Exhibit 2.1
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STOCK PURCHASE AGREEMENT
by and between
HERITAGE MEDIA CORPORATION, as Seller
and
DMAC ACQUISITION CORP., as Buyer
RELATING TO ALL THE CAPITAL STOCK
OF
DIMAC MARKETING CORPORATION
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Dated as of May 17, 1998
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TABLE OF CONTENTS
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1. Definitions............................................................ 1
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2. Sale and Purchase of Shares............................................ 6
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3. Closing; Closing Date.................................................. 6
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4. Purchase Price and Payment for Shares.................................. 6
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5. Representations and Warranties of the Seller........................... 9
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5.1 Due Incorporation and Qualification........................... 9
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5.2 Capital Stock................................................. 9
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5.3 Options or Other Rights....................................... 10
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5.4 Subsidiaries.................................................. 10
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5.5 Certificates of Incorporation and By-Laws..................... 11
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5.6 Power and Capacity............................................ 11
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5.7 Freedom to Contract........................................... 11
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5.8 Financial Statements.......................................... 12
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5.9 Absence of Undisclosed Liabilities............................ 13
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5.10 No Material Adverse Change.................................... 13
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5.11 Taxes......................................................... 14
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5.12 Compliance with Laws.......................................... 15
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5.13 Environmental Matters......................................... 15
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5.14 Litigation.................................................... 17
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5.15 Agreements.................................................... 17
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5.16 Real Property................................................. 19
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5.17 Fixed Assets.................................................. 19
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5.18 Proprietary Rights............................................ 19
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5.19 Title To Properties........................................... 20
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5.20 Employee Benefit Plans........................................ 21
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5.21 Executive Employees........................................... 30
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5.22 Labor Matters................................................. 31
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5.23 Operations of the Company..................................... 32
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5.24 Banks, Brokers and Proxies.................................... 32
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5.25 Brokers and Finders........................................... 32
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5.26 Affiliated Transactions....................................... 33
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6. Representations and Warranties of the Buyer............................ 33
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6.1 Due Incorporation............................................. 33
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6.2 Power and Capacity............................................ 33
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6.3 Freedom to Contract........................................... 34
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6.4 Litigation.................................................... 34
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6.5 Acquisition of Shares for Investment.......................... 35
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6.6 Financing..................................................... 35
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6.7 Brokers and Finders........................................... 35
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7. Covenants of the Parties............................................... 36
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7.1 Conduct of Business Pending Closing........................... 36
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7.2 Seller's Notice of Certain Events............................. 38
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7.3 Buyer's Notice of Certain Events.............................. 38
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7.4 Company Access................................................ 39
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7.5 Consent to Jurisdiction and Service of Process................ 39
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7.6 Expenses...................................................... 40
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7.7 Independent Investigation..................................... 40
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7.8 Post-Closing Access........................................... 40
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7.9 Books and Records............................................. 41
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7.10 Confidentiality............................................... 42
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7.11 Regulatory and Other Authorizations; Consents................. 42
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7.12 Title Insurance............................................... 43
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7.13 Supplements to Schedules...................................... 43
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7.14 Non-Solicitation.............................................. 43
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7.15 Capital Expenditures; Capital Leases.......................... 43
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8. Conditions Precedent to the Obligation of the Buyer to Close........... 43
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8.1 Representations and Warranties True as of the Closing Date.... 44
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8.2 Compliance with this Agreement................................ 44
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8.3 Officer's Certificate......................................... 44
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8.4 Opinion of Counsel to the Company and the Seller.............. 44
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8.5 Litigation.................................................... 45
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8.6 Delivery of Stock Certificates................................ 45
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8.7 HSR Act....................................................... 45
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8.8 Consents...................................................... 45
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8.9 KCET Disposition.............................................. 45
