EXHIBIT 2.2
EXECUTION COPY
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STOCK PURCHASE AGREEMENT
Dated as of July 1, 2001
Among
EMAP PLC,
EMAP AMERICA PARTNERS,
EMAP, INC.
And
PRIMEDIA INC.
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TABLE OF CONTENTS
PAGE
ARTICLE I
PURCHASE AND SALE OF THE SHARES; CLOSING; AND POST-CLOSING
PURCHASE PRICE ADJUSTMENT
SECTION 1.01. Purchase and Sale of the Shares................................1
SECTION 1.02. Certain Transfers of Assets....................................1
SECTION 1.03. Closing Date...................................................3
SECTION 1.04. Transactions To Be Effected at the Closing.....................3
SECTION 1.05. Exclusion of Liabilities.......................................4
SECTION 1.06. Partial Transfer...............................................4
SECTION 1.07. Post-Closing Purchase Price Adjustment.........................5
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF PARENT AND SELLER
SECTION 2.01. Organization and Standing of Parent and Seller.................9
SECTION 2.02. Capital Stock of the Company and its Subsidiaries..............9
SECTION 2.03. Authority; Execution and Delivery; Enforceability.............10
SECTION 2.04. No Conflicts or Violations; No Consents or Approvals Required.10
SECTION 2.05. The Shares....................................................11
SECTION 2.06. Benefit Plans.................................................12
SECTION 2.07. Financial Statements..........................................13
SECTION 2.08. Assets Other than Real Property Interests.....................14
SECTION 2.09. Real Property.................................................14
SECTION 2.10. Intellectual Property.........................................15
SECTION 2.11. Contracts.....................................................16
SECTION 2.12. Permits.......................................................18
SECTION 2.13. Taxes.........................................................19
SECTION 2.14. Litigation....................................................20
SECTION 2.15. Absence of Changes or Events..................................21
SECTION 2.16. Compliance with Applicable Laws...............................21
SECTION 2.17. Voting Requirements...........................................21
SECTION 2.18. No Barter Receivables or Obligations..........................21
SECTION 2.19. Transactions with Affiliates..................................22
SECTION 2.20. Warrants......................................................22
Contents, p. 2
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
SECTION 3.01. Organization and Standing.....................................22
SECTION 3.02. Authority; Execution and Delivery; Enforceability.............22
SECTION 3.03. No Conflicts or Violations; No Consents or Approvals Required.23
SECTION 3.04. Proceedings...................................................24
SECTION 3.05. Securities Act................................................24
SECTION 3.06. No Knowledge of Misrepresentations or Omissions...............24
SECTION 3.07. Voting Requirements...........................................24
SECTION 3.08. Capital Stock of Purchaser and its Subsidiaries...............25
SECTION 3.09. SEC Documents; Undisclosed Liabilities........................25
ARTICLE IV
COVENANTS
SECTION 4.01. Covenants Relating to Conduct of Business.....................26
SECTION 4.02. Access to Information.........................................28
SECTION 4.03. Confidentiality ..............................................28
SECTION 4.04. Efforts.......................................................29
SECTION 4.05. Brokers or Finders............................................31
SECTION 4.06. Employee Matters..............................................31
SECTION 4.07. Tax Matters...................................................33
SECTION 4.08. Publicity.....................................................38
SECTION 4.09. Resignations..................................................38
SECTION 4.10. No Use of Certain Names.......................................38
SECTION 4.11. Support Services..............................................39
SECTION 4.12. Litigation Matters............................................39
SECTION 4.13. Intercompany Arrangements.....................................40
SECTION 4.14. Accounts......................................................40
SECTION 4.15. Records.......................................................40
SECTION 4.16. Sub-Lease.....................................................41
SECTION 4.17. Certain Liabilities...........................................41
SECTION 4.18. Bank Accounts.................................................41
ARTICLE V
CONDITIONS PRECEDENT
SECTION 5.01. Conditions to Each Party's Obligation.........................42
SECTION 5.02. Conditions to Obligation of Purchaser.........................42
SECTION 5.03. Conditions to Obligation of Seller............................43
SECTION 5.04. Frustration of Closing Conditions.............................43
Contents, p. 3
ARTICLE VI
TERMINATION, AMENDMENT AND WAIVER
SECTION 6.01. Termination...................................................44
SECTION 6.02. Effect of Termination.........................................45
ARTICLE VII
INDEMNIFICATION
SECTION 7.01. Tax Indemnification...........................................45
SECTION 7.02. Other Indemnification by Seller...............................46
SECTION 7.03. Other Indemnification by Purchaser and the Company............47
SECTION 7.04. Indemnification Procedures....................................48
SECTION 7.05. Limitations on Indemnification................................50
SECTION 7.06. Calculation of Indemnity Payments.............................52
SECTION 7.07. Tax Treatment of Indemnification..............................52
SECTION 7.08. Audit Adjustments Relating to Income Taxes....................53
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.01. Assignment....................................................53
SECTION 8.02. No Third-Party Beneficiaries..................................53
SECTION 8.03. Expenses......................................................53
SECTION 8.04. Notices.......................................................54
SECTION 8.05. Headings; Certain Definitions.................................55
SECTION 8.06. Counterparts..................................................56
SECTION 8.07. Integrated Contract; Exhibits/Schedules.......................56
SECTION 8.08. Severability; Enforcement.....................................57
SECTION 8.09. Governing Law.................................................57
SECTION 8.10. Jurisdiction..................................................57
SECTION 8.11. Service of Process............................................58
SECTION 8.12. Waiver of Jury Trial..........................................58
SECTION 8.13. Amendments....................................................58
SECTION 8.14. Survival of Representations and Warranties....................58
SECTION 8.15. Further Assurances............................................58
SECTION 8.16. Joint and Several.............................................58
GLOSSARY OF DEFINED TERMS
LOCATION OF
DEFINITION DEFINED TERMS
Acquisition......................................................Section 1.01
Actions..........................................................Section 4.12
Adjusted Purchase Price.......................................Section 1.07(c)
Affected Employee.............................................Section 4.06(a)
affiliate.....................................................Section 8.05(b)
Agreement............................................................Preamble
Ancillary Agreements.............................................Section 2.03
Applicable Law...................................................Section 2.04
Articles......................................................Section 8.05(a)
Balance Sheet.................................................Section 2.07(a)
BALBOA...............................................................Preamble
business day..................................................Section 8.05(b)
Closing..........................................................Section 1.03
Closing Date.....................................................Section 1.03
Closing Date Payment..........................................Section 1.04(b)
Closing Working Capital.......................................Section 1.07(a)
Code..........................................................Section 2.13(a)
Commonly Controlled Entity....................................Section 2.06(c)
Company..............................................................Preamble
Company Benefit Plans.........................................Section 2.06(a)
Company Contracts.............................................Section 2.11(c)
Company Intellectual Property.................................Section 2.10(a)
Company Material Adverse Effect...............................Section 8.05(b)
Company Property.................................................Section 2.09
Company's 401(k) Plan.........................................Section 4.06(d)
Confidentiality Agreement........................................Section 4.03
Consent..........................................................Section 2.04
Contract......................................................Section 1.02(d)
Current Assets................................................Section 1.07(d)
Current Liabilities...........................................Section 1.07(d)
DOJ...........................................................Section 4.04(b)
ERISA.........................................................Section 2.06(a)
Elections.....................................................Section 4.07(k)
Emap.............................................................Section 4.10
Employment Contracts..........................................Section 2.11(b)
Environmental Laws............................................Section 2.16(b)
Excluded Assets..................................................Section 1.02
Excluded Employees...............................................Section 1.02
Excluded Liabilities.............................................Section 1.05
Exhibits......................................................Section 8.05(a)
FHM..............................................................Section 4.10
FHM Business.....................................................Section 1.02
FHM Intellectual Property.....................................Section 1.02(e)
FTC...........................................................Section 4.04(b)
Financial Statements..........................................Section 2.07(a)
First Union...................................................Section 1.07(g)
Form 8023..................................................Section 4.07(k)(i)
GAAP..........................................................Section 2.07(a)
Governmental Entity..............................................Section 2.04
HSR Act..........................................................Section 2.04
Glossary, p 2
Income Tax....................................................Section 2.13(a)
Income Taxes..................................................Section 2.13(a)
includes......................................................Section 8.05(b)
including.....................................................Section 8.05(b)
Indemnified Party.............................................Section 7.04(a)
Indemnifying Party............................................Section 7.04(a)
Independent Expert.........................................Section 1.07(b)(2)
Intellectual Property.........................................Section 2.10(c)
IRS...........................................................Section 2.06(a)
Judgment.........................................................Section 2.04
knowledge of the Company......................................Section 8.05(b)
Leased Property..................................................Section 2.09
Legal Restraint...............................................Section 5.01(b)
Letter of Credit..............................................Section 1.07(g)
Liens.........................................................Section 2.08(a)
Losses...........................................................Section 7.02
Metro............................................................Section 4.10
Names............................................................Section 4.10
Notice of Objection........................................Section 1.07(b)(1)
Outside Date.....................................................Section 6.01
Parent...............................................................Preamble
Pension Plan..................................................Section 2.06(a)
Permits..........................................................Section 2.12
Permitted Liens...............................................Section 2.08(a)
person........................................................Section 8.05(b)
Post-Closing Tax Period.......................................Section 4.07(f)
Pre-Closing Tax Period........................................Section 2.13(a)
Prime Lease......................................................Section 4.16
Proceeding.......................................................Section 2.14
Pro Forma Financial Statements................................Section 2.07(c)
Purchase Price...................................................Section 1.01
Purchase Entities.....................................................4.07(k)
Purchaser............................................................Preamble
Purchaser Indemnitees.........................................Section 7.01(a)
Purchaser Material Adverse Effect................................Section 3.01
Purchaser SEC Document...........................................Section 3.09
Purchaser Shares.................................................Section 3.08
Purchaser Tax Act.............................................Section 7.01(a)
Purchaser Welfare Plans.......................................Section 4.06(e)
Purchaser's Accountants....................................Section 1.07(b)(1)
Records.......................................................Section 1.02(c)
Schedules.....................................................Section 8.05(a)
Sections......................................................Section 8.05(a)
Seller...............................................................Preamble
Seller Indemnitees............................................Section 7.01(b)
Shares...............................................................Recitals
Shares Purchase Price.........................................Section 1.07(c)
Statement.....................................................Section 1.07(a)
Straddle Period............................................Section 4.07(b)(i)
Sub-Lease........................................................Section 4.16
subsidiary....................................................Section 8.05(b)
Target Working Capital........................................Section 1.07(c)
Tax...........................................................Section 2.13(a)
Glossary, p 3
Tax Claim.....................................................Section 7.04(b)
Taxes.........................................................Section 2.13(a)
Tax Indemnified Party.........................................Section 7.04(b)
Tax Indemnifying Party........................................Section 7.04(b)
Tax Return....................................................Section 2.13(a)
Taxing Authority..............................................Section 2.13(a)
Third Party Claim.............................................Section 7.04(a)
Transfer Taxes................................................Section 2.13(a)
Transition Services Agreement....................................Section 2.03
..............................................................Section 4.07(k)
Warrant Agreement.............................................Section 1.04(c)
Warrants.........................................................Section 1.01
Welfare Plan..................................................Section 2.06(a)
Working Capital...............................................Section 1.07(d)
Exhibit A-Form of Transition Services Agreement
Exhibit B-Form of Sub-Lease Agreement
Exhibit C-Warrant Term Sheet
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT dated as of July 1, 2001
(this "AGREEMENT"), among EMAP PLC ("PARENT"), a
corporation organized under the laws of the United
Kingdom, EMAP AMERICA PARTNERS, a Delaware general
partnership ("SELLER"), EMAP, INC., a Delaware
corporation and a wholly owned subsidiary of Seller
("BALBOA" and, excluding the FHM Business (as defined
below), the "COMPANY") and PRIMEDIA INC., a Delaware
corporation ("PURCHASER").
Purchaser desires to purchase from Seller, and Seller desires
to sell to Purchaser, all the issued and out standing shares of common stock,
par value $0.01 per share (the "SHARES"), of the Company on the terms and
conditions set forth in this Agreement.
Accordingly, the parties hereby agree as follows:
ARTICLE I
PURCHASE AND SALE OF THE SHARES; CLOSING; AND POST-CLOSING
PURCHASE PRICE ADJUSTMENT
SECTION 1.01. PURCHASE AND SALE OF THE SHARES. On the terms
and subject to the conditions of this Agreement, at the Closing (as defined in
Section 1.03), Seller shall sell, transfer and deliver to Purchaser, and
Purchaser shall purchase from Seller, the Shares for an aggregate purchase price
of $505,000,000 plus warrants to purchase 2,000,000 shares of Purchaser's common
stock on substantially the terms set forth on Exhibit C hereto (the "WARRANTS")
(collectively, the "PURCHASE PRICE"), subject to adjustment as provided in
Section 1.07. Purchaser shall pay the Purchase Price on the Closing Date (as
defined in Section 1.03) by wire transfer of immediately available funds to
accounts designated in writing by Seller one business day before the Closing
Date and by delivery of the Warrants. The purchase of the Shares is referred to
herein as the "ACQUISITION".
SECTION 1.02. CERTAIN TRANSFERS OF ASSETS. Prior to the
Closing, Seller shall effect such transfers as are necessary to remove all
Excluded Assets and all excluded employees as set forth on Schedule 1.01(a) (the
"EXCLUDED EMPLOYEES") from the Company and the Excluded Assets shall
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not be sold, conveyed or delivered to Purchaser and the Excluded Employees shall
no longer be employed by the Company and its subsidiaries after the Closing.
Notwith standing anything in this Agreement to the contrary, the term "COMPANY",
or any derivation thereof, including the phrases "the Company or its
subsidiaries" or "the Company and its subsidiaries" shall be deemed to not
include, in any way, the Excluded Assets or the Excluded Employees prior to or
after such transfers. As used in this Agreement the term "EXCLUDED ASSETS" shall
mean (i) all cash or cash equivalents and (ii) all the right, title and interest
in the properties, assets, goodwill and rights of whatever kind and nature, real
or personal, tangible or intangible, that are owned, leased or licensed by
Balboa or its subsidiaries and used or held for use primarily in the operation
or conduct of the business of producing, marketing or distributing the FHM
magazine and the FHM digital services (the "FHM BUSINESS"), including:
(a) office and other supplies and vehicles and equipment used
or held for use primarily in connection with the operation or
conduct of the FHM Business;
(b) the inventories of the FHM Business, and raw materials,
wrappings, supply and packaging items relating thereto;
(c) all books of account, ledgers, general, financial,
accounting and personnel records, files, customers and suppliers
lists, prospect lists, sub scription or circulation lists, sales and
promotional literature, customer and supplier correspondence,
manuals, files, data, papers, personnel and employment records and
other information, whether in hard copy or computer or other format
(collectively "RECORDS"), in each case primarily relating to the FHM
Business;
(d) any contract, lease, sublease, license, agreement,
purchase order or other commitment or arrangement, written or
unwritten, ("CONTRACT") that is used or held for use primarily in
the operation or conduct of the FHM Business;
(e) all Intellectual Property (as defined in Section 2.10(c))
primarily relating to the FHM Business, including the Intellectual
Property listed on Schedule 1.01(e)(the "FHM INTELLECTUAL
PROPERTY");
(f) all Permits that are used or held for use primarily in the
conduct or operation of the FHM Business;
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(g) all receivables constituting the right to receive payments
in respect of goods or services as and to the extent arising out of
or relating to the operation or conduct of the FHM Business;
(h) all goodwill generated by or associated with the FHM
Business;
(i) all credits, prepaid expenses, deferred charges, advance
payments, security deposits and pre paid items as and to the extent
used or held for use in, or that arise out of, the operation or
conduct of the FHM Business;
(j) all other tangible and intangible assets of Balboa and its
subsidiaries primarily related to the FHM Business; and
(k) all subscriptions in connection with the FHM Business,
including subscriptions for the FHM magazine and the FHM digital
services.
SECTION 1.03. CLOSING DATE. The closing of the Acquisition
(the "CLOSING") shall take place at the offices of Cravath, Swaine & Xxxxx, 000
Xxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, at 10:00 a.m. on the second business
day following the satisfaction (or, to the extent permitted, the waiver) of the
conditions set forth in Article V, or at such other place, time and date as may
be agreed by Seller and Purchaser. The date on which the Closing occurs is
referred to in this Agreement as the "CLOSING DATE". The Closing shall be deemed
to be effective as of the close of business on the Closing Date.
SECTION 1.04. TRANSACTIONS TO BE EFFECTED AT THE CLOSING.
