[EXECUTION COPY]
================================================================================
ASSET PURCHASE AGREEMENT
among
THE COLUMBIA HOUSE COMPANY
and
AUDIO BOOK CLUB, INC.
---------------------------------------
Dated December 30, 1998
---------------------------------------
================================================================================
TABLE OF CONTENTS
Page #
------
ARTICLE 1. SALE OF ASSETS................................................... 1
1.1 Sale and Purchase of Assets................................ 1
ARTICLE 2. CLOSING, PURCHASE PRICE, LIABILITIES............................. 4
2.1 Closing.................................................... 4
2.2 Purchase Price............................................. 5
2.3 Liabilities................................................ 5
2.4 Instruments of Conveyance and Transfer..................... 6
2.5 Ancillary Agreements....................................... 6
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF SELLER......................... 7
3.1 Organization and Qualification............................. 7
3.2 Authority to Effect Transactions........................... 7
3.3 Effect of Agreements....................................... 7
3.4 Government Approvals....................................... 7
3.5 Financial Statements....................................... 8
3.6 Absence of Certain Developments............................ 8
3.7 Title to Properties, Absence of Liens and Encumbrances..... 8
3.8 Masterfile Database........................................ 9
3.9 Inventory.................................................. 9
3.10 Accounts Receivable........................................ 9
3.11 List of Contracts.......................................... 9
3.12 Litigation................................................. 9
3.13 Compliance With Law; Permits............................... 10
3.14 Affiliated Parties......................................... 10
3.15 Broker's or Finders' Fees.................................. 10
3.16 Investment Intent.......................................... 10
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF BUYER.......................... 11
4.1 Organization............................................... 11
4.2 Authority to Effect Transactions........................... 11
4.3 Effect of Agreements....................................... 11
4.4 Shares..................................................... 11
4.5 Title to Shares............................................ 12
4.6 SEC Filings; Financial Statements.......................... 12
4.7 Capitalization............................................. 12
4.8 Certificate of Incorporation............................... 13
4.9 Absence of Certain Developments............................ 13
-i-
Page #
------
4.10 Litigation................................................. 13
4.11 Governmental Approvals..................................... 13
4.12 Broker's or Finder's Fees.................................. 13
ARTICLE 5. COVENANTS ....................................................... 14
5.1 Covenants of Seller........................................ 14
5.2 Covenants of Buyer......................................... 15
5.3 Xxxx-Xxxxx-Xxxxxx.......................................... 16
5.4 Confidentiality............................................ 16
5.5 Allocation of Purchase Price............................... 17
5.6 Preparation of Certain Financial Information............... 17
5.7 Further Assurances......................................... 18
5.8 No Solicitation; Acquisition Proposals..................... 19
5.9 Employees.................................................. 19
5.10 Reasonable Efforts; Additional Actions..................... 19
5.11 Notification of Certain Matters............................ 20
ARTICLE 6. CONDITIONS PRECEDENT ............................................ 20
6.1 Conditions Precedent to the Obligations of Buyer........... 20
(a) Accuracy of Representations and Warranties........ 20
(b) Material Adverse Change........................... 20
(c) Compliance with Covenants......................... 20
(d) Opinion of Counsel for Seller..................... 20
(e) Legal Actions or Proceedings...................... 20
(f) Regulatory Approvals.............................. 21
(g) Ancillary Agreements.............................. 21
(h) Supporting Documents.............................. 21
(i) Seller Financial Statements....................... 21
6.2 Conditions Precedent to the Obligations of Seller.......... 21
(a) Accuracy of Representations and Warranties........ 21
(b) Buyer Material Adverse Change..................... 21
(c) Compliance with Covenants......................... 21
(d) Opinions of Counsel for Buyer..................... 21
(e) Legal Actions or Proceedings...................... 22
(f) Seller Released................................... 22
(g) Ancillary Agreements.............................. 22
(h) Supporting Documents.............................. 22
ARTICLE 7. INDEMNIFICATION......................................... 22
7.1 Indemnity by Seller........................................ 22
-ii-
Page #
------
7.2 Indemnity by Buyer......................................... 23
7.3 Defense of Claims.......................................... 24
7.4 Exclusive Remedies......................................... 25
7.5 Survival................................................... 25
7.6 Damages.................................................... 25
7.7 Owners or Affiliates of Seller............................. 26
7.8 Put Amount................................................. 26
ARTICLE 8. TERMINATION...................................................... 27
8.1 Termination................................................ 27
8.2 Effect of Termination...................................... 27
ARTICLE 9. MISCELLANEOUS.................................................... 28
9.1 Bulk Sales Laws............................................ 28
9.2 Expenses................................................... 28
9.3 Further Actions............................................ 28
9.4 Entire Agreement; Modification............................. 28
9.5 Notices.................................................... 28
9.6 Waiver..................................................... 29
9.7 Binding Effect; Assignment................................. 30
9.8 Separability............................................... 30
9.9 Headings................................................... 30
9.10 Counterparts............................................... 30
9.11 Return of Information...................................... 30
9.12 Sections of Disclosure Schedule............................ 31
9.13 Incorporation by Reference................................. 31
9.14 Governing Law.............................................. 31
-iii-
Page #
------
DISCLOSURE SCHEDULES, EXHIBITS AND ANNEXES
SECTIONS OF DISCLOSURE SCHEDULE
Schedule 1.1(a)(viii) Analytical Files
Schedule 2.3 Liabilities
Schedule 3.3 Effect of Agreements
Schedule 3.5 Financial Statements
Schedule 3.6 Absence of Certain Developments
Schedule 3.7 Title to Properties, Absence of Liens and Encumbrances
Schedule 3.8 Masterfile Database
Schedule 3.11 List of Contracts and Other Data
Schedule 3.12 Litigation
Schedule 4.7 Capitalization
Schedule 4.8 Certificate of Incorporation
Schedule 4.9 Absence of Certain Developments
Schedule 5.1 Covenants of Seller
Schedule 5.2 Covenants of Buyer
EXHIBITS
Exhibit A Xxxx of Sale, Assignment and Assumption Agreement
Exhibit B Mailing Agreement
Exhibit C Registration and Shareholder Rights Agreement
Exhibit D Non-Compete Agreement
Exhibit E Transitional Services Agreement
Exhibit F Warrant
Exhibit G(1) Buyer Press Release
Exhibit G(2) Seller Press Release
ANNEXES
Annex A Form of opinion of Xxxx, Weiss, Rifkind, Xxxxxxx &
Xxxxxxxx
Annex B Form of opinion of Xxxxxx X. Xxxxxx, Esq.
Annex C Form of opinion Xxxxxx & Carnelutti/Atlas, Xxxxxxxx,
Trop & Borksin
-iv-
ASSET PURCHASE AGREEMENT
AGREEMENT, dated as of December 30, 1998, between Audio Book Club, Inc., a
Florida corporation ("Buyer"), and The Columbia House Company, a New York
general partnership ("Seller").
W I T N E S S E T H:
WHEREAS, Seller operates a business for the direct marketing of audio books
by mail, through "Columbia House Audio Book Club," a membership club (the
"Business"), and owns or has the right to use, among other assets, certain
databases, licenses, inventory and goodwill relating thereto; and
WHEREAS, Buyer desires to acquire those assets of Seller as set forth in
Section 1.1(a) herein, and Seller desires to sell such assets to Buyer, upon the
terms and subject to the conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the representations, warranties,
convents and agreements contained herein, and intending to be legally bound
hereby, Seller and Buyer agree as follows:
ARTICLE 1.
SALE OF ASSETS
1.1 Sale and Purchase of Assets. (a) Upon the terms and subject to the
conditions set forth in this Agreement, including receipt of necessary Consents
(as defined in Section 1.1(b) hereof) for the assignment of Contested Assets (as
defined in Section 1.1(b) hereof), on the Closing Date (as defined in Section
2.1 hereof), Seller shall sell, convey, assign, transfer and deliver to Buyer,
and Buyer shall purchase and acquire from Seller, all of Seller's right, title
and interest at the Closing Date in and to those assets exclusively relating to
the Business and listed in clauses (i) - (ix) below, and those additional assets
referred to in Section 1.1(b) hereof (only to the extent provided herein), but
excluding those assets referred to in Section 1.1(c) below (all said assets
exclusively relating to the Business to be sold, conveyed, transferred, assigned
and delivered being hereinafter collectively referred to as the "Purchased
Assets"):
(i) Seller's Audio Book Club masterfile database, including, without
limitation, all (active and inactive) customer (member) data (including
addresses), sales/returns transaction history, payment history, promotional
marketing data and history, and collections history (such data being
hereinafter collectively referred to as the "Masterfile Database");
(ii) the proprietary "800" telephone number exclusively relating to
the Business;
(iii) Seller's inventories of (A) audio books, (B) premium
merchandise, if any, (e.g., audio cassette players) and (C) manufacturing
components, in each such case relating exclusively to audio book club new
member recruitment and not imprinted with the name "Columbia House" or any
related marks or derivations thereof, in each case wherever located (the
"Inventory");
(iv) Seller's inventory of brochures, sales literature, creative
advertising materials, art work, promotional material and other selling
material in each case exclusively relating to the Business, wherever
situated, including, but not limited to, book cover images and title copy
descriptions (collectively, the "Promotional Assets"); provided, however,
Seller will not be required to transfer to Buyer any materials containing
the name "Columbia House", any other name used by Seller, or any related
marks or derivations thereof (collectively, "Seller Marks"), subject to the
next sentence. If any creative materials, duplicating film or other
"master" duplicating materials constituting Promotional Assets contain
Seller Marks, Seller will so advise Buyer and will make printed copies of
the materials concerned available for Buyer's review. If Buyer so elects in
respect of any such materials, Seller will transfer them to Buyer but may
delete the Seller Marks from them at Buyer's expense;
(v) Papers, documents (including printed or computerized copies of
information stored in electronic forms such as computer disks, CD Rom,
computer tape, computer hard drive and the like), instruments, books and
records, files, books of account and other records by which the Purchased
Assets might be identified or rights with respect thereto enforced. Seller
shall not be required to deliver such items listed in this Section
1.1(a)(v) to the extent that such delivery would violate (i) any
confidentiality agreement to which Seller is a party, or bound by, or (ii)
any legal privilege; provided, that in the case of clause (i) Seller shall
use those efforts prescribed in Section 1.1(b) herein to obtain the consent
of the parties to the relevant confidentiality agreements to the transfer
of such items;
(vi) the rights of Seller under all such contracts, agreements or
commitments exclusively relating to the Business, including, without
limitation, license agreements, marketing agreements (including, without
limitation, agreements relating to rights to list rentals, package inserts
and ride alongs), noncompetition agreements, confidentiality agreements and
vendor agreements;
(vii) all accounts receivable of the Business net of credits due to
customers, and all payments made relating thereto after the Closing Date;
-2-
(viii) a complete set of analytical files, as set forth on Schedule
1.1(a)(viii) hereto, relating exclusively to audio book club members and
analysis and testing files of other Columbia House Members as to audio
books only; and
(ix) current backorder files and collections files relating
exclusively to audio book club accounts.