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8.10 Material Adverse Change....................................... 45
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8.11 Indebtedness.................................................. 46
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8.12 Intercompany Accounts......................................... 46
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9. Conditions Precedent to the Obligation of the Seller to Close.......... 46
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9.1 Representations and Warranties True as of the Closing Date.... 46
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9.2 Compliance with this Agreement................................ 47
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9.3 Officer's Certificate......................................... 47
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9.4 Opinion of Counsel to the Buyer............................... 47
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9.5 Litigation.................................................... 47
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9.6 HSR Act....................................................... 47
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9.7 Payment of Purchase Price..................................... 47
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9.8 Consents...................................................... 47
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10. Survival of Representations and Warranties; Indemnification............ 48
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10.1 Survival of Representations and Warranties.................... 48
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10.2 Indemnification............................................... 48
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10.3 Notice to the Indemnitor...................................... 48
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10.4 Rights of Parties to Settle or Defend......................... 49
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10.5 Settlement Proposals.......................................... 50
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10.6 Tax and Other Benefits........................................ 50
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11. Tax Matters............................................................ 51
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11.1 Liability For Taxes........................................... 51
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11.2 Allocation.................................................... 52
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11.3 Filing of Tax Returns; Change of Tax Year..................... 52
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11.4 Payment....................................................... 53
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11.5 Refunds....................................................... 54
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11.6 Contests...................................................... 54
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11.7 Payments for Certain Audit Adjustments........................ 56
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11.8 Cooperation and Exchange of Information....................... 56
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11.9 Conveyance Taxes.............................................. 57
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11.10 No Section 338(h)(10) Election................................ 57
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11.11 Disputes...................................................... 57
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11.12 Exclusive Tax Remedy.......................................... 58
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11.13 Treatment of Indemnity Payments............................... 58
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12. Cooperation; Further Assurances........................................ 58
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13. Termination of Agreement............................................... 59
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13.1 Termination................................................... 59
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13.2 No Liabilities in the Event of Termination.................... 59
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14. Miscellaneous.......................................................... 59
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14.1 Knowledge..................................................... 59
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14.2 No Rescission................................................. 60
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14.3 Post-Closing Liabilities; Mitigation of Damages............... 60
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14.4 Entire Agreement.............................................. 60
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14.5 Governing Law................................................. 60
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14.6 Headings and Titles........................................... 60
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14.7 Notices....................................................... 61
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14.8 Separability.................................................. 62
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14.9 Amendment; Waiver............................................. 62
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14.10 Publicity..................................................... 62
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14.11 Assignment and Binding Effect................................. 62
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14.12 No Benefit to Others.......................................... 62
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14.13 Counterparts.................................................. 62
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14.14 Interpretation................................................ 63
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14.15 Guaranty by the Fund.......................................... 63
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SCHEDULES:
5.4 Subsidiaries
5.7 Seller's Consents
5.9 Undisclosed Liabilities
5.11 Taxes
5.13 Environmental Matters
5.14 Litigation
5.15 Material Contracts
5.16 Real Property
5.17 Fixed Assets
5.18 Proprietary Rights
5.19 Title to Properties
5.20(a) Employee Benefit Plans
5.20(b) Disclosures Relating to Employee Benefit Plans
5.21 Executive Employees
5.22 Labor Matters
5.23 Operations of the Company
5.24 Banking Relations
6.3 Buyer's Consents
14.1(I) Knowledge
14.1(II) Knowledge
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STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT (the "Agreement"), dated as of May 17, 1998, by
and between HERITAGE MEDIA CORPORATION, a Delaware corporation (the "Seller"),
and DMAC ACQUISITION CORP., a Delaware corporation (the "Buyer").
W I T N E S S E T H:
WHEREAS, the Seller is the beneficial and record owner of all of the issued
and outstanding shares (the "Shares") of common stock, par value $.01 per share,
of DIMAC MARKETING CORPORATION, a Delaware corporation, with its principal
executive office located at Xxx Xxxxxxxxx Xxxxx Xxxxx, Xxxxxxxxx, Xxxxxxxx 00000
(the "Company"); and
WHEREAS, the Seller wishes to sell, and the Buyer wishes to purchase, the
Shares upon the terms and subject to the conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements set forth herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto do
hereby agree as follows:
1. Definitions. For the purposes of this Agreement, the following terms
shall have the following meanings:
"Acquisition Date" shall mean August 20, 1997.
"Adjusted Working Capital" shall have the meaning set forth in Section
4(b)(i) hereof.
"Affiliate" shall mean any Person which controls, is controlled by, is
under the control of or is under direct or indirect common control with the
Person in question.
"Agreement" shall have the meaning set forth in the Preamble hereto.