At the Closing:
(a) Seller shall deliver to Purchaser certificates
representing the Shares, duly endorsed in blank or accompanied by
stock powers duly endorsed in blank in proper form for transfer and
with all necessary stock transfer stamps attached thereto and
canceled;
(b) Purchaser shall deliver to Seller, in the manner set forth
in Section 1.01, immediately available funds in an amount equal to
the cash portion of the Purchase Price plus or minus an estimate,
reasonably prepared by Seller and delivered to Purchaser at least
two business days prior to the Closing Date, of any adjustment to
the Purchase Price under Section 1.07 (the cash portion of the
Purchase Price plus or minus
4
such estimate of any adjustment under Section 1.07 being hereinafter
called the "CLOSING DATE PAYMENT");
(c) Purchaser shall deliver the Warrants to Seller, and a duly
executed Warrant Agreement (the "WARRANT AGREEMENT") substantially
on the terms set forth in Exhibit C hereto; and
(d) at the option of Purchaser, the shares of Emap Digital
shall be transferred to any affiliate of Purchaser at the Closing.
SECTION 1.05. EXCLUSION OF LIABILITIES. Notwith standing any
provisions of this Agreement to the contrary, the Excluded Liabilities shall not
be assumed by Purchaser and all such Excluded Liabilities shall be retained by
and shall be obligations and commitments of Parent and its sub sidiaries (other
than the Company and its subsidiaries). Notwithstanding anything in this
Agreement to the contrary, the term "Company," or any derivation thereof,
including the phrases "the Company or its subsidiaries" or "the Company and its
subsidiaries" shall be deemed to not include, in any way, the Excluded
Liabilities prior to or after such trans fers. As used in this Agreement, the
term "EXCLUDED LIABILITIES" shall mean any liability, obligation or commitment
of Balboa or its subsidiaries that relates primarily to, or arises primarily out
of any Excluded Asset or arises out of the distribution of such Excluded Asset
to Parent or its subsidiaries (except the Company or its sub sidiaries) in
accordance with the first sentence of Section 1.02.
SECTION 1.06. PARTIAL TRANSFER. In the case of Contracts that
do not constitute Excluded Assets, but which relate to the FHM Business, the
parties hereto shall use their reasonable best efforts to assign to Parent or
its subsidiaries (other than the Company or its subsidiaries) that portion of
such Contracts as and to the extent it relates to the FHM Business. In the event
that such assignments cannot be obtained, Purchaser and Parent shall use
reasonable best efforts to effect such alternative arrangements as may be
required to ensure that the FHM Business is provided with the services or
licenses that are the subject of such Contracts by a vendor reasonably
acceptable to Parent and in substantially the same manner as provided to the FHM
Business prior to the Closing Date. The cost for any such service or the fee for
any such license shall be paid by the FHM Business in accordance with the
Transition Services Agreement. The set-up cost, if any, for engaging any such
alternative arrangement shall be shared equally by the FHM Business and
Purchaser. In furtherance
5
and not in limitation of the foregoing, it is understood and agreed that the
Contracts set forth on Schedule 1.06(a) shall be subject to this Section 1.06.
SECTION 1.07. POST-CLOSING PURCHASE PRICE ADJUSTMENT. (a) THE
STATEMENT. Within 60 days after the Closing Date, Parent shall prepare and
deliver to Purchaser a statement (the "STATEMENT"), setting forth the Working
Capital (as defined in Section 1.07(d)) as of the close of business at the end
of the day immediately preceding the Closing Date ("CLOSING WORKING CAPITAL")
determined in accordance with the accounting principles, practices,
methodologies and policies used in the preparation of the Balance Sheet (as
defined in Section 2.07)(except as provided on Schedule 1.07). After the Closing
Date, Purchaser shall assist, and shall cause the Company and its subsidiaries
to assist, Parent and its representatives in the preparation of the Statement
and shall provide Parent and its representatives any information reasonably
requested and shall provide them access at all reasonable times to the
personnel, properties, books and records of the Company and its subsidiaries for
such purpose.
(b) OBJECTIONS; RESOLUTION OF DISPUTES. (1) Unless Purchaser
notifies Parent in writing within 30 days after Parent's delivery of the
Statement of any objection to any component of the computation of Closing
Working Capital set forth therein (the "NOTICE OF OBJECTION"), such computation
shall be final and binding. During such 30-day period Purchaser and its
representatives shall be permitted to review the working papers of Parent
relating to the Statement. Any Notice of Objection shall specify in reasonable
detail the basis for the objections set forth therein and shall include a
special purpose report of Deloitte & Touche ("PURCHASER'S ACCOUNTANTS") stating
that they concur with the matters set forth in such Notice of Objection and that
such Notice of Objection has been prepared in accordance with this Section 1.07.
Any Notice of Objection shall include only objections based on (i) mathematical
errors in the computation of Closing Working Capital or (ii) Closing Working
Capital not having been calculated in accordance with the consistent application
of the accounting principles, practices, methodologies and policies used in the
preparation of the Balance Sheet (after taking into consideration the provisions
of Schedule 1.07). Parent and Purchaser acknowledge that (i) the sole purpose of
the determination of Closing Working Capital is to adjust the Closing Date
Payment so as to reflect the change in Working Capital resulting only from the
operation of the business of the Company and its subsidiaries and (ii) such
change can be
6
measured only if the calculation is done using the same accounting principles,
practices, methodologies and policies as those used in preparing the Balance
Sheet (except as provided on Schedule 1.07).
(2) If Purchaser provides the Notice of Objection to Parent
within such 30-day period, Purchaser and Parent shall, during the 15-day period
following Parent's receipt of the Notice of Objection, attempt in good faith to
resolve Purchaser's objections. During such 15-day period, Parent and its
representatives shall be permitted to review the working papers of Purchaser and
Purchaser's Accountants relating to the Notice of Objection and the basis
therefor. If Purchaser and Parent are unable to resolve all such objections
within such 15-day period, the matters remaining in dispute shall be submitted
to Xxxxxx Xxxxxxxx (or, if such firm declines to act, to another nationally
recognized public accounting firm mutually agreed upon by Purchaser and Parent
and, if Purchaser and Parent are unable to so agree within 10 days after the end
of such 15-day period, then Purchaser and Parent shall each select such a firm
and such firms shall jointly select a third nationally recognized firm to
resolve the disputed matters (such determining firm being the "INDEPENDENT
EXPERT")). The parties shall instruct the Independent Expert to render its
written decision as promptly as practicable but in no event later than 30 days
after its selection. The resolution of disputed items by the Independent Expert
shall be final and binding, and the determination of the Independent Expert
shall constitute an arbitral award that is final, binding and non-appealable and
upon which a judgment may be entered by a court having jurisdiction thereover.
The fees and expenses of the Independent Expert shall be borne equally by
Purchaser and Parent. After final determination of Closing Working Capital,
Purchaser shall have no further right to make any claims against Parent or
Seller in respect of any element of Closing Working Capital that Purchaser
raised, or could have raised, in the Notice of Objection.
(c) ADJUSTMENT PAYMENT. Subject to Section 1.07(f), the
Purchase Price shall be increased by the amount by which Closing Working Capital
exceeds negative $8,385,000 (the "TARGET WORKING CAPITAL"), and the Purchase
Price shall be decreased by the amount by which Closing Working Capital is less
than the Target Working Capital (the Purchase Price as so increased or decreased
being herein after called the "ADJUSTED PURCHASE PRICE"). Within 10 days after
the Closing Working Capital has been finally determined in accordance with
Section 1.07(b), (i) if the Closing Date Payment is less than the Adjusted
Purchase Price, Purchaser shall pay to Parent by wire transfer to an
7
account specified by Parent in immediately available funds an amount equal to
such difference, plus interest thereon at a rate of 6% per annum, compounded
every three months, and calculated on the basis of a year of 365 days and the
actual number of days elapsed from the Closing Date to the date of payment, and
(ii) if the Closing Date Payment is greater than the Adjusted Purchase Price,
Seller shall pay to Purchaser by wire transfer to an account specified by
Purchaser in immediately available funds an amount equal to such difference,
plus interest thereon at a rate of 6% per annum, compounded every three months,
and calculated on the basis of a year of 365 days and the actual number of days
elapsed from the Closing Date to the date of payment (the Closing Date Payment
as so increased or decreased being hereinafter called the "SHARES PURCHASE
PRICE").
(d) WORKING CAPITAL. The term "WORKING CAPITAL" means Current
Assets minus Current Liabilities. The terms (i) "CURRENT ASSETS" means total
current assets exclusive of cash and cash equivalents but including the
non-current portion of deferred subscription acquisition costs and (ii) "CURRENT
LIABILITIES" means the total current liabilities exclusive of (x) subject to
Section 4.18, all liabilities with respect to Kick Media Corporation and (y) any
employee benefits and related costs payable as a direct result of the
Acquisition with respect to the individuals listed on Schedule 2.06(e) but
including the non-current portion of unearned subscription revenues, of the
Company and its consolidated subsidiaries, calculated in the same way, using the
same accounting principles, practices, methodologies and policies, as the line
items comprising current assets and current liabilities, respectively, on the
Balance Sheet (except as provided on Schedule 1.07). For the avoidance of doubt,
the allowance for doubtful debts shall be calculated in accordance with the
accounting principles, practices and methodologies set forth on Schedule 1.07.
Current Assets and Current Liabilities relating to Income Taxes (as defined in
Section 2.13(a)) and deferred taxes shall not be taken into account in
determining Working Capital.
(e) POST-CLOSING BOOKS AND RECORDS. Following the Closing,
Purchaser shall not take any action with respect to the accounting books and
records of the Company and its subsidiaries on which the Statement is to be
based that is not consistent with the past practices of the Company and its
subsidiaries. Without limiting the general ity of the foregoing, no changes
shall be made in any reserve or other account existing as of the date of the
Balance Sheet except as a result of events occurring after the date of the
Balance Sheet and, in such event, only in a
8
manner consistent with the past practices of the Company and its subsidiaries.
(f) POST-CLOSING ADJUSTMENT THRESHOLD. Notwith standing the
foregoing provisions of this Section 1.07, no adjustment to the Closing Date
Payment pursuant to this Section 1.07 shall be made unless such adjustment would
exceed $100,000 and, if the adjustment would exceed $100,000, then the full
amount of the adjustment shall be made.
(g) The parties acknowledge that Seller intends to cause all
cash and cash equivalents held by the Company and its subsidiaries to be
distributed to Seller. To the extent that (i) any such cash and cash equivalents
are not so distributed prior to the Closing, there shall be an upward adjustment
to the Adjusted Purchase Price in an amount equal to the amount of such
undistributed cash and cash equivalents and (ii) to the extent that, prior to
Closing, (x) the landlord of the property located at 000 0xx Xxxxxx, Xxx Xxxx,
Xxx Xxxx, draws upon the Company's (or its predecessor's) letter of credit with
First Union National Bank ("FIRST UNION") in respect of the Prime Lease (as
defined in Section 4.16) (the "LETTER OF CREDIT"), or (y) the Company is
required by First Union to make a deposit of cash collateral in connection with
the Letter of Credit, there shall be an upward adjustment to the Adjusted
Purchase Price in an amount equal to the draw (or draws) thereunder or any
deposits made in connection therewith to the extent not part of the calculation
of Closing Working Capital. The parties acknowledge that the Company is being
sold free of any indebtedness for borrowed money. To the extent that any such
indebtedness for borrowed money exists at the time of Closing, there shall be a
downward adjustment to the Adjusted Purchase Price in an amount of such
indebtedness to the extent not part of the calculation of Closing Working
Capital. The amount and timing of such adjustments pursuant to the provisions of
this paragraph shall be on the same time frame and in a manner analogous to that
applicable to the calculation of the Closing Working Capital, except that there
shall be no minimum amount required as a precondition to making any such
adjustment.
9
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF PARENT AND SELLER
Each of Parent and Seller, jointly and severally, hereby
represents and warrants as follows:
SECTION 2.01. ORGANIZATION AND STANDING OF PARENT AND SELLER.
(a) Seller is a general liability partnership validly existing and in good
standing under the laws of the State of Delaware. Parent is a corporation
validly existing under the laws of the United Kingdom.
(b) ORGANIZATION AND STANDING OF THE COMPANY. Each of the
Company and its subsidiaries is a corporation validly existing and in good
standing under the laws of its jurisdiction of incorporation, which jurisdiction
is set forth opposite its name on Schedule 2.01(b). Each of the Company and its
subsidiaries has full corporate power and authority to enable it to own, lease
or otherwise hold its properties and assets and to carry on its business as
presently conducted (excluding the FHM Business). Each of the Company and its
subsidiaries is duly qualified and in good standing to do business as a foreign
corporation in each jurisdiction in which the conduct or nature of its business
or the ownership, leasing or holding of its properties makes such qualification
necessary, except such jurisdictions where the failure to be so qualified or in
good standing, individually or in the aggregate, would not reasonably be
expected to have a Company Material Adverse Effect.
SECTION 2.02. CAPITAL STOCK OF THE COMPANY AND ITS
SUBSIDIARIES. Schedule 2.02 sets forth, for each of the Company and its
subsidiaries (i) the amount of its author ized capital stock, (ii) the par value
of such capital stock, (iii) the number of shares of capital stock issued and
outstanding as of the date of this Agreement and (iv) the record owners of all
outstanding capital stock. Except for the Shares, there are no shares of capital
stock or other equity securities of the Company issued, reserved for issuance or
outstanding. Except as set forth in Schedule 2.02, the Company has no
subsidiaries and there are no shares of capital stock or other equity securities
of any subsidiary of the Company issued or outstanding. All of the outstanding
capital stock of the Company and its subsidiaries is duly authorized, validly
issued, fully paid and nonassessable, free of preemptive rights and are owned
free from any Liens or restrictions on transfer. There are no outstanding
contractual obligations of the Company or any of its subsidiaries to repurchase,
redeem or otherwise
10
acquire any shares of capital stock of the Company or any of its subsidiaries.
There are no outstanding options, warrants, convertible securities,
subscriptions or other commitments or rights to acquire any shares of capital
stock of the Company or any of its subsidiaries.
SECTION 2.03. AUTHORITY; EXECUTION AND DELIVERY;
ENFORCEABILITY. Each of Parent, Seller and the Company has full corporate power
and authority to execute and deliver this Agreement, the transition services
agreement to be dated as of the Closing Date substantially in the form annexed
hereto as Exhibit A (the "TRANSITION SERVICES AGREEMENT"), the Warrant Agreement
and the other agreements and instruments executed and delivered in connection
with this Agreement (collectively with the Transition Services Agreement and the
Warrant Agreement, the "ANCILLARY AGREEMENTS") to which it is, or is specified
to be, a party and to consummate, in the case of Seller and the Company, the
Acquisition and the other transactions contemplated by this Agreement and the
Ancillary Agreements. Each of Parent, Seller and the Company has taken all
corporate action required to authorize the execution and delivery of this
Agreement and the Ancillary Agreements to which it is, or is specified to be, a
party and to authorize the consummation of, in the case of Seller and the
Company, the Acquisition and the other transactions contemplated by this
Agreement and the Ancillary Agreements, except, in each case, obtaining the
Required Shareholder Approval (as defined below). Each of Parent, Seller and the
Company has duly executed and delivered this Agreement and prior to the Closing
will have duly executed and delivered each Ancillary Agreement to which it is,
or is specified to be, a party, and this Agreement constitutes, and each
Ancillary Agreement to which it is, or is specified to be, a party will after
the Closing constitute, its legal, valid and binding obligation, enforceable
against it in accordance with its terms subject to applicable bankruptcy,
insolvency, moratorium, reorganization or similar laws affecting creditors'
rights generally and to general equitable principles.
SECTION 2.04. NO CONFLICTS OR VIOLATIONS; NO CONSENTS OR
APPROVALS REQUIRED. Except as set forth as Schedule 2.04, the execution and
delivery by each of Parent, Seller and the Company of this Agreement does not,
the execution and delivery by each of Parent, Seller and the Company of each
Ancillary Agreement to which it is, or is specified to be, a party will not, and
the consummation of the Acquisition and the other transactions contemplated by
this Agreement and the Ancillary Agreements, will not conflict with, or result
in any breach of or constitute a
11
violation, default or an event of default under, or require Consent (as defined
below) under, or give rise to a right of acceleration, termination or
cancellation under or increased, additional, accelerated or guaranteed rights or
entitlements of any person under or result in the creation of any Lien (as
defined in Section 2.08) upon any of the Shares or any of the properties or
assets of the Company or its subsidiaries under any provision of (i) the
Certificates of Incorporation, By-laws, or similar governing documents of
Parent, Seller or the Company or any of its subsidiaries, respectively, (ii) any
Contract, note, instrument or financing obligation to which any of Parent,
Seller or the Company is a party or by which any of its properties or assets are
bound or (iii) any judgment, order or decree ("JUDGMENT") or statute, law,
ordinance, rule or regulation promulgated by any Governmental Entity
("APPLICABLE LAW") applicable to Parent, Seller or the Company or their
respective properties or assets, other than, in the case of clauses (ii) and
(iii) above, any such items that would not, individually or in the aggregate,
reasonably be expected to have a Company Material Adverse Effect or otherwise
materially adversely affect Parent's or Seller's ability to consummate the
transactions hereby. Except as set forth on Schedule 2.04, no consent, approval
or authorization ("CONSENT") of, or registration, declaration or filing with,
any Federal, state, local or foreign court of competent jurisdiction,
governmental agency, authority, instrumental ity or regulatory body (a
"GOVERNMENTAL ENTITY") is required to be obtained or made in connection with the
execution, delivery and performance of this Agreement or the consummation of the
Acquisition, other than (A) compliance with and filings under the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the "HSR
ACT"), (B) compliance with and filings and notifications under applicable
Environmental Laws (as defined in Section 2.16(b)), (C) the Required Shareholder
Approval and (D) those the failure of which to obtain or make would not
reasonably be expected to have a Company Material Adverse Effect.
