is a party, or by which Parent, Merger Sub or any of their
respective Subsidiaries, or
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any of their respective properties or assets, may be bound or affected except in
the case of clause (ii) in each case as would not have or reasonably be expected
to have a Parent Material Adverse Effect.
Section 6.3 Consents and Approvals. Except for (x) the applicable
filings under the HSR Act and any other applicable antitrust or competition
laws, (y) the filing of the Certificate of Merger and (z) compliance with and
filings under the Securities Laws as may be required in connection with this
Agreement, the Ancillary Agreements and the transactions contemplated hereby and
thereby, no consents or approvals of or filings or registrations with any
Governmental Authority, any third party or any other Person are necessary in
connection with (i) the execution and delivery by Parent or Merger Sub of this
Agreement and the Ancillary Agreements to which each is a party and (ii) the
consummation by Parent or Merger Sub of the Merger, the Stock Purchase or the
other transactions contemplated by this Agreement or the Ancillary Agreements
except as in each case as would not have or reasonably be expected to have a
Parent Material Adverse Effect.
Section 6.4 No Other Broker. Other than any Person whose fees and
expenses will be paid by Parent, no broker, finder or similar intermediary has
acted for or on behalf of, or is entitled to any broker's, finder's or similar
fee or other commission from or as a result of engagement by Parent, Merger Sub
or any of their respective Subsidiaries in connection with this Agreement, the
Ancillary Agreements or the transactions contemplated hereby or thereby.
Section 6.5 Investment Representation. Parent understands that the KMV
Corporation Shares have not been registered under the Securities Act. Parent
also understands that the KMV Corporation Shares are being offered and sold
pursuant to an exemption from registration contained in the Securities Act based
in part upon Parent's representations contained in this Agreement. In connection
therewith, Parent represents and warrants to KMV Corporation and the KMV
Corporation Shareholders that Parent (a) has substantial experience and
knowledge in evaluating and investing in private placement transactions of
securities in companies similar to the KMV Corporation Shares so that Parent is
capable of evaluating the merits and risks of its investment in KMV Corporation,
can bear the economic risk of its investment and has the capacity to protect its
own interests; (b) is acquiring the KMV Corporation Shares for its own account
for investment only, not as a nominee or agent, and not with a view towards the
resale or distribution of any part thereof and has no present intention of
selling, granting any participation in, or otherwise distributing the same; (c)
is an "accredited investor" within the meaning of Rule 501 of Regulation D under
the Securities Act, as currently in effect; and (d) has had an opportunity to
discuss KMV Corporation's business, management and financial affairs with
directors, officers and management of KMV Corporation
Section 6.6 Filing of Documents. None of the information regarding any
of Parent or Merger Sub supplied or to be supplied by Parent or Merger Sub for
inclusion in any documents to be filed with any Governmental Authority prior to
Closing in connection with the transactions contemplated hereby will, at the
respective times such information is supplied by Parent or Merger Sub, contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
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Section 6.7 No Parent Material Adverse Effect. Since September 30, 2001,
to the Knowledge of Parent, there has not occurred any event or development that
would, individually or in the aggregate, reasonably be expected to prevent the
consummation of the Merger, the Stock Purchase or the performance by Parent of
its obligations under this Agreement or any of the Ancillary Agreements to which
it is a party.
ARTICLE 7.
COVENANTS AND ADDITIONAL AGREEMENTS
Section 7.1 Conduct of Business by the Combined Company. During the
period from the date of this Agreement and continuing through the Closing Date,
except as expressly contemplated, permitted or required by this Agreement or
with the prior written consent of Parent, the Company and KMV Corporation shall,
and shall cause each of their respective Subsidiaries to (i) carry on its
business in the ordinary course consistent with past practice and (ii) use
reasonable best efforts to preserve their present business organizations and
relationships (including keeping available the present services of their
employees and preserving their rights, franchises, goodwill and relations with
their customers and others with whom they conduct business). Without limiting
the generality of the foregoing, except as expressly contemplated, permitted or
required by this Agreement or consented to in writing by Parent which consent
shall not be unreasonably withheld in the case of clause (m) below, the Company
and KMV Corporation shall not, and shall not permit any of their respective
Subsidiaries to, directly or indirectly:
(a) amend or agree to amend the Company Operating Agreement, their
articles of incorporation or bylaws (or comparable organizational documents), or
merge with or into or consolidate with, or agree to merge with or into or
consolidate with, any other Person, subdivide or in any way reclassify any of
their membership interests, shares or any other ownership interests, or change
or agree to change in any manner the rights of their membership interests,
shares or any other ownership interests or liquidate or dissolve;
(b) (x) except as set forth in Section 7.1 of the Company Disclosure
Schedule, issue, sell, redeem or acquire any membership interest, share or any
other ownership interest or any debt security in the Company, KMV Corporation or
any of their respective Subsidiaries; provided, however, that, with respect to
employees who terminate employment with the Company between signing and the
Closing Date, the Company may exercise its contractual right to repurchase
Company Units in accordance with the provisions of Section 7.2 of the Company
Operating Agreement; (y) issue, sell or grant any option, warrant, convertible
or exchangeable Security, right, "phantom" partnership (or other ownership)
interest (or similar "phantom" security), restricted partnership (or other
ownership) interest, subscription, call, unsatisfied preemptive right or other
agreement or right of any kind to purchase or otherwise acquire (including by
exchange or conversion) any of their membership interests, shares or any other
ownership interests in the Company, KMV Corporation or any of their respective
Subsidiaries; or (z) enter into any Contracts, agreements or arrangements to
issue, redeem, acquire or sell any of their membership interests, shares or any
other ownership interests in the Company, KMV Corporation or any of their
respective Subsidiaries;
(c) incur any long-term indebtedness for borrowed money;
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(d) incur any indebtedness for borrowed money in excess of $10,000
individually or $50,000 in the aggregate or guarantee any liability, obligation
or indebtedness (whether or not currently due or payable) of any other Person or
incur any Company Voting Debt or KMV Corporation Voting Debt;
(e) make any change in their accounting methods or practices for Tax or
accounting purposes or make any change in depreciation or amortization policies
or rates adopted by them for Tax or accounting purposes or make any material, or
change any existing, Tax election, settle any pending audits or make voluntary
disclosure agreements or settle or compromise any Tax liability, except in the
case of any such liability to the extent reserved for on the Company Balance
Sheet;
(f) make any loan or advance or capital contribution to any of their
Affiliates (other than KMV Corporation or the Foreign Subsidiaries), officers,
directors, employees, consultants, agents or other representatives (other than
reasonable and customary travel advances made in the ordinary course of business
consistent with past practice);
(g) sell, transfer, lease, license, offer to sell, abandon or make any
other disposition of any of their assets or rights or grant or suffer, or agree
to grant or suffer, any Encumbrance other than Permitted Encumbrances on any of
their assets or rights, other than in the ordinary course of business consistent
with past practice and not exceeding $10,000 individually, other than pursuant
to the terms of any Company End User Agreement in the ordinary course of
business consistent with past practice (to which no maximum shall apply);
(h) except as expressly permitted pursuant to subsection (p) below,
settle any claim, action or proceeding involving any liability for money damages
or any restrictions upon any of their operations, any of the Company Assets or
the Company Business;
(i) create, renew, amend, terminate or cancel, any Contract other than
in the ordinary course of business consistent with past practice and providing
for consideration payable by or to the Company Group equal to or less than
$25,000 individually (excluding in each case Company End User Agreements in the
ordinary course of business consistent with past practice as to which no value
limit shall apply); provided, however, that neither KMV Corporation, the Company
nor any of their respective Subsidiaries may enter into any Company Inbound
License Agreements or Contracts or agreements that include any noncompetition or
nonsolicitation covenant or any exclusive dealing or similar arrangement that
limits the ability of KMV Corporation, the Company or any of their respective
Subsidiaries to compete (geographically or otherwise) in any line of business or
which would so limit the Surviving Company or Parent or any of their respective
Subsidiaries after the Effective Time, or any Contracts with any Person listed
on Exhibit E or any Person who, to the Combined Company's Knowledge is a
Subsidiary of any Person listed on Exhibit E; and provided, further, that
nothing in this subsection (i) shall prevent the automatic or "evergreen"
renewal of a Contract to which KMV Corporation, the Company or any of their
respective Subsidiaries is a party (A) pursuant to which KMV Corporation, the
Company or any of their respective Subsidiaries is either obligated to pay or
entitled to receive less than $50,000 in any year or (B) which is a Company End
User Agreement terminable by KMV Corporation, the Company or any of their
respective Subsidiaries not more than one (1) year from the date of such
renewal;
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(j) enter into, amend, or agree to enter into or amend any Contract,
agreement or arrangement or any financial transaction with any of their
officers, directors, consultants, agents (in the case of agents, other than in
the ordinary course of business consistent with past practice), representatives
(in the case of representatives, other than in the ordinary course of business
consistent with past practice) or Affiliates; provided, however, that this
clause (j) shall not prohibit the performance of Contracts executed prior to the
date of this Agreement, the terms of which have been disclosed to Parent in the
Company Disclosure Schedule;
(k) other than those payments set forth on Exhibit G attached hereto,
declare or make any dividends or declare or make any other distributions of any
kind payable to Members or KMV Corporation Shareholders;
(l) acquire or agree to acquire in any manner any equity interests in,
or any business of, any Person or other business organization or division
thereof, including by way of merger, consolidation, or purchase of an equity
interest or assets;
(m) enter into, amend, modify or renew any Benefit Plan, collective
bargaining agreement or other Contract with any labor organization, or other
written employment, consulting, severance or similar agreements or arrangements
with any Company Employee or Company Independent Contractor, or grant any salary
or wage increase or increase in severance or termination pay or increase any
employee benefit or hire any new employee for a management position, except as
may be required by Applicable Law;
(n) take any action to accelerate any material rights or benefits, or
make any material determinations not in the ordinary course of business
consistent with past practice, under any collective bargaining agreement,
Benefit Plan or employment, indemnification, severance or termination agreement;
(o) make or incur any capital expenditures in excess of $300,000 in the
aggregate in any 30-day period, or cease to make capital expenditures in the
ordinary course of business consistent with past practice; or acquire any assets
for consideration exceeding $25,000 individually;
(p) cancel any indebtedness or waive any claims or rights in amounts, in
each case, in excess of $50,000 individually or $150,000 in the aggregate,
except in the ordinary course of business consistent with past practices with
respect to the Company End User Agreements;
(q) enter into or renew (other than month-to-month renewals of the lease
for the premises located at 240 Lombard Street, #235, San Francisco, California
94111) any lease of real property;
(r) accrue or pay any bonuses to any Company Employee or Company
Independent Contractor, except as set forth in Section 7.1(r) of the Company
Disclosure Schedule; or
(s) fail to make payments on payables of the Company Group in a manner
consistent with past practice or fail to collect receivables of the Company
Group in a manner consistent with past practice;
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(t) authorize or agree (by Contract or otherwise) to do any of the
foregoing.
Section 7.2 Access to Information; Confidentiality.
(a) Between the date of this Agreement and the Closing Date, subject to
Applicable Laws relating to the exchange of information and to existing
confidentiality agreements, the Combined Company and its Affiliates shall afford
to Parent and its authorized agents and representatives access, upon reasonable
notice and during normal business hours, to all properties of, and all
Contracts, documents and information of or relating to the assets, liabilities,
business, customers, employees, operations, personnel and other aspects of the
business of, the Combined Company and its Affiliates; provided, however, that
such access shall be coordinated by the Combined Company and shall be conducted
in a manner which does not unreasonably interfere with the Combined Company's or
its Affiliates' normal operations, customers and employee relations.
(b) The parties agree to be bound by and comply with the provisions set
forth in the Confidentiality Agreement, the provisions of which are hereby
incorporated herein by reference.