Promptly following the Closing Date, Seller shall provide Buyer with a
certificate to the effect that all amounts required to be refunded to customers
have been refunded.
(b) Notwithstanding anything to the contrary contained in this Agreement,
to the extent that the sale, assignment, transfer, conveyance or delivery to
Buyer of any of the assets set forth in Sections 1.1(a)(ii), (iii)(A), (iii)(C),
(iv), (v) and (vi) herein is prohibited by any applicable law or would require
any governmental or third party consent, authorization, waiver or approval
(collectively, "Consents"), and any such Consent shall not have been obtained on
or prior to the Closing Date, Seller shall assign the assets concerned to Buyer
on a quitclaim, "as is, where is" basis, without liability; provided, that, if
any third party contests, in writing, the assignment of the assets concerned
(the "Contested Assets"), or such third party commences any legal action
regarding the same, then Buyer and Seller shall cooperate in obtaining such
Consent in accordance with the next paragraph. If the parties hereto are unable
to obtain such Consent within 30 business days of notice to either of them of
such third party claim (such date of notice, the "Notice Date"), then the
assignment concerned shall be deemed void ab initio (the "Retroactive
Cancellation Date") unless otherwise agreed by Seller in writing and shall be
governed by the next paragraph. Any such assignment may be made void ab initio
before the end of that 30-day period by notice from either party to the other if
the notifying party considers such action advisable to avoid exposure to
material liability or other material detriment to its business or to the
business of any of its owners or affiliates, and considers such exposure
reasonably likely, in its sole and absolute discretion (which will be exercised
in good faith). From and after the Notice Date, Buyer shall not exercise (and
Seller shall not be obligated under the Transitional Services Agreement to
exercise on Buyer's behalf) any rights with respect to the Contested Asset in
question, unless and until the relevant Consent shall have been obtained.
To the extent that the sale, assignment, transfer, conveyance or delivery
to Buyer of any of the Contested Assets is deemed void ab initio pursuant to the
forgoing paragraph, this Agreement shall not constitute a sale, assignment,
transfer, conveyance or delivery thereof, nor create any obligation to sell,
assign, transfer, convey or deliver such assets, nor shall failure to obtain any
such Consent prior or subsequent to the Closing Date give rise to a breach of
this Agreement or the failure of a condition to Buyer's obligations to
consummate the transactions contemplated hereby, or entitle Buyer to adjust the
Purchase Price (as defined in Section 2.2(c) hereof); provided, further, no
Contested Asset for which the assignment was deemed void ab initio shall
constitute a Purchased Asset until such Consent has been obtained in accordance
with the next sentence. Following the Notice Date, Seller's sole and exclusive
obligation in connection with any such Consent shall be to make a reasonable
-3-
number of oral and/or written requests or any other action reasonably requested
by Buyer in writing (subject to the limitation set forth in the penultimate
sentence of this Section 1.1(b)), to any party whose Consent is necessary for
the sale, assignment, transfer, conveyance or delivery to Buyer of any of the
Contested Assets, and the parties shall cooperate with one another to obtain
promptly such Consents. Pending any such Consent, the parties shall cooperate
with each other in any reasonable and lawful arrangements to provide Buyer the
economic benefits and liabilities of use of such Contested Assets which
arrangements shall be at Buyer's expense. Once any such Consent is obtained,
Seller shall, at its own expense, promptly assign, transfer, convey and deliver
such Contested Assets to Buyer for no additional consideration. Buyer shall
indemnify Seller against any liabilities arising from Buyer's use of any such
assets on or after the Closing Date in accordance with Article 7 hereof. The
Seller shall not be obligated to incur any costs in connection with obtaining
any Consent except for incidental costs associated with Seller's obligations as
set forth in this Section 1.1(b) (e.g., Seller shall not be required to pay any
party to a contract, agreement, license or other commitment for any Consent).
Notwithstanding anything to the contrary contained in this Agreement, Seller
shall not use, sell, give away, rent, liquidate, assign, transfer, convey or
deliver any Purchased Assets (including Contested Assets) after the Closing Date
(as defined in Section 2.1 herein) except as otherwise provided for herein or in
the Transitional Services Agreement.
(c) Anything herein contained to the contrary notwithstanding, all other
rights, interests, properties and assets of Seller not specifically referred to
in Section 1.1(a) herein are specifically excluded from the Purchased Assets and
shall be retained by Seller (all such other rights, interests, properties and
assets of Seller not specifically covered pursuant to Section 1.1(a), "Excluded
Assets"), including, without limitation:
(i) all rights in and to the name "Columbia House" and all related
marks and derivations thereof;
(ii) all owned and leased personal property not specifically acquired
pursuant to Section 1.1(a), including, without limitation, all computer
software;
(iii) all owned and leased real property; and
(iv) cash and cash equivalents.
ARTICLE 2.
CLOSING, PURCHASE PRICE, LIABILITIES
2.1 Closing. The closing of the transactions contemplated by this Agreement
(the "Closing") shall take place at the offices of Xxxxxx & Carnelutti, 000
Xxxxx Xxxxxx, Xxx Xxxx, or at such other location as may be mutually agreed upon
by the parties hereto, on December 31, 1998, or, if later, the first business
day following the date on which all of the conditions set forth in Sections 6.1
and 6.2 hereof have been satisfied or
-4-
waived, or such other date as shall be mutually agreed upon in writing by the
parties hereto (such date and time of closing being herein called the "Closing
Date").
2.2 Purchase Price. As consideration for the Purchased Assets, Buyer shall:
(a) pay to Seller $32,750,000 as follows: (i) $30,750,000 in cash by wire
transfer in immediately available funds at the Closing (the "Cash Amount"); and
(ii) $2,000,000 by Seller's retention of the first $2,000,000 actually collected
by Seller on account of the accounts receivable under the Transitional Services
Agreement (as defined below), whether or not such accounts receivable are
included in the Purchased Assets (with the next $108,000 so collected by Seller
to be retained by Seller to be applied to payment of applicable sales taxes);
(b) deliver at the Closing one or more stock certificates evidencing in the
aggregate 325,000 shares (the "Shares") of common stock of Buyer (the "ABC
Common Stock"), no par value. The Shares shall have the rights, and be subject
to the obligations, as more fully set forth in the Rights Agreement (as defined
below);
(c) deliver at the Closing one or more warrants (the "Warrant", and,
together with the Cash Amount and the Shares, the "Purchase Price") to purchase
in the aggregate 100,000 shares of ABC Common Stock at an exercise price per
share of ABC Common Stock equal to $11.125 (the "Exercise Price"), exercisable
during the period from the Closing Date to the fifth anniversary of the Closing
Date, with such other terms as are set forth in the Warrant; and
(d) simultaneously with the execution of this Agreement, Buyer shall pay to
Seller $500,000 (the "Transaction Fee") by wire transfer in immediately
available funds, which amount shall be used to (i) reduce the Purchase Price
payable at the Closing Date by a like amount or (ii) in the case the penultimate
sentence of Section 8.2 shall apply, satisfy the obligations of Buyer pursuant
thereto. The Transaction Fee will be non-refundable except in the event of the
termination of this Agreement under Sections 8.1(a), (c), (d) or (e).
2.3 Liabilities. (A) Buyer shall not assume or be bound by any duties,
responsibilities, obligations or liabilities of Seller or the Business of any
kind or nature, known, unknown, contingent or otherwise (including, without
limitation, any benefit plan maintained by Seller, any trade payables or any
professional fees), except as specifically set forth on Schedule 2.3 attached
hereto. Such liabilities retained by Seller are herein referred to as "Retained
Liabilities" and such liabilities expressly assumed by Buyer in Schedule 2.3 are
herein referred to as "Assumed Liabilities." The parties agree to indemnify and
hold each other harmless against any and all Retained Liabilities and Assumed
Liabilities in accordance with Article 7 hereof.
-5-
(B) Anything herein contained to the contrary notwithstanding, the
following liabilities of Seller are specifically excluded from the Assumed
Liabilities and shall constitute Retained Liabilities:
(i) Any and all income, franchise, sales, use, property, payroll,
employment, transfer and any other taxes, charges, fees, levies, imports,
duties, licenses or other assessments, together with interest, penalties
and any other additions to tax or additional amounts imposed by any
governmental or taxing authority, or liability for such amounts as a result
of Seller being a member of an affiliated, consolidated, combined or
unitary group or being a party to any agreement or arrangement whereby
Seller may be liable for Taxes of any other person for any period prior to
(or up to and including) the close of business on the day prior to the
Closing Date;
(ii) Any and all employment or consulting agreements, executive
compensation plans, collective bargaining agreements, bonus plans,
guaranteed bonus arrangements, deferred compensation agreements, employee
pension plans or retirement plans, employee profit sharing plans, employee
stock purchase and stock option plans, group life insurance,
hospitalization insurance or other plans or arrangements providing for
benefits to employees of Seller; and
(iii) Any and all credits due to customers arising prior to the
Closing Date in respect of which accounts receivable otherwise included in
the Purchased Assets are reduced pursuant to Section 1.1(a)(vii) herein.
2.4 Instruments of Conveyance and Transfer. At Closing, (x) Seller shall
execute and deliver to Buyer (i) a xxxx of sale in the form included in the form
of the Xxxx of Sale, Assignment and Assumption Agreement annexed hereto as
Exhibit A (the "Xxxx of Sale") and (ii) such other documents of transfer that
Buyer may reasonably request, transferring to Buyer the assets to be acquired by
Buyer under the terms of this Agreement and (y) Buyer shall execute (i) the Xxxx
of Sale and (ii) all other documents reasonably requested.
