EXHIBIT 2.1
ASSET SALE AND PURCHASE AGREEMENT
BY AND AMONG
XXXXXXXX PUBLISHING COMPANY, L.L.C.,
CURTCO FREEDOM GROUP, L.L.C.,
AND, FOR PURPOSES OF SECTION 4, SECTION 7.1(c), SECTION 7.7 AND SECTION 8 ONLY,
FREEDOM MAGAZINES, INC. AND CURTCO PUBLISHING
AND, FOR PURPOSES OF SECTION 8 ONLY,
XXXXXXX X. XXXXXX
DATED AS OF DECEMBER 15, 1998
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TABLE OF CONTENTS
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Section 1. SALE AND PURCHASE OF ASSETS; CLOSING. . . . . . . . . . . 1
1.1 SALE AND PURCHASE OF ASSETS . . . . . . . . . . . . . . . . . . 1
1.2 EXCLUDED ASSETS . . . . . . . . . . . . . . . . . . . . . . . . 3
1.3 ASSUMPTION OF LIABILITIES . . . . . . . . . . . . . . . . . . . 4
1.4 CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.5 PURCHASE PRICE. . . . . . . . . . . . . . . . . . . . . . . . . 7
1.6 CLOSING DATE STATEMENT OF ASSETS AND LIABILITIES AND
LISTING OF PURCHASED RECEIVABLES. . . . . . . . . . . . . . . . 7
1.7 POST-CLOSING RECONCILIATION OF PURCHASED CURRENT ASSETS
AND ASSUMED CURRENT LIABILITIES; BUYER'S RECONCILIATION
LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 2. CLOSING CONDITIONS . . . . . . . . . . . . . . . . . . . 10
2.1 CONDITIONS TO OBLIGATION OF BUYER . . . . . . . . . . . . . . 10
2.2 CONDITIONS TO OBLIGATION OF SELLER. . . . . . . . . . . . . . 12
Section 3. REPRESENTATIONS AND WARRANTIES OF SELLER . . . . . . . . 13
3.1 ORGANIZATION. . . . . . . . . . . . . . . . . . . . . . . . . 13
3.2 AUTHORITY; CONSENTS AND APPROVALS; NO VIOLATION . . . . . . . 13
3.3 ABSENCE OF UNDISCLOSED LIABILITIES. . . . . . . . . . . . . . 14
3.4 PURCHASED ASSETS. . . . . . . . . . . . . . . . . . . . . . . 14
3.5 ACCOUNTS RECEIVABLE . . . . . . . . . . . . . . . . . . . . . 15
3.6 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.7 COMPLIANCE WITH LAWS; LITIGATION. . . . . . . . . . . . . . . 15
3.8 BROKERAGE . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.9 EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.10 CHANGES SINCE LATEST STATEMENT OF ASSETS AND LIABILITIES. . . 16
3.11 ABSENCE OF CERTAIN DEVELOPMENTS.. . . . . . . . . . . . . . . 16
3.12 CONTRACTS AND COMMITMENTS . . . . . . . . . . . . . . . . . . 18
3.13 INTELLECTUAL PROPERTY RIGHTS. . . . . . . . . . . . . . . . . 20
3.14 AFFILIATED TRANSACTIONS . . . . . . . . . . . . . . . . . . . 21
Section 4. AUTHORITY OF SELLER MEMBERS; CONSENTS AND APPROVALS; NO
VIOLATION. . . . . . . . . . . . . . . . . . . . . . . . 21
Section 5. REPRESENTATIONS AND WARRANTIES OF BUYER. . . . . . . . . 22
5.1 ORGANIZATION. . . . . . . . . . . . . . . . . . . . . . . . . 22
5.2 AUTHORITY; CONSENTS AND APPROVALS; NO VIOLATION . . . . . . . 22
5.3 BROKER. . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 6. ADDITIONAL AGREEMENTS OF SELLER. . . . . . . . . . . . . 23
6.1 ACCESS TO PROPERTIES AND RECORDS. . . . . . . . . . . . . . . 23
6.2 CONDUCT OF BUSINESS PENDING THE CLOSING . . . . . . . . . . . 23
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6.3 SELLER'S PROVISION OF SERVICES TO BUYER DURING
TRANSITION PERIOD.. . . . . . . . . . . . . . . . . . . . . . 24
6.4 FURTHER TRANSFERS; TRANSITION ASSISTANCE. . . . . . . . . . . 25
6.5 LICENSING OF CERTAIN COPYRIGHTED MATERIALS. . . . . . . . . . 26
6.6 COOPERATION WITH RESPECT TO XX XXXXXXXXX AGREEMENT. . . . . . 26
6.7 BUYER'S PAYMENT OF ACCOUNTS PAYABLE . . . . . . . . . . . . . 26
6.8 SELLER'S CONTINUED DISTRIBUTION OF THEO BOOK. . . . . . . . . 26
6.9 LICENSE TO DISTRIBUTE WORK-IN-PROGRESS REPRINTS . . . . . . . 27
6.10 CERTAIN EMPLOYEE-RELATED OBLIGATIONS. . . . . . . . . . . . . 27
Section 7. SURVIVAL OF REPRESENTATIONS AND WARRANTIES . . . . . . . 27
7.1 INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE BUYER GROUP . . 27
7.2 INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE . . . . . . . . 28
7.3 INDEMNIFICATION FOR EXCLUDED . . . . . . . . . . . . . . . . 29
7.4 MATTERS INVOLVING THIRD PARTIES . . . . . . . . . . . . . . . 29
7.5 DETERMINATION OF ADVERSE CONSEQUENCES.. . . . . . . . . . . . 30
7.6 EXCLUSIVE REMEDY. . . . . . . . . . . . . . . . . . . . . . . 30
7.7 SELLER MEMBERS' OBLIGATION WITH RESPECT TO PURCHASED ACCOUNTS
RECEIVABLES . . . . . . . . . . . . . . . . . . . . . . . . . 30
7.8 OBLIGATIONS UNDER SECTION 8.. . . . . . . . . . . . . . . . . 31
Section 8. COVENANT NOT TO COMPETE, SOLICIT . . . . . . . . . . . . 31
Section 9. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . 32
Section 10. MISCELLANEOUS AGREEMENTS . . . . . . . . . . . . . . . . 37
10.1 SEVERANCE LIABILITIES TO FORMER EMPLOYEES OF SELLER.. . . . . 37
10.2 COMPLIANCE WITH BULK SALES LAW. . . . . . . . . . . . . . . . 37
10.3 GOOD FAITH OBLIGATIONS. . . . . . . . . . . . . . . . . . . . 37
10.4 CONFIDENTIALITY . . . . . . . . . . . . . . . . . . . . . . . 37
10.5 RISKS OF LOSS; PRORATIONS; EXPENSES . . . . . . . . . . . . . 38
10.6 TERMINATION.. . . . . . . . . . . . . . . . . . . . . . . . . 38
10.7 EXTENSION; WAIVER . . . . . . . . . . . . . . . . . . . . . . 38
10.8 NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
10.9 EMPLOYEE BENEFITS AND EMPLOYEE PRIOR SERVICE CREDIT . . . . . 40
10.10 BINDING EFFECT. . . . . . . . . . . . . . . . . . . . . . . . 41
10.12 EXECUTION IN COUNTERPARTS . . . . . . . . . . . . . . . . . . 41
10.13 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . 41
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10.14 ATTORNEYS' FEES; COSTS OF LITIGATION. . . . . . . . . . . . . 41
10.15 RIGHT TO SUPPLEMENT SCHEDULES . . . . . . . . . . . . . . . . 41
10.16 CONSTRUCTION AND INTERPRETATION . . . . . . . . . . . . . . . 42
10.17 NO THIRD PARTY BENEFICIARIES. . . . . . . . . . . . . . . . . 42
10.18 ASSIGNMENT. . . . . . . . . . . . . . . . . . . . . . . . . . 42
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EXHIBITS
Exhibit A - Form of Closing Date Statement of Assets and Liabilities
Exhibit B - [RESERVED]
Exhibit C - [RESERVED]
Exhibit D - Form of Xxxx of Sale and Assignment
Exhibit E - Form of Trademark, Trade Name and Assumed Name Assignment
Exhibit F - Form of Assumption Agreement
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SCHEDULES
Contract Schedule
Purchased Assets Schedule
Excluded Assets Schedule
Assumed Liabilities Schedule
Excluded Liabilities Schedule
Purchase Price Allocation Schedule
Employees' Proposed 1999 Salaries Schedule
Litigation Schedule
Developments Schedule
Intellectual Property Schedule
Affiliated Transactions Schedule
Latest Statement of Assets and Liabilities
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ASSET SALE AND PURCHASE AGREEMENT
THIS ASSET SALE AND PURCHASE AGREEMENT (this "AGREEMENT") is dated as
of this 15th day of December, 1998, by and among Xxxxxxxx Publishing Company,
L.L.C., a Delaware limited liability company ("BUYER"), and CurtCo Freedom
Group, L.L.C., a Delaware limited liability company ("SELLER"). Capitalized
terms not defined elsewhere in this Agreement are defined in Section 9 below.
WHEREAS, Seller is the owner and publisher of various magazines,
including the Purchased Magazines.
WHEREAS, Seller desires to sell to Buyer, and Buyer desires to
purchase from Seller, all of the assets that are primarily used in and
materially necessary to the business of publishing, promoting and distributing
the Purchased Magazines as such business has been conducted by the Seller prior
to the date hereof (the activities of publishing, promoting and distributing the
Purchased Magazines are collectively referred to herein as the "BUSINESS").
WHEREAS, Buyer and Seller have previously entered into a letter of
intent dated November 11, 1998 pursuant to which they agreed in principal to
basic terms of the transaction contemplated herein. This Agreement contemplates
a transaction in which, pursuant to the terms and subject to the conditions set
forth herein, Buyer will purchase from Seller, and Seller will sell to Buyer,
all of Seller's right, title and interest in and to the assets that are
primarily used in and materially necessary to the Business.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual promises, representations, warranties and covenants set forth herein, and
for other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties hereto agree as follows:
SECTION 1. SALE AND PURCHASE OF ASSETS; CLOSING.
1.1 SALE AND PURCHASE OF ASSETS. On the terms and subject to
the conditions contained in this Agreement, on the Closing Date, Buyer shall
purchase from Seller, and Seller shall sell, convey, assign, transfer and
deliver to Buyer, free and clear of all Liens (except for Permitted Liens) by
bills of sale, assignments and other instruments reasonably satisfactory to
Buyer and its counsel, all of Seller's right, title and interest in and to
the materially necessary assets, properties, rights, titles and interests of
every kind and nature owned by Seller as of the Closing Date, whether
tangible, intangible or personal and wherever located and by whomever
possessed, that are primarily used in and materially necessary to the conduct
of the Business as conducted by the Seller Prior to the date hereof, but
excluding all Excluded Assets (collectively, the "PURCHASED ASSETS"),
including without limitation, all of Seller's right, title and interest in
and to the following assets to the extent
materially necessary to the conduct of the Business, owned by Seller and used
primarily in connection with the operation of the Business:
(i) all rights existing under each contract, agreement or
arrangement listed and expressly specified to be assumed by Buyer on
the attached CONTRACTS SCHEDULE and under each Immaterial Assumed
Contract;
(ii) all copyrights, trademarks, trade names and other
Intellectual Property Rights and all goodwill associated therewith,
including, without limitation, the names of each of the Purchased
Magazines, but excluding any portion of such names using "CurtCo,"
"CurtCo Freedom Group" or derivations thereof (the parties hereto
expressly acknowledge and agree that the trademarks included in the
Purchased Assets are assigned to Buyer in conjunction with Buyer's
acquisition of the business of Seller to which such trademarks
pertain, as an ongoing business);
(iii) all subscription lists, owned mail lists, customer
lists, advertiser lists and vendor lists;
(iv) all Purchased Accounts Receivable;
(v) all cash and other property received by Seller with
respect to the Purchased Issues;
(vi) all notes receivable, rights to payment, choses in
action, claims against third parties, prepayments, refunds and rights
of set-off or recoupment of every kind and nature with respect to the
Purchased Issues;
(vii) all Purchased Inventories;
(viii) all computer equipment (both hardware and software)
and other equipment listed on the PURCHASED ASSETS SCHEDULE;
(ix) all authorizations, franchises, approvals, permits,
licenses, orders, registrations, certificates, variances, and similar
rights obtained from federal, state or local governments or
governmental agencies or other similar rights that are transferable to
Buyer (collectively, "GOVERNMENT LICENSES") listed on the PURCHASED
ASSETS SCHEDULE, and all data and records pertaining to the Government
Licenses;
(x) all insurance proceeds and warranty proceeds received
after the date hereof with respect to damage to, non-conformance with
vendor warranties or loss to the Purchased Assets occurring after the
date hereof and prior to the Closing Date;
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(xi) all rights to receive mail and other communications
addressed to Seller with respect to the Purchased Magazines,
including, without limitation, mail and other communications relating
to payments on Purchased Accounts Receivable;
(xii) all books, records, ledgers, accounting records,
financial statements, files, documents, correspondence, lists,
drawings, specifications, creative materials, advertising and
promotional materials, studies, reports and other printed or written
materials, Seller-owned film, negatives, editorial proofs and other
editorial materials, and all of Seller's rights to inventories of and
rights to reprint issues of the Purchased Magazines with cover dates
prior to the Purchased Issues, but only to the extent that Seller owns
or has been granted such rights from writers, advertisers,
contractors, photographers, and other persons that authorize
reprinting of their materials and only to the extent that such rights
are assignable to Buyer;
(xiii) all of Seller's rights associated with any web sites
relating exclusively to the Purchased Magazines, including the right
to use the domain names "xxxxxxxxxxxxxx.xxx," "xxxxxxxxxxxxxxx.xxx,"
"xxxxxxxxxxxxxxxxx.xxx" and "XXXxxx.xxx" in connection with such web
sites;
(xiv) all of Seller's rights and assets relating
exclusively to the promotion and operation of the Home Theater
Magazine's Entertainment Expo & Sale Show (the "SHOW"); and
(xv) all Purchased Prepaids.