Section 7.3 Regulatory Matters; Third-Party Consents.
(a) The parties to this Agreement shall cooperate with each other and
use their commercially reasonable efforts promptly to prepare and file (on a
confidential basis if reasonably requested by the other parties) all necessary
documentation, to effect (on a confidential basis if reasonably requested by the
other parties) all applications, notices, petitions and filings, and to obtain
as promptly as practicable all permits, consents, approvals, waivers and
authorizations of all Governmental Authorities, third parties and other Persons
which are necessary or advisable to consummate the Merger, the Stock Purchase
and the other transactions contemplated by this Agreement and the Ancillary
Agreements, including any filing to be made under the HSR Act, which filings
shall be made as promptly as reasonably practicable (and, in the case of any
initial filing to be made under the HSR Act, no later than ten (10) Business
Days after the date of this Agreement), and requests for required consents under
the Contracts. The parties agree to request early termination of the waiting
period under the HSR Act. Parent, on the one hand, and the Company Group, on the
other hand, agree to take all reasonable steps necessary to satisfy any
conditions or requirements imposed by any Governmental Authority in connection
with the consummation of the transactions contemplated by this Agreement, other
than those conditions or requirements, in the aggregate, the satisfaction of
which are reasonably likely to result in either a Company Material Adverse
Effect or a Parent Material Adverse Effect or a material adverse effect on the
business, assets, liabilities, financial condition or results of operations of
Parent and its Subsidiaries, taken as a whole, or materially adversely affect
the economic benefit of the transactions expected to be received by Parent
hereby. Notwithstanding the foregoing or any provision of this Agreement to the
contrary, in no event shall any party hereto be obligated to (A) agree to, or
proffer to, divest or hold separate, or enter into any licensing or similar
arrangement with respect to, any assets (whether tangible or intangible) or any
portion of the business of Parent, KMV Corporation, the Company or any of their
respective Subsidiaries, or (B) litigate any suit, claim, action, investigation
or proceeding, whether judicial or administrative, (1) challenging or seeking to
restrain or prohibit the consummation of the Merger or the Stock Purchase; (2)
seeking to prohibit or limit in any respect the ownership or
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operation by KMV Corporation, the Company, Parent or any of their respective
Affiliates of a material portion of the Company Assets or the Company Business,
or to require any such Person to dispose of or hold separate any portion of the
Company Assets or the Company Business as a result of the Merger or the Stock
Purchase; or (3) seeking to prohibit Parent or any of its Affiliates from
effectively controlling in any respect all or any portion of the Company Assets
or the Company Business. The parties to this Agreement agree that they will
consult with each other with respect to the obtaining of all permits, consents,
approvals and authorizations of all Governmental Authorities, third parties and
other Persons necessary or advisable to consummate the Merger, the Stock
Purchase and the other transactions contemplated by this Agreement and the
Ancillary Agreements and each party will keep the other parties hereto apprised
of the status of matters relating to completion of the transactions contemplated
herein and therein.
(b) The parties to this Agreement shall promptly advise each other party
hereto upon receiving any communication from any Governmental Authority whose
consent or approval is required for consummation of the transactions
contemplated by this Agreement or the Ancillary Agreements.
Section 7.4 Use of "KMV" Name and Company Trademarks. Each of the
Principal Members (other than KMV Corporation) and the KMV Corporation
Shareholders and their respective Affiliates agree that from and after the
Closing, they shall have no right to the use of the "KMV" name or mark or any
Company Trademarks, and each of the Principal Members and the KMV Corporation
Shareholders and their respective Affiliates shall take all actions as may be
necessary to terminate within five (5) Business Days after the Closing Date the
use by any of them of (i) the "KMV" name or mark or any Company Trademarks or
(ii) any two or more of the names "Kealhofer," "McQuown" or "Vasicek" together
in any combination; provided, however, that nothing in this Section 7.4 shall
prohibit any Principal Member or KMV Corporation Shareholder from using his or
her name individually, so long as such use is not restricted by Section 7.11
hereof.
Section 7.5 Employees and Employee Benefit Matters
(a) The Combined Company and Parent shall seek to retain Other Employees
through the Closing Date and for one (1) year thereafter by offering aggregate
compensation and benefits to each Other Employee that possess substantially
equivalent monetary value to the aggregate non-equity based compensation and
benefits that an Other Employee is receiving in effect on the date of this
Agreement, and as to equity based compensation, by offering Parent stock options
on standard terms in amounts comparable to similarly situated Parent Employees
with similar responsibilities except that, from and after the Closing (i)
performance-based incentive compensation will be primarily based upon
performance of the Surviving Company as a separate business unit and in part
based upon performance of Parent's business as a whole and (ii) retirement
benefits will be provided under Parent's Section 401(k) and pension plan
according to their terms and will not include a SEP-IRA plan. Between the date
of this Agreement and the Closing, the Combined Company and Parent will
cooperate in good faith with a view toward restructuring the compensation of
each of the Other Employees in accordance with the foregoing principles,
effective upon the Closing.
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(b) The Combined Company's Benefit Plans shall remain in effect through
the Closing, and shall be thereafter assumed by Parent, or terminated or
modified by Parent and replaced by Parent's similar benefit plans, as Parent may
determine.
Section 7.6 Tax Matters.
(a) For the purposes of this Section 7.6, the term "Applicable Sellers"
shall have the following meanings:
(i) With respect to any Tax items relating to KMV Corporation,
Applicable Sellers shall mean the KMV Corporation Shareholders.
(ii) With respect to any Tax items relating to the Company or its
Subsidiaries, Applicable Sellers shall mean the Principal Members.
(b) Parent and the Applicable Sellers agree that if KMV Corporation, the
Company or their respective Subsidiaries shall be permitted to treat the Closing
Date as the last day of a taxable period they will do so.
(c) The Member Representative shall prepare or cause to be prepared and
Parent shall timely file or cause to be timely filed all Tax Returns for KMV
Corporation, the Company and their respective Subsidiaries for all periods
ending on or prior to the Closing Date. To the extent permitted by law, all such
Tax Returns shall be prepared in a manner consistent with past practices of KMV
Corporation, the Company and their Subsidiaries, respectively. Prior to filing
such Tax Returns, the Member Representative shall, no later than ten (10)
Business Days prior to the filing date of such Tax Returns, submit copies of the
same for review and filing by Parent. The Member Representative shall execute
such documents, if any, that are required to grant or confirm the authority of
Parent and its agents to properly file any such Tax Returns on behalf of KMV
Corporation, the Company and their respective subsidiaries. The Applicable
Sellers shall jointly and severally pay (subject to Section 10.6(a)) any
liabilities in connection with Taxes levied or assessed upon KMV Corporation,
the Company or any of their respective Subsidiaries or any of their respective
properties for any period ending on or prior to the Closing Date including, but
not limited to, (i) any Taxes arising as a result of the deemed sale of assets
of KMV Corporation pursuant to the Section 338(h)(10) Elections or (ii) any
Taxes arising with respect to the change in accounting method adjustment
described in Section 4.11(f) of the Company Disclosure Schedule.
(d) Parent shall prepare or cause to be prepared and timely file or
cause to be timely filed any Tax Returns of KMV Corporation, the Company or
their respective Subsidiaries for Tax periods that begin before the Closing Date
and end after the Closing Date (a "Straddle Period"). To the extent permitted by
law, all such Tax Returns shall be prepared in a manner consistent with past
practices of KMV Corporation, the Company and their respective Subsidiaries
except as set forth in a separate letter agreement between the Company and
Parent dated the date hereof. Prior to filing such Tax Returns, Parent shall, no
later than ten (10) Business Days prior to the timely filing thereof, submit
copies of the same for review and approval by the Member Representative.
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(e) Any Income Taxes for a Straddle Period shall be apportioned between
the Applicable Sellers and Parent based on the actual operations of KMV
Corporation, the Company or their respective Subsidiaries during the portion of
such period ending on the Closing Date and the portion of such period beginning
on the day following the Closing Date. Other than PAYE, Value Added Tax, Stamp
Duty and Corporation Tax on chargeable gains in respect of KMV Europe Limited,
all Taxes other than Income Taxes ("Other Taxes") relating to a Straddle Period
shall be apportioned between Parent and the Applicable Sellers based on the
number of days during the portion of such period occurring on and before the
Closing Date, and the number of days during such period occurring after the
Closing Date. The Applicable Sellers shall jointly and severally pay (subject to
Section 10.6(a)) to Parent within fifteen (15) days after the date on which
Taxes are paid with respect to any Straddle Period an amount equal to the
portion of such Taxes that relates to the portion of such Straddle Period ending
on the Closing Date. To the extent estimated Taxes have been paid prior to the
Closing Date with respect to a Straddle Period, the Applicable Sellers'
liability with respect thereto shall be reduced by that amount; provided,
however, that if such payment or accrual of Taxes exceeds the Applicable
Sellers' liability as calculated pursuant to this Section 7.6, Parent shall
promptly pay the Applicable Sellers the amount of such excess. In respect of KMV
Europe Limited, PAYE, Value Added Tax, Stamp Duty and Corporation Tax on
chargeable gains to the extent accrued before Closing Date shall be the
liability of the Applicable Seller. Any liability due to PAYE, Value Added Tax,
Stamp Duty and Corporation Tax on chargeable gains accrued after Closing Date
shall be the liability of Parent.
(f) Any Tax refunds that are received by Parent, KMV Corporation, the
Surviving Company or any of their respective Subsidiaries, and any amounts
credited against Tax to which Parent, KMV Corporation, the Surviving Company or
any of their respective Subsidiaries becomes entitled, that relate to Tax
periods or portions thereof ending on or before the Closing Date shall be for
the account of the Applicable Sellers, except to the extent such refund arises
as a result of a carryback of a loss or other tax benefit from a Post-Closing
Period or a Post-Closing Partial Period. Parent shall pay over to the Applicable
Sellers any such refund or the amount of any such credit within fifteen (15)
days of receipt or entitlement thereto.
(g) After the Closing Date, Parent, KMV Corporation, the Surviving
Company and their respective Subsidiaries and the Applicable Sellers shall
provide each other with such cooperation and information relating to KMV
Corporation, the Surviving Company or their respective Subsidiaries as the
parties reasonably may request in (i) filing any Tax Return, (ii) determining
any liability for Taxes or a right to a Tax refund or (iii) conducting or
defending any proceeding in respect of Taxes. Such cooperation and information
shall include provisions by Parent to provide powers of attorney for the purpose
of signing Tax Returns and defending any Tax Audits for Pre-Closing Periods.
(h) With respect to the sale of the KMV Corporation Shares hereunder,
the KMV Corporation Shareholders and Parent shall jointly make all available
Section 338(h)(10) Elections in accordance with applicable Tax Laws as set forth
herein. Parent and the KMV Corporation Shareholders agree to report the
transfers under this Agreement consistent with Section 338(h)(10) Elections, and
shall take no position contrary thereto unless required to do so by applicable
Tax Laws pursuant to a final determination. Parent may, at its election, make an
election under Section 338 of the Code and any corresponding election under any
other relevant
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Tax Laws with respect to Parent's acquisition of the Foreign Subsidiaries. The
Applicable Sellers shall make such filings, cooperate with Parent and take any
such other actions as are reasonably necessary or appropriate to accomplish such
election.
(i) Parent shall be responsible for the preparation and filing of all
Section 338 Forms, including Form 8023, in accordance with applicable Tax Laws
and the terms of this Agreement. The Member Representative shall deliver to
Parent such documents or forms as are reasonably requested and are required by
an relevant Tax Laws to properly complete the Section 338 Forms, at least
sixty-five (65) days prior to the date such Section 338 Forms are required to be
filed. Parent shall deliver such documents and forms to the Member
Representative in a form suitable for execution at least forty-five (45) days
prior to the date such Section 338 Forms are required to be filed, and the KMV
Corporation Shareholders shall execute such documents or forms and deliver said
executed Section 338 Forms to Parent at least twenty (20) days prior to the date
such Section 338 Forms are required to be filed.