SECTION 2.05. THE SHARES. Seller has good and valid title to
the Shares, free and clear of all Liens. The shares of capital stock of each of
the Company's subsidi aries are free and clear of all Liens. Assuming Purchaser
has the requisite power and authority to be the lawful owner of the Shares, upon
delivery to Purchaser at the Closing of certificates representing the Shares,
duly endorsed by Seller for transfer to Purchaser, and upon Seller's receipt of
the Closing Date Payment, good and valid title to the Shares will pass to
Purchaser, free and clear of any Liens, other than those arising from acts of
Purchaser or its
12
affiliates. Other than this Agreement, the Shares are not subject to any voting
trust agreement or other Contract restricting or otherwise relating to the
voting, dividend rights or disposition of the Shares.
SECTION 2.06. BENEFIT PLANS. (a) Schedule 2.06(a) includes a
list of each material "employee pension benefit plan" (as defined in Section
3(2) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) (a "PENSION PLAN"), material "employee welfare benefit plan" (as
defined in Section 3(1) of ERISA) (a "WELFARE PLAN") and each other material
plan, arrangement or policy relating to stock options, stock purchases, deferred
compensation, severance, fringe benefits or other employee benefits, in each
case maintained by the Company or any of its subsidiaries for the benefit of any
present or former directors, officers or employees of the Company or any of its
subsidiaries (all the foregoing being herein called "COMPANY BENEFIT PLANS").
Seller has delivered or made available to Purchaser copies of (i) each Company
Benefit Plan, (ii) the most recent annual report on Form 5500 filed with the
Internal Revenue Service ("IRS") with respect to each Company Benefit Plan (if
any such report was required), (iii) the most recent summary plan description
for each Company Benefit Plan for which such a summary plan description is
required and (iv) each trust agreement and group annuity contract relating to
any Company Benefit Plan.
(b) The Company's 401(k) Plan (as defined in Section 4.06(d))
has been administered substantially in accordance with its terms, except where
the failure to be so administered would not reasonably be expected to have a
Company Material Adverse Effect (as defined in Section 8.05(b)). The Company and
its subsidiaries and the Company's 401(k) Plan are in substantial compliance
with all applicable provisions of ERISA and the Code (as defined in Section
2.13(a)), except for instances of possible non compliance that would not
reasonably be expected to have a Company Material Adverse Effect. The Company's
401(k) Plan has received a favorable determination letter from the IRS dated
November 26, 1997, to the effect that it is qualified and exempt from Federal
Income Taxes under Sections 401(a) and 501(a), respectively, of the Code, and no
such determination letter has been revoked nor, to the knowledge of the Company,
has revocation been threatened. Except as would not reasonably be expected to
have a Company Material Adverse Effect, there is no pending or, to the knowledge
of Seller, threatened litigation relating to the Company Benefit Plans.
13
(c) Except as would not reasonably be expected to have a
Company Material Adverse Effect, neither the Company nor any person or entity
that, together with the Company or any of its subsidiaries, is treated as a
single employer (a) "COMMONLY CONTROLLED ENTITY") under Section 414(b), (c), (m)
or (o) of the Code has incurred or would reasonably be expected to incur any
liability under Title IV of ERISA.
(d) Except as would not reasonably be expected to have a
Company Material Adverse Effect, each Company Benefit Plan that is a Welfare
Plan, to the extent applicable, complies in all material respects with the
applicable requirements of Section 4980B(f) of the Code.
(e) Except as set forth in Schedule 2.06(e), no employee of
the Company or any of its subsidiaries will be entitled to any additional
benefits or any acceleration of the time of payment or vesting of any benefits
under any Company Benefit Plan as a result of the transactions contem plated by
this Agreement.
SECTION 2.07. FINANCIAL STATEMENTS. (a) Schedule 2.07(a) sets
forth the audited consolidated balance sheets of Balboa as of March 31, 2001
(the "BALANCE SHEET"), the audited consolidated balance sheet of Balboa as of
March 31, 2000, the audited consolidated statements of income of Balboa for each
of the twelve-month periods ended March 31, 2001 and March 31, 2000, together
with the notes to such financial statements, (such financial statements,
together with the notes to such financial statements, the "FINANCIAL
STATEMENTS"). The Financial Statements have been prepared in conformity with
generally accepted accounting principals in effect at the time of application
("GAAP"), consistently applied (except in each case as described in the notes
thereto). The Financial Statements fairly present in all material respects the
consolidated financial condition and results of operations of Balboa as of the
respective dates thereof and for the respective periods indicated.
(b) Neither Balboa nor any of its subsidiaries has any
liabilities or obligations of any nature (whether accrued, absolute, contingent,
or otherwise) required by GAAP to be set forth on a consolidated balance sheet
of Balboa and its consolidated subsidiaries or notes thereto that individually
or in the aggregate, would be expected to have a Company Material Adverse
Effect, except (i) as disclosed on Schedule 2.07(b), (ii) as disclosed or
reserved for in the Financial Statements, (iii) for liabilities or obligations
incurred in the ordinary course of business
14
since the date of the Balance Sheet or (iv) which is reflected in the Closing
Working Capital.
(c) Schedule 2.07(c) sets forth the unaudited pro forma
consolidated balance sheet of the Company and its subsidiaries (excluding the
FHM Business) as of March 31, 2001 and the unaudited pro forma consolidated
statements of income of the Company and its subsidiaries (excluding the FHM
Business) for the twelve-month periods ended March 31, 2000 and March 31, 2001
(collectively, the "PRO FORMA FINANCIAL STATEMENTS"). The Pro Forma Financial
Statements have been prepared in conformity with GAAP consistently applied. The
Pro Forma Financial Statements fairly present in all material respects the pro
forma consolidated financial condition and results of operations of the Company
and its subsidiaries (excluding the FHM Business).
SECTION 2.08. ASSETS OTHER THAN REAL PROPERTY INTERESTS. (a)
The Company or one of its subsidiaries has good and valid title to all the
material assets reflected on the Balance Sheet or thereafter acquired, other
than those set forth in Schedule 2.08 or otherwise disposed of since the date of
the Balance Sheet, in each case free and clear of all mortgages, liens, charges,
claims, pledges or other encumbrances (collectively, "LIENS"), except (i) such
Liens as are set forth in Schedule 2.08, (ii) mechanics', carriers', workmen's,
repairmen's or other like Liens arising or incurred in the ordinary course of
business, (iii) Liens arising under original purchase price condi tional sales
contracts and equipment leases with third parties entered into in the ordinary
course of business, (iv) Liens for Taxes (as defined in Section 2.13(a)) and
other governmental charges that are not due and payable or that may thereafter
be paid without penalty, (v) Liens that secure debt that is reflected as a
liability on the Balance Sheet or the existence of which is referred to in the
notes to the Balance Sheet and (vi) other imperfections of title, licenses or
encumbrances, if any, which, individually or in the aggregate, would not
reasonably be expected to have a Company Material Adverse Effect (the Liens
described in clauses (i) through (vi) above, together with the Liens referred to
in clauses (ii) through (vi) of Section 2.09, are referred to collectively as
"PERMITTED LIENS").
(b) This Section 2.08 does not relate to real property or
interests in real property, such items being the subject of Section 2.09, or to
Intellectual Property, such items being the subject of Section 2.10.
SECTION 2.09. REAL PROPERTY. Neither the Company nor any of
its subsidiaries own any real properties.
15
Schedule 2.09 sets forth a list that includes all material real property leased
by the Company or any of its subsidi aries with annual rental payments in excess
of $250,000 (a "LEASED PROPERTY" or "COMPANY PROPERTY"). The Company or one of
its subsidiaries has valid leasehold interests in the Company Properties, in
each case free and clear of all Liens, except (i) Permitted Liens, (ii) such
Liens as are set forth in Schedule 2.09, (iii) subleases and similar agreements
set forth in Schedule 2.09, (iv) easements, covenants, rights-of-way and other
similar restrictions of record, (v) any conditions that may be shown by a
current, accurate survey or that would be apparent as part of a physical
inspection of any Company Property made prior to the Closing and (vi) (A)
zoning, building and other similar restrictions, (B) Liens that have been placed
by any developer, landlord or other third party and subordination or similar
agreements relating thereto and (C) unrecorded easements, covenants,
rights-of-way and other similar restrictions. Except as would not, individually
or in the aggregate, have a Company Material Adverse Effect with respect to each
Leased Property, such lease is pursuant to a written lease which is in full
force and effect. This Section 2.09 does not relate to environmental matters,
such items being the subject of Section 2.16.
SECTION 2.10. INTELLECTUAL PROPERTY. (a) Schedule 2.10 sets
forth a list that includes all material Intellectual Property (as defined in
Section 2.10(d)), owned, registered by, filed by or licensed to the Company or
any of its subsidiaries, exclusive of the FHM Intellectual Property. The
Intellectual Property set forth on Schedule 2.10, but exclusive of the
Intellectual Property of the FHM Business, is collectively referred to in this
Agreement as the "COMPANY INTELLECTUAL PROPERTY". With respect to the Company
Intellectual Property that is registered or subject to an application for
registration, Schedule 2.10 sets forth a list that includes the jurisdic tions
where such Company Intellectual Property is registered or where applications
have been filed. Except as set forth in Schedule 2.10, all Company Intellectual
Property owned by the Company or its subsidiaries is owned free and clear of all
Liens except Permitted Liens.
(b) Neither the Company nor any of its subsidi aries is bound
by or a party to any option, license or similar Contract relating to any
material Intellectual Property of any other person for the use of such
Intellectual Property in the conduct of the business of the Company and its
subsidiaries, except as set forth in Schedule 2.10 and except for so-called
"shrink-wrap" license agreements relating to computer software licensed to the
16
Company or one of its subsidiaries in the ordinary course of business. Except as
set forth in Schedule 2.10, no claims are pending or, to the knowledge of Parent
and Seller, threatened, as of the date of this Agreement against the Company or
any of its subsidiaries by any person claiming infringement by use of the
Company Intellectual Property. Except as set forth in Schedule 2.10, and to the
knowledge of Parent and Seller, there is no continuing infringement by any other
person of the Company Intellectual Property.
(c) "INTELLECTUAL PROPERTY" means any patent, patent
application, trademarks, trademark registrations, trademark applications,
service marks, service xxxx registrations, service xxxx applications, trade
dress, trade secrets, domain names and related rights, copyrights, copy right
registrations and copyright applications (including all reissues, divisions,
continuations and extensions, modifications, or renewals of any such
registration or application thereof in any jurisdiction).
SECTION 2.11. CONTRACTS. (a) Except as set forth on
Schedule 2.11(a), or except contracts which constitute Excluded Assets or any
Ancillary Agreement, neither the Company nor any of its subsidiaries is a party
to or bound by any:
(i) employee collective bargaining agreement or
other Contract with any labor union;
(ii) covenant not to compete (other than (A) pur suant to any
radius restriction contained in any lease, reciprocal easement or
development, construction, operating or similar agreement and (B) any
such covenant contained in any distribution agreement with a
distributor, "independent operator", "wholesaler" or "multiple") that
materially limits the conduct of the business of the Company as
currently conducted;
(iii) (A) continuing Contract for the future purchase by the
Company or its subsidiaries of materials, supplies or equipment (other
than purchase Contracts and orders for inventory in the ordinary course
of business) or (B) service or consulting Contract (other than
Contracts for services in the ordinary course of business) for the
provision of services to the Company or its subsidiaries which has an
aggregate future liability by the Company or its subsidiaries to any
person (other than the Company or one of its subsidiaries),
individually, in excess of $500,000 and is not terminable by the
Company or one of its subsidiaries by notice of not more than 180 days;
17
(iv) Contract under which the Company or one of its
subsidiaries has borrowed any money from, or issued any note, bond,
debenture or other evidence of indebtedness to, any person (other than
the Company or one of its subsidiaries) or any other note, bond,
debenture or other evidence of indebtedness of the Company or one of
its subsidiaries (other than in favor of the Company or one of its
subsidiaries) in any such case which, individually, involves in excess
of $500,000 of indebtedness;
(v) Contract (other than intercompany relation ships) under
which (A) any person (other than the Company or one of its
subsidiaries) has directly or indirectly guaranteed indebtedness,
liabilities or obligations of the Company or one of its subsidiaries or
(B) the Company or one of its subsidiaries has directly or indirectly
guaranteed indebtedness, liabilities or obligations of any person,
other than the Company or another subsidiary of the Company (in each
case other than endorsements for the purpose of collection in the
ordinary course of business), in any such case which, individually,
involves in excess of $500,000 of indebtedness;
(vi) material Contract granting a Lien upon any Company
Property, which Lien is not set forth in Schedule 2.08 or which is not
a Permitted Lien;
(vii) lease, sublease or similar Contract with any person
(other than the Company or one of its subsidi aries) under which the
Company or one of its subsidi aries is a lessor or sublessor of, or
makes available for use to any person (other than the Company or one of
its subsidiaries), (A) any Leased Property or (B) any portion of any
premises otherwise occupied by the Company or one of its subsidiaries
that, in either case, specifies annual payments in excess of $500,000
and which is not terminable by the Company or its sub sidiaries by
notice of not more than 180 days;
(viii) lease or similar Contract with any person (other than the
Company or one of its subsidiaries) under which the Company or one of
its subsidiaries is lessee of, or holds or uses, any machinery,
equipment, vehicle or other tangible personal property owned by any
person which lease or similar Contract has an aggregate future
liability in excess of $500,000 and which is not terminable by the
Company or one of its subsidiaries by notice of not more than 180 days;
18
(ix) (A) advertising agreement or arrangement, (B)
distribution agreement or arrangement or (C) printing or publishing
agreement or arrangement, in each case, individually, involving annual
payments by or to the Company and its subsidiaries in excess of
$500,000 and which is not terminable by the Company or its subsidiaries
on notice of not more than 180 days; or
(x) other Contract that has an aggregate future liability to
any person (other than the Company or one of its subsidiaries) in
excess of $500,000 and is not terminable by the Company or one of its
subsidiaries by notice of not more than 180 days (other than purchase
orders or sales orders).
(b) Set forth on Schedule 2.11(b) is each written employment
agreement, employment contract, special incentive agreement or severance
agreement to which the Company or one of its subsidiaries is a party that has an
aggregate future liability of the Company or its subsidiaries in excess of
$500,000 (collectively, the "EMPLOYMENT CONTRACTS").
(c) Except as indicated with respect to the Contracts set
forth in Schedule 2.11(a) (such Contracts, together with the Employment
Contracts, the "COMPANY CONTRACTS"), all Company Contracts are valid, binding
and in full force and effect and are enforceable by the Company or the
applicable subsidiary of the Company in accordance with their terms (subject to
applicable bankruptcy, insolvency, moratorium, reorganization or similar laws
affecting creditors' rights generally and to general equitable principles),
except for such failures to be valid, binding, in full force and effect or
enforceable that, individually or in the aggregate, would not reasonably be
expected to have a Company Material Adverse Effect. Except as set forth in
Schedule 2.11(c), the Company or the applicable sub sidiary of the Company is
not in breach or default under any Company Contract and, to the knowledge of
Parent or Seller, no other party to any Company Contract, as of the date hereof,
is in breach or default thereunder, except to the extent that such breach or
default, individually or in the aggregate, would not reasonably be expected to
have a Company Material Adverse Effect.