1.2 EXCLUDED ASSETS. Notwithstanding the foregoing, the
following assets are expressly excluded from the purchase and sale contemplated
hereby (the "EXCLUDED ASSETS") and, as such, are not included in the Purchased
Assets:
(i) cash on hand, in bank accounts and cash equivalents
(other than the cash described in Section 1.1(a)(v));
(ii) Seller's rights under or pursuant to this Agreement;
(iii) Seller's prepaid taxes and other prepaid items not
included in the Purchased Prepaids;
(iv) any benefits from or rights to receive Seller's
deferred income taxes;
(v) any interests in real property, whether owned or
leased by Seller;
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(vi) Seller tax returns and records and all other books,
records and other documents not related exclusively to the Purchased
Magazines and all of Seller's personnel records;
(vii) any right to receive mail and other communications
addressed to Seller and not related exclusively to the Purchased
Assets or the Assumed Liabilities (provided that Seller shall deliver
to Buyer copies of any mail or other communications which relate in
part (though not exclusively) to the Purchased Assets or Assumed
Liabilities);
(viii) all contracts, agreements and arrangements and all
leases and subleases (A) which are listed on the CONTRACTS SCHEDULE as
being retained by Seller or not assumed by Buyer, or (B) are not
disclosed on the CONTRACTS SCHEDULE, other than the Immaterial Assumed
Contracts;
(ix) all accounts receivable not included in the Purchased
Accounts Receivables (the "EXCLUDED RECEIVABLES"); and
(x) all network and mainframe computers, cellular phones,
pagers, facsimile and copy machines, and all other office furniture
and equipment not listed in the PURCHASED ASSETS SCHEDULE, whether or
not used primarily in connection with the operation of the Business;
(xi) all tradenames, trademarks, copyrights and other
Intellectual Property Rights not included in the Purchased Assets,
including the name "CurtCo Freedom Group" or any derivative thereof;
(xii) all subscription cash and subscription deposits
received by Seller on or before the Closing Date;
(xiii) all postal deposits;
(xiv) any assets, properties or rights, tangible or
intangible, real, personal or mixed, of any kind whatsoever owned,
leased or used by Seller that are not used in connection with the
Business; and
(xv) all other assets expressly listed on the EXCLUDED
ASSETS SCHEDULE hereto.
1.3 ASSUMPTION OF LIABILITIES.
(a) ASSUMED LIABILITIES. On the terms and subject to the
conditions set forth in this Agreement (including paragraph (b) below), in
addition to the Closing Date Cash Payment and as
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additional consideration for the Purchased Assets, as of the Closing Date,
Buyer shall assume and (on or after the Closing Date) the Buyer shall pay for
or perform only the following debts, liabilities and obligations of Seller,
in each case only with respect to the Purchased Issues (collectively, the
"ASSUMED LIABILITIES"):
(i) accounts payable incurred in the ordinary course of
business to the extent relating to the Purchased Issues (the estimated
aggregate amount of which shall be reflected on the CLOSING DATE
STATEMENT OF ASSETS AND LIABILITIES (as hereinafter defined)) and
accounts payable which are incurred with respect to the Purchased
Issues after the Closing Date;
(ii) all obligations of Seller to provide advertising in
Purchased Issues in the ordinary course of business which have been
prepaid by advertising customers (to the extent such prepaid amounts
are included as Purchased Assets pursuant to Section 1.1(v)), an
estimate of which shall be reflected on the CLOSING STATEMENT OF
ASSETS AND LIABILITIES;
(iii) all obligations of Seller to provide printing,
mailing, distribution and fulfillment of the Purchased Issues to
subscribers who have prepaid for the term of their subscriptions;
(iv) obligations of Seller under (A) contracts that are
listed on the attached CONTRACTS SCHEDULE and which are expressly
identified on such schedule as being assumed by Buyer and (B)
Immaterial Assumed Contracts, but only with respect to the period
commencing on the Closing Date and excluding any liability for breach
of such Contracts by Seller prior to the Closing Date; and
(v) (A) all obligations of Seller to former employees of
Seller who are hired by Buyer (or who are engaged by Buyer as
independent contractors) on or within 30 days after the Closing Date
for accrued vacation, accrued sick days and accrued personal days
existing as of the Closing Date and reflected on the CLOSING DATE
STATEMENT OF ASSETS AND LIABILITIES and (B) those costs and expenses
incurred by Seller pursuant to Section 6.3 below.
(vi) all obligations of Seller to employees (whether or
not hired or engaged by Buyer) for commissions payable with respect to
the Purchased Issues (whether such obligation to pay commissions has
been previously paid by Seller with respect to a Purchased Issue or
which shall become payable upon the run date of a Purchased Issue),
the estimated amount of which is set forth on the ASSUMED LIABILITIES
SCHEDULE;
(vii) other liabilities expressly set forth on the ASSUMED
LIABILITIES SCHEDULE.
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(b) EXCLUDED LIABILITIES. Notwithstanding the foregoing, Buyer
shall not assume and shall not be deemed to have assumed or in any way become
liable for any of Seller's debts, liabilities or obligations of any nature
whatsoever (other than the Assumed Liabilities), whether accrued, absolute or
contingent, whether known or unknown, whether due or to become due and whether
related to the Business or the Purchased Assets, and regardless of when or by
whom asserted (collectively, the "EXCLUDED LIABILITIES") including, but not
limited to, and without limiting the generality of the foregoing, the following:
(i) any liability of the Seller or of any of its
Affiliates for Taxes;
(ii) any liability of the Seller or its Members for costs
and expenses incurred in connection with this Agreement and the
transactions contemplated hereby;
(iii) any liability of the Seller or its Members relating
to Excluded Assets;
(iv) any liability relating to issues of the Purchased
Magazines with cover dates prior to the cover dates of the Purchased
Issues;
(v) any obligations under employment contracts entered
into by Seller prior to the Closing Date;
(vi) any stay or termination bonuses payable by Seller to
employees of Seller;
(vii) any obligation arising in tort or for breach of
contract occurring prior to the Closing Date and for obligations and
liabilities now existing or hereafter arising from or relating to
pending litigation listed on the attached LITIGATION SCHEDULE;
(viii) any obligation unrelated to the operation of the
Purchased Magazines;
(ix) except as set forth in Section 1.3(a), obligations to
employees for accrued wages, earned commissions, accrued vacation,
accrued sick days, accrued personal days, bonuses payable to employees
of Seller and similar compensation liabilities; and
(x) all other liabilities set forth on the attached
EXCLUDED LIABILITIES SCHEDULE.
For purposes of this Section 1.3(b), "Seller" shall be deemed to include all
Affiliates of Seller and any predecessors to Seller and any Person with respect
to which Seller is a successor-in-interest (including by operation of law,
merger, liquidation, consolidation, assignment, assumption or otherwise). Seller
hereby acknowledges that Seller is retaining the Excluded Liabilities, and
Seller shall retain all obligations and liabilities with respect thereto.
1.4 CLOSING. The closing (the "CLOSING") shall be coordinated
through the offices of Xxxxxxxx & Xxxxx in Chicago, Illinois, at 10:30 a.m. on a
date specified by the parties within five (5)
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business days after the satisfaction or waiver of all conditions to Closing
set forth in Section 2.2 hereof, but in no event later than February 3, 1999
(the "CLOSING DATE") or on such other date as the Buyer and Seller mutually
agree.
1.5 PURCHASE PRICE. The total purchase price (the "PURCHASE
PRICE") to be paid by Buyer to the Seller on the Closing Date for the Purchased
Assets shall be (i) $55,500,000, PLUS (ii) the Estimated Purchased Current
Assets Price, LESS (iii) the Purchased Current Assets Holdback, LESS (iv) the
amount of cash and/or the value of other property received by the Seller prior
to the Closing Date pursuant to Section 1.1(v) above (the result of the
determination set forth in clauses (i) through (iv), the "CLOSING DATE CASH
PAYMENT"), PLUS the assumption by Buyer of the Assumed Liabilities. On or about
180 days after the Closing Date, the Purchase Price may be adjusted pursuant to
Section 1.7 below.
1.6 CLOSING DATE STATEMENT OF ASSETS AND LIABILITIES AND LISTING
OF PURCHASED RECEIVABLES. On or before five (5) business days prior to the
scheduled Closing Date, Seller shall prepare and deliver to Buyer a statement of
assets and liabilities setting forth (together with other pertinent
information), Seller's estimate of all Purchased Current Assets and Assumed
Current Liabilities as of the scheduled Closing Date, prepared using accounting
principles consistent with those used in preparing the LATEST STATEMENT OF
ASSETS AND LIABILITIES, which statement of assets and liabilities Buyer shall
review and approve (which approval shall not be unreasonably upheld provided
that Seller provides Buyer with reasonable access to its books and records
related to the Business in order to facilitate such review) (such statement of
assets and liabilities, as approved by Buyer, shall be attached hereto as
EXHIBIT A and shall be referred to herein as the "CLOSING DATE STATEMENT OF
ASSETS AND LIABILITIES").
1.7 POST-CLOSING RECONCILIATION OF PURCHASED CURRENT ASSETS AND
ASSUMED CURRENT LIABILITIES; BUYER'S RECONCILIATION LIABILITIES.
(a) BUYER'S OBLIGATION WITH RESPECT TO PURCHASED ACCOUNTS
RECEIVABLE. Buyer may collect and shall be entitled to retain all amounts
received in respect of Purchased Accounts Receivable. During the 180-day period
(the "RECONCILIATION PERIOD") commencing on the Closing Date, Buyer shall use
reasonable commercial and ordinary course efforts to collect in good faith the
Purchased Accounts Receivable, and Buyer shall apply payments it receives in
respect of accounts receivable related to the Purchased Magazines (collectively,
the "ACCOUNTS RECEIVABLE") to the Purchased Accounts Receivable or Buyer's other
Purchased Magazine-related accounts receivable (each a "NON-PURCHASED
RECEIVABLE") as follows:
(i) if a payment is received by Buyer from a payor, and
(x) such payor has directed such payment to be applied to a
particular Accounts Receivable (whether on the face of the check or
money order, in correspondence accompanying the check or money order,
or otherwise) and (y) the Accounts Receivable to which the payment is
directed is the oldest Accounts Receivable with respect to such payor,
THEN such
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payment shall be applied to the Accounts Receivable to which the
payment was directed by the payor;
(ii) if a payment is received by Buyer from a payor, and
(x) more than one Accounts Receivable remains outstanding with respect
to such payor and (y) such payor failed to specify the Accounts
Receivable to which the payment should be directed, THEN Buyer shall
apply such payment to the oldest Accounts Receivable with respect to
the applicable payor;
(iii) if a payment is received by Buyer from a payor, and
(x) more than one Account Receivable remains outstanding with respect
to such payor, (y) such payor has directed such payment to be applied
to a particular Accounts Receivable, and (z) the Accounts Receivable
to which the payment is directed is NOT the oldest Accounts Receivable
with respect to such payor, THEN, as soon as practicable after the
receipt of such payment, a representative from each of the Buyer and
Seller shall together contact such payor and inquire as to why such
payor delivered a payment to the Buyer that was directed to an
Accounts Receivable that was not the oldest Accounts Receivable.
Unless the payor states to the representatives of Buyer and Seller
that the Accounts Receivable of payor which are older than the
Accounts Receivable to which such payor directed such payment are
subject to a good faith dispute as to whether such older Accounts
Receivable are due and owing, the Buyer shall apply such payment to
the oldest Accounts Receivable with respect to such payor. If such
payor does state to the representatives of Buyer and Seller that the
Accounts Receivable which are older than the Accounts Receivable to
which the payor directed the payment are subject to a good faith
dispute as to whether such Accounts Receivable are due and owing, then
the payment shall be applied by the Buyer to the Accounts Receivable
to which the payor directed the payment.
(b) During the Reconciliation Period, the Buyer shall provide
Seller with bi-monthly status reports with respect to the collection of Accounts
Receivable. The status reports shall (i) be delivered to Seller commencing on
or about the 15th and 30th days of each month, in each case with respect to the
status of the Accounts Receivables as of the date which is fifteen (15) days
prior, (ii) include a listing of all collections with respect to each payor
(whether or not each such collection was directed by the payor to a Purchased
Accounts Receivable, a Non-Purchased Receivable or not directed to any
particular Accounts Receivable) and (iii) include a description of any existing
disputes relating to the Purchased Accounts Receivable. During the
Reconciliation Period, the Buyer shall not make concessions with payors with
regard to the Purchased Accounts Receivable without Seller's consent, which
consent shall not be unreasonably withheld or delayed. During the
Reconciliation Period, Buyer and Seller shall cooperate in good faith to collect
all Purchased Accounts Receivable, and, in furtherance of such cooperation,
Buyer and Seller agree that Seller may utilize its own credit collections
personnel in order to assist Buyer in collecting the Purchased Accounts
Receivable, PROVIDED that Seller shall inform Buyer prior to contacting a
particular payor with respect to a particular Purchased Accounts Receivable in
order to ensure that
8
Buyer's and Seller's collection efforts with respect to such payor and such
Purchased Accounts Receivable are not unnecessarily duplicative or
unnecessarily disruptive of the Buyer's business relationship with such payor.
(c) BUYER'S RECONCILIATION STATEMENT. On or about the 180th day
after the Closing Date, Buyer will deliver to Seller a reconciliation ("BUYER'S
RECONCILIATION STATEMENT") of all Purchased Current Assets and Assumed Current
Liabilities, including Buyer's actual experience with respect to its collections
of Purchased Accounts Receivable since the Closing Date.
(d) SELLER'S OBJECTIONS TO BUYER'S RECONCILIATION STATEMENT;
DISPUTE RESOLUTION. If Seller objects to Buyer's calculation of the Purchased
Current Assets and Assumed Current Liabilities as set forth on the Buyer's
Reconciliation Statement, Seller shall deliver to Buyer, within twenty (20)
business days of receipt of Buyer's Reconciliation Statement, written notice
of Seller's objections thereto, which written notice shall specify such
objections in reasonable detail (a "NOTICE OF OBJECTION"), and if Seller
fails to deliver to Buyer a Notice of Objection in such period Seller will be
deemed to have agreed with Buyer's determination set forth on Buyer's
Reconciliation Statement. If Buyer and Seller are unable to agree on the
foregoing within thirty (30) days of delivery of a Notice of Objections,
Buyer and Seller shall select an accounting firm mutually acceptable to both
of them to resolve any remaining objections. If Buyer and Seller are unable
to agree on the choice of an accounting firm, they shall select a "big six"
accounting firm (or any of their respective successors) by lot (after
excluding their respective regular outside accounting firms). The accounting
firm so selected (the "ACCOUNTING FIRM") shall prepare a written report to
the parties which shall address its resolution of the disputed items in
accordance with this Section 1.7 and shall make any required adjustments to
Buyer's Reconciliation Statement to reflect the resolution of all disputed
items. The parties shall share the fees and expenses of the Accounting Firm
as follows: the percentage of such fees and expenses to be paid by Seller
shall equal the portion of the contested amount (as presented in the Notice
of Objections) not awarded to the Seller DIVIDED BY the full amount contested
by Seller, and Buyer shall pay the remainder. The Buyer's Reconciliation
Statement, as adjusted to reflect any changes agreed upon, or made by the
Accounting Firm pursuant to this Section 1.7, shall be, with respect to
Buyer's calculation of Purchased Current Assets and Assumed Current
Liabilities and all other purposes, conclusive, final, binding and
non-appealable by the parties hereto. Upon final reconciliation of the
Purchased Current Assets and Assumed Current Liabilities as of the Closing
Date in accordance with this Section 1.7(d), the Estimated Current Assets
Purchase Price will be adjusted (up or down) (the "FINAL CURRENT ASSETS
PURCHASE PRICE") to reflect the final reconciliation of the Purchased Current
Assets (other than Purchased Accounts Receivable), Assumed Current
Liabilities and the amount of Purchased Accounts Receivable not collected by
Buyer during the 180-day period after the Closing Date. To the extent the
Final Current Assets Purchase Price is GREATER THAN the Estimated Current
Assets Purchase Price, Buyer shall pay to Seller the amount of such excess.