(j) The parties hereto acknowledge that the consummation of the
transactions contemplated hereby will cause a termination for federal income tax
purposes under Section 708 of the Code of the Company and its domestic
Subsidiaries and a corresponding closing of the taxable year of each such entity
on the date of such termination. Prior to the Closing, the Member Representative
and Parent shall jointly prepare, and the Member Representative shall cause the
applicable Members of the Company and its domestic Subsidiaries to sign, an
election under Section 754 of the Code with respect to the Company and its
domestic Subsidiaries. The Principal Members shall cause such elections to be
filed with the Internal Revenue Service on Internal Revenue Service Forms 1065
for the applicable entity for the short taxable year ending on the Closing Date
and shall not seek to revoke such election.
(k) The parties hereto agree that as soon as reasonably practical after
the Closing, and prior to the filing of any Tax Return which includes
information related to the transactions contemplated by this Agreement, the
aggregate amount of the Cash Consideration payable to the KMV Corporation
Shareholders pursuant to the Stock Purchase shall be allocated among the assets
of KMV Corporation and the non-compete agreement described in Section 7.11 of
this Agreement in accordance with an allocation schedule (the "KMV Corporation
Purchase Price Allocation Schedule") proposed by Parent and reasonably
acceptable to the Member Representative. The parties hereto also agree that as
soon as reasonably practical after the Closing, and prior to the filing of any
Tax Return which includes information related to the transactions contemplated
by this Agreement, the sum of (i) the aggregate amount of the Cash Consideration
payable to Holders of Company Units pursuant to the Merger plus (ii) the
aggregate amount of the Cash Consideration payable to KMV Corporation
Shareholders pursuant to the Stock Purchase that is allocable to Company Units
owned by KMV Corporation shall be allocated among the assets of the Company and
the non-compete agreement described in Section 7.11 of this Agreement in
accordance with an allocation schedule (the "Company Purchase Price Allocation
Schedule" and, together with the KMV Corporation Purchase Price Allocation
Schedule, the "Purchase Price Allocation Schedules") proposed by Parent and
reasonably acceptable to the Member Representative. For the avoidance of doubt,
the amounts allocated above shall not be reduced by the Combined Company
Transaction Fees, which for Tax purposes shall be treated as paid, as
applicable, to Holders of Company Units pursuant to the Merger and KMV
Corporation Shareholders pursuant to the Stock Purchase and as subsequently
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paid by such Persons to the ultimate recipients thereof. The Purchase Price
Allocation Schedules shall be prepared in a manner required by Section 1060 or
Section 338, as applicable, of the Code and other Applicable Law and delivered
by Parent to the Member Representative within forty-five (45) days after the
Closing. In connection with the Purchase Price Allocation Schedules, Parent and
the Member Representative shall discuss the allocations of the consideration and
attempt in good faith to reach agreement with respect thereto. Provided Parent
and the Member Representative reach agreement with respect to the Purchase Price
Allocation Schedules, none of the Principal Members, the KMV Corporation
Shareholders, the Surviving Company and its Subsidiaries or Parent shall take
any position on any Tax Return inconsistent with the allocations set forth on
the Purchase Price Allocation Schedules, taking into account any necessary
adjustments as a result of Section 3.2.4 of this Agreement as agreed upon,
unless required to do so by a final determination by the Internal Revenue
Service.
(l) For a period of six (6) years after the Closing Date, Parent shall,
and shall cause KMV Corporation, the Company and their respective Subsidiaries
to retain all Tax Returns, books and records (including computer files) of, or
with respect to the activities of, KMV Corporation, the Company and their
respective Subsidiaries for all taxable periods ending on or prior to the
Closing Date. If, within sixty (60) days after the end of the six-year period
referred to above, the Member Representative requests such Tax Returns, books or
records, Parent shall provide such requested Tax Returns, books or records to
the Member Representative.
(m) The Member Representative shall, in consultation with Parent,
control, manage and be solely responsible for any audit, contest, claim,
proceeding or inquiry with respect to Taxes for any Taxable period ending on or
before the Closing Date and shall have the right, in consultation with Parent,
to settle or contest any such audit, contest, claim, proceeding or inquiry;
provided, however, that the Member Representative shall not settle any such
issue that would adversely affect Parent, KMV Corporation, the Surviving Company
or any of their respective Subsidiaries, without the prior written consent of
Parent, which consent shall not be unreasonably withheld or delayed.
(n) Parent shall, in consultation with the Member Representative,
control, manage and be solely responsible for any audit, contest, claim,
proceeding or inquiry with respect to Taxes for any Straddle Period and shall
have the right, in consultation with the Member Representative, to settle or
contest any such audit, contest, claim, proceeding or inquiry; provided,
however, that Parent shall not settle any such issue that would adversely affect
the Applicable Sellers, without the prior written consent of the Member
Representative, which consent shall not be unreasonably withheld or delayed.
(o) Parent shall control, manage and solely be responsible for any
audit, claim, proceeding or inquiry with respect to any item relating to Taxes
for which the Applicable Sellers are not obligated to indemnify Parent pursuant
to Section 10.7(c) of this Agreement.
Section 7.7 Insurance. Each of KMV Corporation, the Company and their
respective Subsidiaries shall maintain in effect and pay all premiums due
thereon for the period ending on the Closing Date with respect to any and all
fidelity bonds maintained by them on the date hereof and all Company Insurance
Policies or procure comparable replacement policies and
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bonds (or such replacement coverage as is obtainable on a commercially
reasonable basis) and maintain such policies and bonds in effect until the
Closing Date.
Section 7.8 Notification of Certain Matters. Each party to this
Agreement shall give prompt notice to the other parties, to the extent known by
such party, of (a) the occurrence, or failure to occur, of any event or
existence of any condition that has caused or could reasonably be expected to
cause any of the representations or warranties of such party contained in this
Agreement to be untrue or inaccurate in any material respect at any time after
the date of this Agreement, up to and including the Closing Date; (b) the
occurrence of any matter or event that is materially adverse to the business,
assets, financial condition or results of operations of such party and its
respective Subsidiaries taken as a whole, as applicable, and (c) any failure on
its part to comply with or satisfy, in any material respect, any covenant,
condition or agreement to be complied with or satisfied by such party under this
Agreement. In addition, the Company shall promptly notify Parent in the event
that (w) any Key Employee or Other Employee shall, for any reason, cease to be
employed by or contract with the Combined Company; (x) any Key Employee or Other
Employee shall have delivered notice either to terminate his or her employment
with the Combined Company; (y) the Combined Company receives any notice of
cancellation or intent to cancel any of the Contracts with its customers or (z)
any material adverse change occurs in the business relationship of the Combined
Company with any customer or any significant supplier, agent or distributor.
Section 7.9 Further Assurances; Transfer of Omitted Assets.
(a) Each party to this Agreement shall execute such documents and other
papers and perform such further acts as may be reasonably required to carry out
the provisions of this Agreement, the Ancillary Agreements and the transactions
contemplated hereby and thereby. Upon the request of Parent, each of KMV
Corporation, the Company, the Principal Members, the KMV Corporation
Shareholders and their respective Affiliates shall promptly execute and deliver
such further instruments of assignment, transfer, conveyance, endorsement,
direction or authorization and other documents as Parent may reasonably request
to effectuate the purposes of this Agreement and the Ancillary Agreements.
(b) Effective as of the Closing Date, each of the Principal Members and
the KMV Corporation Shareholders, severally, for itself, himself or herself,
hereby assigns, transfers, conveys and contributes all right, title or interest
with respect to any and all Omitted Assets held by such party to the Surviving
Company. Each of the Principal Members and the KMV Corporation Shareholders
shall take all necessary action to obtain as promptly as practicable, and in any
event before the Closing Date, all permits, consents, approvals, waivers and
authorizations of all Governmental Authorities, third parties or other Persons
which are necessary or advisable to consummate such assignment, transfer,
conveyance and contribution. In the event that at any time or from time to time
after the Closing, any of the Principal Members or the KMV Corporation
Shareholders shall have received or otherwise acquired any right, title or
interest with respect to any Omitted Assets, such party shall promptly notify
Parent. Promptly upon Parent's demand that any such Omitted Assets be
transferred to the Surviving Company or any other Person designated by Parent,
such Principal Member or KMV Corporation Shareholder, as the case may be, shall
cause such Person to transfer such Omitted Assets to the Surviving Company or
such other Person designated by Parent. Prior to any such transfer, such
Principal
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Member or KMV Corporation Shareholder, as the case may be, shall cause the
Person possessing such Omitted Assets to hold such Omitted Assets (and all
earnings generated by such Omitted Assets from and after the Closing) in trust
for the Surviving Company or such other Person designated by Parent.
Section 7.10 Third-Party Matters.
(a) From and after the date of this Agreement, neither KMV Corporation,
the Company nor any of the Principal Members or KMV Corporation Shareholders
shall, nor shall they permit any of their respective Affiliates, officers,
directors, employees, members, shareholders, representatives or agents,
including any investment banker, attorney or accountant engaged by any of them
to, directly or indirectly solicit, encourage or facilitate inquiries or
proposals, or enter into any agreement, with respect to, or initiate or
participate in any negotiations or discussions with any Person concerning, any
acquisition or purchase of all or a substantial portion of the assets of, or of
any equity interest in, the Company, KMV Corporation or any of their respective
Subsidiaries, or any merger or business combination with any of the Company, KMV
Corporation or any of their respective Subsidiaries (each, an "Acquisition
Proposal"), or furnish any information to any such Person. KMV Corporation, the
Company, the Principal Members and the KMV Corporation Shareholders shall notify
Parent within twenty-four (24) hours if any Acquisition Proposal (including the
terms thereof) is received by, any such information is requested from, or any
such negotiations or discussions are sought to be initiated with, KMV
Corporation, the Company, the Principal Members and the KMV Corporation
Shareholders, any of their respective Affiliates, officers, directors,
employees, members, or shareholders (for purposes of this Section 7.10,
collectively, the "Seller Parties"), or their representatives and agents,
including any investment banker, attorney or accountant engaged by any of them.
It is understood that any breach of the restrictions set forth in this Section
7.10(a) by any Seller Party or any investment banker, attorney or other advisor
or representative of the Seller Parties shall be deemed to be a breach of this
Section 7.10(a) by KMV Corporation and the Company and any Principal Member or
KMV Corporation Shareholder who is in breach of the restrictions set forth in
this Section 7.10(a); provided, however, that no Principal Member or KMV
Corporation Shareholder shall be liable under this Section 7.10(a) for the
action or inaction of any other Principal Member or KMV Corporation Shareholder.
(b) KMV Corporation, the Company, the Principal Members and the KMV
Corporation Shareholders shall, and shall cause their respective Affiliates,
officers, directors, employees, members, shareholders, representatives and
advisors to, immediately cease or cause to be terminated any existing
activities, including discussions or negotiations with any parties, conducted
prior to the date hereof with respect to any Acquisition Proposal and, subject
to the terms of any existing confidentiality agreements, shall seek to have all
materials distributed to Persons in connection therewith by KMV Corporation, the
Company, the Principal Members, the KMV Corporation Shareholders or any of their
respective Affiliates or advisors returned to the Company promptly. Neither KMV
Corporation, the Company, the Principal Members, the KMV Corporation
Shareholders or any of their respective Affiliates, officers, directors,
employees, members, shareholders, representatives or agents, including any
investment banker, attorney or accountant engaged by any of them, shall amend,
modify, waive or terminate, or otherwise release any Person from, any
standstill, confidentiality or similar agreement or arrangement currently in
effect relating to this Agreement or the transactions contemplated hereby. KMV
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Corporation, the Company, the Principal Members and the KMV Corporation
Shareholders shall cause their respective Affiliates, officers, directors,
employees, members, shareholders, representatives and agents to comply with the
provisions of this Section 7.10.