SECTION 2.12. PERMITS. Except as set forth in Schedule 2.12,
(i) each of the Company and its subsidiaries possesses all material
certificates, licenses, permits, authorizations and approvals from any
Governmental Entity ("PERMITS") necessary to enable it to own or lease its
properties or assets and to carry on its business as
19
presently conducted, and the Company or the applicable sub sidiary of the
Company is in compliance with the terms and conditions thereof, except for any
non-compliance that, individually or in the aggregate, would not reasonably be
expected to have a Company Material Adverse Effect and (ii) none of such Permits
would reasonably be expected to be subject to suspension, modification,
revocation or non renewal as a result of the execution and delivery of this
Agreement or the consummation of the Acquisition, except for any such
suspensions, modifications, revocations or non renewals that, individually or in
the aggregate, would not reasonably be expected to have a Company Material
Adverse Effect. This Section 2.12 does not relate to environmental matters, such
items being the subject of Section 2.16(b).
SECTION 2.13. TAXES. (a) For purposes of this Agreement:
"CODE" shall mean the Internal Revenue Code of 1986, as
amended.
"INCOME TAX" or "INCOME TAXES" shall mean (i) all income or
franchise Taxes imposed on or measured by income and (ii) any interest,
penalties and additions associated with the amounts described in clause (i)
hereof.
"PRE-CLOSING TAX PERIOD" shall mean all taxable periods ending
on or before the Closing Date and the portions ending on the Closing Date of all
Straddle Periods (as defined in Section 4.07(b)).
"TAX" or "TAXES" shall mean all forms of taxation imposed by
any Federal, state, local, foreign or other Taxing Authority, including income,
franchise, property, sales, use, excise, employment, unemployment, payroll,
social security, estimated, value added, ad valorem, trans fer, recapture,
withholding and other taxes of any kind, including any interest, penalties and
additions thereto.
"TAXING AUTHORITY" shall mean any Federal, state, local or
foreign government, any subdivision, agency, commission or authority thereof or
any quasi-governmental body exercising tax regulatory authority.
"TAX RETURN" shall mean any report, return, document,
declaration or other information or filing required to be supplied to any Taxing
Authority with respect to Taxes, including any amendment made with respect
thereto.
"TRANSFER TAXES" shall mean all sales (including bulk sales),
use, transfer, recording, ad valorem,
20
privilege, documentary, gross receipts, registration, conveyance, excise,
license, stamp or similar Taxes and fees arising out of, in connection with or
attributable to the transactions effectuated pursuant to this Agreement.
(b) Except as set forth in Schedule 2.13(b), (i) the Company
and each of its subsidiaries has prepared, completed and timely filed or caused
to be filed (taking into account any applicable extension periods) all material
Tax Returns required to be filed by it, (ii) all material Taxes with respect to
taxable periods covered by such Tax Returns, and all other material Taxes for
which the Company or any of its subsidiaries is or might otherwise be liable,
have been timely paid in full or will be timely paid in full by the due date
thereof and (iii) there are no material Liens for Taxes with respect to any of
the assets or properties of the Company or any of its subsidiaries that are not
adequately provided for in the Balance Sheet, except liens for Taxes not yet due
and payable or that may thereafter be paid without penalty.
(c) Except as set forth in Schedule 2.13(c), as of the date
hereof, no material Tax Return of the Company or any of its subsidiaries is
under audit, examination or the subject of any legal controversy by or with any
Taxing Authority, and no notice of such an audit, examination or controversy has
been received by the Company or any of its subsidiaries.
(d) Seller is a domestic corporation, for U.S. federal income
tax purposes and is the common parent of a consolidated group of which the
Company is a member.
(e) Seller is not a "foreign person" within the meaning of
Section 1445 of the Code.
SECTION 2.14. LITIGATION. Schedule 2.14 sets forth a list as
of the date of this Agreement of each pending, or to the knowledge of Parent or
Seller, threatened material suit or legal action (each, a "PROCEEDING") against
the Company or any of its subsidiaries and pursuant to which a party seeks more
than $500,000 from the Company or its subsidiaries. Except as set forth in
Schedule 2.14, neither the Company nor any of its subsidiaries is subject to, or
in default under, any unsatisfied Judgment, other than for such Judgments that,
individually or in the aggregate, would not reasonably be expected to have a
Company Material Adverse Effect. This Section 2.14 does not relate to
environmental matters or Intellectual Property matters, such items being the
subject of Sections 2.16(b) and 2.10, respectively.
21
SECTION 2.15. ABSENCE OF CHANGES OR EVENTS. Except as set
forth in Schedule 2.15, since the date of the Balance Sheet there has not
occurred any event or condition that has had a Company Material Adverse Effect.
Purchaser acknowledges that there may be disruption to the Company's and its
subsidiaries' business as a result of the announcement by Seller of its
intention to sell the Company (and there may be further disruption to the
Company's and its subsidiaries' business as a result of the execution of this
Agreement and the consummation of the transactions contemplated hereby), and
Purchaser agrees that any such disruptions do not and shall not constitute a
breach of this Section 2.15.
SECTION 2.16. COMPLIANCE WITH APPLICABLE LAWS. (a) To the
knowledge of Parent and Seller, the Company and its subsidiaries are in
compliance with all Applicable Laws, except for instances of noncompliance that,
individually or in the aggregate, would not reasonably be expected to have a
Company Material Adverse Effect. Neither Parent nor Seller has received any
written notice that any investigation by a Governmental Entity of the Company or
its subsidiaries is pending, except where the outcome of any such investigation,
individually or in the aggregate, would not reasonably be expected to have a
Company Material Adverse Effect. This Section 2.16 does not relate to matters
with respect to Taxes, which are the subject of Section 2.13, or to environ
mental matters, which are the subject of Section 2.16(b).
(b) Except as set forth in Schedule 2.16(b), and except for
any matter that would not reasonably be expected to have a Company Material
Adverse Effect, (i) the Company and its subsidiaries are in compliance with all
Applicable Laws relating to protection of the environment ("ENVIRONMENTAL
LAWS"), (ii) the Company and its sub sidiaries possess and are in compliance
with all Permits required under Environmental Laws for the conduct of their
respective operations and (iii) there are no pending Proceedings against the
Company or its subsidiaries alleging a violation of Environmental Laws.
SECTION 2.17. VOTING REQUIREMENTS. No vote of the holders
of any class or series of Parent's capital stock is necessary to approve this
Agreement, the Ancillary Agreements and to consummate the transactions
contemplated by this Agreement.
SECTION 2.18. NO BARTER RECEIVABLES OR OBLIGATIONS. Except
as set forth in Schedule 2.18, there are no material "barter" agreements
relating to the Company or its subsidiaries, and none of the Parent, Seller or
Company or
22
its subsidiaries is liable for any outstanding material barter obligations
relating to the Company or its subsidi aries, or is the owner of any material
outstanding barter receivables.
SECTION 2.19. TRANSACTIONS WITH AFFILIATES. There are (i) no
material services currently being provided by Parent or Seller or their
respective affiliates (other than the Company and its subsidiaries) to the
Company and its subsidiaries and (ii) no material Contracts, agreements or
instruments (other than this Agreement and the Ancillary Agreements) between the
Company or its subsidiaries, on the one hand, and Parent or Seller or an
affiliate of Parent or Seller (other than the Company and its subsidiaries), on
the other hand.
SECTION 2.20. WARRANTS. Parent shall not and shall cause
its subsidiaries not to, offer to sell or otherwise dispose of, such Warrants in
violation of any of the registration requirements of the Securities Act of 1933,
as amended.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Seller as follows:
SECTION 3.01. ORGANIZATION AND STANDING. Purchaser is a
corporation validly existing and in good standing under the laws of the
jurisdiction in which it is organized and has full corporate power and authority
to enable it to own, lease or otherwise hold its properties and assets and to
carry on its business as presently conducted. Purchaser is duly qualified and in
good standing to do business as a foreign corporation in each jurisdiction in
which the conduct or nature of its business or the owner ship, leasing or
holding of its properties makes such qualification necessary, except such
jurisdictions where the failure to be so qualified or in good standing,
individually or in the aggregate, would not reasonably be expected to prevent or
materially impede or delay the Acquisition or otherwise have a material adverse
effect on the ability of Purchaser to consummate the Acquisition (a "PURCHASER
MATERIAL ADVERSE EFFECT").
SECTION 3.02. AUTHORITY; EXECUTION AND DELIVERY;
ENFORCEABILITY. Purchaser has full corporate power and authority to execute and
deliver this Agreement, the
23
Ancillary Agreements and the Warrants to which it is, or is specified to be, a
party and to consummate the Acquisition and the other transactions contemplated
hereby and thereby. Purchaser has taken all corporate action required by its
organizational documents to authorize the execution and delivery of this
Agreement, the Ancillary Agreements and the Warrants to which it is, or is
specified to be, a party and to authorize the consummation of the Acquisition
and the other transactions contemplated hereby and thereby. Purchaser has duly
executed and delivered this Agreement and prior to the Closing will have duly
executed and delivered each Ancillary Agreement and the Warrants to which it is,
or is specified to be, a party, and this Agreement constitutes, and each
Ancillary Agreement and the Warrants to which it is, or is specified to be, a
party will after the Closing constitute its legal, valid and binding obligation,
enforce able against it in accordance with its terms subject to applicable
bankruptcy, insolvency, moratorium, reorganiza tion or similar laws affecting
creditors' rights generally and to general equitable principles. When issued,
the Warrants and any shares of common stock of Purchaser or its affiliates into
which such Warrants are exercisable will be free of all Liens or any
restrictions on transfer except restrictions under U.S. and state securities
laws.
SECTION 3.03. NO CONFLICTS OR VIOLATIONS; NO CONSENTS OR
APPROVALS REQUIRED. The execution and delivery by Purchaser of this Agreement do
not, the execution and delivery by Purchaser of each Ancillary Agreement or the
Warrants to which it is, or is specified to be, a party will not, and the
consummation of the Acquisition and the other transactions contemplated hereby
and thereby will not conflict with, or result in any breach of or constitute a
violation, default or event of default under, or result in the creation of any
Lien upon any of the properties or assets of Purchaser or any of its
subsidiaries under, or require Consent under, or give rise to a right of
acceleration, termination or cancellation under or increased, additional,
accelerated or guaranteed rights or entitlements of any person under, any
provision of (i) its or any of its subsidiaries' Certificate of Incorporation,
By-laws or similar governing document, (ii) any Contract, note, instrument or
financing obligation to which Purchaser or any of its subsidiaries is a party or
by which any of their respective properties or assets is bound or (iii) any
Judgment or Applicable Law applicable to Purchaser or any of its subsidiaries or
their respective properties or assets, other than, in the case of clauses (ii)
and (iii) above, any such items that would not reasonably be expected to have a
Purchaser Material Adverse Effect or otherwise materially adversely affect
Purchaser's ability to consummate the
24
transactions contemplated hereby. No Consent of, or registration, declaration or
filing with, any Governmental Entity is required to be obtained or made by or
with respect to Purchaser or any of its subsidiaries in connection with the
execution, delivery and performance of this Agreement or the consummation of the
Acquisition other than (A) compliance with and filings under the HSR Act, (B)
compliance with and filings and notifications under applicable Environmental
Laws and (C) those the failure of which to obtain or make would not reasonably
be expected to have a Purchaser Material Adverse Effect.
SECTION 3.04. PROCEEDINGS. To the knowledge of Purchaser,
neither it nor any of its subsidiaries is a party to any Proceeding pursuant to
which a party seeks injunctive relief prohibiting the consummation of the
Acquisition. Neither Purchaser nor any of its subsidiaries is a party or subject
to, or in default under, any unsatisfied Judgment, other than for Judgments that
would, individually or in the aggregate, not reasonably be expected to have a
Purchaser Material Adverse Effect.
SECTION 3.05. SECURITIES ACT. The Shares purchased by
Purchaser pursuant to this Agreement are being acquired for investment only and
not with a view to any public distribution thereof, and Purchaser shall not
offer to sell or otherwise dispose of the Shares so acquired by it in violation
of any of the registration requirements of the Securities Act of 1933, as
amended.
SECTION 3.06. NO KNOWLEDGE OF MISREPRESENTATIONS OR OMISSIONS.
After due inquiry and investigation, including review of the material and
information made available by Parent to Purchaser in the data rooms at the
offices of Cravath, Swaine & Xxxxx and Xxxxxx Xxxxxxx & Co. Incorporated (i)
Purchaser does not have any knowledge that any of the representations and
warranties of Parent, Seller or the Company or its subsidiaries made in this
Agreement are not true and correct and (ii) Purchaser does not have any
knowledge of any material errors in, or material omissions from, any Schedule.
SECTION 3.07. VOTING REQUIREMENTS. No vote of the holders of
any class or series of Purchaser's capital stock is necessary (i) to approve
this Agreement or the Ancillary Agreements, (ii) for the issuance of the
Warrants or exercise thereof (including the issuance of shares of common stock
of the Purchaser in connection therewith) or (iii) to consummate the
transactions contemplated by this Agreement.
25
SECTION 3.08. CAPITAL STOCK OF PURCHASER AND ITS SUBSIDIARIES.
As of March 31, 2001, (i) the authorized capital stock of Purchaser (the
"PURCHASER SHARES") and (ii) the number of shares of capital stock of Purchaser
issued and outstanding is as set forth on the Purchaser SEC Documents dated
March 31, 2001. All of the outstanding capital stock of Purchaser is, and the
Purchaser Shares when issued pursuant to the Warrants will be, duly authorized,
validly issued, fully paid and nonassessable. The Warrants and the Purchaser
Shares into which they are exercisable are not, and will not be, subject to any
preemptive rights of any kind. There are no outstanding contractual obligations
of Purchaser to repurchase, redeem or otherwise acquire any shares of capital
stock of Purchaser. There are no outstanding options, warrants, convertible
securities, subscriptions or other commitments or rights to acquire any shares
of capital stock of Purchaser.
SECTION 3.09. SEC DOCUMENTS; UNDISCLOSED LIABILITIES.
Purchaser has filed all reports, schedules, forms, statements and other
documents required to be filed by Purchaser with the SEC since January 1, 2001
(the "PURCHASER SEC DOCUMENTS"). Except to the extent that information contained
in any Purchaser SEC Document has been revised or superseded by a later filed
Purchaser SEC Document, none of Purchaser SEC Documents contains any untrue
statement of a material fact or omits to state any 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. The consolidated
financial statements of Purchaser included in Purchaser SEC Documents comply as
to form in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto, have been
prepared in accordance with GAAP (except, in the case of unaudited statements,
as permitted by Form 10-Q of the SEC) applied on a consistent basis during the
periods involved (except as may be indicated in the notes thereto) and fairly
present the consolidated financial position of Purchaser and its consolidated
subsidiaries as of the dates thereof and the consolidated results of their
operations for the periods then ended (subject, in the case of unaudited
statements, to normal year-end audit adjustments). Neither Purchaser nor any of
its subsidiaries has any liabilities or obligations of any nature (whether
accrued, absolute, contingent, or otherwise) required by GAAP to be set forth on
a consolidated balance sheet of Purchaser and its consolidated subsidiaries or
notes thereto that individually or in the aggregate, would be expected to have a
material adverse effect on Purchaser, except (i) as disclosed on Schedule 3.10,
(ii) as disclosed or reserved
26
for in the Purchaser SEC Documents or (iii) for liabilities or obligations
incurred in the ordinary course of business since December 31, 2000.
ARTICLE IV
COVENANTS
SECTION 4.01. COVENANTS RELATING TO CONDUCT OF BUSINESS.