To the extent that the Final Current Assets Purchase Price is LESS THAN the
Estimated Current Assets Purchase Price , Seller shall pay to Buyer the
amount of such shortfall. If the Final Current Assets Purchase Price is
greater than the Estimated Current Assets Purchase Price, the reconciliation
payment made to Seller shall also include the full amount of the Current
Purchased Assets Holdback. If the Final Current Assets Purchase Price is less
9
than the Estimated Current Assets Purchase Price, the reconciliation payment
to Buyer shall first be recovered from the Current Purchased Assets Holdback
to the extent of the shortfall, and to the extent the total amount of the
shortfall is less than the Current Assets Purchase Price, the remainder of
the Estimated Current Assets Purchase Price shall be returned to Seller
within the five (5) business day period specified above. All amounts payable
by Buyer or Seller (as the case may be) under this Section 1.7(d) shall be
paid by wire transfer of immediately available funds to the account
designated by Buyer or Seller (as the case may be) within five (5) business
days of the final determination of the Final Current Assets Purchase Price.
After the reconciliation of the Estimated Current Assets Purchase Price and
the payment of all amounts owing to Buyer or Seller (as the case may be) in
accordance with this Section 1.7(d) , Buyer shall reconvey the uncollected
Purchased Accounts Receivable to Seller (together with a complete collection
history with respect to all Accounts Receivable with respect to each payor
whose Purchased Accounts Receivable are among those reconveyed to Seller upon
the expiration of the Reconciliation Period), free and clear of all liens,
encumbrances, security interests or other adverse interests, and the Buyer
shall thereafter have no obligation to the Seller with respect to such
Purchased Accounts Receivable.
1.8 ALLOCATION OF PURCHASE PRICE AND OTHER PAYMENTS. The Purchase
Price shall be allocated among the Purchased Assets and the covenant not to
compete set forth in Section 8 in accordance with the PURCHASE PRICE ALLOCATION
SCHEDULE attached hereto, PROVIDED that the portion of the Purchase Price
allocated to the fixed assets being acquired shall not exceed the net book value
of such assets for tax purposes as reflected in the books and records of Seller
as of the Closing Date. No party shall take, for income tax purposes, any
position inconsistent with the allocation set forth on the PURCHASE PRICE
ALLOCATION SCHEDULE.
SECTION 2. CLOSING CONDITIONS.
2.1 CONDITIONS TO OBLIGATION OF BUYER. The obligation of Buyer
to consummate the transactions to be performed by it in connection with the
Closing is subject to the satisfaction of the following conditions as of the
Closing (any or all of which may be waived by Buyer):
(a) REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF COVENANTS. The
representations and warranties made by Seller and set forth in Section 3 hereof
shall be true and correct at and as of the Closing Date as though then made
(except as to representations and warranties made as of a specified date, in
which case the applicable representation and warranty shall be made as of such
specified date), and Seller shall have performed in all material respects all of
the covenants and agreements required to be performed by Seller pursuant to this
Agreement and the transactions contemplated hereby on or prior to the Closing
Date.
(b) NO LIENS. Buyer shall have received from Seller releases of
all Liens relating to the Purchased Assets (other than the Permitted Liens)
(collectively, the "LIEN RELEASES").
(c) THIRD-PARTY APPROVALS. Any and all approvals and consents that
are necessary for the consummation of the transactions contemplated hereby or
that are required in order to prevent
10
a material breach of or material default under, a termination or modification
of, or acceleration of the terms of, any material contract to be assumed by
Buyer (collectively, the "THIRD-PARTY APPROVALS") shall have been received,
in each case on terms reasonably satisfactory to Buyer, except as to such
consents identified on the CONTRACT SCHEDULE as being unable to be obtained
prior to the Closing Date (it being understood and agreed that the Seller and
Buyer shall cooperate in good faith to obtain any necessary consents and
approvals as promptly as practical after the Closing Date).
(d) GOVERNMENTAL APPROVALS. All filings, notices, licenses and
other consents (collectively, the "GOVERNMENT APPROVALS") of, to or with, any
governmental entity or any other Person that are required (i) for the
consummation of the transactions contemplated by this Agreement, including
approval pursuant to Xxxx-Xxxxx-Xxxxxx Antitrust Improvement Act of 1976, as
amended (the "HSR ACT"); and (ii) in order to prevent a material breach of or
material default under or a right of termination or modification of any contract
to which Seller is a party and to which any portion of the property of the
Business is subject shall have been duly made or obtained, in each case on terms
reasonably satisfactory to Buyer.
(e) BOOKS, RECORDS. All books, records and other materials related
to the Business and its administration and record keeping acquired by Buyer
hereunder shall have been delivered to, or made available for pickup by, Buyer.
(f) TRANSFER INSTRUMENTS. Seller shall have delivered to Buyer all
appropriately executed instruments of sale, transfer, assignment, conveyance and
delivery, warranty assignments of leases, assignments and all other instruments
of conveyance which are necessary to effect transfer to Buyer all of Seller's
right, title and interest in and to the Purchased Assets (including without
limitation the Xxxx of Sale and Assignment attached hereto as EXHIBIT D and the
Trademark, Trade Name and Assumed Name Assignment attached hereto as EXHIBIT E),
free and clear of all Liens, other than Permitted Liens (including assignment
documents acceptable for recordation in the United States Patent and Trademark
Office, the United States Copyright Office and any other similar domestic or
foreign office, department or agency), all in form and substance reasonably
satisfactory to Buyer and its counsel, (collectively, the "TRANSFER DOCUMENTS").
(g) PROCEEDINGS. No action or proceeding shall be pending or
threatened which could reasonably be expected to materially impair or prohibit
the consummation of the transactions contemplated by this Agreement, any other
Seller Document or any other instrument or document furnished to the Buyer by
the Seller pursuant to this Agreement or any other Seller Document. No judgment,
order or decree shall have been rendered which has the effect of enjoining the
consummation of the transactions contemplated by this Agreement.
(h) CLOSING DATE STATEMENT OF ASSETS AND LIABILITIES. Buyer and
Seller shall have agreed upon all items set forth on the CLOSING DATE STATEMENT
OF ASSETS AND LIABILITIES.
(i) SELLER GOVERNANCE PROCEEDINGS AND DOCUMENT. All limited
liability company and other proceedings required to be taken by Seller with
respect to the approval and consummation of
11
the transactions contemplated hereby shall have been taken and Seller shall
have delivered a copy of all certificates, resolutions or other documents
reflecting such proceedings and approval.
(j) OTHER CLOSING DOCUMENTS. Seller shall have delivered to Buyer
(i) a certificate to the effect that the condition specified in Sections 2.1(a)
through 2.1(i) have been fully satisfied and (ii) such other documents or
instruments as are required to be delivered at the Closing pursuant to the terms
hereof or that Buyer reasonably requests prior to the Closing Date to effect the
transactions contemplated hereby.
2.2 CONDITIONS TO OBLIGATION OF SELLER. The obligation of Seller
to consummate the transactions to be performed by Seller in connection with
the Closing is subject to the satisfaction of the following conditions as of
the Closing Date (any or all of which may be waived by Seller):
(a) REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF COVENANTS. The
representations and warranties set forth in Section 5 hereof shall be true and
correct at and as of the Closing Date, as though then made (except as to
representations and warranties made as of a specified date, in which case the
applicable representation and warranty shall be made as of such specified date),
and Buyer shall have performed in all material respects all of the covenants and
agreements required to be performed by it under this Agreement on or prior to
the Closing Date.
(b) CLOSING PAYMENT. Buyer shall have delivered to Seller the
Closing Date Cash Payment (by wire transfer of immediately available funds to an
account designated by Seller prior to the Closing).
(c) ASSUMPTION DOCUMENTS. Buyer shall have executed and delivered
to Seller any and all assumption documents in form and substance reasonable
satisfactory to Seller or as may be required by third parties in connection with
contracts being assigned to Buyer hereunder (including, without limitation, the
Assumption Agreement attached hereto as EXHIBIT I), and such documents shall be
in full force and effect as of the Closing Date.
(d) GOVERNMENT APPROVAL. All Governmental Approvals that are
required (i) for the consummation of the transactions contemplated by this
Agreement, including approval pursuant to the HSR Act; and (ii) in order to
prevent a material breach of or material default under or a right of termination
or modification of any material contract to which Seller is a party and to which
any portion of the property of the Business is subject shall have been duly made
or obtained in each case on terms reasonably satisfactory to Seller.
(e) BUYER GOVERNANCE PROCEEDINGS AND DOCUMENTS. All limited
liability company and other proceedings required to be taken by Buyer with
respect to the approval and consummation of the transactions contemplated
hereby shall have been taken and Buyer shall have delivered a copy of all
certificates, resolutions and other documents reflecting such proceedings and
approval.
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(f) PROCEEDINGS. No action or proceeding shall be pending or
threatened which could reasonably be expected to materially impair or prohibit
the consummation of the transactions contemplated by this Agreement, any other
Buyer Document or any other instrument or document furnished to the Seller by
Buyer pursuant to this Agreement or any other Buyer Document. No judgment, order
or decree shall have been rendered which has the effect of enjoining the
consummation of the transactions contemplated by this Agreement.
(g) CLOSING DATE STATEMENT OF ASSETS AND LIABILITIES. Buyer and
Seller shall have agreed upon all items set forth in the CLOSING DATE STATEMENT
OF ASSETS AND LIABILITIES.
(h) OTHER CLOSING DOCUMENTS. Buyer shall have delivered to Seller
(i) a certificate to the effect that the conditions specified in Sections 2.2(a)
through 2.2(g) (other than Section 2.2(b) above) have been fully satisfied and
(ii) such other documents or instruments as are required to be delivered at the
Closing pursuant to the terms hereof or that Seller reasonably requests prior to
the Closing Date to effect the transactions contemplated hereby.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF SELLER. To
induce Buyer to enter into this Agreement and to consummate the transactions
contemplated hereunder, Seller represents and warrants to Buyer as follows
(unless otherwise stated in the following representations and warranties, all
such representations and warranties are true and correct as of the date
hereof).
3.1 ORGANIZATION. Except as set forth on the SELLER ORGANIZATION
SCHEDULE attached hereto, Seller is a limited liability company duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has all requisite limited liability company power and authority to own,
lease and operate its properties, including the Purchased Assets, and to carry
on the Business as now being conducted, and is duly qualified and in good
standing to do business in each jurisdiction in which the nature of the Business
or the ownership or leasing of the Purchased Assets makes such qualification
necessary, or, if not so duly qualified, its failure to be so qualified will not
have a Material Adverse Effect on the Purchased Accounts or the Business.
3.2 AUTHORITY; CONSENTS AND APPROVALS; NO VIOLATION. Seller has
the requisite authority and legal right to execute and deliver this
Agreement and all other agreements, instruments or other documents executed
by Seller in connection herewith (the "SELLER DOCUMENTS"), to sell the
Purchased Assets pursuant to this Agreement, and otherwise to perform its
obligations hereunder and under the other Seller Documents. The execution and
delivery of this Agreement and the other Seller Documents have been duly
authorized by the Seller Members, and no other limited liability company
proceeding or action on the part of Seller is necessary to authorize this
Agreement, the sale of the Purchased Assets hereunder or the other
transactions contemplated hereunder. This Agreement and each of the other
Seller Documents has been (or upon Closing will be) validly executed and
delivered by Seller and constitute valid and binding obligations of Seller,
except to the extent that the binding nature thereof may be subject to the
limitations which might result from bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to creditors' rights
13
now or thereafter in effect, and except for the limitations on the remedy of
specific performance and other forms of equitable relief. The execution and
delivery of this Agreement and the other Seller Documents, the sale of the
Purchased Assets, and the consummation of the other transactions and matters
contemplated hereunder and thereunder do not and will not violate any
provision of Seller's Certificate of Formation or Operating Agreement. Except
for compliance with the notification requirements and expiration or early
termination of the waiting period under the HSR Act, no permit,
authorization, consent or approval of, or declaration or filing with any
public body, agency, court or authority within the United States is necessary
for the lawful, proper and valid consummation by Seller of the other
transactions contemplated hereunder. The execution and delivery of this
Agreement and the other Seller Documents, the sale of the Purchased Assets,
and the consummation of the other transactions and matters contemplated
hereunder and thereunder do not and will not violate any statute, rule or
regulation, any order or decree of any public body,agency, court or authority
by which Seller or any of its property, is bound, or violate, conflict with,
result in a breach of or constitute (with or without due notice or lapse of
time) a default under any agreement, license, contract, franchise, permit,
indenture, lease, or other instrument to which Seller is a party, or by which
it or any of the Purchased Assets is bound, except for such violations or
conflicts, breaches or default which could not reasonably be expected to have
a Material Adverse Effect.
3.3 ABSENCE OF UNDISCLOSED LIABILITIES. Except as listed in
Section 1.3(a) or as reflected on the attached ASSUMED LIABILITIES SCHEDULE,
Seller has no liability of any nature, fixed or contingent which constitute
Assumed Liabilities or for which Buyer shall otherwise be liable hereunder as
a result of the transactions contemplated hereby, except for liabilities for
ordinary operating expenses incurred in the ordinary course of business since
the date hereof and other liabilities which individually and in the aggregate
are not material in amount or nature. Since the date of the LATEST STATEMENT
OF ASSETS AND LIABILITIES, Seller has continued to pay its expenses which
constitute Assumed Liabilities on a basis consistent with its prior practice.
3.4 PURCHASED ASSETS. Except as set forth on the attached
PURCHASED ASSETS SCHEDULE and except for the Excluded Assets, all of the
tangible Purchased Assets are in good working condition and repair and
constitute all of the tangible assets primarily used in connection with the
Business and materially necessary to Seller's conduct of the Business prior
to the date hereof. Except as set forth in the LATEST STATEMENT OF ASSETS
AND LIABILITIES or on the PURCHASED ASSETS SCHEDULE, Seller has good and
marketable title to all of the tangible Purchased Assets, and all of the
Purchased Assets are held free and clear of all Liens, except for Permitted
Liens. Other than pursuant to this Agreement, there are no existing options,
rights, contracts, commitments, understandings, arrangements, or executory
agreements of any nature to which Seller is a party or by which it is bound,
relating to the sale, delivery, lease (as lessor) or transfer of any of the
Purchased Assets, except those that exist in the ordinary course of Seller's
business.