2.5 Ancillary Agreements. In connection with the transactions contemplated
hereby, Buyer and Seller hereby covenant and agree to enter into at the Closing,
as applicable, (i) the Mailing Agreement in the form annexed hereto as Exhibit B
(the "Mailing Agreement"), (ii) the Registration and Shareholder Rights
Agreement in the form annexed hereto as Exhibit C (the "Rights Agreement"),
(iii) the Non-Compete Agreement in the form annexed hereto as Exhibit D (the
"Non-Compete Agreement"), (iv) the Transitional Services Agreement in the form
annexed hereto as Exhibit E (the "Transitional Services Agreement") and (v) the
Warrant in the form annexed hereto as Exhibit F. The Warrant, collectively with
the Transitional Services Agreement, the Non-Compete Agreement, the Mailing
Agreement, the Rights Agreement and the Xxxx of Sale, the "Ancillary
Agreements").
-6-
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES OF SELLER
As an inducement to Buyer to enter into this Agreement and to consummate
the transactions contemplated hereby, Seller represents and warrants to Buyer as
follows:
3.1 Organization and Qualification. Seller is a general partnership duly
organized and validly existing under the laws of the State of New York, with
full organizational power and authority to own or lease its properties and
assets and to conduct its business as presently conducted.
3.2 Authority to Effect Transactions. Seller has all requisite
organizational power and authority to execute, deliver and perform this
Agreement and the Ancillary Agreements. All necessary partnership action on the
part of Seller has been duly taken to authorize the execution, delivery and
performance by Seller of this Agreement and the Ancillary Agreements. This
Agreement has been duly authorized, executed and delivered by Seller, and is the
legal, valid and binding obligation of Seller, enforceable against Seller in
accordance with its terms. Each of the Ancillary Agreements has been duly
authorized by Seller and, upon execution and delivery by Seller, as contemplated
hereby, will be the legal, valid and binding obligation of Seller, enforceable
against Seller in accordance with its terms.
3.3 Effect of Agreements. Except, in the case of clause (i) for any such
violation, conflict, breach or default as would not be material, and except as
set forth on Schedule 3.3, and assuming the expiration or termination of any
applicable waiting period under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act
of 1976, as amended (the "Act"), the execution and delivery by Seller of this
Agreement and the Ancillary Agreements, and the performance by Seller of its
obligations hereunder and thereunder, will not (i) violate any provision of law,
any order of any court or other agency of government, or any judgment, award or
decree or any indenture, agreement, permit or other instrument in each case to
which Seller is a party, or by which Seller or any of the Purchased Assets are
bound or affected, or conflict with, result in a breach of or constitute (with
due notice or lapse of time or both) a default under, any such indenture,
agreement, permit or other instrument, or (ii) result in the creation or
imposition of any material lien, charge, security interest or encumbrance of any
nature whatsoever upon any of the Purchased Assets.
3.4 Government Approvals. No approval, authorization, consent, order or
action of or filing with any court, administrative agency or other governmental
authority is required for the execution and delivery by Seller of this Agreement
or any of the Ancillary Agreements or the consummation by Seller of the
transactions contemplated hereby or thereby except for termination of any
applicable waiting period under the Act or where the failure to obtain any
approval, authorization, consent, order or action of or make a filing with any
court, administrative agency or other governmental authority would not be
material.
-7-
3.5 Financial Statements. The Audited Financial Statements (as defined in
Section 5.6 hereof) will be prepared from and in accordance with the books and
records of the Business, will be prepared in accordance with generally accepted
accounting principles consistently applied and will fairly present in all
material respects the financial position of the Business as of December 20, 1996
and December 19, 1997, as appropriate, and the results of its operations for the
periods then ended in accordance with generally accepted accounting principles.
The Financial Statements (as defined in Section 5.6 hereof) will be prepared on
a basis consistent with the preparation of the Audited Financial Statements
(other than for normal year-end audit adjustments and the exclusion of notes and
other disclosures that may be required in audited annual financial statements).
Set forth on Schedule 3.5 hereto is certain additional financial information
with respect to Seller. Notwithstanding the foregoing, the Seller Financial
Statements will not necessarily be indicative of results that would have
occurred if the Business had been a separate stand-alone entity during the
periods presented or of the future results of the Business.
3.6 Absence of Certain Developments. Since December 19, 1997 through the
date hereof, except as otherwise set forth on Schedule 3.6 hereto and except for
the transactions contemplated hereby, Seller has: (i) maintained its audio book
club membership lists and its promotions to those lists and its new member
acquisition programs consistent with past practices; (ii) maintained its
policies with respect to the accounts receivable of the Business consistent with
past practices and has not accelerated collection efforts or made changes in
income recognition practices; (iii) continued to acquire inventory necessary for
the operation of the Business as a going concern, consistent with past practice,
and has not had any material write-downs or instituted any material changes with
respect to its policies on scrapping obsolete merchandise; (iv) not entered into
any long term agreements for rental of its audio book club mailing lists; (v)
not terminated or revoked any Material Contract (as defined in Section 3.11
herein) except in Seller's reasonable business judgment; and (vi) not, except in
connection with this Agreement and the transactions contemplated hereby,
suffered any material adverse change with respect to the Purchased Assets taken
as a whole (a "Material Adverse Change"); provided that a change in economic
conditions or response declines or any other changes in sales behavior which are
not related to policy or promotional changes instituted by Seller shall not be
deemed to give rise to a Material Adverse Change; and provided, further, that
the effects of competition or changes in prices of products shall not constitute
a Material Adverse Change. Further, Seller has not entered into any agreement or
commitment to take any action not consistent with clauses (i) through (v)
herein.
3.7 Title to Properties, Absence of Liens and Encumbrances. Except as set
forth on Schedule 3.7 hereto, Seller has good and marketable title to all the
Purchased Assets, free and clear of all liens, charges, pledges, security
interests or other encumbrances of any nature whatsoever, subject to
restrictions on assignment or use in any agreements relating to any Purchased
Assets.
-8-
3.8 Masterfile Database. Set forth on Schedule 3.8 hereto is true and
correct information describing certain contents of the Masterfile Database as of
the date hereof.
3.9 Inventory. The Inventory of Seller to be transferred pursuant to this
Agreement consists of audio book manufacturing components and merchantable
finished goods, and premium merchandise as provided in Section 1.1(a)(iii)
herein, all of which is fit in all material respects for the purpose for which
it was procured or manufactured.
3.10 Accounts Receivable. The accounts receivable of Seller are reflected
in all material respects properly on its books and records and are valid
receivables subject to no material setoffs or counterclaims, except customer
adjustments, returns and bad debts occurring in the normal course of the
Business. Seller does not make any warranty or representation regarding the
collection of those receivables by Buyer.
3.11 List of Contracts. Annexed as Schedule 3.11 hereto is a list setting
forth as of the date hereof with respect to the Purchased Assets, and relating
exclusively thereto, the following:
(i) All material license agreements, marketing agreements (including,
without limitation, agreements relating to rights to list rentals, package
inserts and ride alongs), noncompetition agreements, confidentiality
agreements and vendor agreements; and
(ii) all contracts and commitments, whether oral or written, if any,
to which Seller is or may become a party or to which Seller or any of its
assets are or may become subject and which are not specifically referred to
in this Section 3.11, and which is a contract or group of related contracts
which involve payments by or to Seller exceeding $25,000 per annum in
amount.
True and complete copies of all documents and complete descriptions of all
oral contracts (if any) referred to in Schedule 3.11 hereto (collectively, the
"Material Contracts") have been provided or made available to Buyer and its
counsel. Except as set forth in Schedule 3.11 hereto, (i) Seller is not in
material breach or default of any of the Material Contracts and, to the
Knowledge of Seller, no other party to any of the Material Contracts is in
material breach or default thereunder, and (ii) no event has occurred with
respect to Seller or, to the Knowledge of Seller, any other party thereto which,
with notice or lapse of time, would constitute a material breach or default or
permit termination or modification thereof. "Knowledge" with respect to Seller,
shall mean the actual knowledge of Xxxxxxx X. Xxxxxx, Xxxx X. Xxxxxxx and Xxxxxx
X. Xxxxxx.
3.12 Litigation. As of the date hereof, except as set forth in Schedule
3.12 hereto, there is no action, suit, investigation or proceeding pending or,
to the Knowledge of Seller, threatened in writing against or affecting Seller
before any court or by or before any governmental body or arbitration board or
tribunal, the outcome of which individually or in
-9-
the aggregate would have a Material Adverse Change or would enjoin or prevent
the consummation of the transactions contemplated by this Agreement.
3.13 Compliance With Law; Permits. Except as would not result in a Material
Adverse Change, the conduct of the Business with respect to the Purchased Assets
by Seller does not violate any federal, state or local laws, statutes,
ordinances, rules, regulations, decrees, orders, permits or other similar items
in force on the date hereof that are applicable to the Purchased Assets. No
material governmental licenses, franchises or permits are required under
applicable law as of the date hereof for the conduct of the Business with
respect to the Purchased Assets by Seller.
3.14 Affiliated Parties. No affiliate of the Seller is a party to, or
beneficiary under, any Material Contract nor are any Purchased Assets
transferred hereunder held by, or in the name of, any affiliate of the Seller.
3.15 Broker's or Finders' Fees. Seller has not employed, or consulted with,
any investment banker, financial advisor, broker or finder in connection with
the transactions contemplated by this Agreement, except for The Chase Manhattan
Bank ("Chase"), or incurred any liability for any investment banking, business
consultancy, financial advisory, brokerage or finders' fees or commissions in
connection with the transactions contemplated hereby, except for fees that may
be payable to Chase, all of which such fees, if any, including any finder's fee,
brokerage commission or similar payment, have been or will be paid by Seller.
3.16 Investment Intent. Except as otherwise provided in the Rights
Agreement, Seller is acquiring the Shares which are issuable under this
Agreement for investment for its own account, not as a nominee or agent, and not
with the view to, or for resale in connection with, any distribution thereof
(except as contemplated by the Rights Agreement) and understands that the Shares
are being offered under an exemption contained in Section 4(2) of the Securities
Act of 1933, as amended (the "Securities Act"), upon reliance on such
representation. Seller is an "accredited investor" as such term is defined in
Rule 501(a) under the Securities Act. Seller understands that the Shares which
are issuable hereunder, have not been, and will not as of the Closing Date be,
registered under the Securities Act. Seller acknowledges that the Shares have
not been registered under the Securities Act and, accordingly, Seller may
dispose of the Shares only pursuant to an effective registration statement under
the Securities Act or an exemption therefrom or as otherwise provided in the
Rights Agreement. Seller is aware of the provisions of Rule 144 promulgated
under the Securities Act which permit limited resale of shares subject to the
satisfaction of the requirements set forth therein. Notwithstanding the
foregoing, Seller may distribute the Shares and/or Warrants to its direct or
indirect owners as a divided or distribution without the payment of
consideration.