Except for matters (x) set forth in Schedule 4.01, (y) consented to by Purchaser
(such consent not to be unreasonably withheld or delayed) or (z) otherwise
contemplated by the terms of this Agreement, from the date of this Agreement to
the Closing Date, Parent and Seller shall cause the Company and its subsidiaries
to conduct their respective businesses in the ordinary course in a manner
substantially consistent with past practice; PROVIDED, that nothing contained in
this Agreement shall be deemed to require the expenditure of funds in a manner
inconsistent with past practice. In addition, except as set forth in Schedule
4.01 or as otherwise contemplated by the terms of this Agreement, Parent and
Seller shall not permit any of the Company or its subsidiaries to do any of the
following without the prior consent of Purchaser (which consent shall not be
unreasonably withheld or delayed):
(i) amend its Certificate of Incorporation or
By-laws or other comparable organizational documents;
(ii) declare, set aside or pay any non-cash dividend or make
any other non-cash distribution to its stockholders whether or not upon
or in respect of any shares of its capital stock or issue any capital
stock; PROVIDED, HOWEVER, that (A) dividends and distributions may
continue to be made by the subsidiaries of the Company to the Company
or to other wholly-owned sub sidiaries of the Company and (B) dividends
and distributions of cash may continue to be made by the Company to
Seller;
(iii) redeem or otherwise acquire any shares of its capital
stock or issue any capital stock or any option, warrant or right
relating thereto or any securities convertible into or exchangeable for
any shares of capital stock;
(iv) adopt or amend in any material respect any Benefit Plan
in respect of any Affected Employee (as defined in Section 4.06(a)) or
former employee of the
27
Company and its subsidiaries, except as required by Applicable Law;
(v) grant to any executive officer any increase in
compensation or benefits, except in the ordinary course of business
consistent with past practice or as may be required under existing
agreements and except for any increases for which Seller or Parent
shall be solely obligated;
(vi) incur or assume any liabilities, obligations or
indebtedness for borrowed money or guarantee any such liabilities,
obligations or indebtedness, other than (A) in the ordinary course of
business consistent with past practice, or (B) in connection with
refinancing or repayment of the indebtedness listed on Schedule
4.01(a)(vi);
(vii) subject any of its assets to any Lien of any nature
whatsoever that would have been required to be set forth in Schedule
2.08 or 2.09 if existing on the date of this Agreement;
(viii) waive any claims or rights of material value;
(ix) make any change in any method of accounting or accounting
practice or policy other than those required or permitted by GAAP or
required by Applicable Law;
(x) acquire by merging or consolidating with, or by
purchasing a substantial portion of the assets of, or by any other
manner, any business or any corporation, partnership, association or
other business organization or division thereof or otherwise acquire
any assets (other than inventory) that are material to the Company and
its subsidiaries, taken as a whole;
(xi) make or incur any capital expenditure that is either (A)
not currently approved in writing or (B) contemplated by the Company's
fiscal 2001 budget (a copy of which has previously been furnished to
Purchaser) which, individually, is in excess of $500,000, or make or
incur any such expenditures which, in the aggregate, are in excess of
$750,000;
(xii) sell, lease, license or otherwise dispose of any asset
that is material to the Company and its sub sidiaries, taken as a
whole, except (A) inventory and obsolete or excess equipment sold or
disposed of in the ordinary course of business and (B) leases entered
into
28
in the ordinary course of business with aggregate annual lease
payments not in excess of $500,000;
(xiii) settle any litigation in a manner that imposes an
equitable remedy against the Company or its sub sidiaries materially
constraining the business of the Company or its subsidiaries; or
(xiv) agree, whether in writing or otherwise, to do
any of the foregoing.
SECTION 4.02. ACCESS TO INFORMATION. (a) To the extent
permitted by Applicable Law, the Company shall, and shall cause its subsidiaries
to, afford to Purchaser and its accountants, counsel and other representatives
reasonable access, upon reasonable notice during normal business hours during
the period prior to the Closing, to the personnel, properties, books, contracts,
commitments and other Records of the Company and its subsidiaries; PROVIDED,
HOWEVER, that such access does not unreasonably disrupt the normal operations of
the Company and its subsidiaries.
(b) After the Closing, Purchaser shall, and shall cause its
affiliates to, give Parent and Seller and their accountants, counsel and other
representatives reasonable access, upon reasonable notice during normal business
hours, to the personnel, properties, books, contracts, commitments and other
Records of the Company and its subsidiaries relating to (i) Seller's operation
of the Company prior to the Closing, (ii) the Excluded Assets or (iii) the
Excluded Liabilities, and to furnish copies thereof, which Parent or Seller or
their representatives or agents reasonably request; PROVIDED, HOWEVER, that such
access does not unreasonably disrupt the normal operations of the Company and
its subsidiaries. Purchaser shall, and shall cause its affiliates to, furnish
reasonable assistance (including access to personnel) to Parent and Seller and
their representatives and agents in connection with any claims, proceedings,
actions, investigations, audits, and other regulatory or legal proceedings in
connection with any of the items listed in the foregoing sentence; PROVIDED that
Seller shall be responsible for all reasonable out-of-pocket expenses in
connection therewith. Purchaser shall not, and shall not permit any of its
affiliates to destroy any such records.
SECTION 4.03. CONFIDENTIALITY. (a) Purchaser acknowledges
that the information being provided to it in connection with the Acquisition and
the consummation of the other transactions contemplated hereby is subject to the
terms of a confidentiality agreement between Purchaser and
29
Parent (the "CONFIDENTIALITY AGREEMENT"), the terms of which are incorporated
herein by reference. Effective upon, and only upon, the Closing, the
Confidentiality Agreement shall terminate with respect to information relating
solely to the Company and its subsidiaries; PROVIDED, HOWEVER, that Purchaser
acknowledges that any and all other information provided to it by Parent or
Seller or Parent's or Seller's representatives concerning Parent, Seller or the
FHM Business shall remain subject to the terms and conditions of the
Confidentiality Agreement after the Closing Date.
(b) After the Closing, each of Parent and Seller and its
respective affiliates shall not divulge, furnish or make available to anyone
(other than Purchaser) any knowledge or information with respect to any
proprietary information of the Company and its subsidiaries and which solely
relates to the business of the Company and its subsidiaries. This Section
4.03(b) shall not apply to any such proprietary information which (i) shall have
entered the public domain or become available through no act or omission of
Parent or Seller or any of their affiliates after the Closing, (ii) shall have
become available to Parent or Seller or any of their affiliates from a third
party whom the Parent or Seller or such affiliate reasonably believes is not
obligated to the Company or its subsidiaries or Purchaser to keep such
proprietary information confidential or (iii) shall be required by law, legal
process, legal proceeding or any Governmental Authority (including stock
exchanges) to be disclosed, PROVIDED that Parent and Seller shall give
reasonably prompt notice of such requirement to Purchaser so that Purchaser may
seek an appropriate protective order.
SECTION 4.04. EFFORTS. (a) Subject to the terms and conditions
of this Agreement, including Section 4.04(c), each of Parent, Seller and the
Company and Purchaser and its affiliates shall use its reasonable best efforts
to cause the Closing to occur, including using its reasonable best efforts to
obtain all material consents, Permits, authorizations and approvals of, and to
make all necessary filings, notifications or registrations with, all
Governmental Entities which are necessary for the consummation of the
transactions contemplated by this Agreement. None of Parent, Seller, the Company
and Purchaser shall, and none shall permit any of their respective affiliates
to, take any actions that would, or that could reasonably be expected to result
in any of the conditions set forth in Article V not being satisfied, including
affecting any acquisitions.
30
(b) Each of Parent, Seller and Purchaser shall as promptly as
practicable, but in no event later than five business days following the
execution and delivery of this Agreement, file or cause to be filed with the
United States Federal Trade Commission (the "FTC") and the United States
Department of Justice (the "DOJ") the notification and report form required for
the transactions contemplated hereby and any supplemental information requested
in connection therewith pursuant to the HSR Act. Any such notification and
report form and supplemental information shall be in substantial compliance with
the requirements of the HSR Act. Each of Parent, Seller and Purchaser shall
furnish to the other such necessary information in its possession and reasonable
assistance as the other may request in connection with its preparation of any
filing or submission that is necessary under the HSR Act. Parent, Seller and
Purchaser shall keep each other appraised of the status of any communications
with, and any inquiries or requests for additional information from, the FTC and
the DOJ and shall comply promptly with any such inquiry or request and shall
promptly provide any supplemental information requested in connection with the
filings made hereunder pursuant to the HSR Act. Each party shall promptly
substantially comply with any request for any additional information or
materials. Each party shall use its best efforts to obtain any clearance
required under the HSR Act for the consummation of the transactions contemplated
by this Agreement. Parent, Seller and Purchaser shall also cooperate to make any
required filings outside the United States as promptly as practicable after the
execution and delivery of this Agreement but in no event later than 15 days
after the Closing. For purposes of this Section 4.04, the "efforts" of Purchaser
shall include promptly (i) opposing any motion or action for a temporary,
preliminary or permanent injunction against the Acquisition and (ii) if
Purchaser loses such motion or action for a preliminary or permanent injunction,
entering into a consent decree containing Purchaser's agreement to hold separate
and divest the products and assets of the Company and its subsidiaries or
Purchaser and its affiliates, as the case may be, as required by the FTC, the
DOJ or any other Governmental Entity.
(c) Purchaser acknowledges that certain consents and waivers
with respect to the transactions contemplated by this Agreement may be required
from parties to the Contracts listed on the Schedules hereto and that such
consents and waivers have not been obtained. Purchaser agrees that Parent,
Seller and their respective affiliates shall not have any liability whatsoever
to Purchaser arising out of or relating to the failure to obtain any consents or
waivers
31
that may be required in connection with the transactions contemplated by this
Agreement or because of the termination of any Contract as a result thereof.
Purchaser further agrees that no representation, warranty or covenant of Parent,
Seller or the Company or its subsidiaries contained herein shall be breached or
deemed breached, and no condition shall be deemed not satisfied, as a result of
(i) the failure to obtain any such consent or waiver, (ii) any such termination
or (iii) any lawsuit, action, pro ceeding or investigation commenced or
threatened by or on behalf of any person arising out of or relating to the
failure to obtain any such consent or any such termination. Prior to the
Closing, Parent, Seller and the Company shall, and shall cause the subsidiaries
of the Company to, cooperate with Purchaser, upon the request of Purchaser, in
any reasonable manner in connection with Purchaser obtaining any such consents
and waivers; PROVIDED, HOWEVER, that such cooperation shall not include any
requirement of Purchaser, Parent, Seller or any of their respective affiliates
(including the Company and the subsidiaries of the Company) to expend money,
commence, defend or participate in any litigation or offer or grant any
accommodation (financial or otherwise) to any third party.
SECTION 4.05. BROKERS OR FINDERS. Each of Purchaser, Parent
and Seller represents, as to itself and its affiliates, that no agent, broker,
investment banker or other firm or person is or will be entitled to any broker's
or finder's fee or any other commission or similar fee in connection with any of
the transactions contemplated by this Agreement, except, as to Parent and
Seller, Xxxxxx Xxxxxxx & Co. Incorporated, whose fees and expenses will be paid
by Parent and Seller and, as to Purchaser and its affiliates, Xxxxxxx Xxxxx &
Co., whose fees and expenses will be paid by Purchaser.
SECTION 4.06. EMPLOYEE MATTERS. (a) CREDITED SERVICE; SECONDED
EMPLOYEES. On and after the Closing Date, Purchaser shall give the Affected
Employees full credit for all purposes (including for purposes of eligibility to
participate, early retirement eligibility and early retirement subsidies and
vesting) under any employee benefit plans or arrangements maintained by
Purchaser and its sub sidiaries, for the Affected Employees' service with Seller
and its subsidiaries to the same extent recognized by Seller and its
subsidiaries immediately prior to the Closing Date. For purposes of this
Agreement, "AFFECTED EMPLOYEE" means each individual (other than an Excluded
Employee) who is selected by Purchaser in accordance with the next sentence and
is employed by the Company and its subsidiaries on the Closing Date, including
any such individuals on approved
32
leave of absence (including maternity and paternity leave, vacation, sick leave,
short-term disability, military leave, jury duty and death leave). Seller shall
permit Purchaser, at its discretion, to make offers of employment, within the
five day period immediately following the date of this Agreement, to the
individuals listed on Schedule 4.06(a); PROVIDED, THAT if any such individual
accepts employment with and becomes an employee of Purchaser, he or she shall be
considered an Affected Employee for purposes of this Agreement and Purchaser
shall assume all liabilities of Parent and Seller and their subsidiaries in
respect of any and all relocation and termination costs associated there with;
PROVIDED FURTHER, that if Purchaser elects to not make offers of employment to
the individuals listed on Schedule 4.06(a), Purchaser shall have no liability
with respect to such employees.
(b) CONTINUATION OF BENEFITS. Purchaser agrees to honor, and
to cause its subsidiaries to honor, in accordance with their current terms, the
Company Benefit Plans, the Employment Contracts and each other employment,
deferred compensation, severance, termination or other agreement or arrangement
between the Company or any of its subsidiaries, on the one hand, and any current
or former director or employee of the Company and its subsidiaries, on the other
hand. For the one-year period immediately following the Closing Date, Purchaser
shall, or shall cause its subsidiaries to, provide (i) each Affected Employee
with salaries that are no less favorable to such Affected Employee than those in
effect immediately prior to the Closing Date; and (ii) Affected Employees shall
be eligible to participate in the employee benefits programs no less generous
than those available to employees of the magazine division of the magazine
business of XxXxxxxx Argus Publishing Inc.
(c) SEVERANCE. Notwithstanding anything to the contrary in
this Agreement, Purchaser agrees to provide each Affected Employee whose
employment is terminated by Purchaser or its subsidiaries with severance
benefits that are no less favorable than those generally available to employees
of the magazine division of XxXxxxxx Argus Publishing Inc.
(d) 401(k) PLAN. From and after the Closing Date, Purchaser
shall continue to sponsor and maintain the emap usa, inc. 401(k) Plan (the
"COMPANY'S 401(k) PLAN"), or shall establish or maintain a defined contribution
plan that Affected Employees shall be eligible to participate in the Primedia
Thrift and Retirement Plan up to the same
33
contribution limits as employees of the magazine division of XxXxxxxx Argus
Publishing Inc.
(e) CERTAIN WELFARE BENEFITS MATTERS. Purchaser shall (A)
waive all limitations as to preexisting conditions, exclusions and waiting
periods with respect to participation and coverage requirements applicable to
any Affected Employee and his or her dependents under any welfare benefit plans
of Purchaser and its subsidiaries ("PURCHASER WELFARE PLANS") in which the
Affected Employees and their dependents may be eligible to participate after the
Closing Date to the extent waived under the applicable corresponding Company
Benefit Plan for such Affected Employee and his or her dependents immediately
prior to the Closing Date and (B) provide each Affected Employee with credit for
any co-payments and deductibles paid prior to the Closing Date in the calendar
year in which the Closing Date occurs (or, if later, in the calendar year in
which Affected Employees and their dependents commence participation in the
applicable Purchaser Welfare Plan) for purposes of satisfying any applicable
deductible or out-of-pocket requirements under any Purchaser Welfare Plans in
which the Affected Employees and their dependents are eligible to participate
after the Closing Date.
(f) ADMINISTRATION. Following the date of this Agreement,
Seller and Purchaser shall reasonably cooperate in all matters reasonably
necessary to effect the trans actions contemplated by this Section 4.06,
including exchanging information and data relating to workers compensation,
employee benefits and employee benefit plan coverages, and in obtaining any
governmental approvals required hereunder.
SECTION 4.07. TAX MATTERS. (a) PRE-CLOSING TAX PERIOD TAX
RETURNS. (i) As to all Tax Returns of the Company and its subsidiaries due on or
before the Closing Date, Parent and Seller shall prepare and timely file such
Returns and pay Taxes shown as due thereon.
(ii) As to the Federal Income Tax Return of the Company and
its subsidiaries for the tax period ending on the Closing Date and at the
request of Seller for the tax period ending on March 31, 2001, Purchaser shall
cause the Company to prepare a pro forma Return in accordance with past practice
and deliver such Return to Parent and Seller at least 30 days before the
corresponding Federal Income Tax Return of Seller is due. Parent and Seller
shall have sole discretion to modify such pro forma Return for use in its own
consolidated Federal Income Tax Returns, except in the event that the election
contemplated by Section 4.07(k) is
34
made in which case Purchaser shall have the right to object to any modifications
that directly relate to the deemed sale arising from such election.
(iii) As to Income Tax Returns (other than Federal) of the
Company and its subsidiaries due after the Closing Date for tax periods ending
on or before the Closing Date, Purchaser shall cause the Company and its
subsidiaries to prepare and timely file such Returns in accordance with past
practice; PROVIDED, HOWEVER, (1) Purchaser shall deliver any such Return to
Seller at least 30 days before it is due, (2) Seller shall have sole discretion
to approve or modify such Return by notice given at least five business days
before such Return is due, (3) such Return shall be filed (as so approved or
modified) on a timely basis by the Company or its subsidiaries, as applicable,
and (4) Seller shall reimburse Purchaser the amount shown to be due on the final
version of any such Return prior to the filing thereof.
(iv) As to Tax Returns (other than Income Tax Returns) of the
Company and its subsidiaries due after the Closing Date for tax periods ending
on or before the Closing Date, Purchaser shall cause the Company and its
subsidiaries to prepare and timely file such Returns; PROVIDED, HOWEVER, (1)
Purchaser shall deliver any such Return to the Seller at least 30 days before it
is due, (2) Seller shall have the right to examine and comment on any such
Return prior to the filing thereof, and such Return will not be filed without
the prior written consent of the Seller, which consent shall not be unreasonably
withheld, (3) Seller shall either provide such written consent or notice of
objection no later than 15 days before the Return is due and (4) Seller shall
reimburse Purchaser the amount shown to be due on the final version of any such
Return prior to the filing thereof.
(v) Any dispute between the parties under this Section 4.07(a)
shall be resolved by the Independent Expert under the principles of Section
1.07(b)(2), except that every effort shall be made by the parties and the
Independent Expert to resolve the dispute prior to the due date for the
applicable Tax Return.