3.5 ACCOUNTS RECEIVABLE. Except as set forth on the attached
PURCHASED ASSETS SCHEDULE, all Purchased Accounts Receivable reflected on the
CLOSING DATE STATEMENT OF ASSETS AND LIABILITIES (net of allowances for
doubtful accounts as reflected thereon and as determined in
14
accordance with the Seller's customary accounting policies consistently
applied) constituted valid receivables arising in the ordinary course of
business. No Person has any Lien on such receivables or any part thereof, and
no agreement for deduction, free goods, discount or other deferred price or
quantity adjustment has been made with respect to any such receivables, other
than adjustments reflected on the CLOSING DATE STATEMENT OF ASSETS AND
LIABILITIES, matters disclosed on the PURCHASED ASSETS SCHEDULE and
obligations for make goods arising in the ordinary course of business.
3.6 TAXES. Except as could not reasonably be expected to result
in a Material Adverse Effect with respect to the Business, Seller has filed
all tax returns which are required to be filed and paid all Taxes of any kind
due and payable to (or claimed to be due and payable by) all federal, state,
county, local, foreign or other taxing authorities, other than Taxes, if any,
which are not yet due and are reflected as liabilities in the LATEST
STATEMENT OF ASSETS AND LIABILITIES or which have arisen as a result of
ordinary and customary business operations since the date of the LATEST
STATEMENT OF ASSETS AND LIABILITIES. Seller has not given or been requested
to give a waiver of any statute of limitations relating to the payment of
federal, state, county, local, foreign or other Taxes for taxable periods
which are still open. There are no actual or proposed Tax deficiencies,
assessments or adjustments with respect to Seller or any assets or operations
of Seller, and there are no ongoing or pending Tax audits by any taxing
authority against Seller. Except current obligations not yet due, all Taxes
and other assessments and levies which Seller is or was required by law to
withhold or collect have been duly withheld or collected and to the extent
required have been paid over to the proper governmental authorities. Seller
has never filed a consolidated income tax return with any person. "TAX" or
"TAXES" means any federal, state, local or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
property, windfall, profits, environmental, customs, capital stock,
franchise, employees' income withholding, foreign or domestic withholding,
social security, unemployment, disability, real property, personal property,
sales, use, transfer, value added, alternative or add-on minimum or other
similar tax, governmental fee, governmental assessment or governmental charge
of any kind whatsoever, including any interest, penalties or additions to Tax
or additional amounts with respect to the foregoing.
3.7 COMPLIANCE WITH LAWS; LITIGATION. Except as disclosed on the
attached LITIGATION SCHEDULE, prior to the Closing Date, the Business was not
operated by Seller in material violation of any applicable law, ordinance or
regulation. Except as disclosed on the LITIGATION SCHEDULE, no litigation or
administrative or arbitration proceeding is pending or, to Seller's
knowledge, has been threatened against Seller with respect to the Business.
3.8 BROKERAGE. Except for the Seller's obligations to XxXxxxx &
Xxxxxxxx (which obligation the parties agree is an Excluded Liability), there
are and shall be no claims for brokerage commissions, finders' fees or similar
compensation in connection with the transactions contemplated by this Agreement
based on any arrangement or agreement to which the Seller or any of its Members
is a party or to which Seller or any of its members is subject.
3.9 EMPLOYEES. The Seller has no material labor relations
problems. Neither the Seller nor, to Seller's knowledge, any of its employees
or consultants relating to the Business are subject
15
to any noncompete, nondisclosure, confidentiality, employment, consulting or
other agreement or judgment, decree or order of any court or administrative
agency, relating to, affecting or in conflict with the present or proposed
business activities of the Seller or such Person's duties to the Seller,
except for agreements between the Seller and its present and former employees
or consultants. The Seller has not received any notice alleging that any
violation of any such agreements has occurred. To the knowledge of Xxxxxxx
X. Xxxxxx, any other senior executive of Seller and any manager or other
employee who is responsible for employee matters of the Seller, no employee
of Seller who is being employed by Buyer on or shortly after the Closing Date
had any plan to terminate his or her employment with Seller prior to the
Closing Date or has any plan to terminate his or her employment with Buyer
after the Closing Date.
3.10 CHANGES SINCE LATEST STATEMENT OF ASSETS AND LIABILITIES.
Attached hereto are the unaudited statement of assets and liabilities of the
Business as of November 30, 1998 and the annualized proforma income and
expense statement for the twelve months ending December 31, 1998 (actual
through November 30, 1998). Such statements are consistent with Seller's
books and records except as disclosed therein. Since the date of the November
30, 1998 Statement of Assets and Liabilities ("LATEST STATEMENT OF ASSETS AND
LIABILITIES"), there has not been, to Seller's knowledge, any Material
Adverse Effect.
3.11 ABSENCE OF CERTAIN DEVELOPMENTS. Except as expressly
contemplated by this Agreement or the transactions contemplated hereby and
other than in the ordinary course of business or as set forth on the attached
DEVELOPMENTS SCHEDULE, since the date of the LATEST STATEMENT OF ASSETS AND
LIABILITIES, Seller has not, with respect to the Business:
(a) incurred or become subject to any material liabilities;
(b) discharged or satisfied any material Lien or paid any material
obligation or liability;
(c) mortgaged or pledged any of the Purchased Assets or subjected
them to any Lien, except for Permitted Liens;
(d) sold, assigned, transferred, leased, licensed or otherwise
encumbered any of its tangible Purchased Assets;
(e) sold, assigned, transferred, leased, licensed or otherwise
encumbered any Intellectual Property Rights or other intangible assets,
disclosed any material proprietary confidential information to any Person (other
than to Buyer) or abandoned or permitted to lapse any Intellectual Property
Rights;
(f) with respect to any employee of Seller who has worked for
Seller in connection with the Business and whom Buyer has indicated it may hire
pursuant to discussions with Seller prior to the date hereof, made or granted
any bonus (other than stay bonuses to be paid by Seller at
16
Closing) or any wage or salary increase to any such employee or group of such
employees (except as required by pre-existing contracts described on the
attached CONTRACTS SCHEDULE or except in the case of ordinary course
increases of not more than that those indicated in the attached SCHEDULE OF
EMPLOYEES' PROPOSED 1999 SALARIES), or made or granted any increase in any
employee benefit plan or arrangement, or amended or terminated any existing
employee benefit plan or arrangement or adopted any new employee benefit plan
or arrangement;
(g) suffered any extraordinary losses or waived any rights of
material value (whether or not in the ordinary course of business or consistent
with past practice) in excess of $25,000 in the aggregate;
(h) made commitments for capital expenditures which are included
in the Assumed Liabilities that aggregate in excess of $25,000;
(i) with respect to accounts payable included in the Assumed
Liabilities, delayed or postponed the payment of any such accounts payable or
any other liability or obligation or agreed or negotiated with any party to
extend the payment date of any accounts payable;
(j) suffered any damage, destruction or casualty loss involving
any of the Purchased Assets exceeding in the aggregate $25,000, whether or not
covered by insurance;
(k) made any change in any method of accounting or accounting
policies (including without limitation with respect to the collection of
accounts receivable) relating to the compilation of the LATEST STATEMENT OF
ASSETS AND LIABILITIES and related annualized proforma income and expense
statement, other than those required by GAAP which have been disclosed in
writing to Buyer, or made any write-down in the value of its inventory included
in the Purchased Inventory that is material;
(l) entered into any agreement or arrangement prohibiting or
restricting it from freely engaging in the Business or otherwise restricting the
conduct of the Business;
(m) agreed, whether orally or in writing, to do any of the
foregoing.
3.12 CONTRACTS AND COMMITMENTSAND COMMITMENTS.
(a) Except as expressly contemplated by this Agreement or as set
forth on the attached CONTRACTS SCHEDULE, the Seller is not a party to or bound
by any of the following, whether written or oral which relate to either an
Assumed Liability or a Purchased Asset:
(i) pension, profit sharing, stock option, employee stock
purchase or other plan or arrangement providing for deferred or other
compensation to employees or any other employee benefit plan,
arrangement or practice, whether formal or informal;
17
(ii) collective bargaining agreement or any other contract
with any labor union, or severance agreements, programs, policies or
arrangements;
(iii) any written management agreement, contract for the
employment of any officer, individual employee or other Person on a
full-time, part-time, consulting or other basis providing annual cash
or other compensation in excess of $25,000 or providing for the
payment of any cash or other compensation or benefits upon the
consummation of the transactions contemplated hereby;
(iv) except for any Immaterial Assumed Contract, any
contract or agreement requiring the consent of any Party thereto upon
a sale of the Purchased Assets, or containing any provision which
would result in a modification of any rights or obligations of any
party thereunder upon a sale of the Purchase Assets or which would
provide any party any remedy (including rescission or liquidation
damages) in the event of a sale of the Purchased Assets;
(v) contract under which it has advanced or loaned monies
to any other Person or otherwise agreed to advance, loan or invest any
funds (other than advances to Seller's employees and credit extended
to third parties in the ordinary course of business consistent with
past practice);
(vi) agreement or indenture relating to borrowed money or
other Indebtedness or the mortgaging, pledging or otherwise placing a
Lien on any material Purchased Asset or material group of Purchased
Assets or any letter of credit arrangements relating to the Business;
(vii) guaranty of any obligation for borrowed money or
otherwise (other than endorsements made for collection in the ordinary
course of business);
(viii) lease or agreement under which Seller is lessee of or
holds or operates any property, real or personal, owned by any other
Person, except for any lease of personal property under which the
aggregate annual rental payments do not exceed $25,000;
(ix) lease or agreement under which Seller is lessor of or
permits any third party to hold or operate any property, real or
personal, owned or controlled by Seller;
(x) license or royalty agreements;
(xi) nondisclosure or confidentiality agreements;
18
(xii) local service agreements (including cleaning or guard
service) and maintenance agreements (including vehicle and equipment
maintenance agreements) involving annual payments individually in
excess of $25,000;
(xiii) contract or group of related contracts with the
same party or group of affiliated parties for the purchase of raw
materials, commodities, supplies, products, equipment or other
personal property or for the receipt of services under which the
undelivered balance of such products and services has a selling price
in excess of $25,000;
(xiv) contract or group of related contracts with the same
party or group of affiliated parties for the sale of raw materials,
commodities, supplies, products or other personal property or for the
furnishing of services under which the undelivered balance of such
products or services due from Buyer has a selling price in excess of
$25,000;
(xv) other contract or group of related contracts with the
same party or group of affiliated parties continuing over a period of
more than six months from the date or dates thereof, not terminable by
Seller upon 30 days' or less notice without penalty or involving more
than $25,000;
(xvi) contract relating to the marketing, sale, advertising
or promotion of its products which requires payments in excess of
$25,000 per year;
(xvii) agreements relating to the ownership of or
investments in any business or enterprise, including investments in
joint ventures and minority equity investments;
(xviii) assignment, license (other than implied licenses to
suppliers), indemnification or other agreement with respect to any
intangible property (including any material Intellectual Property
Rights);
(xix) broker, agent, sales representative, sales or
distribution agreement or agreement relating to the export and/or
import of any goods or equipment;
(xx) noncompetition agreement prohibiting the Seller from
freely engaging in the Business or competing with respect to the
Business anywhere in the world; or
(xxi) other agreement which is material to its operations
or business prospects or involves an annual consideration in excess of
$100,000, whether or not in the ordinary course of business.
(b) Except as set forth on the CONTRACTS SCHEDULE, neither Seller
nor, to Seller's knowledge, any other party is in default under any of such
listed contracts except for breaches or
19
defaults which individually or in the aggregate could not reasonably be
expected to result in any Material Adverse Effect. Seller has not received
any written notice of any claim that Seller is in breach of or default under
any such listed contract, the dispute as to which is continuing as of the
date hereof, and to Seller's knowledge, and there is no basis for a claim
that Seller is in material breach or default under any such listed contract
or agreement. To Seller's knowledge, no event has occurred which constitutes
or, with the lapse of time or the giving of notice, or both, would constitute
a material breach or default by Seller or by any other party under any such
listed contract or agreement.
(c) The Buyer's special counsel has been supplied with a true and
correct copy of each of the written instruments, plans, contracts and agreements
and an accurate description of each of the oral arrangements, contracts and
agreements which are referred to on the attached CONTRACTS SCHEDULE, together
with all amendments, waivers or other changes thereto.
3.13 INTELLECTUAL PROPERTY RIGHTS.
(a) The attached INTELLECTUAL PROPERTY SCHEDULE contains a
complete and accurate list of all (i) patented or registered Intellectual
Property Rights owned or, to Seller's knowledge, used by Seller, and
(ii) pending patent applications and applications for other registrations of
Intellectual Property Rights filed by or on behalf of Seller, in each case where
the applicable Intellectual Property Right is material to the Business. The
attached INTELLECTUAL PROPERTY SCHEDULE also contains a complete and accurate
list of all written licenses and other rights granted by Seller to any third
party with respect to any such material Intellectual Property Rights and all
written licenses and other rights granted by any third party to Seller with
respect to any such material Intellectual Property Rights, in each case
identifying the subject Intellectual Property Rights. Except as set forth on the
attached INTELLECTUAL PROPERTY SCHEDULE, no loss or expiration of any such
material Intellectual Property Right is pending or, to Seller's knowledge,
threatened. Seller has taken commercially reasonable steps to maintain and
protect such material Intellectual Property Rights.
(b) Except as set forth on the attached INTELLECTUAL PROPERTY
SCHEDULE, (i) there have been no claims made or (in the past eighteen (18)
months), to Seller's knowledge, threatened against Seller asserting the
invalidity, misuse or unenforceability of any of the Intellectual Property
Rights set forth on the INTELLECTUAL PROPERTY SCHEDULE, (ii) Seller has not
received any notices of any infringement or misappropriation by, or conflict
with, any third party with respect to any Intellectual Property Rights listed on
the INTELLECTUAL PROPERTY SCHEDULE (including any demand or request that Seller
license any rights from a third party), (iii) to Seller's knowledge, the conduct
of the Business has not infringed, misappropriated or conflicted with and does
not infringe, misappropriate or conflict with any Intellectual Property Rights
of other Persons, and (iv) to Seller's knowledge, the Intellectual Property
Rights listed on the INTELLECTUAL PROPERTY SCHEDULE owned by or licensed to
Seller have not been infringed or misappropriated by other Persons.