-10-
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF BUYER
As an inducement to Seller to enter into this Agreement and to consummate
the transactions contemplated hereby, Buyer represents and warrants to Seller as
follows:
4.1 Organization. Buyer is a corporation duly organized, validly existing
and in good standing under the laws of the State of Florida. Buyer has all
requisite corporate power and authority to own or lease its properties and
assets and to conduct its business as presently conducted.
4.2 Authority to Effect Transactions. Buyer has all requisite corporate
power and authority to execute, deliver and perform this Agreement and the
Ancillary Agreements. All necessary corporate action on the part of Buyer has
been duly taken to authorize the execution, delivery and performance of this
Agreement and the Ancillary Agreements. This Agreement has been duly authorized,
executed and delivered by Buyer, and is the legal, valid and binding obligation
of Buyer enforceable against Buyer in accordance with its terms. Each of the
Ancillary Agreements have been duly authorized by Buyer and, upon execution and
delivery by Buyer as contemplated hereby, will be the legal, valid and binding
obligations of Buyer, enforceable against Buyer in accordance with their terms.
4.3 Effect of Agreements. Except for any such violation, conflict, breach
or default as would not be material, and assuming the expiration or termination
of any applicable waiting period under the Act, the execution and delivery by
Buyer of this Agreement and the Ancillary Agreements, and the performance by
Buyer of its obligations hereunder and thereunder, will not violate any
provision of law, any order of any court or other agency of government, the
Certificates of Incorporation or By-laws of Buyer (or equivalent governing
instruments), or any judgment, award or decree or any indenture, agreement or
other instrument to which Buyer is a party or by which Buyer or its properties
or assets are bound or affected, or conflict with, result in a breach of or
constitute (with due notice or lapse of time or both) a default under, any such
indenture, agreement or other instrument, or result in the creation or
imposition of any lien, charge or encumbrance of any nature whatsoever upon any
of the properties or assets of Buyer.
4.4 Shares. The Shares and shares of ABC Common Stock issuable upon
exercise of the Warrant (the "Warrant Shares") (i) have been duly authorized,
and upon issuance pursuant to Section 2.2(b) hereof, will be validly issued,
fully paid, non-assessable and, except as set forth in the Rights Agreement,
will not have been issued in violation of the preemptive or similar rights of
any individual, corporation, partnership, limited liability company, firm, joint
venture, association, joint-stock company, trust, unincorporated organization,
Governmental Entity or other entity and (ii) Buyer, with respect to the Warrant
Shares, will reserve such shares for issuance.
-11-
4.5 Title to Shares. The Shares and Warrant Shares are free and clear of
any mortgages, deeds of trusts, liens, pledges, charges, encumbrances, security
interests, options, rights of first refusal, easements, restrictive covenants,
encroachments or any other restrictions or third-party rights (collectively,
"Encumbrances"). Upon issuance of the Shares to Seller in accordance with the
terms of Section 2.2(b) hereof, Seller will receive valid and marketable title
to the Shares free and clear of all Encumbrances, other than those set forth in
the Rights Agreement and as imposed by applicable federal and state securities
laws.
4.6 SEC Filings; Financial Statements. Buyer has made, or will make within
the applicable time period set forth in the Securities Act or the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), all filings required to
be made with the Securities and Exchange Commission (the "SEC") since October
27, 1997 and has delivered or made available to Seller true, correct and
complete copies of Buyer's (a) Annual Report on Form 10-K for the year ended
December 31, 1997 (the "Buyer 1997 Form 10-K"), as filed with the SEC, (b) proxy
statements relating to all of Buyer's meetings of stockholders (whether annual
or special) since October 27, 1997 and (c) all other reports, statements and
registration statements (including Quarterly Reports on Form 10-Q and Current
Reports on Form 8-K) filed by Buyer with the SEC since October 27, 1997
(collectively, and in each case including all exhibits and schedules thereto and
documents incorporated by reference therein, the "Buyer SEC Filings"). As of
their respective dates, Buyer SEC Filings did not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The financial
statements of Buyer included or incorporated by reference in Buyer 1997 Form
10-K and Buyer's Quarterly Report on Form 10-Q for the quarters ended March 31,
1998, June 30, 1998 and September 30, 1998 have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis during
the periods involved (except as may be indicated in the notes to such financial
statements) and fairly present in all material respects the consolidated
financial position of Buyer at the respective dates thereof and the consolidated
results of operations and cash flows for the respective periods then ended
(subject, in the case of unaudited interim financial statements, to normal
year-end adjustments and the exclusion of notes and other disclosures that may
be required in audited annual financial statements). As of the date hereof,
Buyer is eligible to use Form S-3 under the Securities Act.
4.7 Capitalization. As of the date hereof, the authorized capital stock of
Buyer is as disclosed in the Buyer SEC Filings. Except as disclosed in the Buyer
SEC Filings or as set forth on Schedule 4.7, no shares of capital stock of Buyer
are authorized, reserved for issuance or issued and outstanding. All issued and
outstanding shares of ABC Common Stock have been duly authorized and are validly
issued, fully paid, nonassessable and free of preemptive rights. Except as
disclosed in the Buyer SEC Filings or as set forth in Schedule 4.7, Buyer does
not have outstanding any subscription, option, put, call, warrant or other right
or commitment to issue or any obligation or commitment to redeem or purchase,
any of its authorized capital stock or any securities convertible into or
exchangeable for any of its authorized capital stock. Except as disclosed in the
Buyer SEC Filings, there are no shareholder agreements, voting agreements,
voting trusts or other similar arrangements to
-12-
which Buyer is a party which have the effect of restricting or limiting the
transfer, voting or other rights associated with the capital stock of Buyer.
4.8 Certificate of Incorporation. Buyer has heretofore delivered to Seller
copies of the Certificate of Incorporation and By-laws of Buyer as in effect on
the date hereof. The minute book of Buyer, which has been made available to
Seller for its inspection contain all existing records of meetings and consents
in lieu of meetings of the board of directors (and any committee thereof) of
Buyer and of stockholders since the time of its organization and accurately
reflect all transactions referred to in such minutes and consents in lieu of
meeting except as set forth in Schedule 4.8.
4.9 Absence of Certain Developments. Since December 31, 1997, except as
otherwise set forth on Schedule 4.9 hereto and except for the transactions
contemplated hereby, Buyer has conducted its business in the ordinary course of
business, consistent with past practice, and except in connection with this
Agreement and the transactions contemplated hereby, has not suffered any
material adverse change in the business, assets, liabilities, financial
condition or results of operations of Buyer's business taken as a whole (a
"Buyer Material Adverse Change"); provided that a change in economic conditions
or response declines or any other changes in sales behavior which are not
related to policy or promotional changes instituted by Buyer shall not be deemed
to give rise to a Buyer Material Adverse Change; and provided, further, that the
effects of competition or changes in prices of products shall not constitute a
Buyer Material Adverse Change. Further, Buyer has not entered into any agreement
or commitment to take any action not consistent with this Section 4.9.
4.10 Litigation. There is no action, suit, investigation or proceeding
pending or, to the knowledge of Buyer, threatened against or affecting Buyer
before any court or by or before any governmental body or arbitration board or
tribunal that might enjoin or prevent the consummation of the transactions
contemplated by this Agreement.
4.11 Governmental Approvals. No approval, authorization, consent or order
or action of or filing with any court, administrative agency or other
governmental authority, other than the expiration or termination of any
applicable waiting period under the Act, is required for the execution and
delivery by Buyer of this Agreement or the Ancillary Agreements or the
consummation by Buyer of the transactions contemplated hereby or thereby.
4.12 Broker's or Finder's Fees. All negotiations relative to this Agreement
and the transactions contemplated hereby have been carried out by Buyer directly
with Seller, without the intervention of any person on behalf of Buyer in such a
manner to give rise to any claim by any person against Seller for a finder's
fee, brokerage commission or similar payment.
-13-
ARTICLE 5.
COVENANTS
5.1 Covenants of Seller.
(a) Seller agrees that, at all times between the date hereof and the
Closing Date, unless Buyer and Seller shall otherwise agree in writing, and
except as set forth in Schedule 5.1, Seller shall use its commercially
reasonable efforts to:
(i) manage the Purchased Assets only in the usual, regular and
ordinary manner generally consistent with past practices taken as a whole;
provided that Seller shall obtain the prior written consent of Buyer, which
consent will not be unreasonably delayed or withheld, prior to incurring
any obligation, or a related series of obligations, in excess of $100,000
to be included in the Assumed Liabilities;
(ii) maintain the books of account and records exclusively relating to
the Purchased Assets in the usual, regular and ordinary manner, on a basis
consistent with past practice, and comply with all material laws applicable
to the conduct of the Business with respect to the Purchased Assets and
perform its material obligations relating to the Business with respect to
the Purchased Assets without default;
(iii) Seller will not make any wholesale, remainder or other bulk sale
of any portion of its Inventory to a third-party purchaser unless making
appropriate provisions to cause all accounts receivable (and proceeds)
derived therefrom to be included in the Purchased Assets in accordance with
the provisions of Section 1.1(a)(vii) herein, and will not factor, sell,
encumber or otherwise dispose of any accounts receivable or offer on a
widespread basis discounts or similar incentives to accelerate the
collection of accounts receivable; and
(iv) not agree, commit or arrange to take any action not consistent
with the foregoing.
(b) Between the date of this Agreement and the Closing Date, Seller shall
afford to the officers, employees, consultants, attorneys, agents, accountants
and other representatives ("Agents") of Buyer and the lender to Buyer or its
Affiliates (the "Buyer's Lender") access, during regular business hours and upon
reasonable advance written notice, to the assets, books and records of Seller
relating exclusively to those assets set forth in Section 1.1(a) hereof, other
than those assets set forth in Section 1.1(a)(viii) hereof, subject to
reasonable rules and regulations of Seller, and furnish to Buyer, Buyer's Agents
or Buyer's Lender, after delivery to Buyer of the Seller Financial Statements
(as defined in Section 5.6(b) hereof), interim financial statements, which shall
be prepared on a basis consistent with the preparation of the Financial
Statements, as Buyer may reasonably request. No investigation by or on behalf of
Buyer shall affect the representations and warranties of
-14-
Seller hereunder. Buyer agrees to abide by the terms of Section 5.4 hereunder
with respect to such access and any information furnished pursuant to this
Section 5.1(b).