"Balance Sheet" shall have the meaning set forth in Section 5.8 hereof.
"Balance Sheet Date" shall have the meaning set forth in Section 5.8
hereof.
"Benefit Plan" shall have the meaning set forth in Section 5.20(a) hereof.
"Buyer" shall have the meaning set forth in the Preamble hereto.
"Business Day" shall mean any day that is not a Saturday, a Sunday or a day
on which banks are required or permitted to be closed in the State of New York.
"CERCLA" shall have the meaning set forth in Section 5.13(e) hereof.
"Closing" shall have the meaning set forth in Article 3 hereof.
"Closing Date" shall have the meaning set forth in Article 3 hereof.
"COBRA" shall have the meaning set forth in Section 5.20(b) hereof.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and the
rules and regulations promulgated thereunder.
"Company" shall have the meaning set forth in the Recitals hereto.
"Company Facilities" shall have the meaning set forth in Section 5.13(a)
hereof.
"Confidentiality Agreement" shall have the meaning set forth in Section 7.9
hereof.
"Contest" shall have the meaning set forth in Section 11.6(b) hereof.
"Controlled Group" shall have the meaning set forth in Section 5.20(a)
hereof.
"December 31, 1997 Financial Statements" shall have the meaning set forth
in Section 5.8 hereof.
"Employee Benefit Plans" shall have the meaning set forth in Section
5.20(a) hereof.
"Environmental Laws" shall have the meaning set forth in Section 5.13(e)
hereof.
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"ERISA" shall have the meaning set forth in Section 5.20(a) hereof.
"Financial Statements" shall have the meaning set forth in Section 5.8
hereof.
"Fund" shall have the meaning set forth in Section 6.6 hereof.
"GAAP" shall mean U.S. generally accepted accounting principles.
"Governmental Authority" shall mean any local, state, federal or foreign
governmental authority, including all agencies, bureaus, commissions,
authorities or bodies of the federal government or any state, county, municipal
or local government.
"Hazardous Substances" shall have the meaning set forth in Section 5.13(f)
hereof.
"HSR Act" shall mean the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended.
"Indemnified Party" shall have the meaning set forth in Section 10.3
hereof.
"Indemnitor" shall have the meaning set forth in Section 10.3 hereof.
"Independent Accounting Firm" shall have the meaning set forth in Section
4(b)(ii) hereof.
"IRS" shall have the meaning set forth in Section 5.20(b) hereof.
"KCET" shall have the meaning set forth in Section 4(b)(iv) hereof.
"KCET Disposition" shall have the meaning set forth in Section 7.1 hereof.
"Islip Leased Property" shall mean the facility leased from The Town of
Islip Industrial Development Agency.
"Law" shall mean any statute, ordinance, code, rule, regulation, order,
writ, judgment, decree or other law enacted, adopted or promulgated by any
Governmental Authority.
"Leased Property" shall have the meaning set forth in Section 5.16 hereof.
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"Liabilities" shall have the meaning set forth in Section 5.9 hereof.
"Liens" shall have the meaning set forth in Section 5.3 hereof.
"Material Adverse Effect" shall mean a material adverse effect on the
business, assets, condition (financial or otherwise), operations or results of
operations of the Company and the Subsidiaries, taken as a whole.
"Material Contracts" shall have the meaning set forth in Section 5.15
hereof.
"XxXxxxx Earn-Out Agreement" shall have the meaning set forth in Section
4(b)(iv) hereof.
"Minimum Working Capital Amount" shall have the meaning set forth in
Section 4(b)(i) hereof.
"Multiemployer Plan" shall have the meaning set forth in Section 5.20(b)
hereof.
"PBGC" shall have the meaning set forth in Section 5.20(b) hereof.
"Owned Real Property" shall have the meaning set forth in Section 5.16
hereof.
"Permits" shall have the meaning set forth in Section 5.12 hereof.
"Permitted Liens" shall have the meaning set forth in Section 5.19 hereof.
"Person" shall mean any individual, trustee, corporation, general or
limited partnership, limited liability partnership, limited liability company,
joint venture, joint stock company, bank, firm, governmental agency, trust,
association, organization or unincorporated entity of any kind or nature
whatsoever.