Section 7.11 Restricted Covenants Related to the Sale of Goodwill. In
consideration for the purchase by Parent of all of his or her equity interests
in the Combined Company, each Non-Compete Member hereby covenants and agrees to
the following:
(a) Agreement Not To Compete. During the applicable Restrictive Period,
each Non-Compete Member hereby agrees, severally, for himself or herself, that
such Non-Compete Member shall not:
(i) acting alone, or in conjunction with others, directly or
indirectly, become involved as officer, director, shareholder, owner, affiliate,
salesperson, co-owner, partner, trustee, promoter, technician, engineer,
analyst, employee, agent, representative, supplier, investor or lender,
consultant, advisor or manager in any business activity within the Territory
which is competitive with any aspect of the Restricted Business;
(ii) provide any service (as an employee, consultant or otherwise),
support, product, technology or Intellectual Property to any Person, if such
service, support, product, technology or Intellectual Property is competitive
with the Restricted Business; or
(iii) permit such Non-Compete Member's name to be used in connection
with any Person which is competitive with the Restricted Business;
provided, however, that nothing in this Section 7.11 shall prevent
any Non-Compete Member from owning as a passive investment less than one percent
(1%) of the outstanding shares of the capital stock of a publicly-held
corporation if (x) such shares are actively traded on an established national
securities market in the United States and (y) such Non-Compete Member is not
otherwise associated directly or indirectly with such corporation or any
Affiliate of such corporation; and provided, further, that nothing in this
Section 7.11 shall prevent any Non-Compete Member's passive investment in mutual
funds or other pooled investment vehicles, in each case over which such
Non-Compete Member does not exercise investment control. Notwithstanding
anything to the contrary in this Section 7.11, a Non-Compete Member may (A) be
employed by or perform services for a Person engaged in the Restricted Business,
provided, however that such Non-Compete Member does not personally engage in any
of the activities set forth in clauses (i) through (iii) above while in such
employ or while performing such services or (B) engage in investment management
services for third parties that may involve activities set forth in clauses (i)
through (iii) above, so long as the provision of any credit risk data to third
parties (1) is limited to prospects and clients of such investment management
business, (2) is incidental to, and not a primary part of, such investment
management business, and (3) will not provide such third party with data or the
capacity to process data that is functionally substantially similar to any
products and services of the Restricted Business; provided, however, that this
clause (B) will not prohibit the provision of credit risk analytics or data to
clients or prospective clients of the investment management business pursuant to
licenses of credit risk data from the Surviving Company or Parent. Parent agrees
that, in the event any Non-Compete Member enters into an investment management
business as contemplated by the foregoing, Parent will, if
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requested, license credit risk analytics and data to such Non-Compete Member for
use in such investment management business on terms no less favorable than
Parent's or the Surviving Company's terms for comparable services to their
respective most preferred similarly situated clients.
As used in this Section 7.11:
(A) "Territory" shall mean the United States, the United Kingdom,
Japan and any other place that the Combined Company conducts the
Restricted Business.
(B) "Restricted Business" shall mean any business of the Combined
Company as currently conducted by the Combined Company, including
without limitation providing credit risk analytics or data to
financial institutions, corporate or investment professionals
within other organizations and any projects currently in
development associated with project fees such as the portfolio
pilot and the pricing models.
(b) Acknowledgements of the Non-Compete Members. Each Non-Compete Member
acknowledges that the promises and restrictive covenants that such Non-Compete
Member is providing in this Agreement are reasonable and necessary to the
protection of the business to be acquired by Parent pursuant to this Agreement
and the Ancillary Agreements and Parent's legitimate interests in the
transactions contemplated by this Agreement and the Ancillary Agreements
(including the Company's goodwill). Each Non-Compete Member acknowledges that,
in connection with the consummation of the transactions contemplated by this
Agreement and the Ancillary Agreements, all of such Non-Compete Member's
membership interests in the Company and shares in KMV Corporation will be
purchased by Parent. Each Non-Compete Member further acknowledges that such
Non-Compete Member sold all of such Non-Compete Member's membership interests in
the Company and shares in KMV Corporation in connection with the transactions
contemplated by this Agreement and the Ancillary Agreements and that goodwill
was a material consideration in Parent's decision to enter into the transactions
contemplated by this Agreement and the Ancillary Agreements. Each Non-Compete
Member acknowledges that if such Non-Compete Member were to engage in the
Restricted Business subsequent to the consummation of the transactions
contemplated by this Agreement and the Ancillary Agreements, such competition
could materially and adversely affect the value of the business acquired by
Parent in the transactions contemplated by this Agreement and the Ancillary
Agreements.
(c) Independence of Obligations. The covenants and obligations of the
Non-Compete Members set forth in this Section 7.11 shall be construed as
independent of any other agreement or arrangement (other than this Agreement)
between any Non-Compete Member, on the one hand, and Parent, on the other hand.
(d) Specific Performance. Each Non-Compete Member hereby agrees that in
the event of any breach or threatened breach by such Non-Compete Member of any
covenant, obligation or other provision contained in this Section 7.11, Parent
shall be entitled (in addition to any other remedy that may be available to it)
to the extent permitted by Applicable Law to (a) a decree or order of specific
performance to enforce the observance and performance of such
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covenant, obligation or other provision and (b) an injunction restraining such
breach or threatened breach.
Section 7.12 State and Foreign Takeover Statutes. Each member of the
Company Group shall take all steps necessary to exempt (or continue the
exemption of) the transactions contemplated hereby from any applicable state or
foreign takeover Law, as now or hereafter in effect.
Section 7.13 Efforts of Parties to Close. Subject to the provisions of
Section 7.3 hereof, during the period from the date of this Agreement through
the Closing Date, each party hereto shall use its reasonable best efforts to
fulfill or obtain the fulfillment of the conditions precedent to the
consummation of the transactions contemplated hereby, including the execution
and delivery of any documents, certificates, instruments or other papers that
are reasonably required for the consummation of the transactions contemplated
hereby. During the period from the date of this Agreement and continuing through
the Closing, except as required by Applicable Law or with the prior written
consent of Parent, in the case of KMV Corporation, the Company or any of the
Principal Members or KMV Corporation Shareholders, or the Company, in the case
of Parent, no party to this Agreement shall knowingly take any action which, or
knowingly fail to take any action the failure of which to be taken, could
reasonably be expected to: (a) result in any of the representations and
warranties set forth in this Agreement on the part of the party taking or
failing to take such action being or becoming untrue in any material respect;
(b) result in any conditions to the Closing set forth in Article 8 not being
satisfied; or (c) result in a violation of any provision of this Agreement or
the Ancillary Agreements.
Section 7.14 Accounting Matters.
(a) Each member of the Company Group shall use its commercially
reasonable efforts to assist Parent and Parent's independent accountants in
completing the audits of the Combined Company for each of the fiscal years ended
December 31, 2001, 2000 and 1999 as soon as reasonably practicable after the
execution of this Agreement.
(b) The Company will complete an assessment of the collectibility of its
accounts receivable by the Closing Date to ensure that an accounts receivable
reserve is established in accordance with GAAP.
Section 7.15 Expenses. Except as expressly provided otherwise in this
Agreement, the parties shall each bear their respective direct and indirect
expenses incurred in connection with the negotiation and preparation of this
Agreement and the consummation of the Merger, the Stock Purchase and the other
transactions contemplated hereby; provided, however, that (i) the expenses of
any audits of the Combined Company shall be paid by Parent and (ii) any filing
fees payable pursuant to the HSR Act shall be paid 50% by Parent and 50% by the
Principal Members and the KMV Corporation Shareholders. Parent hereby agrees to
pay the Combined Company Transaction Fees on behalf of the Combined Company at
the Closing.
Section 7.16 Waiver of Rights to Compensation. Each of the Principal
Members and KMV Corporation Shareholders hereby waives any right it, he or she
may have to receive, from the Company, KMV Corporation, any of their respective
Subsidiaries or any other
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Person, any amount that could be received (whether in cash or property or the
vesting of property), as a result of the consummation of the Merger, the Stock
Purchase and the other transactions contemplated by this Agreement and the
Ancillary Agreements including without limitation any dissenter or appraisal
rights under Applicable Law or Contract, other than as expressly provided for in
this Agreement and the Ancillary Agreements.
Section 7.17 Distributions to Members. Notwithstanding anything to the
contrary in this Agreement (including the provisions of Section 7.1(k) hereof),
after the date of this Agreement and prior to the Closing Date, the Company
shall be permitted to make the distributions to its Members set forth on Exhibit
G hereto.
Section 7.18 Final Closing Consideration Exhibit. At least three (3)
Business Days prior to the Closing Date, the Company shall deliver the final
Closing Consideration Exhibit to Parent, provided, however, that the final
Closing Consideration Exhibit shall only reflect (i) changes in events between
the date of this Agreement and the Closing Date that are not otherwise
prohibited by the terms of this Agreement, or (ii) such other changes as are
previously approved by Parent in writing, which prior written approval shall not
be unreasonably withheld.
Section 7.19 Proprietary Rights Agreements and Other Matters. The
Combined Company shall cause each of the Principal Members and any Key Employee
who is not a Principal Member to execute and deliver prior to closing a
proprietary rights agreement consistent with customary industry practice, or
such other agreement containing substantially similar protections and take such
other actions specified in the last paragraph of Section 4.7 of the Company
Disclosure Schedule.
ARTICLE 8.
CONDITIONS TO THE CONSUMMATION OF THE MERGER AND THE STOCK PURCHASE
Section 8.1 Mutual Conditions. The obligations of each party to this
Agreement to consummate the Merger and the Stock Purchase shall be subject to
the satisfaction of each of the following conditions, provided that Parent may
direct each other party hereto to waive any condition contained in this Section
8.1 if (x) no such party could be criminally culpable for waiving or closing
over such condition, and (y) Parent shall fully indemnify each such party for
any liabilities or losses incurred by each such party in connection with or
arising out of waiving or closing over such condition, such indemnification to
be approved by the Company on behalf of each Principal Member and KMV
Corporation on behalf of each KMV Corporation Shareholder:
(a) No order, injunction or decree issued by any Governmental Authority
of competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the Merger or the Stock Purchase shall be in effect. No
proceeding initiated by any Governmental Authority seeking an injunction to
restrain or prohibit the consummation of the Merger or the Stock Purchase shall
be pending. No statute, rule, regulation, order, injunction or decree shall have
been enacted, entered, promulgated or enforced by any Governmental Authority
which prohibits, restricts in any material manner or makes illegal consummation
of the Merger or the Stock Purchase;
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(b) All consents, waivers, authorizations and approvals required from
all Governmental Authorities to consummate the Merger and the Stock Purchase,
without the imposition of conditions or requirements, in the aggregate, the
satisfaction of which by Parent or its Subsidiaries or KMV Corporation, the
Company or their respective Subsidiaries are reasonably likely to result in
either a Parent Material Adverse Effect or a Company Material Adverse Effect
shall have been obtained and shall remain in full force and effect as of the
Closing Date;
(c) In respect of the notifications of the parties hereto pursuant to
the HSR Act and any other applicable antitrust or competition laws, the
applicable waiting period(s) and any extensions thereof shall have expired or
terminated; and
(d) A general moratorium on commercial banking activities in New York or
California shall not have been declared by either Federal or state authorities
and be continuing nor shall there occur and be continuing any calamity or crisis
in the financial markets that either (i) renders Parent unable to access or
borrow funds in the ordinary course of business or make use of the United States
federal wire system, or (ii) renders the Escrow Agent unable to receive the
deposit of the Escrow Funds.