(c) Except as otherwise provided in the Ancillary Agreements, as soon as
practicable after the expiration of the Transitional Services Agreement (the
"Services Termination Date"), Seller shall delete or destroy all copies of the
Masterfile Database in Seller's possession or control except as set forth in the
next sentence provided that Buyer agrees that it will maintain copies of the
Masterfile Database as of the (i) Closing Date and (ii) Services Termination
Date. Seller will not be obligated to delete any information contained in
Seller's (i) credit screening files, (ii) customer service correspondence files,
(iii) decision support systems that are used exclusively for analytical
purposes, (iv) management reporting abstracts or (v) other lists, files or
databases historically maintained by Seller that may contain information that is
also contained in the Masterfile Database; provided, that, Seller will not use
any information contained in the above files that relate exclusively to audio
book club accounts for the mailing of advertising or promotional materials to
those accounts or for any list rentals of those accounts. Buyer shall provide
Seller with access during normal business hours to the information contained in
the Masterfile Database, within two business days after written request by
Seller, for use in the winding down of the Business, relationships with
customers with respect to periods on or prior to the Services Termination Date,
application and credit evaluation, adverse claims or litigation and tax matters,
and for such other purposes as Seller may reasonably request in writing.
5.2 Covenants of Buyer.
(a) Buyer agrees that, at all times between the date hereof and the Closing
Date, unless Seller and Buyer shall otherwise agree in writing, and except as
set forth in Schedule 5.2, Buyer shall:
(i) use commercially reasonable efforts to operate its existing
business only in the usual, regular and ordinary manner generally
consistent with past practices taken as a whole;
(ii) not amend or propose to amend its Certificate of Incorporation or
By-laws (or equivalent governing instruments) in any manner that would
adversely affect Seller's rights if Seller were a stockholder at the time
thereof;
(iii) not recapitalize, split, combine or reclassify any shares of ABC
Common Stock unless appropriate adjustments reasonably acceptable to Seller
are made to the number and kind of Shares, and the number and kind of
shares of ABC Common Stock and exercise price under the Warrant, to provide
Seller with the benefit of such transactions;
(iv) not declare, pay or set aside for payment any dividend or other
distribution in respect of any ABC Common Stock, or redeem, purchase or
otherwise acquire any shares of ABC Common Stock;
-15-
(v) not acquire or agree to acquire by merging or consolidating with,
or by purchasing a substantial portion of the stock or assets of, or by any
other means, any business or any corporation, partnership, joint venture,
association, or other business organization or division thereof unless
appropriate adjustments are made to the number and kind of Shares, and the
number and kind of shares of ABC Common Stock and exercise price under the
Warrant, to provide Seller with the benefit of such transactions; and
(vi) not agree, commit or arrange to do any of the foregoing except to
the extent that Seller is provided with the benefits of any such agreement,
commitment or arrangement.
(b) Between the date of this Agreement and the Closing Date, Buyer shall
afford to the Agents of Seller access, during regular business hours and upon
reasonable advance written notice, to the assets, books and records of Buyer,
subject to reasonable rules and regulations of Buyer, and from time to time
furnish to Seller or Seller's Agents such financial and operating data and other
information concerning the results of operations of Buyer's business as Seller
may reasonably request including all interim financial statements with respect
to Buyer's business. No investigation by or on behalf of Seller shall affect the
representations and warranties of Seller hereunder. Seller agrees to abide by
the terms of Section 5.3 hereunder with respect to such access and any
information furnished pursuant to this Section 5.2(b).
(c) SEC Filings. Notwithstanding anything in the Rights Agreement to the
contrary, Buyer agrees that it will use commercially reasonable efforts to file
with the SEC, within the time periods specified in the SEC's rules and
regulations, (i) all quarterly and annual financial information required to be
filed with the SEC on Forms 10-Q and 10-K, (ii) all current reports required to
be filed with the SEC on Form 8-K and (iii) any other information required to be
filed with the SEC. Further, Buyer agrees that it will, for so long as any
Shares or Warrants Shares remain outstanding, use commercially reasonable
efforts to qualify for use of Form S-3 under the Securities Act.
5.3 Xxxx-Xxxxx-Xxxxxx. Each of the parties shall file, or shall cause its
"ultimate parent entity," as defined in the Act, to file, and shall assist the
other party in filing, any Notification and Report forms and related material
that it may be required to file under the Act; will use its best efforts to
obtain an early termination of the applicable waiting period; and will make any
further filings pursuant thereto that may be necessary, proper or advisable in
connection therewith.
5.4 Confidentiality. The contents of this Agreement and the Ancillary
Agreements, and all information provided by either party to the other, whether
or not marked confidential, shall be governed by the Confidentiality Agreement,
dated July 8, 1998, between Buyer and Seller, and any amendments thereto (the
"Confidentiality Agreement"). If, at any time, counsel to Buyer shall determine
that a press release or other public
-16-
announcement of the transactions contemplated by this Agreement shall be
required by the federal securities laws on account of Buyer's status as a
reporting company thereunder, Buyer shall inform Seller in writing and release
the press release substantially to the effect set forth in Exhibits G(1) and
G(2) hereto (with any changes thereto subject to the written consent of Seller,
whose consent shall not be unreasonably withheld). No other press release or
other public announcement of the transactions contemplated by this Agreement
materially different than the press release set forth in Exhibits G(1) and G(2)
hereto will be made or authorized, directly or indirectly, by either party
hereto without the prior written approval of the other party.
5.5 Allocation of Purchase Price. For all federal, state and local tax
purposes, Buyer and Seller agree to allocate the Purchase Price (i) as to a
portion thereof, to the covenants and agreements of Seller contained in the
Non-Compete Agreement and (ii) as to the balance, in the manner reasonably
determined by Buyer, but subject to the written approval of Seller, which
approval shall not be unreasonably withheld. Within 180 days following the
Closing Date, Buyer shall deliver to Seller a schedule (the "Allocation
Schedule") allocating the Purchase Price (including, for the purpose of this
Section 5.5, any other consideration paid to Seller, including any liabilities
assumed pursuant hereto) among the Purchased Assets and the covenant not to
compete granted pursuant to the Non-Compete Agreement. The Allocation Schedule
shall be reasonably prepared by Buyer, in accordance with Section 1060 of the
Code and the regulations thereunder, but subject to the written approval of
Seller, which approval shall not be unreasonably withheld.
5.6 Preparation of Certain Financial Information.
(a) In contemplation of and in order to comply with the rules and
regulations (the "SEC Rules") of the Securities and Exchange Commission (the
"SEC"), Seller shall use its reasonable efforts to cause PricewaterhouseCoopers
LLP ("Pricewaterhouse"), the independent accountants of Seller, to prepare (i)
audited carve out balance sheets of the Business as of December 20, 1996 and
December 19, 1997 and (ii) audited carve out statements of operations and
statements of cash flows of the Business for the years ended December 20, 1996
and December 19, 1997 (the "Audited Financial Statements") and to provide all
necessary assistance with respect thereto, it being understood and agreed by
Seller that such assistance shall include, without limitation, (i) providing
Buyer and its representatives with all necessary financial information and data
relating to the Business for such periods, (ii) making available to Buyer all
employees of Seller necessary to assist in the preparation of such financial
statements, and (iii) if requested by Pricewaterhouse, delivering a management
representation letter reasonably acceptable to Pricewaterhouse.
(b) Seller shall prepare and use its reasonable efforts to cause
Pricewaterhouse to review (i) unaudited carve out balance sheets of the Business
as of September 20, 1998 and (ii) unaudited carve out statements of operations
and statements of cash flows of the Business for the nine months ended September
20, 1998 (the "Financial
-17-
Statements" and, together with the Audited Financial Statement, the "Seller
Financial Statements").
(c) The fees and expenses of Pricewaterhouse in preparing the Seller
Financial Statements as provided in this Section 5.6 shall be borne (and
reimbursed) by Buyer in an amount up to $100,000 in accordance with the August
14, 1998 letter agreement by and between Buyer and Seller regarding the subject
matter hereof.
(d) After the Closing Date, Buyer shall afford the representatives of
Seller reasonable access during normal business hours to such books of account
and other financial records of Buyer pertaining to the Business and acquired by
Buyer pursuant to this Agreement as Seller may reasonably request in order to
prepare, file, amend or respond to questions of any governmental authority
relating to its financial statements and Tax Returns for any period or portion
thereof that Seller owned the Business. Seller shall compensate Buyer for its
out-of-pocket expenses incurred in assisting Seller pursuant to this Section
5.6(c).
(e) After the Closing Date, as soon as reasonably practicable, Seller shall
reasonably cooperate with the Buyer and Pricewaterhouse to enable
Pricewaterhouse to prepare (i) an audited carve out balance sheet of the
Business as of December 18, 1998 and (ii) audited carve out statements of
operations and statements of cash flows of the Business for the year ended
December 18, 1998 and all necessary notes and other disclosures consistent with
the statements and information provided for the year ended December 19, 1997.
Buyer shall be solely responsible for all expenses incurred in connection with
(i) and (ii), including, without limitation, Seller's out of pocket expenses
incurred as a result of such cooperation and all fees and expenses of
Pricewaterhouse; provided, however, Buyer shall not be responsible for any
salary or other expenses related to the personnel of Seller. Such cooperation
shall include, without limitation (i) providing Pricewaterhouse with all
necessary financial information, data, work papers and analyses relating to the
Business for the period concerned; and (ii) making available to Pricewaterhouse
all employees of Seller necessary to assist in the preparation of such financial
information, data, work papers, analyses and financial statements consistent
with the information provided and cooperation provided for the audit of the
financial statements for the year ended December 19, 1997.
5.7 Further Assurances. (a) From time to time following the Closing Date,
Seller shall (i) execute and deliver, or cause to be executed and delivered to
Buyer, such other instruments of assignment, conveyance and transfer as Buyer
may reasonably request or as may be otherwise necessary effectively to convey
and transfer to, and vest in, Buyer and put Buyer in possession of, any part of
the Purchased Assets and (ii) take any other actions necessary to reflect
Buyer's ownership of the Purchased Assets as of the Closing Date.
(b) With respect to any Purchased Assets that cannot be physically
delivered to Buyer because they are in the possession of third parties, or
otherwise, Seller shall give irrevocable instructions to the party in possession
thereof, if such be the case, with
-18-
copies to Buyer, that all right, title, and interest therein have been vested in
Buyer and that the same are to be held for Buyer's exclusive use and benefit.
(c) Seller shall use commercially reasonable efforts to promptly remit
payments received by Seller after the Closing Date with respect to accounts
receivable transferred to Buyer pursuant to Section 1.1(a)(vii) herein provided
that in any event Seller shall remit the payment concerned no later than thirty
(30) days after receipt.