"Properties" shall have the meaning set forth in Section 5.16 hereof.
"Proposed Settlement" shall have the meaning set forth in Section 10.5
hereof.
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"Proprietary Rights" shall mean any license, patent, copyright, copyright
permission, trade name, trademark or service xxxx, proprietary right, brand name
or design, or any registration (granted or pending) or applications therefor.
"Purchase Price" shall have the meaning set forth in Section 4(a) hereof.
"RCRA" shall have the meaning set forth in Section 5.13(e) hereof.
"Real Property Leases" shall have the meaning set forth in Section 5.16
hereof.
"Regulations" shall mean the income tax regulations promulgated under the
Code, as such regulations may be amended from time to time (including
corresponding provisions of any succeeding regulations).
"Securities Act" shall have the meaning set forth in Section 6.5 hereof.
"Seller" shall have the meaning set forth in the Recitals hereto.
"Shares" shall have the meaning set forth in the Recitals hereto.
"Single Employer Plan" shall have the meaning set forth in Section 5.20(b)
hereof.
"Subsidiary" shall have the meaning set forth in Section 5.4 hereof.
"Tax Claim" shall have the meaning set forth in Section 11.1(a) hereof.
"Tax Returns" shall mean any returns, declarations and reports and all
information returns and statements of any kind or nature whatsoever relating to
Taxes.
"Taxes" shall mean all foreign, federal, state, county, local and other
taxes, levies, impositions, deductions, charges and withholdings, including any
interest, penalties or additions thereto. Taxes shall include, without
limitation, income, franchise, gross receipts, sales, commercial rent and
employment taxes.
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"VEBA" shall have the meaning set forth in Section 5.20(a) hereof.
"Working Capital" shall have the meaning set forth in Section 4(b)(iv)
hereof.
"Working Capital Statement" shall have the meaning set forth in Section
4(b)(ii) hereof.
2. Sale and Purchase of Shares. Subject to the terms and conditions of this
Agreement, at the Closing provided for in Article 3 hereof, the Seller shall
sell, transfer, convey and assign to the Buyer, and the Buyer shall purchase
from the Seller, the Shares (which shall constitute all of the issued and
outstanding shares of the Company on the Closing Date).
3. Closing; Closing Date. Subject to the terms and conditions of this
Agreement, the closing of the sale and purchase of the Shares contemplated
hereby (the "Closing") shall take place at the offices of Squadron, Ellenoff,
Plesent & Xxxxxxxxx, LLP, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, at 10:00
a.m. New York City time, on the date three (3) Business Days following the later
to occur of (i) the expiration or termination of the applicable waiting periods
under the HSR Act and (ii) the satisfaction or waiver of all other conditions
set forth in Articles 8 and 9 hereof, or such later date as may be agreed to by
the Buyer and the Seller. The date upon which the Closing shall occur is herein
called the "Closing Date." At the Closing, the Seller shall deliver to the Buyer
stock certificates representing all of the Shares, duly endorsed in blank or
accompanied by stock powers duly executed in blank, in proper form for transfer.
4. Purchase Price and Payment for Shares.
(a) The aggregate purchase price for the Shares, to be paid at the Closing,
shall be $200,000,000 (the "Purchase Price").
(b) The Purchase Price shall be adjusted as follows:
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(i) If the amount of the adjusted Working Capital of the Company, as
determined in accordance with Section 4(b)(iv) hereof (the "Adjusted
Working Capital"), is less than $7,686,000 (the "Minimum Working Capital
Amount"), the Purchase Price shall be decreased by the amount equal to the
difference between the Adjusted Working Capital and the Minimum Working
Capital Amount.