Section 8.2 Conditions to Parent's and Merger Sub's Obligations. The
obligations of Parent and Merger Sub to consummate the Merger and the Stock
Purchase shall be subject to the satisfaction of each of the following
conditions, any of which may be waived in writing by Parent and Merger Sub:
(a) For purposes of this Section 8.2(a), the accuracy of the
representations and warranties of the Company, KMV Corporation, the Principal
Members and the KMV Corporation Shareholders set forth in this Agreement shall
be assessed as of the date of this Agreement and shall be assessed as of the
Closing Date with the same effect as though all such representations and
warranties had been made again on and as of the Closing Date (provided, however,
that the representations and warranties that speak as of a specific date shall
speak only as of such date). The representations and warranties of the Company,
KMV Corporation, the Principal Members and the KMV Corporation Shareholders
qualified by materiality or by reference to a Company Material Adverse Effect
shall be true and correct. The representations and warranties of the Company,
KMV Corporation, the Principal Members and the KMV Corporation Shareholders not
qualified by materiality or by reference to a Company Material Adverse Effect
shall be true and correct in all material respects;
(b) KMV Corporation, the Company and each of the Principal Members and
KMV Corporation Shareholders, as applicable, shall have performed and complied
in all material respects with all agreements, covenants, obligations and
conditions required by this Agreement to be performed or complied with by them
at or prior to the Closing Date;
(c) KMV Corporation, the Company, and each of the Principal Members and
KMV Corporation Shareholders shall have delivered to Parent a certificate, dated
as of the Closing Date, signed on behalf of the Company by its Chief Executive
Officer and Chief Operating Officer, signed on behalf of KMV Corporation by its
Chief Executive Officer and Chief
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Operating Officer and signed by each of the Principal Members and KMV
Corporation Shareholders confirming the satisfaction of the conditions contained
in Section 8.2(a) and (b);
(d) Each of the Ancillary Agreements shall be in full force and effect
and Parent shall not be aware of any basis that would reasonably be expected to
cause any of such agreements to cease to be in full force and effect (it being
agreed and understood, however, that the foregoing shall have no effect on any
rights Parent or Merger Sub may have under Section 8.2(f) of this Agreement);
(e) Parent shall have received an opinion dated the Closing Date of
Gibson, Dunn & Crutcher LLP, counsel to the Combined Company, as to the matters
set forth in Exhibit H in the form and with such qualifications and exceptions
as are reasonably acceptable to Parent;
(f) Since December 31, 2001, there shall not have been any Company
Material Adverse Effect or any development or combination of developments that,
individually or in the aggregate, has had or is reasonably likely to have a
Company Material Adverse Effect; and
(g) The Combined Company shall provide evidence to Parent that it has
obtained either the consents under the Contracts set forth under the heading
"Change of Control Contracts" on Exhibit J to this Agreement or obtained such
commercially reasonable substitutes as provided on Exhibit J. In addition,
subject to the last paragraph of Exhibit J, Parent shall have received copies of
all other consents, approvals, authorizations, qualifications and orders of all
Governmental Authorities and all other Persons party to Contracts with any
member of the Combined Company that are required in respect of the transactions
to be consummated at the Closing, other than those that if not obtained would
not individually or in the aggregate reasonably be expected to have a Company
Material Adverse Effect or a material adverse effect on the business, assets,
liabilities, financial conditions or results of operations of Parent and its
Subsidiaries, taken as a whole, and such consents and other items shall remain
in full force and effect as of the Closing Date.
(h) Provided that Parent's independent auditors shall have completed,
within sixty (60) days after the date of this Agreement, an audit of the
Combined Company as of December 31, 2001, such audited consolidated balance
sheet of the Combined Company as of December 31, 2001 and the related
consolidated statements of income, changes in owners' equity and cash flows for
the year then ended shall not be materially adverse when compared to the Company
Balance Sheet and Company Financial Statements for the corresponding period and
dates, provided, however, that variances shall be disregarded for purposes of
this Section 8.2(h) to the extent they are attributable to (i) depreciation,
rental expense and vacation accruals in accordance with GAAP rather than on a
tax basis, (ii) any compensation expense charge attributable to issuance of
Company Units that may be required in accordance with GAAP, or (iii)
capitalization of software development costs that may be required in accordance
with GAAP.
(i) Unless Parent consents otherwise in writing, the relevant member of
the Combined Company shall take all action necessary to terminate, or cause to
terminate, before the Effective Time, any Benefit Plan that is a simplified
employee pension plan, a 401(k) plan or other defined contribution pension plan.
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(j) Each of the four (4) Key Employees listed under Group A on Exhibit I
hereto and seven (7) out of the ten (10) Key Employees listed under Group B on
Exhibit I hereto shall have entered into employment agreements with the
Surviving Company or Parent for a period following the Closing on mutually
agreeable terms, provided however, that a failure of any one of the foregoing to
have accepted such employment shall be disregarded for purposes of this Section
8.2(j) unless Parent has made an employment offer (an "Eligible Offer") to such
Person which (i) provides cash compensation (assuming achievement of targeted
financial performance of the unit consistent with the budgeted operating plan of
the Combined Company provided to Parent prior to the date hereof (the "Budget"))
at least substantially equivalent to such Person's current cash compensation at
such target performance level (which current cash compensation is reflected in
the Budget and has been detailed prior to the date hereof for each such Person
in writing to the Parent (the "Compensation Submission")), and (except as
specified in the Compensation Submission) equity-linked compensation in the form
of Parent stock options on standard terms at least consistent with Parent's
equity-linked compensation for other managers in comparable positions with
comparable responsibilities within Parent's organization, for an employment
agreement duration of not more than one year (or such other duration as is set
forth in the Compensation Submission), (ii) except as set forth in the
Compensation Submission, provides for a role substantially consistent with such
Person's current role in the Combined Company, and (iii) otherwise is on terms
consistent with customary market practice for comparable executive employment
agreements, and such Person has failed to enter into an employment agreement on
the terms of such Eligible Offer.
Section 8.3 Conditions to the Obligations of the Company, KMV
Corporation, the Principal Members and the KMV Corporation Shareholders. The
obligation of the Company, KMV Corporation, the Principal Members and the KMV
Corporation Shareholders to consummate the Merger and the Stock Purchase shall
be subject to satisfaction of each of the following conditions, which may be
waived in writing by the Company on behalf of itself and each of the Principal
Members and by KMV Corporation on behalf of itself and each of the KMV
Corporation Shareholders:
(a) For purposes of this Section 8.3(a), the accuracy of the
representations and warranties of Parent set forth in this Agreement shall be
assessed as of the date of this Agreement and shall be assessed as of the
Closing Date with the same effect as though all such representations and
warranties had been made again on and as of the Closing Date (provided, however,
that the representations and warranties that speak as of a specific date shall
speak only as of such date). The representations and warranties of Parent
qualified by materiality or by reference to a Parent Material Adverse Effect
shall be true and correct. The representations and warranties of Parent not
qualified by materiality or by reference to a Parent Material Adverse Effect
shall be true and correct in all material respects;
(b) Parent shall have performed and complied in all material respects
with all agreements, covenants, obligations and conditions required by this
Agreement to be performed or complied with by it at or prior to the Closing
Date;
(c) Parent shall have delivered to the Company, KMV Corporation, the
Principal Members and the KMV Corporation Shareholders a certificate, dated as
of the Closing Date, signed on behalf of Parent by its Chief Executive Officer
or Chief Financial Officer confirming
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the satisfaction of the conditions contained in Section 8.3(a) and (b);
(d) The Company, KMV Corporation, the Principal Members and the KMV
Corporation Shareholders shall have received an opinion dated the Closing Date
of Simpson Thacher & Bartlett, counsel to Parent, in the form and as to the
matters set forth on Exhibit K with such exceptions and qualifications as are
reasonably acceptable to the Company and KMV Corporation; and
(e) There shall not exist any event or combination of events that,
individually or in the aggregate, will (or would reasonably be expected to)
prevent Parent from performing any of its post-Closing obligations under this
Agreement or any Ancillary Agreement at or after the Effective Time.
ARTICLE 9.
TERMINATION
Section 9.1 Termination.
(a) This Agreement may be terminated prior to the Closing as follows:
(i) by written consent of Parent, the Company on behalf of itself
and each of the Principal Members and KMV Corporation on behalf of itself and
each of the KMV Corporation Shareholders;
(ii) by Parent, the Company on behalf of itself and each of the
Principal Members or KMV Corporation on behalf of itself and each of the KMV
Corporation Shareholders, if any order of any Governmental Authority permanently
restraining, enjoining or otherwise prohibiting the consummation of the Merger
or the Stock Purchase shall have become final and non-appealable; provided,
however, that the party seeking to terminate this Agreement pursuant to this
Section 9.1(a)(ii) shall, subject to Section 7.3(a), have used commercially
reasonable efforts to prevent the entry of and to remove such order;
(iii) by Parent if any condition to the obligations of Parent
hereunder becomes incapable of fulfillment through no fault of Parent and is not
waived by Parent;
(iv) by the Company on behalf of itself and each of the Principal
Members and by KMV Corporation on behalf of itself and each of the KMV
Corporation Shareholders, if any condition to the obligations of such party
hereunder becomes incapable of fulfillment through no fault of such party and is
not waived by such party;
(v) by Parent, the Company on behalf of itself and each of the
Principal Members or KMV Corporation on behalf of itself and each of the KMV
Corporation Shareholders, if the Closing does not occur by the close of business
on or prior to April 24, 2002 (the "Termination Date"); provided, however, that
the Termination Date may be extended by Parent, the Company on behalf of itself
and each of the Principal Members or KMV Corporation on behalf of itself and
each of the KMV Corporation Shareholders by written notice to the other parties
if the Closing shall not have been consummated as a direct result of the
condition set forth in Sections 8.1(b) and (c) failing to have been satisfied
and the extending party (x)
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reasonably believes that the relevant approvals will be obtained during such
extension period, and (y) so long as the extending party is diligently pursuing
such approvals, but in any case such extension shall not be more than one
hundred twenty days (120) days after April 24, 2002; notwithstanding the
foregoing, a party who is or whose Affiliate is in material breach of any of its
obligations or representations, warranties, covenants or agreements contained in
this Agreement shall not have the right to terminate or extend this Agreement
pursuant to this Section 9.1(a)(v).
(b) The termination of this Agreement shall be effectuated by the
delivery by the party terminating this Agreement to each other party of a
written notice of such termination. If this Agreement so terminates, it shall
become null and void and have no further force or effect, except as provided in
Section 9.2.
Section 9.2 Survival after Termination. If this Agreement is terminated
in accordance with Section 9.1 hereof and the transactions contemplated hereby
are not consummated, this Agreement and each Ancillary Agreement shall become
void and of no further force and effect, without any liability on the part of
any party hereto, except for the provisions of Sections 7.15, 11.5, 11.8, 11.9
and 11.10 and this Article 9. Notwithstanding the foregoing, nothing in this
Section 9.2 shall relieve any party to this Agreement of liability for a breach
of any provision of this Agreement or any agreement made as of the date hereof
or subsequent thereto pursuant to this Agreement.
ARTICLE 10.
INDEMNIFICATION
Section 10.1 Survival of Representations, Warranties and Covenants;
Exclusive Monetary Remedies.