20
(c) Seller owns or has licenses to use all computer software
currently used by the Business except for licenses the absence of which could
not reasonably be expected to result in a Material Adverse Effect.
3.14 AFFILIATED TRANSACTIONS. Except as set forth on
the attached AFFILIATED TRANSACTIONS SCHEDULE, with respect to the Business, no
officer, director, member, employee or Affiliate of Seller or, to Seller's
knowledge, any individual related by blood, marriage or adoption to any such
individual or any entity in which any such Person or individual owns any
material beneficial interest, is a party to any material agreement, contract,
commitment or transaction with Seller or has any material interest in any
Purchased Assets.
SECTION 4. AUTHORITY OF SELLER MEMBERS; CONSENTS AND APPROVALS; NO
VIOLATION. Each of the Seller Members has the requisite authority and legal
right to execute and deliver this Agreement and otherwise to perform its
obligations hereunder. The execution and delivery of this Agreement has been
duly authorized by the shareholders and/or board of directors (in each case,
as required under such Seller Member's articles of incorporation and/or
bylaws) of such Seller Member, and no other corporate proceeding or action on
the part of such Seller Member is necessary to authorize this Agreement.
This Agreement has been (or upon Closing will be) validly executed and
delivered by such Seller Member and constitute valid and binding obligations
of such Seller Member, except to the extent that the binding nature thereof
may be subject to the limitations which might result from bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to
creditors' rights now or thereafter in effect, and except for the limitations
on the remedy of specific performance and other forms of equitable relief.
The execution and delivery of this Agreement by each Seller Member hereunder
and thereunder do not and will not violate any provision of such articles of
incorporation. The execution and delivery of this Agreement by each Seller
Member do not and will not violate any statute, rule or regulation, any order
or decree of any public body, agency, court or authority by which such Seller
Member or any of its property, is bound, or violate, conflict with, result in
a breach of or constitute (with or without due notice or lapse of time) a
default under any agreement, license, contract, franchise, permit, indenture,
lease, or other instrument to which such Seller Member is a party, except for
such violations or conflicts, breaches or default which could not reasonably
be expected to have a Material Adverse Effect. It is understood and
acknowledged by the parties hereto that the representations set forth in this
Section 4 are made severally (and not jointly) by each Seller Member).
SECTION 5. REPRESENTATIONS AND WARRANTIES OF BUYER. To induce
Seller to enter into this Agreement and to consummate the transactions
contemplated hereunder, Buyer represents and warrants to Seller as follows
(unless otherwise stated in the following representations and warranties, all
such representations and warranties are true and correct as of the date
hereof).
5.1 ORGANIZATION. Buyer is a limited liability company, duly
organized, validly existing and in good standing under the laws of the State
of Delaware and has all requisite corporate power and authority to own, lease
and operate its properties and to carry on its business as now being
conducted, and is duly qualified and in good standing to do business in each
jurisdiction in
21
which the nature of its business or the ownership or leasing of its
properties makes such qualification necessary, or if not so duly qualified,
its failure to be so qualified will not have a Material Adverse Effect on its
business, operations or financial condition.
5.2 AUTHORITY; CONSENTS AND APPROVALS; NO VIOLATION. Buyer has
full limited liability company power and authority to execute and deliver
this Agreement and all other agreements, instruments or other documents
executed by Buyer in connection herewith ("BUYER DOCUMENTS") to purchase the
Purchased Assets and to perform its obligations and consummate the
transactions contemplated hereunder and thereunder. The execution and
delivery of this Agreement and each of the other Buyer Documents and the
consummation of the transactions contemplated hereby and thereby have been
duly authorized by Buyer, and no other limited liability company proceeding
on the part of Buyer is necessary to authorize such agreements or such
transactions. This Agreement and each of the other Buyer Documents has been
(or upon Closing will be) duly and validly executed and delivered by Buyer
and constitute valid and binding obligations of Buyer except to the extent
that the binding nature thereof may be subject to the limitations which might
result from bankruptcy, insolvency, reorganization, moratorium or other
similar laws relating to creditors' rights now or thereafter in effect, and
except for the limitations on the remedy of specific performance and other
forms of equitable relief. Except for compliance with the notification
requirements and expiration or early termination of the waiting period under
the HSR Act, no permit, authorization, consent or approval of or declaration
or filing with any public body, court or authority within the United States
is necessary for the consummation by Buyer of the transactions contemplated
hereunder or under the other Buyer Documents. The execution and delivery of
this Agreement and the other Seller Documents and the consummation of the
transactions contemplated hereunder and thereunder, will not violate any
provision of Buyer's certificate of formation or operating agreement, any
statute, rule or regulation, any order or decree of any public body, agency,
court or authority by which Buyer is bound or violate or conflict with,
result in a breach of or constitute (with or without due notice or lapse of
time) a default under any license, contract, franchise, permit, indenture,
lease, agreement or other instrument to which Buyer is a party, or by which
it or any of its proerties is bound, and which is material to the business of
Buyer taken as a whole.
5.3 BROKER. Buyer has not engaged any agent, broker or other
Person acting pursuant to its authority Buyer who may be entitled to any
commission or finder's fee in connection with this Agreement or the
transactions contemplated hereunder. There are no actions, suits or judicial,
administrative or arbitration proceedings or investigations pending or, to
Buyer's knowledge, threatened before any court or governmental or
administrative body or agency against Buyer relating to the transactions
contemplated by this Agreement or the other Buyer Documents.
5.4 LITIGATION. There are no actions, suits or judicial,
administrative or arbitration proceedings or investigations pending or, to
Buyer's knowledge, threatened before any court or governmental or administrative
body or agency against Buyer relating to the transactions contemplated by this
Agreement or the other Buyer Documents.
22
SECTION 6. ADDITIONAL AGREEMENTS OF SELLER. Seller covenants
and agrees with Buyer as follows:
6.1 ACCESS TO PROPERTIES AND RECORDS. Seller shall continue to
permit Buyer and its representatives (at Buyer's sole cost and expense), from
and after the date of execution of this Agreement through the Closing Date,
reasonable access during normal business hours to all of the properties,
books, contracts, documents and records of Seller relating to the Business,
the opportunity to continue to inspect, copy and question appropriate
employees of Seller concerning such books and records, and to otherwise
continue to make reasonable investigation of Seller, the Business and the
Purchased Assets, and to furnish to Buyer and its representatives any
additional available financial statements of, and all reasonable information
with respect to the Business that Buyer or its representatives may request.
6.2 CONDUCT OF BUSINESS PENDING THE CLOSING. Until the Closing,
Seller will use reasonable efforts to preserve the Business organization
intact and will use reasonable efforts to retain all present key employees.
Except as otherwise permitted or contemplated by this Agreement or as
consented to by Buyer in writing, and to the extent within Seller's
reasonable control, until the Closing the Seller shall not take any of the
actions set forth in Section 3.11 above, and the Business will otherwise be
conducted only in the ordinary course and in continued compliance with all
applicable laws, regulations and administrative orders of any state or
municipality the noncompliance with which could, individually or in the
aggregate, have a Material Adverse Effect. Furthermore, Seller shall use its
reasonable efforts to keep available to the Business the goodwill of
advertisers and customers having business relations with the Business, and
the Seller shall refrain from taking any action to dissuade any of the
employees (in whom Buyer has expressed in writing prior to the date hereof an
interest in hiring as of the Closing Date), agents, advertisers, customers,
clients, representatives, distributors, creditors and suppliers of the
Business from remaining associated with, or of inducing any of the foregoing
persons to terminate an association with, the Business.
6.3 SELLER'S PROVISION OF SERVICES TO BUYER DURING TRANSITION
PERIOD.
(a) During the period commencing on the Closing Date and ending
on December 31, 1998 (the "TRANSITION PERIOD"), Seller shall continue to
employ those of its employees who have worked for the Business prior to the
date hereof and whom Buyer has identified as employees it desires to employ
(collectively, the "TRANSITION EMPLOYEES"), and during such Transition
Period, Seller shall continue to pay each Transition Employee the same wage
or salary as Seller paid each such employee immediately prior to the Closing
Date, and Seller shall keep in place and make available to each Transition
Employee the same health, profit-sharing, disability, and other employee
benefit plans as Seller had in place and made available for such employee
immediately prior to the Closing Date. In addition, during the Transition
Period Seller shall continue to maintain all insurance policies with respect
to the Transition Employees as Seller maintained prior to the Closing.
23
(b) During the Transition Period, Seller shall, on an
independent contractor basis, cause such the Transition Employees to provide
the same general services for the Buyer with respect to the Business as such
employees provided with respect to the Business prior to the Closing Date.
As soon as practicable after the expiration of the Transition Period, Seller
shall provide Buyer with an invoice (and a detailed accounting) for all
direct out-of-pocket costs and expenses incurred by Seller in connection with
Seller's provision of services to Buyer during the Transition Period
(including without limitation wages, salaries, and any other out-of-pocket
expenses and liabilities incurred by Seller as a direct result of Seller's
continued employment of the Transition Employees and the provision of
services to Buyer during the Transition Period), and Buyer shall, within ten
(10) days after its receipt of such invoice, pay to Seller all undisputed
amounts set forth on such invoice by check or wire transfer to an account
designated by Seller. Seller and Buyer shall cooperate in good faith to
resolve any disputed amounts set forth on such invoice, and Buyer shall
promptly pay all remaining amounts owed Seller promptly after the resolution
thereof.
(c) The Buyer agrees to indemnify, defend, and hold the Seller
harmless from any Adverse Consequences that may be suffered by Seller or any
third party as a result of Seller's retention of the Transition Employees
during the Transition Period, the provision of services to Buyer as described
in this Section 6.3, or the Transition Employees' working on the Seller's
premises during and after the Transition Period. Seller shall not be
responsible for the performance of the services provided by the Transition
Employees.
(d) Buyer shall offer employment or independent contractor
positions to each of the Transition Employees, and each Transition Employee
who accepts such offer shall become an employee or independent contractor of
Buyer as of January 1, 1999.
(e) Buyer shall cause the Transition Employees to vacate the
premises of the Seller on or before January 31, 1999.
6.4 FURTHER TRANSFERS; TRANSITION ASSISTANCE.
(a) The Seller shall execute and deliver such further
instruments of conveyance and transfer and take such additional action as
Buyer may reasonably request to effect, consummate, confirm or evidence the
transfer to Buyer of the Purchased Assets, the assumption by Buyer of the
Assumed Liabilities and the conduct by Buyer of the Business (including with
respect to obtaining and maintaining all licenses, permits, authorizations,
accreditations and consents necessary or desirable in connection therewith),
and Seller shall, at Buyer's expense, execute such documents as may be
necessary to assist Buyer in preserving or perfecting its rights in the
Purchased Assets and its ability to conduct the Business. Without limiting
the generality of the foregoing, Seller and Buyer agree to cooperate with
each other after the Closing and to provide each other with all information,
records and documentation reasonably necessary (i) to permit the preparation
and filing of all federal, state, local, and other tax returns, (ii) in
connection with any financial reporting, accounting, litigation and tax
matters with respect to the Business; and (iii) for purposes of evaluating
the
24
Buyer's Reconciliation Statement; PROVIDED THAT each party shall reimburse
the other party for such other party's reasonable out-of-pocket expenses in
connection therewith. Seller may retain copies of all books, records, files
and other documents included in the Purchased Assets for the purposes set
forth above.
(b) From the date hereof, the Seller shall not in any manner
take or cause to be taken any action which is designed or intended, or which
would be reasonably anticipated to have the effect of, discouraging
customers, suppliers, referral sources, governmental agencies, insurance
companies, lessors, consultants, advisors and other business associates from
maintaining the same business relationships with Buyer or the Business after
the date of this Agreement as were maintained with the Business prior to the
date of this Agreement. Seller agrees that subsequent to the Closing it
shall refer all customer inquiries with respect to the Business to Buyer.
(c) Upon Seller's reasonable request, Buyer shall cooperate with
Seller after the Closing Date to make available to Seller the services of
Xxxxxxx Xxxxxx. Buyer and Seller shall negotiate a reasonable fee associated
with such services.
(d) At Buyer's request, Seller shall provide Buyer with certain
reprint fulfillment services for the Purchased Magazines for a period not to
exceed 90 days after the Closing Date. Seller shall receive fifty percent
(50%) of all profits from such reprint fulfillment services after being
reimbursed for all direct costs (including commissions) associated with such
services.
(e) At Buyer's request Seller shall take all reasonable steps
and execute all necessary documents in order to assist the Buyer in
effectuating the transfer to Buyer of all Intellectual Property Rights
included in the Purchased Assets. Without limiting the generality of the
foregoing sentence, if Buyer determines after the Closing Date that any such
Intellectual Property Rights purportedly assigned by Seller hereunder are
owned by any third party (including without limitation any member, Affiliate
or subsidiary of Seller), then promptly upon reasonable written request from
Buyer, Seller shall assist Buyer in obtaining such third party assignments of
Intellectual Property Rights.
6.5 LICENSING OF CERTAIN COPYRIGHTED MATERIALS. Seller hereby
licenses to Buyer on a royalty-free, nonexclusive, perpetual basis, any and
all photographs, material articles and other copyrighted materials owned by
Seller which were used in the Purchased Magazines on or prior to the Closing
Date to the extent any such materials are not included in the Purchased
Assets. Buyer agrees to use such materials solely in the conduct of the
Business. Buyer may assign the foregoing license to any successor, assign or
purchaser of the Business.
6.6 COOPERATION WITH RESPECT TO XX XXXXXXXXX AGREEMENT. The
Buyer and Seller hereby acknowledge that the Seller is obligated under that
certain Agreement, dated September 15, 1998 (the "DONNELLEY AGREEMENT"), by
and between CurtCo Freedom Group and XX Xxxxxxxxx & Sons Company
("DONNELLEY") to seek Donnelley's consent to assign its right under the
Donnelley Agreement to a buyer of any of the magazines governed by the
Donnelley Agreement, and that upon
25
receipt of such consent by Donnelley Seller is obligated to cause said buyer
to assume all of Seller's obligations under the Donnelley Agreement with
respect to magazines purchased by buyer. Seller recognizes that Buyer
desires to avoid the assumption of Seller's obligations (with respect to
MOBILE COMPUTING AND COMMUNICATION and PORTABLE COMPUTING DIRECT SHOPPER)
under the Donnelley Agreement, and Seller therefore agrees (a) that it will
not require Buyer to expressly assume the Donnelley Agreement under this
Agreement, (b) that it will assist Buyer in its efforts after the Closing
Date to obtain Donnelley's waiver (with respect to Buyer's Purchase of the
Purchased Assets hereunder) of the provisions in the Donnelley Agreement
which require Seller to seek consent to assignment of its rights under the
Donnelley Agreement and which require a buyer of any magazines governed by
such agreement to assume Seller's obligations thereunder; PROVIDED HOWEVER,
if Buyer is unable to obtain said waiver from Donnelley within forty-five
(45) days following the Closing Date, if so requested by Donnelley, and if
necessary to prevent Seller from incurring liability under the Donnelley
Agreement as a result of Buyer's not having assumed the Donnelley Agreement
under this Agreement, Buyer shall assume the Donnelley Agreement with respect
to MOBILE COMPUTING AND COMMUNICATIONS and PORTABLE COMPUTING DIRECT SHOPPER
by executing such assumption documents that are satisfactory to Donnelley;
PROVIDED, FURTHER, that until such time as Buyer and Seller have either
obtained an acceptable waiver from Donnelley or Buyer has assumed the
obligations of Seller under the Donnelley Agreement with respect to MOBILE
COMPUTING AND COMMUNICATIONS and PORTABLE COMPUTING DIRECT SHOPPER, Buyer
shall continue to print such magazines under the Donnelley Agreement.