(ii) The Adjusted Working Capital shall be determined by the Seller as
of the opening of business on the Closing Date in accordance with GAAP, in
all cases applied on a basis consistent with the December 31, 1997
Financial Statements (except as provided below). The Seller shall deliver
to the Buyer a statement of the Adjusted Working Capital (the "Working
Capital Statement") within sixty (60) days after the Closing, together with
a certificate (1) setting forth the amount of Adjusted Working Capital, (2)
stating that the calculation has been made in accordance with GAAP, in all
cases applied on a basis consistent with the December 31, 1997 Financial
Statements (except as provided below) and (3) setting forth the amount of
any required adjustment to the Purchase Price pursuant to this Section
4(b). During the period from the Closing Date until the date of delivery of
the Working Capital Statement, the Buyer shall give to the Seller and its
independent accountants such assistance and access to the assets and books
and records of the Company and the Subsidiaries as the Seller and such
personnel shall reasonably request during normal business hours in order to
enable them to prepare the Working Capital Statement. The Working Capital
Statement shall be final and binding on the parties unless, within thirty
(30) days after delivery to the Buyer, notice is given by the Buyer to the
Seller of its objection. If notice of objection is given, the parties shall
consult with each other with respect to the objection. If such
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dispute is not resolved within thirty (30) days thereafter, the parties
shall submit the dispute to Ernst & Young LLP (the "Independent Accounting
Firm") for resolution, which resolution shall be final, conclusive and
binding on the parties; provided, however, that the Independent Accounting
Firm shall be empowered only to settle numerical discrepancies and disputes
as to whether the Working Capital Statement has been prepared in accordance
with GAAP, on a basis consistent with the December 31, 1997 Financial
Statements (except as provided below), between the parties and shall have
no authority to interpret any term or provision of this Agreement or to
settle any dispute relating to the interpretation of any term or provision
of this Agreement. Notwithstanding anything in this Agreement to the
contrary, the fees and expenses of the Independent Accounting Firm in
resolving the dispute shall be borne equally by the Seller and the Buyer.
(iii) Within ten (10) days after the Working Capital Statement has
become final and binding upon the parties, the Seller shall pay to the
Buyer the amount, if any, by which the Adjusted Working Capital is less
than the Minimum Working Capital Amount, plus interest accrued thereon at a
rate equal to eight percent (8%) per annum.
(iv) For purposes of this Article 4, "Adjusted Working Capital" shall
mean the excess of consolidated current assets over consolidated current
liabilities of the Company and the Subsidiaries applied on a basis
consistent with the December 31, 1997 Financial Statements (except as
provided below), excluding (1) the income tax receivable-parent from the
Seller or News America Incorporated, which shall be recorded as a reduction
of the capital of the Company in accordance with Section 8.12, (2) all
assets and liabilities related to KCET/DIMAC Communications, L.L.C.
("KCET") consistent with the treatment disclosed in footnote number 4
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of the Company's audited financial statements as at December 31, 1997, and
(3) all current deferred tax assets and liabilities. Notwithstanding
anything herein to the contrary, current liabilities for purposes of this
Article 4 and for the calculation of working capital shall include, but not
be limited to, the accrued liabilities related to management bonuses
(including guaranteed bonuses) on a pro rata basis, and the estimated pro
rata portion through to the Closing Date for the earned but unpaid portion
of contingent consideration under the terms of the Earn-Out Agreement among
PCD Acquisition Company, DIMAC Corporation and Palm Coast Data, Ltd., dated
May 1, 1995; the Earn-Out Agreement among TMG Acquisition Company, DIMAC
Corporation and X.X. XxXxxxx & Co., dated September 30, 1995 (the "XxXxxxx
Earn-Out Agreement"); and the Earn-Out Agreement among WAA Acquisition
Company, DIMAC Corporation and Xxxxxx & Associates, Inc., dated March 1,
1996.
(c) The Purchase Price shall be further reduced by the amount of any and
all dividends, distributions or other payments or transfers to any Affiliate of
the Company (other than its Subsidiaries) occurring between the date of this
Agreement and the Closing Date.
(d) Any payment pursuant to this Article 4 shall be made in immediately
available funds by wire transfer to an account or accounts designated in writing
by the Seller or the Buyer, as the case may be, at least two (2) Business Days
prior to the date of such payment.
5. Representations and Warranties of the Seller. The Seller represents and
warrants to the Buyer as follows:
5.1 Due Incorporation and Qualification. Each of the Company and the
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the Laws of its
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jurisdiction of incorporation. Each of the Company and the Subsidiaries is duly
qualified or licensed to transact business as a foreign corporation and is in
good standing in each jurisdiction in which the nature of its business or
location of its properties requires such qualification or licensing and in which
the failure so to qualify would have a Material Adverse Effect.