(a) All representations and warranties in this Agreement or in any
instrument executed and delivered in fulfillment of the requirements of this
Agreement shall survive the Closing for eighteen (18) months following the
Closing Date (the "Expiration Date"), except that the representations and
warranties in Sections 4.1(a), 4.1(b), 4.2(a), 4.3, 4.5, 4.11, 4.17, 5.1, 5.2,
5.4, 6.1 and 6.2 shall not terminate, but shall continue until the expiration of
the respective statutes of limitations relating thereto, provided however, that
the representations and warranties in Section 4.3(c)(ii) shall terminate on the
Expiration Date unless a Parent Indemnitee makes a claim pursuant to Section
10.2.1(a) of this Agreement that a breach under Section 4.3(c)(ii) either (i)
resulted in the unenforceability of this Agreement or any of the Ancillary
Agreements or (ii) prevented Parent from consummating the Merger, the Stock
Purchase or any of the other transactions contemplated by this Agreement or the
Ancillary Agreements. All covenants or other agreements in this Agreement shall
survive the Closing indefinitely or for such lesser period of time as may be
expressly specified herein with respect thereto or until the respective statutes
of limitation relating thereto, provided, however, that the covenants in
Sections 7.1, 7.2(a), 7.3, 7.5, 7.7, 7.8, 7.12, 7.13, 7.14, 7.17 and 7.18 shall
terminate on the Expiration Date.
(b) Notwithstanding anything in this Agreement to the Contrary, the sole
and exclusive basis on which any party may recover monetary damages for any
breach of this Agreement by any other party, whether based upon breach of
representations and warranties,
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breach of any covenant, or otherwise, shall be in accordance with the
indemnification provisions set forth in this Article 10, and subject to the
limitations, exclusions, caps and thresholds set forth in this Article 10,
provided however, that such exclusive remedies for monetary damages shall not
preclude any party from pursuing the remedies of specific performance,
injunctive relief, declaratory judgment or any other non-monetary equitable
remedies available to such party under Applicable Law.
Section 10.2 Indemnification by the Principal Members and the KMV
Corporation Shareholders.
Section 10.2.1 Indemnification. Subject to the limitations contained in
this Article 10 (including, without limitation, the limitations contained in
Section 10.2.3(b) of this Agreement), the Company (prior to the Closing Date)
and each Principal Member and KMV Corporation Shareholder jointly and severally
(from and after the Closing Date, and subject to Section 10.6(a)) shall
indemnify and hold Parent, KMV Corporation, the Surviving Company and each of
their Subsidiaries, and each of their respective officers, directors, employees,
members, stockholders, agents and representatives ("Parent Indemnitees")
harmless from and against all losses, damages, liabilities, claims, demands,
obligations, deficiencies, payments, judgments, settlements, costs and expenses
of any nature whatsoever (including the costs and expenses of any and all
investigations, actions, suits, proceedings, demands, assessments, judgments,
orders, settlements and compromises relating thereto, and reasonable attorneys',
accountants', experts' and other fees and expenses in connection therewith)
("Losses") resulting from, arising out of, or due to, directly or indirectly,
any of the following:
(a) Any inaccuracy or misrepresentation in, or breach of, any
representation or warranty of the Company or KMV Corporation contained in
Article 4 of this Agreement, in any schedule or exhibit delivered hereunder by
the Company or KMV Corporation or in any certificates delivered by the Company
or KMV Corporation pursuant to this Agreement, or any breach or nonfulfillment
of any covenant or agreement of the Company or KMV Corporation contained in this
Agreement, in any schedule or exhibit delivered hereunder by the Company or KMV
Corporation or in any certificates delivered by the Company or KMV Corporation
pursuant to this Agreement, or any claims, causes of actions, rights asserted or
demands made by any third parties (including any Governmental Authority) arising
from or relating to any of the foregoing (it being agreed that for purposes of
such right to indemnification, the representations and warranties made by the
Company or KMV Corporation (except as specifically set forth in all provisions
of Section 4.8 of this Agreement, except Section 4.8.13) shall be deemed not
qualified by any references therein to materiality or whether or not any breach
could result or could reasonably be expected to result in a Company Material
Adverse Effect), provided, however, that a breach of the representations and
warranties in Section 5.1 of this Agreement by a Principal Member or a KMV
Corporation Shareholder shall not, in and of itself, constitute a breach by the
Company or KMV Corporation of the representations and warranties in Section 4.5
of this Agreement;
(b) Any shortfall in the Working Capital Amount or Cash Capital Amount
in excess of the Working/Cash Capital Holdback Amount, as determined in
accordance with Section 3.2.4 hereof;
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(c) Any Third-Party Claims for a breach by the Combined Company prior to
the Closing Date of, or a default by the Combined Company prior to the Closing
Date under, any Contract between the Combined Company and any customer or client
of the Combined Company prior to the Closing Date; provided, however, that the
Principal Members and the KMV Corporation Shareholders shall have no obligation
to indemnify and hold harmless any Parent Indemnitee against any Losses claimed
pursuant to this Section 10.2.1(c) unless such Parent Indemnitee shall have
delivered a notice of such claim pursuant to Sections 10.2.3 or 10.4 hereof to
the indemnifying party before the Expiration Date; and
(d) In the event the Combined Company does not obtain the consent to the
transactions contemplated by this Agreement with respect to the contract
identified as the third item on Section 4.4 of the Company Disclosure Schedule
and cure the default under such contract referred to in Section 4.7 of such
Schedule, and as a result the contract is terminated or ceases to be performed
by the counterparty, any incremental, direct out-of-pocket costs and expenses
that are incurred by the Combined Company or Parent after the Closing resulting
therefrom, including the incremental cost of obtaining a replacement agreement
providing services to the Combined Company substantially similar to those
provided under such terminated agreement and any incremental costs relating to
obtaining or collecting substitute data or funding customer reimbursements,
reprogramming costs, preparation of revised marketing materials and other
collateral materials in connection with such replacement (all such costs and
expenses incurred within eighteen months following the Closing Date,
collectively, "Replacement Costs"), provided that the aggregate amount of such
indemnification for Replacement Costs shall be limited to the first $500,000 of
such Replacement Costs plus one-half of the next $2,000,000 of such Replacement
Costs (which amounts shall be treated as Losses for all other purposes of this
Agreement).
Section 10.2.2 Individual Indemnification. Subject to the limitations
contained in this Article 10, from and after the Closing Date, each Principal
Member and KMV Corporation Shareholder shall severally, and not jointly,
indemnify and hold each Parent Indemnitee harmless from and against all Losses
resulting from, arising out of, or due to, directly or indirectly, any
inaccuracy or misrepresentation in, or breach of, any representation or warranty
made by such Principal Member or KMV Corporation Shareholder contained in
Article 5 of this Agreement, in any schedule or exhibit delivered hereunder by
such Principal Member or KMV Corporation Shareholder or in any certificates
delivered by such Principal Member or KMV Corporation Shareholder pursuant to
this Agreement, or any breach or nonfulfillment of any covenant of such
Principal Member or KMV Corporation Shareholder contained in this Agreement, in
any schedule or exhibit delivered hereunder by such Principal Member or KMV
Corporation Shareholder or in any certificates delivered by such Principal
Member or KMV Corporation Shareholder pursuant to this Agreement, or any claims,
causes of actions, rights asserted or demands made by any third parties
(including any Governmental Authority) arising from or relating to any of the
foregoing (it being agreed that for purposes of such right to indemnification,
the representations and warranties made by the Principal Members or the KMV
Corporation Shareholders shall be deemed not qualified by any references therein
to materiality or whether or not any breach could result or could reasonably be
expected to result in a Company Material Adverse Effect).
Section 10.2.3 Escrow Account Offset; Waiver.
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(a) For purposes of this Section 10.2 and Section 10.7, in the event
that a Parent Indemnitee wishes to make any indemnification claim under this
Section 10.2 or Section 10.7, such Parent Indemnitee shall first provide written
notice of such claim (an "Indemnification Notice") to the Escrow Agent and the
Member Representative and, with respect to any indemnification claim under
Section 10.2.2 of this Agreement, to the Principal Member(s) and/or KMV
Corporation Shareholder(s) from whom indemnification is sought. Any such notice
shall, to the extent practicable, set forth in reasonable detail (w) the
individual items of Losses; (x) the basis for the claim, including the alleged
misrepresentation or breach; (y) the amount of the claim and (z) the date each
such item of Losses was paid or properly accrued, if applicable. Thereafter, the
Member Representative or, with respect to any indemnification claim under
Section 10.2.2 of this Agreement, the Principal Member(s) and/or KMV Corporation
Shareholder(s) from whom indemnification is sought, shall have twenty (20)
Business Days following such party's receipt of the Indemnification Notice in
which to deliver notice of objection to such claim to the Parent Indemnitee and
the Escrow Agent. If no objection notice is given, then the claim in the amount
alleged by the Parent Indemnitee in the Indemnification Notice shall be deemed
to be valid and indemnifiable pursuant hereto. No offset shall be permitted if
the relevant claim is timely disputed as set forth above, unless and until its
validity is finally resolved. In the event that the Parent Indemnitee is
entitled to offset as a result of the final resolution of the validity of such
claim, such Parent Indemnitee and the Member Representative or, with respect to
any indemnification claim under Section 10.2.2 of this Agreement, the Principal
Member(s) and/or KMV Corporation Shareholder(s) from whom indemnification is
sought (the "Notifying Person"), shall provide joint written notice (the
"Resolved Claim Notice") of such offset to the Escrow Agent. If the Notifying
Person has not so provided the Resolved Claim Notice to the Escrow Agent within
ten (10) days after the demand of the Parent Indemnitee in writing to the
Notifying Person, then the Parent Indemnitee will be permitted to unilaterally
deliver a Resolved Claim Notice (a "Unilateral Resolved Claim Notice") to the
Escrow Agent so long as the Parent Indemnitee provides written notice of the
delivery to the Escrow Agent of such Unilateral Resolved Claim Notice to the
Notifying Person within five (5) days thereafter. Within five (5) Business Days
after receipt of the Resolved Claim Notice or, in the case of a Unilateral
Resolved Claim Notice, within fifteen (15) Business Days after receipt thereof,
the Escrow Agent shall deliver to Parent Escrow Funds in the amount of the
offset set forth in the Resolved Claim Notice or the Unilateral Resolved Claim
Notice; provided, however, that the Escrow Agent shall not make such delivery in
respect of a Unilateral Resolved Claim Notice if the Notifying Person has prior
to the date of such delivery provided notice to the Escrow Agent and the Parent
Indemnitee of a written objection asserting that the Unilateral Resolved Claim
Notice was improperly given.
(b) With respect to indemnification claims under Section 10.2.1 of this
Agreement, if and to the extent the amount of the offset remains unfulfilled
after delivery of the Escrow Funds as set forth in subsection (a) above, the
Principal Members and the KMV Corporation Shareholders shall be severally, and
not jointly, liable for the delivery to such Parent Indemnitee, in cash, of the
amount of the offset remaining after payment of the Escrow Funds equal to such
Principal Member's or KMV Corporation Shareholder's Allocable Share of such
excess Losses, as applicable, subject to the limitations contained in Section
10.6(a) hereof. Notwithstanding anything to the contrary contained in this
Agreement, it is understood and agreed that in no event shall any Principal
Member or KMV Corporation Shareholder be liable under Section 10.2.1 of this
Agreement for the Allocable Share of Losses of any other Principal Member or KMV
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Corporation Shareholder. For purposes of this Agreement, "Allocable Share" shall
mean, as to each Principal Member and KMV Corporation Shareholder, the
percentage set forth opposite their respective names on Exhibit L hereto.
(c) With respect to indemnification claims under Section 10.2.2 of this
Agreement, (i) a Parent Indemnitee shall only be entitled to offset Escrow Funds
beneficially held by the Principal Member(s) and/or KMV Corporation
Shareholder(s), as the case may be, from whom indemnification is sought under
Section 10.2.2, and (ii) if and to the extent the amount of the offset remains
unfulfilled after delivery of the Escrow Funds beneficially held by such
Principal Member or KMV Corporation Shareholder, as the case may be, such
Principal Member or KMV Corporation Shareholder, as the case may be, from whom
indemnification is sought shall be severally liable for the delivery to such
Parent Indemnitee, in cash, of the full amount of such offset remaining after
payment of the Escrow Funds beneficially held by such Principal Member or KMV
Corporation Shareholder, as the case may be, subject to the limitations
contained in Section 10.6(a).