(b) STRADDLE PERIOD TAX RETURNS. (i) As to any Tax Return of
the Company and its subsidiaries for a tax period that begins before and ends
after the Closing Date (a "STRADDLE PERIOD"), Purchaser shall cause the Company
and its subsidiaries to prepare and timely file such Return and pay all Taxes
due with respect thereto; PROVIDED, HOWEVER, that Seller shall reimburse
Purchaser for any amount owed by Seller with respect to such Return five days
before the
35
filing date of such Return. The proviso contained in Section 4.07(a)(iv) shall
apply to any such Return.
(ii) All Tax Returns for any tax period that includes the
Closing Date shall be filed on the basis that the relevant tax period ended as
of the close of business on the Closing Date (and thus that Section 4.07(b)(i)
does not apply), unless such a Tax Return would be clearly contrary to
Applicable Law.
(iii) Any dispute between the parties under this Section
4.07(b) shall be resolved by the Independent Expert under the principles of
Section 1.07(b)(2), except that every effort shall be made by the parties and
the Independent Expert to resolve the dispute prior to the due date for the
applicable Tax Return.
(c) TRANSFER TAX RETURNS. Purchaser shall pay all Transfer
Taxes; PROVIDED, HOWEVER, that each of Parent, Seller, the Company and Purchaser
shall use reasonable efforts to avail itself of any available exemptions from
any such Transfer Taxes, and to cooperate with the other parties in providing
any information and documentation that may be necessary to obtain such
exemption.
(d) AMENDED TAX RETURNS. After the Closing Date, the Company
and its subsidiaries shall not, without the prior written consent of Seller and
Parent, file any amended Tax Return for a Pre-Closing Tax Period if Seller would
be liable for additional Taxes on such return under Section 7.01.
(e) COOPERATION. Seller, the Company and Purchaser shall
reasonably cooperate, and shall cause their respective affiliates, officers,
employees, agents, auditors and representatives reasonably to cooperate, in
preparing and filing all Tax Returns of the Company or its subsidiaries,
including maintaining and making available to each other all records necessary
in connection with Taxes and in resolving all disputes and audits with respect
to all taxable periods relating to Taxes. Seller and its affiliates will need
access, from time to time after the Closing Date, to certain accounting and Tax
records and information held by the Company and its subsidiaries to the extent
such records and information pertain to events occurring prior to the Closing
Date; therefore, Purchaser and the Company shall, and shall cause each
subsidiary of the Company to, (i) use its best efforts to properly retain and
maintain such records until such time as Parent and Seller agree that such
retention and maintenance is no longer necessary, and (ii) allow Parent and
Seller and their
36
agents and representatives (and agents or representatives of any of their
affiliates), upon reasonable notice during normal business hours, to inspect,
review and make copies of such records as Parent and Seller may deem necessary
or appropriate from time to time, PROVIDED, HOWEVER, that such access does not
unreasonably disrupt normal operations of Purchaser or the Company and its
subsidiaries.
(f) REFUNDS AND CREDITS. Any refund or credit of Income Taxes
of the Company or any of its subsidiaries for any Pre-Closing Tax Period shall
be for the account of Seller. Purchaser shall promptly notify Seller of any
refunds or credits it has received for any Pre-Closing Tax Period. Any refund or
credit of Income Taxes of the Company or any of its subsidiaries for any taxable
period (or portion thereof) beginning after the Closing Date (a "POST- CLOSING
TAX PERIOD") shall be for the account of Purchaser. Purchaser shall, if Seller
so requests and at Seller's expense, cause the Company or any of its
subsidiaries to file for and obtain any refunds or credits to which Seller is
entitled under this Section 4.07(f). Purchaser and the Company shall permit
Seller to control the prosecution of any such refund claim. If Seller pays (or
causes the Company or any of its subsidiaries to pay prior to the Closing Date)
estimated Income Taxes for any Straddle Period in excess of the amount
ultimately determined to be due for the portion of such Straddle Period ending
on the Closing Date and Purchaser obtains the benefit of such excess payment,
Purchaser shall promptly refund such excess to the Seller.
(g) TAX SHARING AGREEMENTS. Seller shall cause the provisions
of any Tax sharing agreement between Seller or any of its affiliates (other than
the Company and its subsidiaries), and the Company or any of its subsidiaries,
to be terminated on or before the Closing Date. After the Closing Date, no party
shall have any rights or obligations under any such Tax sharing agreement.
(h) CLOSING DATE. On the Closing Date, Purchaser shall cause
the Company and each subsidiary of the Company to conduct its business in the
ordinary course in sub stantially the same manner as presently conducted and on
the Closing Date shall not permit the Company or any of its sub sidiaries to
effect any extraordinary transactions (other than any such transactions
expressly required by Applicable Law or by this Agreement) that could result in
Tax liability to the Company or any of its subsidiaries in excess of Tax
liability associated with the conduct of its business in the ordinary course.
37
(i) FIRPTA CERTIFICATE. Seller shall deliver to Purchaser at
the Closing a certificate in form and substance satisfactory to Purchaser, duly
executed and acknowledged, certifying that such Seller is exempt from
withholding under Section 1445 of the Code.
(j) Purchaser and Seller shall attempt in good faith to agree
within 60 days following the Closing Date as to the value of the Warrants on the
Closing Date. If Purchaser and Seller cannot agree, the dispute shall be
resolved by the Independent Expert under the principles of Section 1.07(b)(2).
(k) SECTION 338(h)(10) ELECTIONS. On or prior to the Closing
Date, Purchaser shall notify Seller of its intent for Purchaser and Seller to
make elections under Section 338(h)(10) of the Code. If such notification is
made, Purchaser and Seller shall (i) join in making elections under Section
338(h)(10) of the Code and Section 1.338(h)(10)-1 of the Treasury Regulations
promulgated thereunder (the "TREASURY REGULATIONS") and any comparable election
under state or local Tax law with respect to the Company and each of the
subsidiaries listed on Schedule 2.02 subpart A (collectively, the "PURCHASED
ENTITIES") (the "ELECTIONS"); (ii) provide to the other the necessary
information to permit the Elections to be made; and (iii) as promptly as
practicable following the Closing Date, take all actions necessary and
appropriate (including filing any necessary forms, returns, elections, schedules
and other documents) as may be required to effect and preserve timely Elections.
(i) PURCHASE PRICE ALLOCATIONS. If Purchaser notifies Seller
of its intent to make the Elections on or prior to Closing, (i) within 120
calendar days following the Closing Date, Purchaser shall deliver to Seller (A)
a proposed allocation of the Purchase Price among the assets of the Purchased
Entities and (B) a completed IRS Form 8023 and the required schedules thereto
("FORM 8023"), providing for the elections under Section 338(h)(10) of the Code
and Section 1.338(h)(10)-1 of the Treasury Regulations. If Seller disputes any
of such allocations or any of the computations reflected on Form 8023, Seller
and Purchaser will attempt in good faith to promptly agree on allocations and/or
revised Form 8023. If the parties cannot resolve any such dispute within 60
calendar days of the delivery of such allocations and Form 8023, the items
remaining in dispute shall be submitted to the Independent Expert. Seller and
Purchaser shall be bound by the allocation of such items as determined by the
Independent Expert. The Independent Expert shall make any such determination
within 30 calendar
38
days after submission of the remaining disputed items. The fees and expenses of
the Independent Expert shall be borne 50% by Purchaser, on the one hand, and 50%
by Seller, on the other hand.
(ii) Purchaser and Seller agree to file all Tax Returns
consistent with the elections, allocations and forms described in this Section
4.07. Purchaser and Seller further agree not to take any position inconsistent
therewith for any Tax purpose.
SECTION 4.08. PUBLICITY. From the date hereof through the
Closing Date, no public release or announcement concerning the transactions
contemplated hereby shall be issued by any party without the prior consent of
the other parties (which consent shall not be unreasonably withheld or delayed),
except as such release or announcement may be required by law or the rules or
regulations of any United States or foreign securities exchange; PROVIDED,
HOWEVER, that each of the parties may make internal announcements to their
respective employees that are consistent with the parties' prior public
disclosures regarding the transactions contemplated hereby.
SECTION 4.09. RESIGNATIONS. On the Closing Date, Seller
shall cause to be delivered to Purchaser duly signed resignations (from the
applicable board of directors), effective immediately after the Closing, of all
directors of the Company and each of its subsidiaries who are not employees of
the Company or one of its subsidiaries and shall take such other action as is
necessary to accomplish the foregoing.
SECTION 4.10. NO USE OF CERTAIN NAMES. Purchaser shall, and
shall cause the Company and its subsidiaries promptly, and in any event (a)
within 30 days after the Closing, to revise print advertising and labeling to
delete and destroy all references to the Names (as defined below) and (b) within
30 days after the Closing, to change signage and stationery and otherwise
discontinue use of the Names. In no event shall Purchaser, the Company or its
subsidiaries use any Names after the Closing in any manner or for any purpose
different from the use of such Names by the Company during the 30-day period
preceding the Closing. With respect to product inventory manufactured by the
Company or its subsidiaries prior to the Closing, the Company or its
subsidiaries may continue to sell such inventory, notwith standing that it bears
one or more of the Names, for a reasonable time after the Closing (not to exceed
60 days). Within 5 days after the Closing, Purchaser shall cause the Company and
its subsidiaries to file applications to amend
39
or terminate any certificate of assumed name or d/b/a filings so as to eliminate
the right of the Company and its subsidiaries to use the Names. Immediately
prior to the Closing, Seller shall cause the names of the Company and its
subsidiaries (to the extent they make use of the Names) to be changed to names
(that do not include the Names) selected by Purchaser. "NAMES" means "EMAP",
"METRO", and "FHM", any variations and derivatives thereof and any other logos
or trademarks of Parent or Seller or its affiliates not included in Schedule
2.10.
SECTION 4.11. SUPPORT SERVICES. (a) Purchaser agrees that as
of the Closing Date and with respect to the Excluded Assets, it shall provide to
Seller or its subsidiary the support and other services with respect to the FHM
Business as more fully set forth in the Transition Services Agreement in the
form attached hereto as Exhibit A, which Agreement shall be entered into by
Parent, Seller and the Purchaser as of the Closing Date.
(b) Purchaser acknowledges that as of the Closing Date,
neither Parent nor Seller shall have any obligation to provide any support or
other services to Purchaser, the Company or any of their subsidiaries (including
any of the services for which allocations were previously paid by the Company as
set forth in the notes to the Financial Statements).
SECTION 4.12. LITIGATION MATTERS. Prior to the Closing Date,
Purchaser and Seller shall enter into arrangements such that on and after the
Closing Date, Purchaser or the Company shall assume full responsibility for (a)
the prosecution, defense and/or settlement and all other aspects of the
administration of any suit, action, proceeding or arbitration by or primarily
against the Company or any of its subsidiaries except in respect of the Excluded
Liabilities or Excluded Assets (including the matters set forth on Schedule
2.14) (collectively, the "ACTIONS") and (b) the timely payment of any and all
losses, damages, liabilities, obligations or expenses related to or arising out
of the Actions. After the Closing, Seller shall (x) promptly deliver to
Purchaser (or the Company if so requested) the case files relating to the
Actions and (y) provide reasonable cooperation and assistance in connection with
the assumption by Purchaser of the Actions contemplated by this Section 4.12.
Purchaser shall reimburse Seller for reasonable out-of-pocket costs and expenses
(including reasonable attorney's fees and costs of investigation) incurred in
assisting Purchaser pursuant to this Section 4.12. Seller shall not be required
by this Section 4.12 to take any action that would interfere with
40
the conduct of its business or disrupt its normal operations. In the event that
Seller or any of its affiliates (other than the Company and its subsidiaries) is
a party to any Action, Seller may, at its own cost and expense, continue to
control the prosecution, defense and/or settlement and all other aspects of the
administration of that portion of such Action that relates to Seller or any of
its affiliates (other than the Company and its subsidiaries).
SECTION 4.13. INTERCOMPANY ARRANGEMENTS. Except as
contemplated by the Transition Services Agreement, Parent, Seller and Purchaser
acknowledge and agree that, immediately prior to the Closing, all Contracts
(other than this Agreement and the other Ancillary Agreements) between the
Company and its subsidiaries, on the one hand, and Parent or Seller or any of
their subsidiaries (exclusive of the Company and its subsidiaries), on the other
hand, including all intercompany loans, shall be terminated or settled, as the
case may be, and be of no further force or effect, notwithstanding any terms
thereof to the contrary. The parties agree that the Max Power license shall be
terminated without liability to Parent or its subsidiaries prior to Closing.
SECTION 4.14. ACCOUNTS. All payments and reimbursements
received by Purchaser or its affiliates in connection with or arising out of the
Excluded Assets or Excluded Liabilities after the Closing shall be held by such
person in trust for the benefit of Parent and Seller and, immediately upon
receipt by such person of any such payment or reimbursement, such person shall
pay over to Seller the amount of such payment or reimbursement without right of
set off.
SECTION 4.15. RECORDS. On the Closing Date, Parent and
Seller shall deliver or cause to be delivered to Purchaser all Records, if any,
in the possession of Parent or Seller or their subsidiaries (other than the
Company and its subsidiaries) primarily relating to the business and operations
of the Company and its subsidiaries not then in the possession of the Company
and its subsidiaries, subject to the following exceptions:
(i) Purchaser recognizes that certain Records may contain
incidental information relating to the Company and its subsidiaries,
and that Parent and Seller may retain such Records and shall provide
copies of the relevant portions thereof to Purchaser;
41
(ii) Parent and Seller may retain all Records prepared in
connection with the sale of the Shares, including bids received from
other parties and analyses relating to the Company and its
subsidiaries;
(iii) Parent and Seller may retain any Tax Returns, and
Purchaser shall be provided with copies of such Tax Returns only as and
to the extent that they relate to the Company or its subsidiaries'
separate Tax Returns; and
(iv) Parent and Seller may, and may cause the Company and its
subsidiaries to, redact any information as and to the extent such
information relates to the FHM Business or any other business other
than the Company's business which is contained in any of the Records.
SECTION 4.16. SUB-LEASE. On Closing, Purchaser, as sublessor,
shall enter into a sub-lease substantially in the form annexed hereto as Exhibit
B (the "SUB-LEASE") with Seller or its designated subsidiary, as sublessee, with
respect to a portion of the premises demised under an existing lease dated March
18, 1997, as amended (the "PRIME LEASE") covering office space in the building
known as 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx, as more fully set forth in the
Sub-Lease in the form attached hereto as Exhibit B. Purchaser, with Seller's
cooperation but at no out of pocket cost to Seller, shall exercise commercially
reasonable efforts to obtain the Prime Lease landlord's consent to the
Sub-Lease.
SECTION 4.17. CERTAIN LIABILITIES. After the Closing, Parent
and Seller shall reimburse Purchaser for all amounts drawn down by Kick Media
Corporation with respect to advertising and promotional services pursuant to the
Advertising Agreement, dated December 28, 1999, between the Company and Kick
Media Corporation, PROVIDED, HOWEVER, that Purchaser shall use reasonable best
efforts to minimize the amount of such reimbursement and shall promptly notify
Parent and Seller of any claims and related negotiations with respect to such
reimbursement, and PROVIDED, FURTHER, that the amount of such reimbursement
shall not exceed $4 million.
SECTION 4.18. BANK ACCOUNTS. On or prior to the Closing
Date, Seller shall segregate the bank accounts of the Company and its
subsidiaries from those of Seller and its affiliates.
42
ARTICLE V
CONDITIONS PRECEDENT
SECTION 5.01. CONDITIONS TO EACH PARTY'S OBLIGATION. The
obligation of Purchaser to purchase and pay for the Shares and the obligation of
Seller to sell the Shares is subject to the satisfaction (or waiver by Purchaser
and Seller) on or prior to the Closing Date of the following conditions:
(a) GOVERNMENTAL APPROVALS. The waiting period under the HSR
Act shall have expired or been terminated. All other material Consents of, or
registrations, declarations or filings with, or expirations of waiting periods
imposed by, any Governmental Entity necessary for the consummation of the
Acquisition shall have been obtained or filed or shall have occurred excluding
those the obtaining or making of which is necessary but the failure of which to
obtain would not prohibit the consummation of the Acquisition.
(b) NO INJUNCTIONS OR RESTRAINTS. No Applicable Law or
injunction enacted, entered, promulgated, enforced or issued by any Governmental
Entity or other legal restraint or prohibition (each, a "LEGAL RESTRAINT")
preventing the consummation of the Acquisition shall be in effect; PROVIDED,
HOWEVER, that each of the parties shall have used its reasonable best efforts
(as required by Section 4.04) to prevent the occurrence or entry of any such
Legal Restraint and to remove or appeal as promptly as possible any such Legal
Restraint.