5.8 No Solicitation; Acquisition Proposals. Upon execution of this
Agreement until the Closing Date or until this Agreement is terminated as
provided in Article 8, Seller will not directly or indirectly (i) solicit or
initiate (including by way of furnishing any information) discussions with or
(ii) enter into negotiations or agreements with, or furnish any information to,
any corporation, partnership, person or other entity or group (other than Buyer,
an affiliate of Buyer or its authorized representatives pursuant to this
Agreement) concerning any proposal for a merger, sale of substantial assets or
other takeover or business combination transaction, which, if consummated, would
prevent Seller from consummating the purchase and sale contemplated hereby (an
"Acquisition Transaction"); and Seller will instruct its officers, directors,
advisors and other financial and legal representatives and consultants not to
take any action contrary to the foregoing provisions of this sentence. Seller
will notify Buyer promptly in writing if Seller becomes aware that any inquiries
or proposals are received by, any information is requested from, or any
negotiations or discussions are sought to be initiated with Seller with respect
to an Acquisition Transaction and will immediately after receipt provide to
Buyer a copy of any letter, proposal or other document in which any proposal for
an Acquisition Transaction is made or expressed. Seller will immediately cease
any existing activities, discussions or negotiations with any third parties
which may have been conducted on or prior to the date hereof with respect to an
Acquisition Transaction and shall direct and use reasonable efforts to cause its
officers, advisors and representatives not to engage in any such activities,
discussions or negotiations.
5.9 Employees. Buyer shall have no obligation to employ any employees of
Seller.
5.10 Reasonable Efforts; Additional Actions. Upon the terms and subject to
the conditions of this Agreement, including Section 1.1(b) hereof, each of the
parties hereto shall use all commercially reasonable best efforts to take, or
cause to be taken, all action, and to do or cause to be done, and to assist and
cooperate with the other parties in doing, all things necessary, proper or
advisable to consummate and make effective as promptly as practicable the
transactions contemplated by this Agreement, including using all reasonable
efforts to (a) effect promptly all necessary or appropriate registrations and
filings with governmental or taxing authorities, including, filings and
submissions pursuant to the Act and the Securities Act, (b) defend any lawsuit
or other legal proceedings, whether judicial or administrative, challenging this
Agreement or the consummation of the transaction contemplated hereby and (c)
fulfill or cause the fulfillment of conditions precedent to the other party's
obligations hereunder.
-19-
5.11 Notification of Certain Matters. Each of the parties hereto shall give
written notice to the other party, promptly upon becoming aware of (i) the
occurrence of a Material Adverse Change or a Buyer Material Adverse Change, as
appropriate, (ii) any occurrence, or failure to occur, of any event, which
occurrence or failure to occur has caused or could reasonably be expected to
cause any representation or warranty in this Agreement to be untrue or
inaccurate in any material respect at any time after the date hereof and prior
to the Closing Date or (iii) any material failure on the part of either party to
comply with or satisfy any covenant, condition or agreement to be complied with
or satisfied by such party hereunder; provided that the delivery of any notice
pursuant to this Section 5.11 shall not limit or otherwise affect the remedies
available hereunder to the party receiving such notice.
ARTICLE 6.
CONDITIONS PRECEDENT
6.1 Conditions Precedent to the Obligations of Buyer. The obligations of
Buyer under this Agreement are subject, at the option of Buyer, to the
satisfaction at or prior to the Closing Date of each of the following
conditions:
(a) Accuracy of Representations and Warranties. The representations and
warranties of Seller contained in this Agreement or in any certificate or
document delivered to Buyer pursuant hereto shall be true and correct in all
material respects on and as of the Closing Date as though made at and as of that
date, except to the extent specifically made as of an earlier date and except
that any such representations and warranties that by their terms are qualified
by a "materiality" or similar standard should be true and correct in all
respects, and Seller shall have delivered to Buyer a certificate to that effect.
(b) Material Adverse Change. Since the date hereof, there has been no
Material Adverse Change.
(c) Compliance with Covenants. Seller shall have performed and complied in
all material respects with all terms, agreements, covenants and conditions of
this Agreement to be performed or complied with by it at or prior to the Closing
Date, and Seller shall have delivered to Buyer a certificate to that effect.
(d) Opinion of Counsel for Seller. Buyer shall have received the favorable
opinion from Xxxx, Weiss, Rifkind, Xxxxxxx & Xxxxxxxx, counsel to Seller, and
Xxxxxx X. Xxxxxx, Esq., General Counsel of Seller, each dated the Closing Date,
substantially to the effect set forth in Annexes A and B hereto.
(e) Legal Actions or Proceedings. No legal action or proceeding shall have
been instituted or threatened which would reasonably be expected to restrain,
prohibit or invalidate the consummation of the transactions contemplated hereby
or which would reasonably be expected to cause a Material Adverse Change.
-20-
(f) Regulatory Approvals. All applicable waiting periods (and any
extensions thereof) under the Act shall have expired or otherwise been
terminated.
(g) Ancillary Agreements. Seller shall have executed and delivered the
Ancillary Agreements and, subject to Buyer's execution thereof, said Agreements
shall be in full force and effect as of the Closing Date.
(h) Supporting Documents. Buyer and its counsel shall have received a
certificate of a representative of Seller (1) certifying that the Board of
Representatives of Seller has authorized the execution, delivery and performance
of this Agreement and the Ancillary Agreements and the transactions contemplated
hereby and thereby; and (2) as to the incumbency and specimen signature of each
officer of Seller executing this Agreement and any certificate or instrument
furnished pursuant hereto, and a certification by another officer of Seller as
to the incumbency and signature of the officer signing the certificate referred
to in this Section 6.1(h).
(i) Seller Financial Statements. Buyer shall have received the Audited
Financial Statements and Financial Statements prior to the Closing, and the
Audited Financial Statements shall reflect the information set forth in Schedule
3.5 hereto.
6.2 Conditions Precedent to the Obligations of Seller. The obligations of
Seller under this Agreement are subject, at the option of Seller, to the
satisfaction at or prior to the Closing Date of each of the following
conditions:
(a) Accuracy of Representations and Warranties. The representations and
warranties of Buyer contained in this Agreement or in any certificate or
document delivered to Seller pursuant hereto shall be true and correct in all
material respects on and as of the Closing Date as though made at and as of that
date, except to the extent specifically made as of an earlier date and except
that any such representations and warranties that by their terms are qualified
by a "materiality" or similar standard should be true and correct in all
respects, and Buyer shall have delivered to Seller a certificate to that effect.
(b) Buyer Material Adverse Change. Since the date hereof, there has been no
Buyer Material Adverse Change with respect to Buyer's business.
(c) Compliance with Covenants. Buyer shall have performed and complied in
all material respects with all terms, agreements, covenants and conditions of
this Agreement to be performed or complied with by them at or prior to the
Closing Date, and Buyer shall have delivered to Seller a certificate to that
effect.
(d) Opinions of Counsel for Buyer. Seller shall have received the favorable
opinion of Xxxxxx & Carnelutti and Atlas, Xxxxxxxx, Trop & Borksin, as
appropriate, counsel for Buyer, dated the Closing Date, substantially to the
effect set forth in Annex C hereto.
-21-
(e) Legal Actions or Proceedings. No legal action or proceeding shall have
been instituted or threatened which would reasonably be expected to restrain,
prohibit or invalidate the consummation of the transactions contemplated hereby
or which would reasonably be expected to cause a Buyer Material Adverse Change
with respect to Buyer's business.
(f) Seller Released. Seller shall have been released from any obligations
under any agreements and contracts assigned to Buyer under this Agreement or
Buyer has specifically assumed such obligations.
(g) Ancillary Agreements. Buyer shall have executed and delivered the
Ancillary Agreements and, subject to Seller's execution thereof, said Agreements
shall be in full force and effect as of the Closing Date.
(h) Supporting Documents. Seller and its counsel shall have received copies
of the following supporting documents:
(i) (1) copies of the Certificate of Incorporation of Buyer and all
amendments thereto, certified as of a recent date by the Secretary of State
of the State of Florida, (2) a certificate of said Secretary of State, with
respect to Buyer, dated as of a recent date, as to the due incorporation
and good standing of Buyer and listing all documents of Buyer on file with
said Secretary; and
(ii) a certificate of the Secretary or an Assistant Secretary of Buyer
dated the Closing Date and certifying: (1) that attached thereto is a true
and complete copy of resolutions duly adopted by the Board of Directors of
Buyer authorizing the execution, delivery and performance of this Agreement
and the Ancillary Agreements and the transactions contemplated hereby and
thereby and that all such resolutions are still in full force and effect
and are all the resolutions adopted in connection with the transactions
contemplated by this Agreement; and (2) as to the incumbency and specimen
signature of each officer of Buyer executing this Agreement and any
certificate or instrument furnished pursuant hereto, and a certification by
another officer of Buyer as to the incumbency and signature of the officer
signing the certificate referred to in this paragraph (ii).
ARTICLE 7.
INDEMNIFICATION
7.1 Indemnity by Seller. Seller agrees that, from and after the Closing
Date, it will indemnify and hold harmless Buyer and its successors and assigns
and its and their respective officers, directors, controlling persons (if any),
employees, attorneys, agents, affiliates, partners and stockholders, in each
case past, present, or as they may exist at any time after the date of this
Agreement (including Buyer, the "Buyer Indemnitees"), with respect to the
matters set forth below in this Section 7.1; provided, however, Seller shall not
be liable to Buyer Indemnitees for any losses as set forth in Section 7.1(a)(i)
below unless
-22-
and until the losses thereon exceed an aggregate amount equal to $100,000 (the
"Basket") and then only for any and all such losses without regard to the
Basket, but only up to an amount equal to $16.0 million; provided, further,
Seller shall be liable for all losses arising (i) as a result of a breach of
Sections 3.7 and 3.8 herein up to an amount equal to the Cash Amount and (ii)
out of Sections 7.1(a)(ii), 7.1(a)(iii) and 7.1(b) herein. Notwithstanding
anything in this Agreement to the contrary, Seller agrees to indemnify and hold
harmless Buyer Indemnitees against and in respect of any and all:
(a) claims, suits, actions, proceedings (formal and informal),
investigations, judgments, deficiencies, damages, settlements, liabilities,
losses, costs and reasonable legal and other expenses arising out of or based
upon (i) any breach of any representation, warranty, covenant or agreement of
Seller contained in this Agreement or in any other agreement executed and
delivered by Seller hereunder or in connection herewith, (ii) any Retained
Liabilities and (iii) the waiver by Buyer of compliance by Seller with the
provisions of applicable bulk sales laws; and
(b) claims, suits, actions and proceedings (formal and informal) of persons
not a party to this Agreement and related investigations, judgments,
deficiencies, damages, settlements, liabilities, losses, costs and reasonable
legal and other expenses arising from events occurring prior to the Closing Date
relating to the Purchased Assets (other than Assumed Liabilities).