Section 10.3 Indemnification by Parent. Parent shall indemnify and hold
harmless the Company and KMV Corporation (prior to the Closing) and each of the
Principal Members and KMV Corporation Shareholders (from and after the Closing)
("Seller Indemnitees") from and against all Losses resulting from, arising out
of, or due to, directly or indirectly, any inaccuracy or misrepresentation in,
or breach of, any representation or warranty of Parent or Merger Sub contained
in Article 6 of this Agreement, in any schedule or exhibit delivered hereunder
by Parent or Merger Sub or in any certificates delivered by Parent or Merger Sub
pursuant to this Agreement, or any breach or nonfulfillment of any covenant of
Parent or Merger Sub contained in this Agreement, in any schedule or exhibit
delivered hereunder by Parent or Merger Sub or in any certificates delivered by
Parent or Merger Sub pursuant to this Agreement, or any claims, causes of
actions, rights asserted or demands made by any third parties (including any
Governmental Authority) arising from or relating to any of the foregoing.
Section 10.4 Procedures for Third-Party Claims.
(a) Third-Party Claims. In order for a Person (the "Indemnified Party")
to be entitled to any indemnification provided for under Section 10.2 or 10.3
hereof in respect of, arising out of or involving a claim made by any Person
against the Indemnified Party (a "Third-Party Claim"), such Indemnified Party
must notify the indemnifying party in writing of the Third-Party Claim promptly
following receipt by such Indemnified Party of written notice of the Third-Party
Claim; provided, however, that failure to give such notification shall not
affect the indemnification provided hereunder except to the extent the
indemnifying party shall have been actually materially prejudiced as a result of
such failure. Thereafter, the Indemnified Party shall deliver to the
indemnifying party, as promptly as practicable following the Indemnified Party's
receipt thereof, copies of all notices and documents (including court papers)
received by the Indemnified Party relating to the Third-Party Claim that are not
separately addressed to the indemnifying party.
(b) Assumption. If a Third-Party Claim is made against an Indemnified
Party, the indemnifying party shall be entitled to participate in the defense
thereof and, if it so chooses, to assume the defense thereof with counsel
selected by the indemnifying party; provided, however,
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that such counsel is not reasonably objected to by the Indemnified Party.
Should the indemnifying party so elect to assume the defense of a Third-Party
Claim, the indemnifying party shall not be liable to the Indemnified Party for
any reasonable legal expenses subsequently incurred by the Indemnified Party in
connection with the defense thereof. If the indemnifying party assumes such
defense, the Indemnified Party shall have the right to participate in the
defense thereof and to employ counsel, at its own expense, separate from the
counsel employed by the indemnifying party, it being understood that the
indemnifying party shall control such defense; provided, however, that the
indemnifying party shall bear the reasonable fees and expenses of such separate
counsel (i) if the parties to any such action or proceeding (including impleaded
parties) include any of the Principal Members or KMV Corporation Shareholders
and representation of both parties would, in the reasonable opinion of counsel
for the Indemnified Party, be inappropriate due to a conflict of interest or
(ii) if the indemnifying party shall not have employed counsel (other than
counsel that is reasonably objected to by the Indemnified Party) within a
reasonable time after the Indemnified Party has given notice of the institution
of a Third-Party Claim in compliance with Section 10.4(a) hereof. The
indemnifying party shall be liable for the reasonable fees and expenses of
counsel employed by the Indemnified Party for any period during which the
indemnifying party has not assumed the defense thereof, provided, however, that
such counsel is not reasonably objected to by the indemnifying party. If the
indemnifying party chooses to defend or prosecute a Third-Party Claim, all the
Indemnified Parties shall cooperate in the defense or prosecution thereof at the
indemnifying party's expense. Such cooperation shall include the retention and
(upon the indemnifying party's request) the provision to the indemnifying party
of records and information that are reasonably relevant to such Third-Party
Claim, and making employees available on a mutually convenient basis to provide
additional information and explanation of any material provided hereunder. If
the indemnifying party assumes the defense of a Third-Party Claim, the
Indemnified Party shall not admit any liability with respect to, or settle,
compromise or discharge, such Third-Party Claim without the indemnifying party's
prior written consent (which consent shall not be unreasonably withheld). If the
indemnifying party assumes the defense of a Third-Party Claim, the Indemnified
Party shall agree to any settlement, compromise or discharge of a Third-Party
Claim that the indemnifying party may recommend and that by its terms obligates
the indemnifying party to pay the full amount of the liability in connection
with such Third-Party Claim, which releases the Indemnified Party completely in
connection with such Third-Party Claim and that would not otherwise materially
adversely affect the Indemnified Party. Notwithstanding the foregoing, an
Indemnified Party shall have the right to jointly control the defense of any
Third-Party Claim against such Indemnified Party in the event the potential
Losses with respect to such Third Party Claim, when aggregated with all other
satisfied or pending Losses subject to indemnification pursuant to Section 10.1,
10.2 and 10.3 hereof exceed the limits set forth in Section 10.6(a), in the case
of any Parent Indemnitee, or Section 10.6(b), in the case of any Seller
Indemnitee.
Section 10.5 Termination of Indemnification. The obligations to
indemnify and hold harmless any Person pursuant to Sections 10.2.1, 10.2.2 or
10.3 hereof shall terminate when the applicable representation or warranty or
covenant terminates pursuant to Section 10.1 hereof; provided, however, that
such obligations to indemnify and hold harmless shall not terminate with respect
to any item as to which the Person to be indemnified shall have, before the
expiration of the applicable period, previously made a bona fide claim by
delivering a notice of such claim to the indemnifying party.
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Section 10.6 Limitations; Maximum Liability.
(a) Principal Members and KMV Corporation Shareholders.
(i) Notwithstanding anything in this Agreement to the contrary, the
Principal Members and the KMV Corporation Shareholders shall not be obligated to
indemnify any Parent Indemnitee pursuant to Sections 10.2.1(a), 10.2.1(c) or
10.2.2 of this Agreement unless and until the aggregate amount of all Losses
suffered by all Parent Indemnitees (excluding all Parent Indemnitee First-Dollar
Losses) exceeds the Threshold Amount, and then only to the extent of any such
excess; provided, however, that the Threshold Amount shall not apply to Parent
Indemnitee First-Dollar Losses or in the case of common law fraud, intentional
misrepresentation or criminal activity on the part of any Principal Member or
KMV Corporation Shareholder.
(ii) Except for the indemnification obligations set forth in Section
10.7 of this Agreement or in the case of common law fraud, intentional
misrepresentation or criminal activity on the part of any Principal Member or
KMV Corporation Shareholder, the aggregate indemnification obligations of the
Principal Members and the KMV Corporation Shareholders pursuant to this
Agreement shall be limited to a maximum of $70,000,000; provided, however, that
the aggregate indemnification obligations of the Principal Members and the KMV
Corporation Shareholders pursuant to this Agreement for breaches of the
representations and warranties contained in Sections 4.1(a), 4.1(b), 4.3 (other
than Section 4.3(c)(ii), unless the Loss under Section 4.3(c)(ii) results from
the unenforceability of this Agreement or any of the Ancillary Agreements or
from Parent being unable to consummate the Merger, the Stock Purchase or any of
the other transactions contemplated by this Agreement or the Ancillary
Agreements), 4.5, 5.1 or 5.2 of this Agreement shall be limited to a maximum of
$210,000,000; and provided, further, that in all cases the indemnification
obligations of an individual Principal Member or KMV Corporation Shareholder
pursuant to any provision of this Agreement shall not exceed the aggregate
amount of the gross Transaction Consideration that such Principal Member or KMV
Corporation Shareholder is entitled to receive pursuant to this Agreement,
except for the indemnification obligations set forth in Section 10.7 of this
Agreement or in the case of common law fraud, intentional misrepresentation or
criminal activity on the part of such individual Principal Member or KMV
Corporation Shareholder.
(iii) Notwithstanding anything in this Agreement to the contrary,
the expressions of "joint and several" with respect to certain liabilities under
this Agreement of the Principal Members and KMV Corporation Shareholders are
solely to permit the recovery of such liabilities on that basis from the Escrow
Funds, and the parties agree that in all other circumstances in which any
liability under this Agreement is being enforced against a Principal Member or
KMV Corporation Shareholder, such Principal Member or KMV Corporation
Shareholder shall only be liable for its Allocable Share of the applicable total
liability, and up to its Allocable Share of the applicable limits set forth
above, except solely in the case of liabilities under Sections 7.9(b), 7.11 and
10.2.2, as to which such Principal Member or KMV Corporation Shareholder shall
bear the full amount of the applicable liability up to the amount of the gross
Transaction Consideration that such Principal Member or KMV Corporation
Shareholder is entitled to receive pursuant to this Agreement.
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(b) Parent. Except in the case of common law fraud, intentional
misrepresentation or criminal activity on the part of Parent, the aggregate
indemnification obligations of Parent pursuant to this Agreement shall be
limited to a maximum of $210,000,000.
Section 10.7 Tax Indemnification.
(a) The Applicable Sellers shall jointly and severally (subject to
Section 10.6(a)) indemnify and hold each of the Parent Indemnitees harmless from
and against all Taxes of KMV Corporation, the Applicable Sellers, the Company,
the Surviving Company and any of their respective Subsidiaries (i) with respect
to all Pre-Closing Periods, including, but not limited to, any Taxes arising as
a result of the deemed sale of assets of KMV Corporation, pursuant to the
Section 338(h)(10) Elections, (ii) with respect to any period beginning before
the Closing Date and ending after the Closing Date, but only with respect to the
portion of such period up to and including the Closing Date (such portion, a
"Pre-Closing Partial Period"), (iii) with respect to the change in accounting
method adjustment described in Section 4.11(f) of the Company Disclosure
Schedule, (iv) payable as a result of a breach of any representation or warranty
set forth in Section 4.11 of this Agreement (it being agreed that for purposes
of such right to indemnification, the representations and warranties set forth
in Section 4.11 of this Agreement shall be deemed not qualified by any
references therein to materiality or whether or not any breach could result or
could reasonably be expected to result in a Company Material Adverse Effect) and
(v) resulting from any breach of Section 7.6 by the Applicable Sellers, KMV
Corporation, the Company or any of their respective Subsidiaries. The Applicable
Sellers shall be entitled to any net refunds of Taxes with respect to the
periods described in clauses (i) and (ii) above, except to the extent such
refund arises as a result of a carryback of a loss or other tax benefit from a
Post-Closing Period or a Post-Closing Partial Period.
(b) Parent shall, and shall cause KMV Corporation, the Surviving Company
and their respective Subsidiaries, to indemnify and hold each of the Applicable
Sellers harmless from and against all Taxes of the Surviving Company and its
Subsidiaries (i) with respect to all Post-Closing Periods, (ii) with respect to
any period beginning before the Closing Date and ending after the Closing Date,
but only with respect to the portion of such period beginning the day after the
Closing Date (such portion, a "Post-Closing Partial Period") and (iii) resulting
from any breach of any covenant of the Surviving Company or any of its
Subsidiaries. Parent shall be entitled to all refunds of Taxes with respect to
the periods described in clauses (i) and (ii) above.
(c) Any Taxes for a period including a Pre-Closing Partial Period and a
Post-Closing Partial Period shall be apportioned between such Pre-Closing
Partial Period and such Post-Closing Partial Period shall be determined pursuant
to Section 7.6(e) of this Agreement.