6.7 BUYER'S PAYMENT OF ACCOUNTS PAYABLE. Within thirty (30)
days after Buyer's receipt from Seller of accounts payable relating to
Purchased Issues for which Seller received an invoice but for which Buyer is
obligated to pay, Buyer shall pay such accounts payable unless there is a
legitimate good faith dispute as to whether such accounts payable is due and
owing and, in such event, Buyer shall promptly pay such accounts payable upon
resolution of such dispute.
6.8 SELLER'S CONTINUED DISTRIBUTION OF THEO BOOK. Seller
retains all right, title and interest in the "Theo Kalamirakis' Private Home
Theater" book ("Theo Book") and the right to publish and distribute such
book. All amounts received with respect to the Theo Book are also retained
by Seller. To the extent necessary for the foregoing, Buyer hereby grants to
Seller a royalty-free, nonexclusive, perpetual license to all Intellectual
Property Rights included in the Purchased Assets and which are used in the
Theo Book, solely for use in connection with the Theo Book. The foregoing
shall not constitute a violation of the provisions of Section 8 hereof.
6.9 LICENSE TO DISTRIBUTE WORK-IN-PROGRESS REPRINTS. The
parties acknowledge that there are certain obligations of Seller to provide
reprints of Purchased Magazines with cover dates prior to the Purchased
Issues which are currently work-in-progress reprints, and the Seller shall
retain all revenues relating to such work-in-progress. To the extent
necessary for the foregoing, Buyer hereby grants to Seller a royalty-free,
nonexclusive, perpetual license to all Intellectual property Rights included
in the issues of the Purchased Magazines related to such work-in-progress,
solely for the purpose of fulfilling such reprint obligations. The foregoing
shall not constitute a violation of the provisions of Section 8 hereof.
26
6.10 CERTAIN EMPLOYEE-RELATED OBLIGATIONS. Notwithstanding
anything contained in this Agreement to the contrary, Buyer has agreed to
hire Xxxxxx Xxxxxxxxx and Xxxxxx Xxxxxxx at least for a period equal to two
months following the end of the Transition Period, less the period of time
constituting the Transition Period. In the event that Buyer terminates the
employment of Ms. Coldwells or Xx. Xxxxxxx, or either such person voluntarily
terminates the employment relationship with Buyer, in either case prior to or
upon the expiration of the foregoing period, Seller shall be responsible for
the payment of all salary, benefits and severance to such persons who are so
terminated or who so terminated (with respect to severance only, to the
extent Seller would be obligated for the payment of the severance if such
persons had been terminated by Seller and not hired by Buyer as of the
Closing Date).
SECTION 7. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Each of
the representations and warranties of the Buyer and the Seller contained in
this Agreement shall survive the Closing and continue in full force and
effect for the length of time set forth in Section 7.1(a) below and shall in
no event be affected by any investigation, inquiry or examination made for or
on behalf of Buyer; PROVIDED THAT neither Buyer nor Seller shall be entitled
to be indemnified for a breach by the other of a representation or warranty
hereunder if at Closing it knew that the other was in breach of such
representation and warranty and it failed to notify the other of its
knowledge of such breach.
7.1 INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE BUYER GROUP.
(a) Seller shall indemnify the Buyer and its members, officers,
employees and Affiliates (collectively, the "BUYER GROUP") against and hold
them harmless from, and pay on behalf of or reimburse them as and when
incurred for, any losses, costs, damages, charges or expenses (including,
without limitation, all amounts paid in settlement in accordance with this
Section 7 and all reasonable fees of counsel incurred) (collectively,
"ADVERSE CONSEQUENCES") any of them may suffer, sustain or become subject to
as the result of, arising out of, relating to, in the nature of or caused by
(i) the breach or non-fulfillment by Seller of (or, in the event any third
party alleges facts that, if true, would mean Seller has breached or not
fulfilled) any representation, warranty, covenant or agreement contained in
this Agreement, any other Seller Document or any other instrument or document
furnished to the Buyer by the Seller pursuant to this Agreement or any other
Seller Document or (ii) the ownership or operation of the Business on or
prior to the Closing Date (subject only to Buyer's assumption of the Assumed
Liabilities). Notwithstanding anything to the contrary contained herein,
Seller shall not be required to indemnify the Buyer Group to the extent
arising from a breach of representations or warranties contained in this
Agreement or any other Seller Documents unless Buyer gives Seller written
notice of such breach prior to the 18-month anniversary of the Closing Date,
except with respect to any breach of any representation or warranty made in
Section 3.1 [Organization], Section 3.2 [Authority; Consents and Approvals; No
Violation], Section 3.4 [Purchased Assets], Section 3.13 [Intellectual Property
Rights], Section 3.14 [Affiliated Transactions], with respect to a breach of
which Buyer must give Seller written notice prior to the 36-month anniversary
of the Closing Date.
27
(b) Notwithstanding anything contained to the contrary in this
Section 7.1, (i) Seller shall not be obligated to indemnify Buyer for any
Adverse Consequences with respect to any claim arising under Section 7.1(a)
for breach of representations and warranties unless and until such time as
the aggregate amount of such Adverse Consequences arising from any and all
breaches of representations and warranties exceeds Two Hundred Seventy Five
Thousand Dollars ($275,000) ("BASKET AMOUNT"), and then only for amounts in
excess of the Basket Amount; and (ii) the maximum aggregate liability of
Seller for any and all Adverse Consequences incurred by Buyer with respect to
any claim arising under Section 7.1(a) shall not exceed an amount equal to
Twenty-five Million Dollars ($25,000,000) ("CAP AMOUNT").
(c) Each Seller Member, severally and not jointly, shall
indemnify the members of the Buyer Group against and hold them harmless from,
and pay on behalf of or reimburse them as and when incurred for any Adverse
Consequences any of them may suffer, sustain or become subject to as the
result of, arising out of, relating to, in the nature of or caused by the
breach by such Seller Member of the representations made by such Seller
Member in Section 4 hereof. Notwithstanding anything to the contrary
contained herein, a Seller Member shall not be required to indemnify the
Buyer Group to the extent arising from a breach of the Section 4
representations by such Seller Member unless Buyer gives such Seller Member
written notice of such breach prior to the 36-month anniversary of the
Closing Date. Neither Seller Member shall be responsible for the breach of
Section 4 by the other Seller Member.
7.2 INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE PROVISIONS FOR
BENEFIT OF THE SELLER. The Buyer shall indemnify the Seller and its members,
officers, employees and Affiliates (collectively, the "SELLER GROUP") and
hold them harmless from, and pay on behalf of or reimburse them as and when
incurred, any Adverse Consequences they may suffer, sustain or become subject
to as the result of, arising out of, relating to, in the nature of or caused
by the (i) a breach or non-fulfillment by the Buyer of (or, in the event any
third party alleges facts that, if true, would mean that the Buyer has
breached or not fulfilled) any representation, warranty, covenant or
agreement contained in this Agreement, any other Buyer Document or any other
instrument document or certificate delivered to Seller pursuant to this
Agreement or any other Buyer Document, (ii) any Assumed Liability, or (iii)
the ownership or operation of the Business after the Closing Date.
Notwithstanding anything contained herein to the contrary, Buyer shall not be
required to indemnify the Seller with respect to any Adverse Consequence
related to any breach of the representations or warranties contained in this
Agreement or any other Buyer Document unless Seller gives Buyer written
notice of such breach prior to the eighteen-month anniversary (as the case
may be) of the Closing Date, except with respect to any breach of any
representation or warranty made in Section 5.1 [Organization] and Section 5.2
[Authority, Consents and Approvals; No Violation], with respect to a breach
of which Seller must give Buyer written notice prior to the 36-month
anniversary of the Closing Date.
28
7.3 INDEMNIFICATION FOR EXCLUDED FOR EXCLUDED LIABILITIES.
Seller shall indemnify Buyer and hold Buyer harmless against all Excluded
Liabilities and any Adverse Consequences Buyer may suffer, sustain or become
subject to as the result of, arising out of, relating to, in the nature of or
caused by any of the Excluded Liabilities. Notwithstanding anything to the
contrary contained herein, Seller's obligations pursuant to this Section 7.3
shall not be subject to any limitation, whether as to time, amount or
otherwise.
7.4 MATTERS INVOLVING THIRD PARTIES.
(a) If any third party shall notify any party entitled to
indemnification under this Agreement ("INDEMNIFIED PARTY") with respect to
any matter (a "THIRD PARTY CLAIM") which may give rise to a claim for
indemnification against any other party hereto ("INDEMNIFYING PARTY") under
this Section 7, then the Indemnified Party shall promptly notify each
Indemnifying Party thereof in writing; PROVIDED, HOWEVER, that no delay on
the part of the Indemnified Party in notifying any Indemnifying Party shall
relieve the Indemnifying Party from any obligation hereunder unless (and then
solely to the extent) the Indemnifying Party thereby is prejudiced.
(b) Any Indemnifying Party will have the right to control the
defense of the Third Party Claim with counsel of its choice reasonably
satisfactory to the Indemnified Party so long as (i) the Indemnifying Party
notifies the Indemnified Party in writing within 15 days after the
Indemnified Party has given notice of the Third Party Claim that the
Indemnifying Party will indemnify the Indemnified Party from and against the
entirety of any Adverse Consequences the Indemnified Party may suffer
resulting from, arising out of, relating to, in the nature of, or caused by
the Third Party Claim, or if the Indemnifying Party notifies the Indemnified
Party that the Indemnifying Party will assume the defense of the Third Party
Claim while reserving its rights to contest its obligations under this
Section 7 (provided that the Indemnifying Party shall in such case provide
the Indemnified Party with a reasonable basis for so reserving its rights to
contest, and the Indemnifying Party shall promptly notify the Indemnified
Party if, upon its further review of the Third Party Claim, that it is not
obligated under this Section 7 to indemnify the Indemnified Party with
respect to such Third Party Claim), (ii) the Indemnifying Party has the
financial resources to defend the Third Party Claim, (iii) the Third Party
Claim is not of such a nature that an adverse determination of which would
have a material adverse effect on the Indemnified Party's ability to conduct
it Business in the future, and (iv) the Indemnifying Party conducts the
defense of the Third Party Claim actively and diligently.
(c) So long as the Indemnifying Party is conducting the defense
of the Third Party Claim in accordance with Section 7.4(b) above, (A) at the
expense of the Indemnified Party, the Indemnified Party may retain separate
co-counsel and participate in the defense of the Third Party Claim, (B)the
Indemnified Party will not consent to the entry of any judgment or enter into
any settlement with respect to the Third Party Claim without the prior
written consent of the Indemnifying Party (which consent shall not be
withheld unreasonably) and (C) the Indemnifying Party will not consent to the
entry or any judgment or enter into any settlement with respect to the
29
Third Party Claim without the prior written consent of the Indemnified Party
(which consent shall not be withheld unreasonably).
(d) In the event any of the conditions in Section 7.4(b)(ii),
7.4(b)(iii) and 7.4(b)(iv) above is or becomes unsatisfied, however, (A) the
Indemnified Party may defend against, the Third Party Claim and (B) the
Indemnifying Party will reimburse the Indemnified Party promptly and
periodically for the costs of defending against the Third Party Claim
(including reasonable attorneys' fees and expenses), and (C) the Indemnifying
Parties will remain responsible for any Adverse Consequences the Indemnified
Party may suffer resulting from, arising out of, relating to, in the nature
of, or caused by the Third Party Claim to the fullest extent provided in this
Section 7. The provisions of Section 7(c)(B) and (C) shall be applicable
under this Section 7(d).
7.5 DETERMINATION OF ADVERSE CONSEQUENCES. The parties shall
take into account the time cost of money (using the prime rate published from
time-to-time in the WALL STREET JOURNAL as the discount rate) in determining
Adverse Consequences for purposes of this Section 7. The parties shall also
take into account any tax savings realized by the Indemnifying Party
resulting from any Adverse Consequences. Any indemnification obligations of
any party under this Section 7 shall be reduced by any insurance proceeds
received by the Indemnified Party with respect to the Adverse Consequences
giving rise to such indemnification obligation, except for purposes of
Section 7.1(b) above.
7.6 EXCLUSIVE REMEDY. Following the Closing, the
indemnification obligations of this Section 7 shall be the exclusive remedy
for breaches under this Agreement and any other Buyer Document or Seller
Document, and no other remedy shall be had in contract, tort or otherwise
with respect to breaches of this Agreement.
7.7 SELLER MEMBERS' OBLIGATION WITH RESPECT TO PURCHASED
ACCOUNTS RECEIVABLES. Each of the Seller Members hereby severally (and not
jointly) guarantees the payment obligations of the Seller (if any) under
Section 1.7(d) above as follows: if the Seller fails to make a required
payment under Section 1.7(d) above within the time period set forth in such
section, then, within two (2) business days after the expiration of such
time period, each Seller Member shall deliver to Buyer in immediately
available funds to an account designated by Buyer an amount equal to fifty
percent (50%) of the amount owed by Seller under such section.
7.8 OBLIGATIONS UNDER SECTION 8. Notwithstanding any to the
contrary in this Agreement, the obligations of each of the Restricted Parties
and under Section 8 are several, and not joint, obligations of each
Restricted Party. None of the Restricted Parties shall be responsible for
the compliance with, or liable for the breach of, any provision of Section 8
by another Restricted Party.