SECTION 5.02. CONDITIONS TO OBLIGATION OF PURCHASER. The
obligation of Purchaser to purchase and pay for the Shares is subject to the
satisfaction (or waiver by Purchaser) on or prior to the Closing Date of the
following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Parent and Seller in this Agreement shall be true and correct in
all material respects, as of the Closing Date as though made on the Closing
Date, except to the extent such representations and warranties expressly relate
to an earlier date (in which case such representations and warranties shall be
true and correct in all material respects, on and as of such earlier date), in
each case except for breaches as to matters that would not reasonably be
expected to have a Company Material Adverse Effect, and Purchaser shall have
received a certificate dated as of the Closing Date signed by an
43
authorized officer of Parent or Seller, as applicable, to such effect.
(b) PERFORMANCE OF OBLIGATIONS. Parent and Seller shall have
performed or complied in all material respects with all obligations and
covenants required by this Agreement to be performed or complied with by it, by
the time of the Closing, and Purchaser shall have received a certificate dated
as of the Closing Date signed by an authorized officer of Parent, Seller and the
Company, as applicable, to such effect.
SECTION 5.03. CONDITIONS TO OBLIGATION OF SELLER. The
obligation of Seller to sell the Shares is subject to the satisfaction (or
waiver by Seller) on or prior to the Closing Date of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Purchaser made in this Agreement shall be true and correct in all
material respects, as of the Closing Date as though made on the Closing Date,
except to the extent such representations and warranties expressly relate to an
earlier date (in which case such representations and warranties shall be true
and correct in all material respects, on and as of such earlier date), in each
case except for breaches as to matters that would not reasonably be expected to
have a Purchaser Material Adverse Effect, and Parent and Seller shall have
received a certificate dated as of the Closing Date signed by an authorized
officer of Purchaser to such effect.
(b) PERFORMANCE OF OBLIGATIONS OF PURCHASER. Purchaser shall
have performed or complied in all material respects with all obligations and
covenants required by this Agreement to be performed or complied with by
Purchaser by the time of the Closing, and Parent and Seller shall have received
a certificate dated as of the Closing Date signed by an authorized officer of
Purchaser to such effect.
(c) TRANSITION SERVICES AGREEMENT. Purchaser shall have
executed and delivered to Parent and Seller the Transition Services Agreement.
(d) SUB-LEASE. Purchaser shall have executed and delivered to
Parent and Seller the Sub-Lease or a license on comparable terms.
SECTION 5.04. FRUSTRATION OF CLOSING CONDITIONS. None of
Purchaser, Parent or Seller may rely on the failure of any condition set forth
in this Article V to be satisfied if such failure was caused by such party's
failure to act in
44
good faith or to use its reasonable best efforts to cause the Closing to occur,
as required by Section 4.04.
ARTICLE VI
TERMINATION, AMENDMENT AND WAIVER
SECTION 6.01. TERMINATION. (a) Notwithstanding anything to
the contrary in this Agreement, this Agreement may be terminated and the
Acquisition and the other trans actions contemplated by this Agreement abandoned
at any time prior to the Closing:
(i) by mutual written consent of Parent, Seller
and Purchaser;
(ii) by Parent or Seller if any of the conditions set forth
in Sections 5.01 or 5.03 shall have become incapable of fulfillment,
and shall not have been waived by Seller;
(iii) by Purchaser if any of the conditions set forth in
Sections 5.01 or 5.02 shall have become incap able of fulfillment, and
shall not have been waived by Purchaser;
(iv) by any of Parent, Seller or Purchaser, if a
Legal Restraint has become final and non-appealable; or
(v) by Seller or Purchaser, if the Closing does not occur
on or prior to a date six months from the date hereof (the "OUTSIDE
DATE"); PROVIDED that Parent may extend the Outside Date by up to an
additional three months in the event of any actions described in the
last sentence of Section 4.04(b).
PROVIDED, HOWEVER, that the party seeking termination pursuant to clause (ii),
(iii) or (iv) is not then in material breach of any of its representations,
warranties, covenants or agreements contained in this Agreement.
(b) In the event of termination by Seller or Purchaser
pursuant to this Section 6.01, written notice thereof shall forthwith be given
to the other parties and the transactions contemplated by this Agreement shall
be terminated, without further action by any party. If the
45
transactions contemplated by this Agreement are terminated as provided herein:
(i) Purchaser shall return all documents and other material
received from Parent, Seller, the Company or any other affiliate of
Parent or Seller relating to the transactions contemplated hereby,
whether so obtained before or after the execution hereof; and
(ii) all confidential information received by Purchaser with
respect to the business of Parent, Seller and their affiliates
(including the Company and its subsidiaries) shall be treated in
accordance with the Confidentiality Agreement, which shall remain in
full force and effect notwithstanding the termination of this
Agreement.
SECTION 6.02. EFFECT OF TERMINATION. If this Agreement is
terminated and the transactions contemplated hereby are abandoned as described
in Section 6.01, this Agreement shall become null and void and of no further
force and effect, except for the provisions of (i) Section 4.03 relating to the
obligation of Purchaser to keep confidential certain information and data
obtained by it, (ii) Section 8.03 relating to certain expenses, (iii) Section
4.05 relating to finder's fees and broker's fees, (iv) Section 6.01 and this
Section 6.02, (v) Section 4.08 relating to publicity, (vi) Section 8.09 relating
to governing law, (vii) Section 8.10 relating to jurisdiction, (viii) Section
8.11 relating to service of process and (ix) Section 8.12 relating to waiver of
jury trial. Nothing in this Section 6.02 shall be deemed to release any party
from any liability for any breach by such party of the terms and provisions of
this Agreement or to impair the right of any party to compel specific
performance by any other party of its obligations under this Agreement.
ARTICLE VII
INDEMNIFICATION
SECTION 7.01. TAX INDEMNIFICATION. (a) From and after the
Closing Date, Parent and Seller, jointly and severally, shall indemnify
Purchaser and its affiliates and each of their respective officers, directors,
employees, stockholders, members, partners, agents and representatives and their
respective successors and assigns (the "PURCHASER INDEMNITEES") against and hold
them harmless from (i) all liability for Taxes of the Company and its
subsidiaries for
46
the Pre-Closing Tax Period, (ii) all liability (as a result of Treasury
Regulation ss. 1.1502-6(a) (or any similar provision of state, local or foreign
law)) for Income Taxes of Parent and Seller or any other corporation which is or
has been affiliated with Parent and Seller (other than the Company or any of its
subsidiaries), (iii) all liability for Taxes related to the Excluded Assets and
(iv) all liability for reasonable legal fees and expenses attributable to any
item in clause (i), (ii) or (iii) above. Notwithstanding the foregoing, Parent
and Seller shall not indemnify and hold harmless any Purchaser Indemnitee from
any liability for Taxes attributable to any action taken on or after the Closing
Date by Purchaser, any of its affiliates (including the Company or any of its
subsidiaries), or any transferee of Purchaser or any of its affiliates (other
than any such action expressly required by Applicable Law or by this Agreement)
(a "PURCHASER TAX ACT") or attributable to a breach by Purchaser of its
obligations under this Agreement.
(b) From and after the Closing Date, Purchaser shall indemnify
Parent, Seller and their affiliates and each of their respective officers,
directors, employees, stockholders, members, partners, agents and
representatives and their respective successors and assigns (the "SELLER
INDEMNITEES") against and hold them harmless from (i) all liability for Taxes of
the Company and its subsidiaries for all taxable periods whether ending before,
on or after the Closing Date other than Taxes described in 7.01(a)(i) through
(iii), (ii) all liability for Taxes attributable to a Purchaser Tax Act or to a
breach by Purchaser of its obligations under this Agreement, and (iii) all
liability for reasonable legal fees and expenses attributable to any item in
clause (i) or (ii) above.
SECTION 7.02. OTHER INDEMNIFICATION BY SELLER. Subject to the
limitations set forth in Section 7.05, from and after the Closing, Parent and
Seller shall, jointly and severally, indemnify, defend and hold harmless the
Purchaser Indemnitees against any and all claims, losses, damages, liabilities,
obligations or expenses, including reasonable third-party legal fees and
expenses (collectively, "LOSSES") (other than any Loss relating to Taxes, for
which indemnifi cation provisions are set forth in Section 7.01), to the extent
arising or resulting from any of the following:
(i) any breach of any representation or warranty
of Parent or Seller contained in this Agreement;
(ii) any breach of any covenant of Parent or
Seller contained in this Agreement;
47
(iii) any fees, expenses or other payments incurred or owed
by Parent or Seller or the Company to any agent, broker, investment
banker or other firm or person retained or employed by it in connection
with the transactions contemplated by this Agreement;
(iv) any of the Excluded Liabilities;
(v) the operation or ownership of the Excluded
Assets; and
(vi) all monetary payments made, or any other costs incurred
by, the Company or its subsidiaries in respect of Actions pending
against the Company or its subsidiaries prior to the date hereof as and
to the extent they cumulatively exceed $2,000,000; PROVIDED that (i) to
the extent the aggregate monetary payments to be made, or any other
costs incurred by Purchaser exceed $4,000,000 but are equal to or less
than $6,000,000 the Purchaser shall not be indemnified for 50% of the
amount in excess of $4,000,000 and (ii) to the extent that the
aggregate monetary payments to be made or costs incurred by Purchaser
exceeds $6,000,000 in the aggregate, Purchaser shall not be indemnified
for any amount in excess of $6,000,000. For the avoidance of doubt, in
no case shall Parent or Seller be responsible for more than $3,000,000
pursuant to this clause (vi).
SECTION 7.03. OTHER INDEMNIFICATION BY PURCHASER AND THE
COMPANY. From and after the Closing, Purchaser shall indemnify, defend and hold
harmless the Seller Indemnitees from and against any and all Losses (other than
any Loss relating to Taxes, for which indemnification provisions are set forth
in Section 7.01), to the extent arising or resulting from any of the following:
(i) any breach of any representation or warranty
of Purchaser contained in this Agreement;
(ii) any breach of any covenant of Purchaser or
the Company contained in this Agreement;
(iii) any guarantee or obligation to assure performance given
or made by Parent or Seller or any affiliate of Parent or Seller (other
than the Company or one of its subsidiaries) with respect to any
obligation of the Company or any of its subsidiaries;
(iv) all obligations, liabilities and commitments
of whatever kind and nature, primary or secondary,
48
direct or indirect, express, implied, liquidated, absolute, contingent
or otherwise, known or unknown, whether or not accrued, whether arising
before, on or after the Closing Date, of the Company or any of its
subsidiaries, including any such obligations or liabilities relating to
(x) any Company Contract or any agreement, lease, license, permit, plan
or commitment that, because it fails to meet the relevant threshold
amount or term, is not included within the definition of Company
Contracts, (y) any Company Benefit Plan or Company 401(K) Plan or (z)
any Action, except, in the case of each of clauses (x) and (z), to the
extent Parent and Seller are required to provide indemnification for
such obligations, liabilities and commitments under Section 7.02; and
(v) the operation or conduct of the Company and its
subsidiaries after the Closing except to the extent Parent and Seller
are required to provide indemnification for any such obligations,
liabilities or commitments pursuant to Section 7.02.
SECTION 7.04. INDEMNIFICATION PROCEDURES. (a) PROCEDURES. In
order for an indemnified party (the "INDEMNIFIED PARTY") to be entitled to any
indemnification provided for under this Agreement (except with respect to claims
made pursuant to section 7.02(vi) to which such procedures shall not apply),
such Indemnified Party shall, within 20 days following the discovery of the
matters giving rise to any Loss, notify the indemnifying party (the
"INDEMNIFYING PARTY") in writing of its claim for indemnification for such Loss,
specifying in reasonable detail the nature of such Loss and the amount of the
liability estimated to accrue therefrom; 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 prejudiced as a
result of such failure (except that the Indemnifying Party shall not be liable
for any expenses incurred during the period in which the Indemnified Party
failed to give such notice). Thereafter, the Indemnified Party shall deliver to
the Indemnifying Party, promptly after the Indemnified Party's receipt thereof,
all information and documentation reasonably requested by the Indemnifying Party
with respect to such Loss; PROVIDED, HOWEVER, that failure to make such delivery
shall not affect the indemnification provided here under except to the extent
the Indemnifying Party shall have been actually prejudiced as a result of such
failure.
If the indemnification sought pursuant hereto involves a claim
made by a third party (which shall not
49
include Parent, Seller or any of their affiliates or Purchaser or its
affiliates) against the Indemnified Party (a "THIRD PARTY CLAIM"), the
Indemnifying Party shall be entitled to participate in the defense of such Third
Party Claim and, if it so chooses, to assume the defense of such Third Party
Claim with counsel selected by the Indemnifying 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 legal expenses
subsequently incurred by the Indemnified Party in connection with the defense
thereof. If the Indemnifying Party chooses to defend or prosecute a Third Party
Claim, all of the parties hereto shall cooperate in the defense or prosecution
thereof. Such cooperation shall include the retention and (upon the Indemnifying
Party's request) the provision to the Indemnifying Party of records and
information which are 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
chooses to defend or prosecute any Third Party Claim, the Indemnified Party will
agree to any settlement, compromise or discharge of such Third Party Claim which
the Indemnifying Party may recommend and which by its terms obligates the
Indemnifying Party to pay the full amount of the liability in connection with
such Third Party Claim; PROVIDED that if such settlement, compromise or
discharge would impose a material order, material injunction or other material
non-monetary damages on the Indemnified Party, the Indemnifying Party shall not
settle or compromise such Third Party Claim without prior written consent of the
Indemnified Party (which consent shall not be unreasonably withheld or delayed).
Whether or not the Indemnifying Party shall have assumed 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.
(b) PROCEDURES RELATING TO INDEMNIFICATION OF TAX CLAIMS. (1)
If one party is responsible for the payment of Taxes pursuant to Section 7.01 of
this Agreement (the "TAX INDEMNIFYING PARTY"), and the other party to this
Agreement (the "TAX INDEMNIFIED PARTY") receives a notice of deficiency,
proposed adjustment, adjustment, assessment, audit, examination, suit, dispute
or other claim (a "TAX CLAIM") with respect (in whole or in part) to such Taxes,
the Tax Indemnified Party shall notify the Tax Indemnifying Party in writing of
such Tax Claim in accordance with the procedures set forth in Section 7.04(a).
50
(2) The Tax Indemnifying Party shall assume and control the
applicable audit or examination and the defense of a Tax Claim involving any
Taxes for which it has an obligation to indemnify the Tax Indemnified Party
pursuant to Section 7.01 of this Agreement, and the Tax Indemnified Party and
its affiliates agree to cooperate with the Tax Indemnifying Party in pursuing
such contest, including execution of any powers of attorney in favor of the Tax
Indemnifying Party. Notwithstanding anything to the contrary contained herein,
the Tax Indemnifying Party shall keep the Tax Indemnified Party informed of all
material developments and events relating to such Tax Claim and the Tax
Indemnified Party, at its own cost and expense and with its own counsel, shall
have the right to participate in (but not control) the applicable audit or
examination and defense of such Tax Claim.
In no case shall any Tax Indemnified Party settle or otherwise
compromise any Tax Claim without the Tax Indemnifying Party's prior written
consent. Neither party shall settle a Tax Claim relating solely to Income Taxes
of the Company or any of its subsidiaries for a Straddle Period without the
other party's prior written consent.
SECTION 7.05. LIMITATIONS ON INDEMNIFICATION. Notwithstanding
the foregoing provisions of this Article VII, (i) except with respect to
breaches of Section 2.02 or Section 2.05 (as to which the provisions of this
subclause (i) shall not apply) neither Parent nor Seller shall be responsible,
pursuant to Section 7.02(i) or Section 7.02(ii), for any Losses suffered by any
Purchaser Indemnitee arising out of a breach of any of Parent's or Seller's
representations or warranties or covenants to be performed prior to Closing
unless a claim therefor is asserted in writing within one year after the Closing
Date, failing which such claim shall be waived and extinguished, (ii) except
with respect to breaches of Section 2.02 or Section 2.05 (as to which the
provisions of this subclause (ii) shall not apply) neither Parent nor Seller
shall be liable, pursuant to Section 7.02(i) or Section 7.02(ii) for any Losses
suffered by any Purchaser Indemnitee arising out of a breach of any of Parent's
or Seller's representations or warranties or covenants to be performed prior to
Closing, in each case for (x) any Losses suffered by any Purchaser Indemnitee
unless the aggregate of all Losses suffered by the Purchaser Indemnitees
exceeds, on a cumulative basis, an amount equal to $5,050,000, and then only to
the extent of any such excess or (y) any individual items where the Loss
relating thereto is less than $50,000 (and such items shall not be aggregated
for purposes of the immediately preceding clause (x)), (iii) except with respect
to breaches of
51
Section 2.02 or Section 2.05 (as to which the provisions of this subclause (iii)
shall not apply), the aggregate liability of Parent and Seller hereunder
pursuant to Section 7.02(i) and Section 7.02(ii) for Losses suffered by the
Purchaser Indemnitees shall in no event exceed $101,000,000, (iv) neither Parent
nor Seller shall have any liability pursuant to Section 7.02(i) in respect of
any breach if Purchaser had knowledge of such breach as of the date of this
Agreement and (v) none of the parties hereto shall be liable to any other for
indirect, special, incidental, consequential or punitive damages claimed by such
other party. In no event shall Parent or Seller be obligated to indemnify
Purchaser or any other person with respect to any matter to the extent that such
matter was reflected in the calculation of the adjustment to the Closing Date
Payment, if any, pursuant to Section 1.07(c).