Section 10.8 Calculation and Payment of Losses. In no event shall any
Loss be recoverable to the extent it is based on incidental or consequential
damages, including but not limited to Losses measured by reductions in the
trading value of a party's stock or based upon the application of revenue or
earnings multiples to direct damages. The amount of any Loss for which
indemnification is provided under this Article 10 shall be net of any amounts
actually recovered by the Indemnified Party under insurance policies with
respect to such Loss and shall be (i) increased to take account of any increase
in the premiums charged to the Indemnified Party under any insurance policy
arising from the incurrence or payment of such Loss; (ii) increased to
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take account of any net Tax cost incurred by the Indemnified Party arising from
the receipt of indemnity payments hereunder and (iii) reduced to take account of
any net Tax benefit realized by the Indemnified Party arising from the
incurrence or payment of such Loss, in each case as reasonably determinable at
the time such Loss is otherwise being determined under this Agreement. Except as
otherwise required by Applicable Law, any indemnity payments under this
Agreement shall be treated as adjustments to the Transaction Consideration for
United States federal income tax purposes.
ARTICLE 11.
MISCELLANEOUS
Section 11.1 Amendments; Waiver. This Agreement may not be amended,
altered or modified except by written instrument executed by Parent, KMV
Corporation, the Company, the Principal Members and the KMV Corporation
Shareholders. Any agreement on the part of Parent, KMV Corporation, the Company,
the Principal Members and the KMV Corporation Shareholders to waive (i) any
inaccuracies in the representations and warranties contained herein by the
Company, KMV Corporation, any of the Principal Members or any of the KMV
Corporation Shareholders, on the one hand, or Parent, on the other hand, or in
any document, certificate or writing delivered pursuant hereto by the Company,
KMV Corporation, the Principal Members and the KMV Corporation Shareholders, on
the one hand, or Parent, on the other hand, or (ii) compliance with any of the
agreements, covenants or conditions contained herein, shall be valid only if set
forth in an instrument in writing signed on behalf of the party against whom the
waiver is to be effective. No such waiver shall constitute a waiver of, or
estoppel with respect to, any subsequent or other inaccuracy, breach or failure
to strictly comply with the provisions of this Agreement. Notwithstanding the
foregoing, each Principal Member hereby authorizes the Company and each KMV
Corporation Shareholder hereby authorizes KMV Corporation to waive any condition
or provision of this Agreement or to take any other action under this Agreement,
including amending this Agreement in any respect, prior to or after the Closing,
and any such waiver, action or amendment shall be binding on each such Principal
Member and KMV Corporation Shareholder without any further action on their part;
provided, however, that no amendment may (a) treat a Principal Member or KMV
Corporation Shareholder in a manner that is disproportionately adverse relative
to all other Principal Members and KMV Corporation Shareholders, or (b) amend
any provision of Section 7.11 applicable to a Principal Member or KMV
Corporation Shareholder, in either case without such Principal Member's or KMV
Corporation Shareholder's written consent to such amendment. Each Principal
Member and KMV Corporation Shareholder further acknowledges that no Principal
Member or KMV Corporation Shareholder shall have any individual ability to
terminate this Agreement pursuant to Article 9.
Section 11.2 Entire Agreement. This Agreement (including the Company
Disclosure Schedule, the Principal Members Disclosure Schedule, the Parent
Disclosure Schedule, any other exhibits, schedules, certificates, lists and
documents referred to herein, and any documents executed by the parties
simultaneously herewith or pursuant thereto), the Ancillary Agreements and the
Confidentiality Agreement constitute the entire agreement of the parties hereto,
except as provided herein, and supersedes all prior agreements and
understandings, written and oral, among the parties with respect to the subject
matter hereof.
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Section 11.3 Interpretation.
(a) When a reference is made in this Agreement to Sections, Exhibits or
Schedules, such reference shall be to a Section of or an Exhibit or a Schedule
to this Agreement unless otherwise indicated. The table of contents and headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement. Whenever the words
"include," "includes" or "including" are used in this Agreement, they shall be
deemed to be followed by the words "without limitation." The phrases "the date
of this Agreement," "the date hereof" and terms of similar import, unless the
context otherwise requires, shall be deemed to refer to the date set forth in
the first paragraph of this Agreement.
(b) Each of the Company Disclosure Schedule, the Principal Members
Disclosure Schedule and the Parent Disclosure Schedule shall set forth items the
disclosure of which is necessary or appropriate either in response to an express
disclosure requirement contained in a provision hereof or as an exception to one
or more of such party's representations or warranties or one or more of its
covenants contained in Article 7 of this Agreement, in each case making
reference to the particular subsection of this Agreement requiring such
disclosure or to which such exception is being taken, provided, however, that
the disclosure of an item in one Section of any party's Disclosure Schedule
shall be deemed a disclosure in another Section or Sections of such party's
Disclosure Schedule if and to the extent that such information is readily
apparent to be so applicable to such other Section or Sections.
Section 11.4 Severability. Any term or provision of this Agreement which
is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction,
be ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
Section 11.5 Notices. Unless otherwise provided herein, all notices and
other communications hereunder shall be in writing and shall be deemed given if
(a) delivered in person, (b) transmitted by facsimile (with written
confirmation), (c) mailed by certified or registered mail (return receipt
requested) (in which case such notice shall be deemed given on the third day
after such mailing) or (d) delivered by an express courier (with written
confirmation) to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):
If to the Company or KMV Corporation prior to the Closing Date or to the
Principal Members or the KMV Corporation Shareholders:
KMV LLC
1620 Montgomery Street
Suite 140
San Francisco, California 94111
Facsimile: (415) 296-9458
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Attention: President
With a copy to:
Gibson Dunn & Crutcher LLP
One Montgomery Street
San Francisco, California 94104-4505
Facsimile: (415) 986-5309
Attention: Peter T. Heilmann, Esq.
If to the Member Representative:
Robert Rudy
1620 Montgomery Street, Suite 140
San Francisco, California 94111
Facsimile: (415) 296-9458
With a copy to:
Gibson Dunn & Crutcher LLP
One Montgomery Street
San Francisco, California 94104-4505
Facsimile: (415) 986-5309
Attention: Peter T. Heilmann, Esq.
If to Parent or to the Company or KMV Corporation after the Closing
Date:
Moody's Corporation
99 Church Street
New York, New York 10007
Facsimile: (212) 406-1696
Attention: Chief Executive Officer
With a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Facsimile: (212) 455-2502
Attention: Robert E. Spatt, Esq.
Section 11.6 Binding Effect; Persons Benefiting; No Assignment. This
Agreement shall inure to the benefit of and be binding upon the parties hereto
and their respective successors and assigns. No provision of this Agreement is
intended or shall be construed to confer upon any entity or Person other than
the parties hereto and their respective successors and permitted assigns any
right, remedy or claim under or by reason of this Agreement or any part hereof.
This Agreement may not be assigned by any of the parties hereto
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without the prior written consent of Parent, in the case of any assignment by
the Company, KMV Corporation, any of the Principal Members or any of the KMV
Corporation Shareholders, or the Company, KMV Corporation, the Principal Members
and the KMV Corporation Shareholders, in the case of any assignment by Parent.
Section 11.7 Counterparts. This Agreement may be executed in two or more
counterparts, each original or facsimile of which shall be deemed an original,
but all of which taken together shall constitute one and the same agreement, it
being understood that all of the parties need not sign the same counterpart.
Section 11.8 Waiver of Jury Trial. EACH OF THE PARTIES HERETO
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
Section 11.9 Governing Law. THIS AGREEMENT, THE LEGAL RELATIONS BETWEEN
THE PARTIES AND THE ADJUDICATION AND THE ENFORCEMENT THEREOF, SHALL BE GOVERNED
BY AND INTERPRETED AND CONSTRUED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE
STATE OF NEW YORK WITHOUT REGARD TO APPLICABLE CHOICE OF LAW PROVISIONS THEREOF.
Section 11.10 Consent to Jurisdiction. Each of the parties hereto hereby
irrevocably and unconditionally submits to the jurisdiction of any state court
of the State of California and any federal court sitting in San Francisco,
California and irrevocably agrees that all actions or proceedings arising out of
or relating to this Agreement, the Ancillary Agreements or the transactions
contemplated hereby or thereby shall be litigated exclusively in such courts.
Each of the parties hereto agrees not to commence any legal proceedings related
hereto except in such courts. Each of the parties hereto irrevocably waives any
objection which he or it may now or hereafter have to the laying of the venue of
any such proceeding in any such court and hereby further irrevocably and
unconditionally waives and agrees not to plead or claim in any such court that
any such action, suit or proceeding brought in any such court has been brought
in an inconvenient forum.
[Signature Page Follows]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
MOODY'S CORPORATION
By: /s/ JOHN RUTHERFURD JR.
--------------------------------------
Name: John Rutherfurd Jr.
Title: President & Chief Executive Officer
XYZ ACQUISITION LLC
By: /s/ JOHN RUTHERFURD JR.
--------------------------------------
Name: John Rutherfurd Jr.
Title: President
KMV LLC
By: /s/ PETER J. CROSBIE
--------------------------------------
Name: Peter J. Crosbie
Title: President
KMV CORPORATION
By: /s/ PETER J. CROSBIE
--------------------------------------
Name: Peter J. Crosbie
Title: President
<PAGE>
PRINCIPAL MEMBERS AND
CREDIT CORP. SHAREHOLDERS:
/s/ STEPHEN KEALHOFER
-------------------------------------------
STEPHEN KEALHOFER
STEPHEN KEALHOFER AND
JANET ANN LUCK 1999 FAMILY TRUST
By: /s/ STEPHEN KEALHOFER, TRUSTEE
--------------------------------------
Name: Stephen Kealhofer, Trustee
By: /s/ JANET ANN LUCK, TRUSTEE
--------------------------------------
Name: Janet Ann Luck, Trustee
KEALHOFER 2001 CHILDREN'S TRUST
By: /s/ STEPHEN KEALHOFER, TRUSTEE
--------------------------------------
Name: Stephen Kealhofer, Trustee
By: /s/ JANET ANN LUCK, TRUSTEE
--------------------------------------
Name: Janet Ann Luck, Trustee
/s/ PETER CROSBIE
-------------------------------------------
PETER CROSBIE
/s/ JOHN MCQUOWN
-------------------------------------------
JOHN MCQUOWN
/s/ OLDRICH VASICEK
-------------------------------------------
OLDRICH VASICEK
VASICEK TRUST
By: /s/ OLDRICH A. VASICEK
--------------------------------------
Name: Oldrich A. Vasicek, Trustee
By: /s/ SILVA VASICEK
--------------------------------------
Name: Silva Vasicek, Trustee
/s/ ROBERT RUDY
-------------------------------------------
ROBERT RUDY
<PAGE>
/s/ PETER OVERMIRE
----------------------------------------------
PETER OVERMIRE
OVERMIRE PARTNERS, L.P.,
a California limited partnership
By: /s/ PETER L. OVERMIRE
------------------------------------------
Name: Peter L. Overmire, as general partner
By: /s/ ROZELL R. OVERMIRE
------------------------------------------
Name: Rozell R. Overmire, as general partner
P/R OVERMIRE FAMILY TRUST
By: /s/ PETER L. OVERMIRE
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Name: Peter L. Overmire, as Trustee
By: /s/ ROZELL R. OVERMIRE
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Name: Rozell R. Overmire, as Trustee
/s/ DAVID NORDBY
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DAVID NORDBY
PRINCIPAL MEMBERS:
/s/ TIM KASTA
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TIM KASTA
/s/ ALLEN LEVINSON
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ALLEN LEVINSON
/s/ MARTHA SELLERS
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MARTHA SELLERS
/s/ TAREK HIMMO
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TAREK HIMMO
/s/ JEFFREY R. BOHN
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JEFFREY R. BOHN
/s/ LAURENCE REED
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LAURENCE REED
LAURENCE AND REBECCA ANDREWS REED
FAMILY LIVING TRUST
By: /s/ LAURENCE REED
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Name: Laurence Reed, as Trustee
By: /s/ REBECCA A. REED
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Name: Rebecca A. Reed, as Trustee
/s/ BRIAN DVORAK
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BRIAN DVORAK