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SECTION 8. COVENANT NOT TO COMPETE, SOLICIT
8.1 NONCOMPETITION. Each of Seller, Xxxxxxx X. Xxxxxx, Freedom
Magazines, Inc. and CurtCo Publishing (collectively the "RESTRICTED PARTIES")
agrees that during the period beginning on the Closing Date and ending on the
third anniversary of the Closing Date (the "NON-COMPETITION PERIOD"), it
shall not, directly or indirectly, either for itself or for any other Person,
permit its name to be used by or participate in the business of (i)
publishing any periodical or other document substantially similar to any of
the Purchased Magazines, and (ii) conducting trade shows substantially
similar to the Show (collectively, the "RESTRICTED ACTIVITIES") anywhere in
the United States. For purposes of this Agreement, the term "participate"
includes any direct or indirect interest in any enterprise, whether as a
partner, sole proprietor, agent, representative, independent contractor,
consultant, franchisor, franchisee, creditor, owner or otherwise; PROVIDED
that the term "participate" shall not include ownership of less than 2% of
the stock of a publicly-held corporation whose stock is traded on a national
securities exchange or in the over-the-counter market. Each of the Restricted
Parties agrees that this covenant is reasonable with respect to its duration,
geographical area and scope. The parties acknowledge that Seller's magazines
entitled HOME OFFICE COMPUTING, SALES & FIELD FORCE AUTOMATION, SMALL
BUSINESS COMPUTING, FIELD FORCE AUTOMATION and KNOWLEDGE MANAGEMENT
(including any related custom publishing and newsletters) do not constitute
magazines substantially similar to the Purchased Magazines.
8.2 NO SOLICITATION; NO HIRE. During the first twelve (12)
months of the Non-Competition Period, none of the Restricted Parties shall
(i) induce or attempt to induce any employee of Buyer or any of its
subsidiaries who was a former employee of Seller related to the Business and
hired by Buyer as of the Closing Date to leave his or her employ with Buyer
or any Buyer subsidiary. The Restricted Parties shall not induce or attempt
to induce any employee of Buyer or any of its subsidiaries to leave his or
her employ or in any way interfere with the relationship between Buyer or any
of its subsidiaries and any such former Buyer employee (ii) hire any person
who (A) was an employee of Buyer or any subsidiary at any time or (B) was an
employee of Seller prior to being hired by Buyer (unless such employee was
terminated by Buyer or such employee first terminated his or her employment
relationship with Buyer (and such termination by the employee occurred at
least ninety (90) days prior to such employee's being hired by a Restricted
Party)) , without the express prior written consent of Buyer, which consent
shall not be unreasonably refused or withheld or (iii) induce or attempt to
induce any supplier, licensee, licensor or franchisee of Buyer or any of its
subsidiaries with the intent to cause them to cease doing business with them
with respect to the Purchased Magazines or in any way interfere with the
relationship between Buyer or any of its subsidiaries and any such person
with such intent (including without limitation, making any negative
statements or communications about Buyer, its Affiliates or its
subsidiaries). The parties acknowledge that inducing or attempting to induce
any supplier, licensor, franchisee or other business relationship in the
ordinary course of business to (i) provide products or services to any of the
parties bound by this Section 8.2 in connection with any existing or future
publications, shows or other products or services or (ii) obtain products or
services from any such party shall not constitute a breach of the foregoing
provisions of this Section 8.2.
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8.3 EQUITABLE RELIEF. Seller hereby agrees and acknowledges that
Buyer has protectable interests (in the form of trade secrets, strategy,
customer lists, etc.) relating to the Business, and that Buyer would suffer
irreparable harm from a breach by Seller of any of the covenants or
agreements contained in this Section 8. In the event of an alleged or
threatened breach by Seller of any of the provisions of this Section 8, Buyer
or its successors or assigns may, in addition to all other rights and
remedies existing in its favor, apply to any court of competent jurisdiction
for specific performance and/or injunctive or other relief in order to
enforce or prevent any violations of the provisions hereof. Seller agrees
that these restrictions are reasonable.
8.4 LIMITED APPLICATION OF PROVISIONS WITH RESPECT TO FREEDOM
MAGAZINES, INC. The provisions of this Section 8 shall not apply to any
Affiliate of Freedom Magazines, Inc., either directly or indirectly, other
than wholly-owned subsidiaries of Freedom Magazines, Inc. and other business
entities which are controlled by Freedom Magazines, Inc.
8.5 COLLECTION OF ACCOUNTS RECEIVABLE. The parties acknowledge
that the collection of accounts receivable by Seller or any assignee or
successor thereof, including the collection of Purchased Accounts Receivable,
shall not constitute a violation of any of the provisions of this Section 8.
SECTION 9. DEFINITIONS. Wherever used in this Agreements the
following terms and phrases have the following respective meanings:
"ACCOUNTING FIRM" has the meaning set forth in Section 1.7(c) hereof.
"ADVERSE CONSEQUENCES" has the meaning ascribed thereto in Section
7.2(a) hereof.
"AFFILIATE" shall mean, with respect to any Person, (i) each Person
that, directly or indirectly, owns or controls, whether beneficially, or as a
trustee, guardian or other fiduciary, 25% or more of the stock having
ordinary voting power in the election of directors of such Person, (ii) each
Person that controls, is controlled by or is under common control with such
Person or any Affiliate of such Person, and (iii) each of such Person's
officers, directors, joint venturers and partners. For the purpose of this
definition, "CONTROL" of a Person shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of its management
or policies, whether through the ownership or voting securities, by contract
or otherwise.
"AGREEMENT" has the meaning set forth in the preamble hereof.
"ASSUMED CURRENT LIABILITIES" means all of Seller's current
liabilities and other liabilities relating to the Purchased Issues as of the
Closing Date, the estimated amounts of which will be reflected on the CLOSING
DATE STATEMENT OF ASSETS AND LIABILITIES.
"ASSUMED LIABILITIES" has the meaning ascribed thereto in Section
1.3(a).
00
"XXXXXX XXXXXX" has the meaning ascribed thereto in Section 7.2(b).
"BUSINESS" has the meaning set forth in the recitals hereof.
"BUYER" has the meaning set forth in the preamble hereof.
"BUYER DOCUMENTS" has the meaning set forth in Section 5.2 hereof.
"BUYER GROUP" has the meaning ascribed thereto in Section 7.2(a).
"BUYER'S RECONCILIATION STATEMENT" has the meaning set forth in
Section 1.7(b) hereof.
"CAP AMOUNT" has the meaning ascribed thereto in Section 7.2(b).
"CLOSING" has the meaning set forth in Section 1.4 hereof.
"CLOSING DATE" has the meaning set forth in Section 1.4 hereof.
"CLOSING DATE CASH PAYMENT" has the meaning set forth in Section 1.5
hereof.
"CLOSING DATE STATEMENT OF ASSETS AND LIABILITIES" has the meaning set
forth in Section 1.6 hereof.
"CODE" means the Internal Revenue Code of 1986, as amended.
"ESTIMATED PURCHASED CURRENT ASSETS PRICE" means the sum of the
estimated Purchased Accounts Receivable, Estimated Purchased Inventories,
estimated Purchased Prepaids as set forth on the CLOSING DATE STATEMENT OF
ASSETS AND LIABILITIES.
"EXCLUDED ASSETS" has the meaning ascribed thereto in Section 1.2
hereof.
"EXCLUDED LIABILITIES" has the meaning ascribed thereto in Section
1.3(b) hereof.
"EXCLUDED RECEIVABLES" has the meaning ascribed thereto in Section
1.2(ix) hereof.
"GAAP" means generally accepted accounting principles in the United
States as in effect at such time with respect to any determination time.
"GOVERNMENT APPROVALS" has the meaning set forth in Section 2.1(e)
hereof.
"GOVERNMENT LICENSES" has the meaning ascribed thereto in Section
1.1(x).
00
"XXX XXX" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended.
"IMMATERIAL ASSUMED CONTRACT" means an agreement or other
obligation (i) having a remaining term of less than six (6) months or
terminable upon 30 days' or less notice, (ii) constituting obligations of
Seller of $25,000 or less and (iii) relating to the Purchased Issues.
"INDEMNIFIED PARTY" has the meaning set forth in Section 7.5(a)
hereof.
"INDEMNIFYING PARTY" has the meaning set forth in Section 7.5(a).
"INTELLECTUAL PROPERTY RIGHTS" means all of the following which are
owned by or licensed to Seller and which are used exclusively in the
Business, together with all income, royalties, damages and payments due or
payable as of the Closing or thereafter (including damages and payments for
past, present or future infringements or misappropriations thereof, the right
to xxx and recover for past infringements or misappropriations thereof and
any and all corresponding rights that, now or hereafter, may be secured
throughout the world): patents, patent applications, patent disclosures and
inventions (whether or not patentable and whether or not reduced to practice)
and any reissue, continuation, continuation-in-part, revision, extension or
reexamination thereof; trademarks, service marks, trade dress, logos and
trade names, together with all goodwill associated therewith and all
translations, adaptations, derivations and combinations of the foregoing;
copyrights and copyrighted works; mask works; and all registrations,
applications and renewals for any of the foregoing; trade secrets and
confidential and proprietary information (including ideas, formulae, recipes,
compositions, know-how, related processes and techniques, research and
development information, drawings, specifications, designs, plans, proposals
and technical data and manuals); referral source lists and related
information; and computer software (including data and related
documentation); together with all associated goodwill with respect thereto
and all books, records, drawings or other indicia, however evidenced; in each
case including the items set forth on the attached INTELLECTUAL PROPERTY
SCHEDULE.
"LATEST STATEMENT OF ASSETS AND LIABILITIES" has the meaning set
forth in Section 3.10 hereof.
"LIEN RELEASES" has the meaning set forth in Section 2.1(c) hereof.
"LIENS" means any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind, including without limitation, any conditional
sale or other title retention agreement, any lease in the nature thereof and
the filing of or agreement to give any financing statement under the Uniform
Commercial Code of any jurisdiction and including any lien or charge arising
by statute or other laws, which secures the payment of a debt (including
without limitation, any Tax) or the performance of an obligation.
34
"MATERIAL ADVERSE EFFECT" means a material adverse effect on the
Purchased Assets or an event which would prevent Seller from consummating the
transactions contemplated by this Agreement.
"NON-COMPETITION PERIOD" has the meaning ascribed thereto in
Section 8.1 hereof.
"NOTICE OF OBJECTION" has the meaning set forth in Section 1.7(c)
hereof.
"PERMITTED LIENS" means (i) liens securing the obligations of
Seller reflected as liabilities on the Closing Date Balance Sheet, to the
extent not satisfied after such date, and expressly assumed by Buyer pursuant
to Section 1.2(a) hereof, (ii) other imperfections of title, restrictions or
encumbrances, if any, which imperfections, restrictions or encumbrance which
do not, individually or in the aggregate, impair the continued use and
operation of the Purchased Assets to which they relate and do not affect the
merchantability of the title to the Purchased Assets to which they relate;
(iii) liens for current Taxes not yet due or payable; (iv) mechanic's or
materialman's liens or similar statutory liens for amounts not yet due or
payable; and (v) purchase money security interests or liens.
"PERSON" means an individual, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization and a government entity or any
department, agency or political subdivision thereof.
"PURCHASED ACCOUNTS RECEIVABLES" means Seller's advertising
receivables, list rental receivables, newsstand receivables and net
direct-to-dealer receivables related exclusively to the Purchased Magazines
and aged less than 180 days as of the Closing Date, the estimated amounts of
which will be reflected on the CLOSING DATE STATEMENT OF ASSETS AND
LIABILITIES.
"PURCHASED ASSETS" has the meaning ascribed thereto in Section 1.1
hereof.
"PURCHASED CURRENT ASSETS" means the Purchased Accounts Receivable,
the Purchased Inventories, and the Purchased Prepaids.
"PURCHASED CURRENT ASSETS HOLDBACK" means the amount of $500,000
which Buyer shall holdback and retain from the Estimated Purchased Current
Assets Price which shall otherwise be paid to Seller on the Closing Date.
The Purchased Current Assets Holdback Amount shall be retained by Buyer
pending the reconciliation of the Purchased Current Assets pursuant to
Sections 1.6 and 1.7.
"PURCHASED INVENTORIES" means Seller's paper inventory (i) held by
the Seller as of the Closing Date, (ii) related to the Purchased Issues with
cover dates of February and March 1999 (plus up to a one-third overage above
such inventories), (iii) for which the Seller has previously paid the
supplier (and for which, therefore, the Buyer is not assuming an accounts
35
payable with respect to and (iv) the estimated amount of which is set forth
on the CLOSING DATE STATEMENT OF ASSETS AND LIABILITIES.
"PURCHASED ISSUES" means the following issues of the Purchased
Magazines and any issues of the Purchased Magazines published after the listed
issue cover date with respect to each Purchased Magazine:
Purchased Magazine Issue Cover Date
------------------ ----------------
HOME THEATER MAGAZINE February 1999
HOME THEATER INTERIORS MAGAZINE Summer 1999
HOME THEATER BUYER'S GUIDE SERIES Spring 1999
DIGITAL HOME ENTERTAINMENT MAGAZINE Spring 1999
MOBILE COMPUTING & COMMUNICATIONS MAGAZINE February 1999
THE ESSENTIAL GUIDE TO COMPANY-WIDE
DEPLOYMENT OF MOBILE TECHNOLOGY January 2000
PORTABLE COMPUTING MAGAZINE February 1999
"PURCHASED MAGAZINES" means HOME THEATER MAGAZINE, HOME THEATER
INTERIORS MAGAZINE, HOME THEATER BUYER'S GUIDE SERIES, DIGITAL HOME
ENTERTAINMENT MAGAZINE, MOBILE COMPUTING & COMMUNICATIONS MAGAZINE, THE
ESSENTIAL GUIDE TO COMPANY-WIDE DEPLOYMENT OF MOBILE TECHNOLOGY and PORTABLE
COMPUTING MAGAZINE.
"PURCHASED PREPAIDS" means all of Seller's prepaid items related to
the Purchased Issues as of the Closing Date, the estimated amounts of which
as of the Closing Date will be reflected in the CLOSING DATE STATEMENT OF
ASSETS AND LIABILITIES.
"RESTRICTED ACTIVITIES" has the meaning ascribed thereto in Section
8.1 hereof.
"SELLER GROUP" has the meaning ascribed thereto in Section 7.3
hereof.
"SELLER DOCUMENTS" has the meaning set forth in Section 3.2 hereof.
"SELLER MEMBERS" shall mean CurtCo Publishing and Freedom
Magazines, Inc.
"SHOW" has the meaning ascribed thereto in Section 1.1(xv) hereof.
"TAX" or "TAXES" has the meaning set forth in Section 3.6 hereof.
"THIRD PARTY APPROVALS" has the meaning set forth in Section 2.1(d)
hereof.
"THIRD PARTY CLAIM" has the meaning set forth in Section 7.5(a)
hereof.
36
"TRANSFER DOCUMENTS" has the meaning set forth in Section 2.1(g)
hereof.