7.2 Indemnity by Buyer. Buyer agrees that, from and after the Closing Date,
it will indemnify and hold harmless Seller and its successors and assigns and
their respective partners, controlling persons (if any), employees, attorneys,
agents, affiliates, partners and stockholders, in each case past, present, or as
they may exist at any time after the date of this Agreement (including Seller,
the "Seller Indemnitees"), with respect to the matters set forth below in this
Section 7.2; provided, however, Buyer shall not be liable to Seller Indemnitees
for any losses as set forth below in Section 7.2(a)(i) unless and until the
losses thereon exceed an aggregate amount equal to the Basket and then only for
any and all such losses without regard to the Basket but only up to an amount
equal to $4.5 million (the "Buyer Cap") except as provided in the next sentence;
provided, further, Buyer shall be liable for all losses arising (i) as a result
of a breach of Sections 4.4 and 4.5 herein or (ii) out of Sections 7.2(a)(ii)
and 7.2(b) herein. If Seller is obligated for any reason to return, refund or
reimburse all or any portion of the Purchase Price to Buyer (other than any
payment by Seller to Buyer pursuant to Section 7.1 herein), or any person
claiming through or on behalf of Buyer, Buyer shall indemnify and hold harmless
Seller for the amount of the Purchase Price so returned, refunded or reimbursed
without regard to the Basket or Buyer Cap. Notwithstanding anything in this
Agreement to the contrary, Buyer additionally agrees to indemnify and hold
harmless Seller Indemnitees against and in respect of any and all:
(a) claims, suits, actions, proceedings (formal and informal),
investigations, judgments, deficiencies, damages, settlements, liabilities,
losses, costs and reasonable legal and other expenses arising out of or based
upon (i) any breach of any representation, warranty, covenant or agreement of
Buyer contained in this Agreement, or in
-23-
any other agreement executed and delivered by Buyer hereunder or in connection
herewith and (ii) the Assumed Liabilities; and
(b) claims, suits, actions and proceedings (formal and informal) of any
party, and related investigations, judgments, deficiencies, damages,
settlements, liabilities, losses, costs and reasonable legal and other expenses,
arising on or after the Closing Date relating to the Purchased Assets (other
than Retained Liabilities) or from Seller's transfer to Buyer hereunder of any
of the Purchased Assets transferred in accordance with Section 1.1(b) herein)
without having obtained the Consent of such party.
7.3 Defense of Claims. Any Buyer Indemnitee or Seller Indemnitee (the
"Indemnified Party") seeking indemnification under this Agreement shall give to
the party obligated to provide indemnification to such Indemnified Party (the
"Indemnitor") a written notice (a "Claim Notice") describing in reasonable
detail the facts giving rise to any claim for indemnification hereunder within
30 days of learning of the existence of such claim; provided, however, that the
Indemnified Party's failure to provide such notice in not more than 30 days
shall not preclude the Indemnified Party from being indemnified for such claim
or demand, except to the extent that the failure to give timely notice results
in a forfeiture of substantive defenses available to the Indemnifying Party.
Upon receipt by the Indemnitor of a Claim Notice from an Indemnified Party with
respect to any claim of a third party, such Indemnitor may assume the defense
thereof with counsel reasonably satisfactory to the Indemnified Party and, in
such event, shall agree to pay and otherwise discharge with the Indemnitor's own
assets all judgments, deficiencies, damages, settlements, liabilities, losses,
costs and legal and other expenses related thereto; and the Indemnified Party
shall cooperate in the defense or prosecution thereof and shall furnish such
records, information and testimony and attend all such conferences, discovery
proceedings, hearings, trials and appeals as may be reasonably requested in
connection therewith. If the Indemnitor does not assume the defense thereof, the
Indemnitor shall similarly cooperate with the Indemnified Party in such defense
or prosecution. The Indemnified Party shall have the right to participate in the
defense or prosecution of any lawsuit with respect to which the Indemnitor has
assumed the defense and to employ its own counsel therein, but the reasonable
fees and expenses of such counsel shall be at the expense of the Indemnified
Party unless (i) the Indemnitor shall not have promptly employed counsel
reasonably satisfactory to such Indemnified Party to take charge of the defense
of such action or (ii) such Indemnified Party shall have reasonably concluded
that there exists a significant conflict of interest with respect to the conduct
of such Indemnified Party's defense by the indemnitor, in either of which events
such reasonable fees and expenses of one counsel shall be borne by the
Indemnitor and the Indemnitor shall not have the right to direct the defense of
any such action on behalf of the Indemnified Party. The Indemnitor shall have
the right, in its sole discretion, to settle any claim solely for monetary
damages for which indemnification has been sought and is available hereunder.
The Indemnified Party shall give written notice to the Indemnitor of any
proposed settlement of any suit, which settlement the Indemnitor may, if it
shall have assumed the defense of the suit, reject in its reasonable judgment
within 10 days of receipt of such notice. Notwithstanding the foregoing the
Indemnified Party shall have the right to pay or settle any suit for which
indemnification has been sought and is available hereunder,
-24-
provided, that, if the defense of such claim shall have been assumed by the
Indemnitor, the Indemnified Party shall automatically be deemed to have waived
any right to indemnification hereunder.
7.4 Exclusive Remedies. Notwithstanding anything in this Agreement to the
contrary, the remedies provided in this Section 7 shall be the sole and
exclusive remedies from and after the Closing Date for any inaccuracy and for
any breach of any representation, warranty, covenant or agreement of, or
obligation or liability of, Buyer or Seller; provided, however, that nothing in
this Section 7.4 shall be construed to limit any right or remedy that Buyer or
Seller may have with respect to fraud or willful misconduct.
7.5 Survival. Except as otherwise provided, the representations and
warranties of the parties hereto contained in this Agreement, the covenant
contained in Section 5.11 and all claims and causes of action with respect to
the foregoing shall expire eighteen months from the Closing Date, except that
(i) the representations and warranties in Sections 3.2 (Authority to Effect
Transactions), 3.7 (Title to Properties, Absence of Liens and Encumbrances), 4.2
(Authority to Effect Transactions), 4.4 (Shares) and 4.5 (Title to Shares) shall
have no expiration date and shall survive indefinitely. In the event a Claim
Notice (within the meaning of Section 7.3) for breach of representation or
warranty under Section 7.1 or Section 7.2 is given within the applicable
survival period, the representations and warranties that are the subject of such
indemnification Claim Notice survive solely with respect to such claim until
such time as such claim is finally resolved.
7.6 Damages. Notwithstanding anything in this Agreement to the contrary,
the Indemnitor shall not be obligated to indemnify the Indemnified Party with
respect to any losses, liabilities, obligations, damages, costs (including costs
of investigation) and expenses (including reasonable attorneys' and other
professionals' fees and expenses) (collectively, the "Losses") to the extent of
any proceeds received in connection with any such Losses by the Indemnified
Party under any insurance policy of the Indemnified Party. Notwithstanding
anything in this Agreement to the contrary, in no event whatsoever shall either
the Seller or Buyer be entitled to make a claim against the other party (the
"Non-Complying Party") for lost profits or other consequential, incidental,
indirect, special or punitive damages ("Special Losses") by reason of a failure
by the Non-Complying Party to comply with this Agreement in any instance, other
than (i) in the case of fraud or willful misconduct or (ii) as set forth in the
next sentence. In the case of any breach of Sections 3.5, 3.7 or 3.8 herein, if
Buyer's actual damages arising solely with respect to a breach or breaches of
any such Section or Sections, are greater than $6.0 million, individually or in
the aggregate (the "Actual Damages Threshold"), then Buyer shall be entitled to
make a claim against Seller for Special Losses by reason of such breach;
provided that in no event shall Seller be obligated to indemnify Buyer in
respect of such Special Losses in excess of $6.0 million (the "Special Losses
Cap") in the aggregate for all such Special Losses; and provided, further, that
in the event the Masterfile Database contains less than: (i) 155,000
Announceable Names but more than 135,000 Announceable Names, then Buyer, at its
option, shall be entitled to (A) receive from Seller $55.00 per Announceable
Name for the shortfall (between 154,999 and the actual amount of Announceable
Names); or (B) if the Actual Damages Threshold is exceeded, make
-25-
a claim against Seller for Special Losses by reason of such breach up to the
Special Losses Cap (subject to the Basket); and (ii) 135,000 Announceable Names,
then Buyer shall be entitled to (A) receive from Seller $55.00 per Announceable
Name for the shortfall (between 154,999 Announceable Names and the actual amount
of Announceable Names) and (B) if the Actual Damages Threshold is exceeded, make
a claim against Seller for Special Losses by reason of such breach (in each
case, subject to the next sentence). The amount of such Special Losses and
payments in respect of (i)(A) and ii(A) above shall be taken into account in
determining whether the Basket shall have been exceeded and Seller's maximum
liability under the relevant provisions of the introductory paragraph of Section
7.1 shall have been reached.
7.7 Owners or Affiliates of Seller. Except in the event of (a) an
assignment permitted pursuant to Section 9.7(b) herein, (b) an assignment to an
affiliate or owner by operation of law (i.e., as a result of a merger or
consolidation) or (c) a sale of all or substantially all of the assets of Seller
to an affiliate or owner, Buyer acknowledges that the obligations and
liabilities of Seller arising out of or relating to: (i) this Agreement; (ii)
the Purchased Assets; (iii) the Business; or (iv) any other transaction
contemplated hereby (other than the Ancillary Agreements which will be governed
by the terms thereof), whether arising before, on or after the Closing Date and
whether known or unknown, actual, fixed, contingent or otherwise, shall not be
binding upon, enforceable against or extend to the owners or affiliates of
Seller.