(b) Purchaser acknowledges that it, its affiliates and its
representatives and agents have received or been afforded the opportunity to
review prior to the date hereof all written materials which Parent or the Seller
were required to deliver or make available, as the case may be, to Purchaser
pursuant to this Agreement on or prior to the date hereof. Purchaser
acknowledges that it, its affiliates and its representatives and agents have
been permitted full and complete access to the Records, facilities, equipment,
Tax Returns, Contracts, insurance policies (or summaries thereof) and other
properties and assets of the Company and its subsidiaries that it, its
affiliates and its representatives have desired or requested to see and/or
review, and that it, its affiliates and its representatives and agents have had
a full opportunity to meet with the officers and employees of the Company to
discuss the businesses and assets of the Company and its subsidiaries. Purchaser
further acknowledges and agrees that, (i) other than the representations and
warranties of Parent and Seller specifically contained in this Agreement,
neither Parent nor Seller or any other person has made any representation or
warranty either expressed or implied (A) with respect to the Company and its
subsidiaries or their respective assets and liabilities, the Excluded Assets,
the Excluded Liabilities, the transactions contemplated hereby or the Shares or
(B) as to the accuracy or completeness of any information regarding the Company
and its subsidiaries furnished or made available to Purchaser, its affiliates,
and its agents and representatives and (ii) Purchaser shall have no claim or
right to indemnification pursuant to this Article VII and none of Parent,
Seller, the Company, any subsidiary of the Company or any other person shall
have or be subject to any liability to Purchaser or any other person with
respect to any information, documents or materials furnished by Parent,
52
Seller, the Company or any of their respective affiliates, officers, directors,
employees, agents, representatives or advisors to Purchaser, its affiliates and
its agents and representatives, including the Confidential Memorandum dated
April, 2001 and any information, documents or material made available to
Purchaser in certain "data rooms", management presentations or any other form in
expectation of the trans actions contemplated hereby.
(c) Purchaser further acknowledges and agrees that, should the
Closing occur, its sole and exclusive remedy with respect to any and all claims
relating to this Agreement, the Company and its subsidiaries or their respective
assets and liabilities, the Excluded Assets, the Excluded Liabilities, the
transactions contemplated hereby and the Shares (other than claims of, or causes
of action arising from, fraud) shall be pursuant to the indemnification
provisions set forth in this Article VII. In furtherance of the foregoing, each
of Purchaser and the Company hereby waives, from and after the Closing, any and
all rights, claims and causes of action (other than claims of, or causes of
action arising from, fraud) Purchaser, the Company or any of its subsidiaries or
any other Purchaser Indemnitee may have against Parent, Seller or any of their
respective affiliates arising under or based upon any Federal, state, local or
foreign statute, law, ordinance, rule or regulation or otherwise (except
pursuant to the indemnification provisions set forth in this Article VII).
SECTION 7.06. CALCULATION OF INDEMNITY PAYMENTS. The amount of
any Loss for which indemnification is provided under this Article VII shall be
net of any amounts recovered or recoverable by the Indemnified Party under
insurance policies with respect to such Loss and shall be (a) increased to take
account of any net Tax cost actually incurred by the Indemnified Party arising
from the receipt of indemnity payments hereunder (grossed up for such increase)
and (b) reduced to take account of any net Tax benefit actually realized by the
Indemnified Party arising from the incurrence or payment of any such indemnified
amount. In computing the amount of any such Tax cost or Tax benefit, the
Indemnified Party shall be deemed to recognize all other items of income, gain,
loss, deduction or credit before recognizing any item arising from the receipt
of any indemnity payment hereunder or the incurrence or payment of any
indemnified amount.
SECTION 7.07. TAX TREATMENT OF INDEMNIFICATION. For all Tax
Purposes, Purchaser and Seller agree to treat any indemnity payment under this
Agreement as an adjustment to the Purchase Price unless a final determination
(which
53
shall include the execution of an IRS Form 870-AD or successor form) provides
otherwise.
SECTION 7.08. AUDIT ADJUSTMENTS RELATING TO INCOME TAXES. If
as a result of an Income Tax audit that involves the Company or its subsidiaries
there is an adjustment to an item which results in the Purchaser or Seller
incurring a Tax detriment and the other party realizing a corresponding Tax
benefit, then the party receiving such Tax benefit will pay to the other party
the amount of such Tax benefit actually realized, but only to the extent of such
Tax detriment.
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.01. ASSIGNMENT. Neither this Agreement nor any of
the rights and obligations of the parties here under may be assigned or
delegated by any of the parties hereto without the prior written consent of each
of the other parties hereto, except that (a) Purchaser may assign its right to
purchase the Shares hereunder to any of its affiliates without the prior written
consent of Seller, (b) Parent or Seller may assign any rights and obligations
hereunder to any affiliates without the prior written consent of Purchaser and
(c) an assignment by operation of law in connection with a merger or
consolidation shall not require the consent of the other parties hereto. Notwith
standing the foregoing, each of Parent, Seller and Purchaser shall remain liable
for all of their respective obligations under this Agreement. Subject to the
first sentence of this Section 8.01, this Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns and no other person shall have any right, obligation or benefit
hereunder. Any attempted assignment or transfer in violation of this Section
8.01 shall be void.
SECTION 8.02. NO THIRD-PARTY BENEFICIARIES. Except as provided
in Article VII, this Agreement is for the sole benefit of the parties hereto and
their permitted assigns and nothing herein expressed or implied shall give or be
construed to give to any person, other than the parties hereto and such assigns,
any legal or equitable rights hereunder.
SECTION 8.03. EXPENSES. Whether or not the transactions
contemplated by this Agreement are consummated, each of the parties hereto shall
be responsible for the
54
payment of its own respective costs and expenses (which, in the case of Parent
and Seller shall include any non-employee related costs and expenses of the
Company and its sub sidiaries directly related to the Acquisition incurred prior
to closing) incurred in connection with the negotiations leading up to and the
performance of its respective obligations pursuant to this Agreement or the
Ancillary Agreements, including the fees of any attorneys, accountants, brokers
or advisors employed or retained by or on behalf of such party.
SECTION 8.04. NOTICES. All notices, requests, permissions,
waivers and other communications hereunder shall be in writing and shall be
deemed to have been duly given (a) five business days following sending by
registered or certified mail, postage prepaid, (b) when sent, if sent by
facsimile; PROVIDED that the facsimile transmission is promptly confirmed by
telephone, (c) when delivered, if delivered personally to the intended recipient
and (d) one business day following sending by overnight delivery via a national
courier service and, in each case, addressed to a party at the following address
for such party:
(i) if to Parent or Seller,
Emap plc
00 Xxxxxxx Xxxxxx
Xxxxxx, XX0 XX
Xxxxxxx
Attention: Group Legal Director
Fax: 000-00-00-0000-00000
with a copy to:
Cravath, Swaine & Xxxxx
Worldwide Plaza
000 Xxxxxx Xxxxxx
Xxx Xxxx, XX 00000-0000
Attention: Xxxxx X. Xxxxxx
Fax: (000)000-0000
(ii) if to Purchaser,
Primedia Inc.
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxx X. Xxxxx
Facsimile: (000) 000-0000
55
with a copy to:
Xxxxxxx Xxxxxxx & Xxxxxxxx
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxx X. Xxxxxxxx
Facsimile: (000) 000-0000
or to such other address(es) as shall be furnished in writing by any such party
to each of the other parties hereto in accordance with the provisions of this
Section 8.04.
SECTION 8.05. HEADINGS; CERTAIN DEFINITIONS. (a) The
descriptive headings of the several Articles and Sections of this Agreement and
the Disclosure Schedule to this Agreement and the Table of Contents to this
Agreement are inserted for convenience only, do not constitute a part of this
Agreement and shall not affect in any way the meaning or interpretation of this
Agreement. All references herein to "Articles", "Sections", "Exhibits" or
"Schedules" shall be deemed to be references to Articles or Sections hereof or
Exhibits or Schedules hereto unless otherwise indicated.
(b) For all purposes hereof:
"AFFILIATE" of any party means any person or entity
controlling, controlled by or under common control with such party.
"BUSINESS DAY" shall refer to a day, other than a Saturday or
a Sunday, on which commercial banks are not required or authorized to close in
the City of New York.
"COMPANY MATERIAL ADVERSE EFFECT" means a material adverse
effect (i) on the financial condition or results of operations of the Company
and its subsidiaries, taken as a whole or (ii) on the ability of Seller to
consummate the Acquisition. For purposes of this Agreement, "Company Material
Adverse Effect" shall exclude any effects on the Company or its subsidiaries to
the extent resulting from (A) changes in the United States or foreign economies
in general, (B) changes in the Company's and its subsidiaries' industries in
general and not specifically relating to the Company or a subsidiary of the
Company, (C) the announcement by Parent or Seller of its intention to sell the
Company or pending status thereof or (D) the consummation of the trans actions
contemplated hereby.
56
"INCLUDING" or "INCLUDES" means including, without
limitation.
"KNOWLEDGE OF THE COMPANY" means the actual knowledge of Xxx
Xxxxxxx, Xxxxx Xxxxxxx and Xxxxx Xxxx.
"PERSON" means any individual, firm, corporation, partnership,
limited liability company, trust, joint venture, Governmental Entity or other
entity.
"SUBSIDIARY" of any person means another person, an amount of
the voting securities, other voting ownership or voting partnership interests of
which is sufficient to elect at least a majority of its Board of Directors or
other governing body (or, if there are no such voting interests, 50% or more of
the equity interests of which) is owned directly or indirectly by such first
person or by another subsidiary of such first person.
SECTION 8.06. COUNTERPARTS. This Agreement may be executed
in one or more counterparts, all of which shall be considered one and the same
agreement, and shall become effective when one or more counterparts have been
signed by each of the parties hereto and delivered, in person or by telecopier,
receipt acknowledged, to the other parties hereto.
SECTION 8.07. INTEGRATED CONTRACT; EXHIBITS/ SCHEDULES. This
Agreement, including the Schedules (and the Introduction thereto) and Exhibits
hereto, any written amendments to the foregoing satisfying the requirements of
Section 8.13 hereof, the Confidentiality Agreement and the Ancillary Agreements,
including the schedules and exhibits thereto, constitute the entire agreement
among the parties with respect to the subject matter hereof and thereof and
supersede any previous agreements and understandings between the parties with
respect to such matters. All Exhibits and Schedules annexed hereto or referred
to herein are hereby incorporated in and made a part of this Agreement as if set
forth in full herein. Any capitalized terms used in any Schedule or Exhibit but
not otherwise defined therein shall be defined as set forth in this Agreement.
There are no restrictions, promises, representations, warranties, agreements or
undertakings of any party hereto with respect to the transactions contemplated
by this Agreement, the Confidentiality Agreement or the Ancillary Agreements
other than those set forth herein or therein. In the event of any conflict
between the provisions of this Agreement (including the Schedules (and the
Introduction thereto) and Exhibits hereto), on the one hand, and the provisions
of the Confidentiality Agreement or the Ancillary Agreements
57
(including the schedules and exhibits thereto), on the other hand, the
provisions of this Agreement shall control. The disclosure of any matter in any
Schedule to this Agreement shall be deemed to be a disclosure for any other
Schedule for which such matter would reasonably be expected to be pertinent in
light of the disclosure made, but shall expressly not be deemed to constitute an
admission by Parent or Seller, or to otherwise imply, that any such matter is
material for the purpose of this Agreement.
SECTION 8.08. SEVERABILITY; ENFORCEMENT. The invalidity of any
portion hereof shall not affect the validity, force or effect of the remaining
portions hereof. If it is ever held that any restriction hereunder is too broad
to permit enforcement of such restriction to its fullest extent, each party
agrees that a court of competent jurisdiction may enforce such restriction to
the maximum extent permitted by law, and each party hereby consents and agrees
that such scope may be judicially modified accordingly in any proceeding brought
to enforce such restriction.
SECTION 8.09. GOVERNING LAW. This Agreement and any disputes
arising under or related thereto (whether for breach of contract, tortuous
conduct or otherwise) shall be governed and construed in accordance with the
internal laws of the State of New York. Nothing contained in the preceding
sentence or elsewhere in this Agreement shall preclude the enforcement of any
judgment or order in any jurisdiction where a party owns any assets or property.
Each party irrevocably and unconditionally waives any objection to the laying of
venue of any action, suit or proceeding arising out of this Agreement or the
transactions contemplated hereby in (a) any Court of the State of New York
sitting in New York County and (b) any United States Federal Court sitting in
New York County, 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.
SECTION 8.10. JURISDICTION. Each party irrevocably agrees
that any legal action, suit or proceeding against them arising out of or in
connection with this Agreement or the transactions contemplated hereby or
disputes relating hereto (whether for breach of contract, tortuous conduct or
otherwise) shall be brought in the United States District Court for the Southern
District of New York, or, if such court does not have subject matter
jurisdiction, the state courts of New York located in New York County and hereby
irrevocably accepts and submits
58
to the exclusive jurisdiction and venue of the aforesaid courts IN PERSONAM,
with respect to any such action, suit or proceeding.
SECTION 8.11. SERVICE OF PROCESS. Each of the parties
agrees that service of any process, summons, notice or document by U.S.
registered mail to such party's respective address set forth above shall be
effective service of process for any action, suit or proceeding in New York with
respect to any matters for which it has sub mitted to jurisdiction pursuant to
Section 8.10.
SECTION 8.12. WAIVER OF JURY TRIAL. Each party hereby waives
to the fullest extent permitted by Applicable Law, any right it may have to a
trial by jury in respect to any litigation directly or indirectly arising out
of, under or in connection with this Agreement or the transactions contemplated
hereby or disputes relating hereto. Each party (a) certifies that no
representative, agent or attorney of any other party has represented, expressly
or otherwise, that such other party would not, in the event of litigation, seek
to enforce the foregoing waiver and (b) acknowledges that it and the other
parties hereto have been induced to enter into this Agreement by, among other
things, the mutual waivers and certifications in this Section 8.12.
SECTION 8.13. AMENDMENTS. This Agreement may be amended,
modified, superseded or canceled and any of the terms, covenants,
representations, warranties or conditions hereof may be waived only by an
instrument in writing signed by each of the parties hereto or, in the case of a
waiver, by or on behalf of the party waiving compliance.
SECTION 8.14. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties contained in this Agreement shall survive the
consummation of the trans actions contemplated by this Agreement through the
period during which claims for indemnification in respect thereof may be made
pursuant to Article VII; PROVIDED that if a claim is made prior to the end of
such period the expiration of the related representation or warranty shall have
no effect on the claim.
SECTION 8.15. FURTHER ASSURANCES. On and after the Closing
Date each party hereto shall take such other actions and execute such other
documents and instruments of conveyance and transfer as may be reasonably
requested by the other parties hereto from time to time to effectuate or confirm
the transfer of the Shares to Purchaser in accordance with the terms of this
Agreement.
SECTION 8.16. JOINT AND SEVERAL. All obligations of Parent,
Seller or Parent and Seller shall be the joint and several obligations of Parent
and Seller.
59
IN WITNESS WHEREOF, Parent, Seller, the Company and Purchaser
have duly executed this Agreement as of the date first written above.
EMAP PLC,
by /s/ Xxxxxx Xxxxxxx
--------------------------
(Xxxxxx Xxxxxxx)
CHIEF OPERATING OFFICER
EMAP AMERICA PARTNERS,
by /s/ Xxxxxx Xxxxxxx
--------------------------
(Xxxxxx Xxxxxxx)
AUTHORIZED OFFICER
EMAP, INC.,
by /s/ Xxxxxx Xxxxxxx
--------------------------
(Xxxxxx Xxxxxxx)
AUTHORIZED OFFICER
PRIMEDIA INC.,
by /s/ Xxxxxxx X. Xxxxx
--------------------------
(Xxxxxxx X. Xxxxx)
VICE CHAIRMAN
EXHIBIT A
[Form of Transition Services Agreement]
A-1
EXHIBIT B
[Form of Sub-Lease Agreement]
A-2
EXHIBIT C
[Warrant Term Sheet]
A-3