SECTION 10. MISCELLANEOUS AGREEMENTS. Buyer and Seller covenant
and agree as follows:
10.1 SEVERANCE LIABILITIES TO FORMER EMPLOYEES OF
SELLER. Seller shall be solely responsible for the payment of severance
compensation and other amounts payable to each employee of Seller (if any,
and regardless of whether any such employee is subsequently hired by Buyer),
except as expressly provided for otherwise in this Agreement.
10.2 COMPLIANCE WITH BULK SALES LAW. Buyer hereby waives
compliance by Seller with the provisions of any bulk sales law if and to the
extent applicable to the transactions contemplated by this Agreement.
10.3 GOOD FAITH OBLIGATIONS. Buyer and Seller agree to
proceed diligently and in good faith to consummate the transactions
contemplated hereunder and otherwise to cause the Closing to occur, and will
use all reasonable efforts to take or cause to be taken all actions, and do
nor cause to be done all things, necessary, proper or advisable to cause the
Closing to be consummated; PROVIDED, HOWEVER, that neither Buyer nor Seller
shall not be obligated to waive any conditions to its obligations to close
set forth in this Agreement.
10.4 CONFIDENTIALITY. Each of the parties to this
Agreements shall keep the terms, provisions and conditions of this Agreement
confidential and shall not disclose the same to any third parties except as
may be required by law or except to such party's attorneys, accountants and,
to the extent necessary, persons providing financing. Notwithstanding the
foregoing, after Closing, either party may issue a press release and
otherwise announce the transaction, PROVIDED THAT such party must receive
prior consent (which consent shall not be unreasonably withheld) of the other
party after giving such party a reasonable amount of time to review the
proposed press release. The covenants of the parties under this Section 10.3
shall continue from the date of this Agreement and shall survive the Closing.
Seller shall continue to maintain and keep confidential all financial
information relating to Buyer which Buyer has provided to Seller. Buyer shall
continue to maintain the confidentiality of any financial information
concerning Seller and the Purchase Price.
10.5 RISKS OF LOSS; PRORATIONS; EXPENSE. Any damage to
the Purchased Assets, or any single asset or any part thereof, prior to the
Closing shall be borne by Seller. In the event of any material loss or
material damage to the Purchased Assets prior to the Closing, Buyer shall
have the option to cancel this Agreement by notice to Seller. Each party
shall bear its own costs and expenses, including attorneys' and accountants'
fees, in connection with the negotiation, due diligence investigation,
documentation and consummation of the sale and purchase of the Purchased
Assets and the other transactions contemplated by this Agreement.
10.6 TERMINATION.
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(a) This Agreement may be terminated and the transactions
contemplated herein may be abandoned (1) by mutual written agreement of the
parties hereto at any time or (2) by either party by written notice to the
other if the closing Date shall have not have occurred on or before February
15, 1999, provided that the right to terminate this Agreement hereunder shall
not be available to any party whose breach of any representation or warranty
or failure to perform or comply with any obligation under this Agreement has
been the cause of, or resulted in, the failure of the Closing to occur on or
before such date.
(b) In the event of any termination of this Agreement as
provided in Section 10.5(a) above, this Agreement shall forthwith become
wholly void and be of no further force and effect and there shall be no
liability on the part of any of the parties hereto or their respective
officers, directors or members, except that (i) such termination shall not
relieve any party from liability for any breach of or preclude any party from
pursuing all available rights or remedies against another party as a result
of the breach of any covenant or agreement contained herein prior to such
termination, and (ii) the confidentiality provisions of Section 10.3 hereof
shall survive such termination.
10.7 EXTENSION; WAIVER. The parties hereto may extend
the time for, or waive the performance of, any of the obligations of any
parties hereto, waive any inaccuracies in the representations or warranties
of any parties hereto, or waive compliance by any parties hereto with any of
the covenants or conditions contained in this Agreement. However, any such
extension or wavier shall be in writing and signed by all of the parties
hereto. No such waiver shall operate or be construed as a waiver of any
subsequent act or omission of any party hereto.
10.8 NOTICES. Any notice to a party pursuant to this
Agreement shall be given by one of the following means: (a) certified or
registered United States mail, postage prepaid, (b) private courier or
express service requesting evidence of receipt as a party of its service, or
(c) by facsimile, with a copy also to be given by first class United States
mail, postage prepaid, or by any means permitted under subparagraphs (a) or
(b) of this Section 10.8 Notices shall be given to the parties at the
following addresses:
(a) IF TO SELLER OR ANY SELLER MEMBER
CurtCo Freedom Group, L.L.C.
00000 Xxxxxxxxxxxx Xxxx, Xxxxx 000
Xxxxxx, XX 00000-0000
Attention: Xxxxxxx X. Xxxxxx, Chief Executive Officer
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Freedom Magazines, Inc.
00000 Xxxxx
Xxxxxx, XX 00000-0000
(P. O. Xxx 00000, Xxxxxx, XX 92623-9549)
38
Attention: Xxxxxx X. Xxxxxxxxx, President
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
WITH A MANDATORY COPY TO:
Freedom Communications, Inc.
00000 Xxxxx
Xxxxxx, XX 00000-0000
(P. O. Xxx 00000, Xxxxxx, XX 92623-9549)
Attention: Xxxxx X. Xxxxxx, Vice President and General Counsel
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
(b) IF TO BUYER:
Xxxxxxxx Publishing Company, L.L.C.
0000 Xxxxxxxx Xxxxxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000
Attention: Xxxxxxx X Xxxxxx
Facsimile: (000) 000-0000
WITH A MANDATORY COPY TO:
Xxxxxxxx & Xxxxx
000 Xxxx Xxxxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxx X. Xxxxxxxxxxx, Esq.
Xxxxxxx X. Xxxxxxxx, Esq.
Facsimile: (000) 000-0000
10.9 EMPLOYEE BENEFITS AND EMPLOYEE PRIOR SERVICE
CREDIT.
(a) Buyer does not assume, and Seller agrees to be solely
responsible for, any and all liabilities and obligations, including but not
limited to obligations to give notice, relating to health care continuation
coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended which relate to, arise out of, or are in connection with, this
transaction or the events contemplated by this Agreement. Seller shall be
obligated to, and shall give in a timely manner all notices and take all
action with respect to, the termination by Seller of its employees or
termination of any employee benefit or retirement plan required by any law,
statute, ordinance or regulation, or any employment agreement or policy, and
making any severance or other payment due with respect to or as a result of
such termination.
39
(b) Buyer shall, as to hired Business employees, cause its
insurance carriers and administrators to (i) recognize service with Seller
("PRIOR SERVICE") for purposes of eligibility to enroll in Buyer's welfare
plans (E.G., its life, medical, dental, accident, disability and similar
benefit plans); (ii) provide each such hired employee with credit relating to
the current calendar year under its medical and dental plans for payments
made under Seller's medical and dental plans in satisfying any deductible or
out-of-pocket limit requirements; (iii) provide medical and dental benefits
to hired employees in accordance with the Health Insurance Portability and
Accountability Act and the rules and regulations promulgated thereunder
("HIAA"), as if the terms and conditions of HIAA were effective and
applicable to Buyer to their fullest extent as of the date hereof; and (iv)
waive all waiting periods, insurability and pre-existing condition
requirements to the extent not applicable to a hired employee under Seller's
employee benefit programs.
(c) Buyer shall recognize Prior Service for hired employees for
purposes of determining entitlement to vacation and sick leave as employees
under its applicable vacation and sick leave policies.
(d) Buyer shall recognize Prior Service for hired employees for
purposes of eligibility and vesting under each benefit program that provides
pension, savings or other deferred benefits which is adopted, maintained or
contributed to by Buyer or any of its Affiliates to the extent such programs
are made available to the hired employees.
(e) Buyer shall recognize Prior Service for purposes of
determining entitlement to and the amount of severance benefits which may be
payable to any hired employees after the Closing Date for at least four (4)
months. During said four-month period, a severance payment to a hired
employee shall not, in any case, be less than the amount to which the hired
employee would have been entitled were such hired employee in the employ of
Seller on the date of termination (based upon Seller's severance policies in
effect as of the Closing).
10.10 BINDING EFFECT. Upon execution hereof by all parties
hereto, this Agreement shall inure to the benefit of, be binding on and be
enforceable against the parties and their respective heirs, legal
representations, successors and assigns.
10.11 ENTIRE AGREEMENT. This Agreement (including the exhibits and
schedules hereto) and the instruments and comments delivered pursuant hereto,
and the other agreements contemplated or required hereby, constitute the
entire agreement and understanding between the parties with respect to the
subject matter hereof, and supersede any prior agreements and understandings
relating to the subject matter hereof, including, without limitation, the
letter of intent dated November 11, 1998. This Agreement may be modified or
amended only by a written instrument executed by all parties hereto.
Notwithstanding the foregoing, in the event the Closing does not occur, any
prior agreement with respect to confidentiality of information furnished by
any party shall continue to be binding on all parties thereto.
40
10.12 EXECUTION IN COUNTERPARTS. This Agreement may be executed in
two or more counterparts, each of which shall be deemed an original and all
of which together shall constitute one and the same agreement.
10.13 GOVERNING LAW. THE LAWS OF THE STATE OF CALIFORNIA SHALL
GOVERN ALL QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY, INTERPRETATION
AND ENFORCEABILITY OF THIS AGREEMENT AND THE EXHIBITS AND SCHEDULES HERETO,
AND THE PERFORMANCE OF THE OBLIGATIONS IMPOSED BY THIS AGREEMENT, WITHOUT
GIVING EFFECT TO ANY CHOICE OF LAW OR CONFLICT OF LAW RULES OR PROVISIONS
(WHETHER OF THE STATE OF CALIFORNIA OR ANY OTHER JURISDICTION) THAT WOULD
CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF
CALIFORNIA.
10.14 ATTORNEYS' FEES; COSTS OF LITIGATION. If any arbitration,
legal action or any other proceeding is brought for the enforcement of this
Agreement, or because of an alleged dispute, breach, default or
misrepresentation in connection with any of the provisions of this Agreement,
the successful or prevailing party or parties shall be entitled to recover
reasonable attorneys' fees and other costs incurred in that action or
proceeding, in addition to any other relief to which it or they may be
entitled.
10.15 RIGHT TO SUPPLEMENT SCHEDULES. Each party hereto shall have
the right to supplement or correct any schedule to this Agreement which
relates to any representation, warranty or disclosure made by such party
pursuant to this Agreement. Any such supplement or correct to a schedule
shall be delivered to all other parties hereto prior to the Closing, shall be
accompanied by true and complete copies of all agreements, instruments or
other documents or items referred to therein, shall be subject to the
approval of all other parties hereto and shall be subject to the other
provisions of this Agreement with respect to such schedule.
10.16 CONSTRUCTION AND INTERPRETATION. The Agreement is the result
of negotiations between the parties and their legal counsel, and the terms
and provisions hereof shall be interpreted and construed in accordance with
their usual and customary meanings. The parties each waive the application of
any rule of law which otherwise would be applicable in connection with the
interpretation and construction of this Agreement that ambiguous or
conflicting terms or provisions should be interpreted or construed against
the party who, or whose attorney, prepared the executed agreement or any
earlier draft of same. The headings of the paragraphs and sections of this
Agreement are included for purposes of convenience only and shall not affect
the construction or interpretation of any of its provisions
10.17 NO THIRD PARTY BENEFICIARIES. 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 caused to give any Person (other than
the parties hereto and such assign) any legal or equitable rights hereunder.
41
10.18 ASSIGNMENT. This Agreement and all of the provisions hereof
shall be binding upon and inure to the benefit of the parties hereto and
their respective successors and permitted assigns (including) all successors
and assigns in the event of a liquidation or dissolution of Seller), except
that neither this Agreement nor any of the rights, interests or obligations
hereunder may be assigned or delegated by either party without the prior
written consent of the other party hereto; PROVIDED, HOWEVER, that no consent
shall be required for an assignment to any Affiliate of the assignor as long
as the assignee has the financial capacity and ability to fulfill the
obligations of the assignor to the other party.
10.19 SEVERABILITY OF PROVISIONS. If any term or provision of this
Agreement, or the application of any such term or provision to any person or
circumstances, shall be held invalid by a court of competent jurisdiction,
the remainder of this Agreement, or the application of such term or provision
to persons or circumstances other than those as to which it is held invalid,
shall not be affected thereby.
10.20 ASSUMED CONTRACTS. To the extent that any of the contracts,
agreements or other documents or instruments assumed by Buyer hereunder
("ASSUMED CONTRACTS") are non-assignable or non-transferable to Buyer, or
non-assignable or non-transferable without the consent of a third party, or
shall be subject to any option in any third party by virtue of a request for
permission to assign or transfer by reason of or pursuant to this Agreement
or the transactions contemplated hereby, this Agreement shall not constitute
a contract to assign or transfer the same if an attempted assignment or
transfer would constitute a breach thereof. If Seller shall have failed to
procure consent to any such assignment or transfer or waiver of such option
prior to the Closing Date, if requested by Buyer, Seller shall use reasonable
commercial efforts to make the use and benefit of such Assumed Contract
available to Buyer to the same extent as nearly as may be possible as if such
impediment to assignment or transfer did not exist. Buyer shall assume and
pay, discharge, perform or otherwise satisfy all debts, obligations and
liabilities of Seller which arise on or after the Closing Date with respect
to such Assumed Contracts, to the extent that the use and benefit thereof
shall have been made available to Buyer pursuant to this Section 10.20.
* * * *
42
IN WITNESS WHEREOF, the parties have executed this Asset Purchase
Agreement as of the date first above written.
CURTCO FREEDOM GROUP, L.L.C.
By: /s/ XXXXXXX X. XXXXXX
-------------------------------------
Xxxxxxx X. Xxxxxx
Its: Chief Executive Officer
XXXXXXXX PUBLISHING COMPANY, L.L.C.
By: /s/ XXXXXXX X XXXXXX
-------------------------------------
Xxxxxxx X. Xxxxxx
Its: Chief Financial Officer
FOR PURPOSES OF SECTION 4, SECTION 7.1(c), SECTION
7.7 AND SECTION 8 ONLY:
FREEDOM MAGAZINES, INC.
By: /s/ XXXXXX X. XXXXXXXXX
---------------------------------------
Printed Name: Xxxxxx X. Xxxxxxxxx
Its: President
CURTCO PUBLISHING
By: /s/ XXXXXXX X. XXXXXX
---------------------------------------
Printed Name: Xxxxxxx X. Xxxxxx
Its: President/CEO
FOR PURPOSES OF SECTION 8 ONLY:
/s/ XXXXXXX X. XXXXXX
---------------------------------------------
Xxxxxxx X. Xxxxxx