7.8 Put Amount. In the event that Seller is required to make payment to
Buyer under Section 7.1 hereof for reasons other than fraud or willful
misconduct pursuant to a final order of a court of competent jurisdiction not
subject to further appeal (a "Section 7.1 Payment"), Seller shall: (a) deposit
in an escrow account held by a commercial bank reasonably acceptable to the
parties an amount (the "Escrow Amount") equal to the Section 7.1 Payment or the
Buyer's then current obligation under the Stockholders Put Right (as defined in
the Rights Agreement) ("Put Amount"), whichever is less; and (b) promptly pay to
Buyer the amount, if any, by which the Section 7.1 Payment exceeds the Put
Amount. In addition, as the Buyer's then current obligation under the
Stockholders Put Right is reduced whether by (i) the lapsing or reduction of
Stockholder Put Rights by time or by sale of ABC Common Stock by Seller (or the
Stockholders) or (ii) the payment by Buyer to Seller and Stockholders of its
obligations under the Stockholder Put Right, the amount by which such obligation
is reduced shall be promptly paid from the Escrow Amount to the Buyer. In the
event Buyer fails to pay any amount under the Stockholders Put Right when due
(without giving effect to the final sentence of Section 5(e) of the Rights
Agreement), such amount shall be promptly paid from the Escrow Amount to the
Seller in satisfaction of Buyer's obligation to pay such amount.
-26-
ARTICLE 8.
TERMINATION
8.1 Termination. This Agreement may be terminated at any time prior to the
Closing Date:
(a) by Buyer, if the conditions set forth in Section 6.1 shall not have
been complied with or performed in any material respect by Seller on or before
January 6, 1999 and such noncompliance or nonperformance shall not have been
waived, cured or eliminated (or by its nature cannot be cured or eliminated);
(b) by Seller, if the conditions set forth in Section 6.2 shall not have
been complied with or performed in any material respect by Buyer on or before
January 6, 1999 and such noncompliance or nonperformance shall not have been
waived, cured or eliminated (or by its nature cannot be cured or eliminated);
(c) by Buyer or Seller, in the event the Closing Date has not occurred on
or prior to the close of business on or before January 6, 1999 or such later
date as the parties hereto may agree in writing (unless such event has been
caused by the breach of this Agreement by the party seeking such termination);
(d) by either Seller or Buyer if (i) there shall be a final nonappealable
order of a federal or state court in effect preventing consummation of the
transactions contemplated by this Agreement or (ii) there shall be any action
taken, or any statute, rule, regulation or order enacted, promulgated or issued
or deemed applicable to the transactions contemplated by this Agreement by any
governmental entity which would make consummation of the transactions
contemplated by this Agreement illegal; or
(e) by either Seller or Buyer if there shall be any action taken, or any
statute, rule, regulation or order enacted, promulgated or issued or deemed
applicable to the transactions contemplated by this Agreement by any
governmental entity, which would (i) prohibit Buyer's ownership or operation of
all or a material portion of the Purchased Assets, or compel Buyer to dispose of
or hold separate all or a material portion of the Purchased Assets or of Buyer
and its subsidiaries taken as a whole, as a result of the transactions
contemplated by this Agreement or (ii) render Seller or Buyer unable to
consummate the transactions contemplated by this Agreement, except for any
waiting period provisions.
8.2 Effect of Termination. In the event of the termination of this
Agreement pursuant to Section 8.1 hereof, this Agreement shall thereafter become
void and have no effect, and no party hereto shall have any liability to the
other party hereto or its stockholders, directors or officers in respect
thereof, except that in the event of any breach hereof by either party, the
other party shall be entitled to any remedy available to it at law or in equity,
including specific performance. Notwithstanding the foregoing, in the event of
the termination of this Agreement pursuant to Section 8.1(b) (other than as a
result of a material breach of this Agreement by Seller), Seller shall retain
the Transaction Fee, which shall
-27-
constitute Buyer's payment to Seller of liquidated damages, and Buyer shall have
no further liability to Seller by reason of such termination. Such liquidated
damages are the sole remedy available to Seller by reason of such termination.
ARTICLE 9.
MISCELLANEOUS
9.1 Bulk Sales Laws. Buyer waives compliance by Seller with any applicable
bulk sales law by Seller.
9.2 Expenses. Each party hereto shall pay its own expenses incident to the
negotiation, preparation and consummation of this Agreement and all other
agreements, instruments and documents executed and delivered by it hereunder or
in connection herewith, including all fees and expenses of its or their
respective counsel and accountants, whether or not the transactions contemplated
hereby or thereby are consummated provided that, (i) Buyer shall bear the
expenses of the audit pursuant to Section 5.6 and (ii) on the Closing Date,
Buyer shall reduce the Cash Amount in an amount equal to one-half of the filing
fee for the "Notification and Report Form For Certain Mergers and Acquisitions"
under the Act ($22,500).
9.3 Further Actions. At any time and from time to time after the Closing,
each party hereto agrees, at its own expense (except as otherwise provided
herein), to take such actions and to execute and deliver such documents as may
be reasonably necessary to effectuate the purposes of this Agreement.
9.4 Entire Agreement; Modification. This Agreement (including the
Disclosure Schedules, Exhibits and Annexes attached hereto) sets forth the
entire understanding of the parties with respect to the subject matter hereof,
supersedes all existing agreements among them concerning such subject matter and
may be modified only by a written instrument duly executed by each party hereto.
9.5 Notices. Any notice given pursuant to this Agreement to any party
hereto shall be deemed to have been duly given when mailed by registered or
certified mail, return receipt requested, or by overnight courier, or when hand
delivered as follows:
If to Seller:
The Columbia House Company
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: General Counsel
-28-
-and-
The Columbia House Company
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: Chief Financial Officer
with a copy to;
Xxxx, Weiss, Rifkind, Xxxxxxx & Xxxxxxxx
1285 Avenue of the Americas
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: Xxxxx X. Xxxxxx, Esq.
If to Buyer:
Audio Book Club, Inc.
00 Xxxxxxxxx Xxxxx
X.X. Xxx 0000
Xxxxxxxxxx, Xxx Xxxxxx 00000-0000
Attention: Xxxxxx Xxxxxxx, CEO
-and-
The Xxxxxxx Company, Inc.
Corporate Blvd, N.W.
Suite 222
X.X. Xxx 0000
Xxxx Xxxxx, XX 00000-0000
Attention: Xxxxxx Xxxxxxx, CEO
with a copy to;
Xxxxxx & Carnelutti
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxx X. Xxxxxxxx, Esq.
or at such other address as either such party shall from time to time designate
by written notice, in the manner provided herein, to the other party hereto. All
references to days in this Agreement shall be deemed to refer to calendar days,
unless otherwise specified.
9.6 Waiver. Any waiver must be in writing, and any waiver by any party of a
breach of any provision of this Agreement shall not operate as or be construed
to be a waiver of any other breach of that provision or of any breach of any
other provision of this
-29-
Agreement. The failure of a party to insist upon strict adherence to any term of
this Agreement on one or more occasions will not be considered a waiver or
deprive that party of the right thereafter to insist upon strict adherence to
that term or any other term of this Agreement.
9.7 Binding Effect; Assignment. (a) Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by either of the
parties hereto without the prior written consent of the other party, and any
purported assignment without such consent shall be void, except that (i) either
party may assign any and all of its rights and remedies and delegate its
obligations under this Agreement to an affiliate without the consent of the
other party as long as such affiliate agrees in writing to be bound by the terms
of this Agreement and (ii) Buyer may grant a security interest in its rights
under this Agreement to Fleet National Bank, as administrative agent (the
"Agent"), in connection with the financing of the transactions contemplated by
this Agreement (although receipt of such financing shall not be deemed to be a
condition to closing hereunder); provided, that the Agent will not be entitled
to exercise any rights granted to Buyer in connection with the transactions
contemplated by this Agreement unless an "Event of Default" under the relevant
financing documents has occurred or been declared and is continuing. By agreeing
to the granting of a security interest in this Agreement to the Agent in
connection with the financing of the transactions contemplated by this
Agreement, Seller does not incur any obligations to the Agent Bank those set
forth herein or therein or agree to grant the Agent any additional rights
herein; provided, further, any foreclosure on the assets concerned will be
deemed a Change of Control with respect to Buyer as set forth in Section 14(c)
of the Mailing Agreement. No assignment or delegation shall relieve the
assigning or delegating party hereto of its obligations hereunder.
(b) This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their permitted successors and assigns.
9.8 Separability. If any provision of this Agreement is invalid, illegal or
unenforceable, such provision shall be ineffective to the extent, but only to
the extent of, such invalidity, illegality or unenforceability, without
invalidating the remainder of such provision or the remaining provisions of this
Agreement, unless such a construction would be unreasonable.
9.9 Headings. The headings in this Agreement are solely for convenience of
reference and shall be given no effect in the construction and interpretation of
this Agreement.
9.10 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
9.11 Return of Information. If for any reason whatsoever the transactions
contemplated by this Agreement are not consummated, the parties hereto shall, in
addition to
-30-
satisfying the requirements of the Confidentiality Agreement, or any amendment
thereto, promptly return to the other party or destroy (and certify to such
party the return or destruction of) all books and records and other information
furnished by or on behalf of Buyer, Seller or their respective Agents (including
all copies, if any, thereof), and shall not use or disclose the information
contained in such books and records for any purpose or make such information
available to any other entity or person.
9.12 Sections of Disclosure Schedule. The disclosure of any matter in any
section of the Disclosure Schedule shall be deemed to be a disclosure for all
purposes of the Disclosure Schedule to which such matter could reasonably be
expected to be pertinent, but shall expressly not be deemed to constitute an
admission by Seller or Buyer or to otherwise imply that any such matter is
material for the purposes of this Agreement.
9.13 Incorporation by Reference. The Disclosure Schedules, Exhibits and
Annexes attached hereto and the letters referred to herein as having been
executed or delivered concurrently with the execution of this Agreement are an
integral part of this Agreement and are incorporated herein by reference.
9.14 Governing Law. This Agreement shall be governed by, and construed in
accordance with, the internal laws of the State of New York. Each party hereto
agrees that it shall bring any action or proceeding in respect of any claim
arising out of or related to this Agreement or the transactions contained in or
contemplated by this Agreement or the Ancillary Agreements, whether in tort or
contract or otherwise or at law or in equity, exclusively in the United States
District Court for the Southern District of New York (the "Chosen Court") and
(i) irrevocably submits to the exclusive jurisdiction of the Chosen Court, (ii)
waives any objection to laying venue in any such action or proceeding in the
Chosen Court and (iii) waives any objection that the Chosen Court is an
inconvenient forum or does not have jurisdiction over any party hereto.
[SIGNATURE PAGE FOLLOWS]
-31-
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
THE COLUMBIA HOUSE COMPANY
By: _____________________________________
Name: Xxxxxxx X. Xxxxxx
Title: Chairman and Chief Executive Officer
AUDIO BOOK CLUB, INC.
By: _____________________________________
Name: Xxxxxx Xxxxxxx
Title: Chairman and Chief Executive Officer
[SIGNATURE PAGE TO ASSET PURCHASE AGREEMENT]
-32-