5.2 Capital Stock. The Company is authorized to issue 5,000 shares of
Common Stock, par value $.01 share, 1,000 shares of which are issued and
outstanding. All of the Shares are duly authorized and are validly issued,
fully paid and nonassessable and free of preemptive rights. The Seller is
the lawful beneficial and record owner of, and has good and marketable
title to, the Shares.
5.3 Options or Other Rights. The Shares are owned by the Seller free and
clear of all liens, claims, charges, pledges, security interests or other
encumbrances of any nature whatsoever ("Liens"), and there are no outstanding
agreements, subscriptions, warrants, calls, preemptive rights, options, trusts
(voting or otherwise) or other rights of any kind granting to any Person any
interest in or the right to purchase or otherwise acquire from the Company, the
Seller or any Subsidiary at any time or upon the happening of any stated event
any shares of the capital stock or any other security of the Company or any
Subsidiary, nor is there any outstanding right, subscription, warrant, call,
preemptive right, option, trust (voting or otherwise) or other agreement of any
kind granting to any Person any interest in or the right to purchase or
otherwise acquire from the Company, the Seller or any Subsidiary any security of
any kind convertible into or exchangeable for capital stock of the Company or
any Subsidiary, including any proxy, agreement, trust or understanding with
respect to the voting of the capital stock of the Company or any Subsidiary.
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5.4 Subsidiaries. Schedule 5.4 annexed hereto sets forth the name and
jurisdiction of incorporation of the Company's subsidiaries (the
"Subsidiaries"). All of the issued and outstanding shares of capital stock of
the Subsidiaries are duly authorized and are validly issued, fully paid and
nonassessable and free of preemptive rights. The Company is the lawful and
beneficial and record owner of, and has good and marketable title to, all of the
outstanding capital stock of the Subsidiaries, free and clear of any and all
Liens. Except as set forth on Schedule 5.4 annexed hereto, the Company does not
have any ownership interest in any entity other than the Subsidiaries.
5.5 Certificates of Incorporation and By-Laws. The copies of the
certificates or articles of incorporation and by-laws of the Company and the
Subsidiaries, and all amendments to each, which have been delivered to the Buyer
are true, correct and complete.
5.6 Power and Capacity. The Seller has all requisite power, authority and
approval required to execute, deliver and perform this Agreement, to consummate
the transactions contemplated hereby and to perform fully its obligations
hereunder. The execution, delivery and performance of this Agreement by the
Seller have been duly authorized by all necessary corporate action of the
Seller. This Agreement and each document and instrument contemplated by this
Agreement to be executed by the Seller, when executed and delivered in
accordance with the provisions hereof (assuming due authorization, execution and
delivery by the Buyer), shall constitute the valid and binding obligations of
the Seller, enforceable against the Seller in accordance with their respective
terms subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting creditors' rights and
remedies generally, and subject, as to enforceability, to general principles of
equity, including principles of commercial
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reasonableness, good faith and fair dealing (regardless of whether enforcement
is sought in a proceeding at law or in equity).
5.7 Freedom to Contract. The execution, delivery and performance of
this Agreement by the Seller do not, and the performance by it of its
obligations hereunder in accordance with its terms and conditions will not, (i)
violate or conflict with any provision of the certificate of incorporation or
by-laws of the Seller, the Company or any Subsidiary, (ii) violate any of the
terms, conditions or provisions of any Law binding upon the Seller, the Company,
the Subsidiaries or any of their respective properties, or (iii) conflict with
or result in a violation or breach of, or constitute (with or without due notice
or lapse of time or both) a default (or give rise to any right of termination,
cancellation or acceleration) under, any of the terms, conditions or provisions
of any note, bond, indenture, debenture, security agreement, trust agreement,
lien, mortgage, lease, license, franchise, permit, guaranty, joint venture
agreement, or other written agreement, instrument or obligation, to which the
Seller, the Company or any Subsidiary is a party or by which any of them or any
of their respective properties is bound, except (x) with respect to clause (iii)
of this sentence, as set forth on Schedule 5.7 annexed hereto, and (y) such
violations, breaches, defaults or conflicts that would not, individually or in
the aggregate, have a Material Adverse Effect. No governmental authorization,
approval, order, license, permit, consent, registration, declaration or filing
with any Governmental Authority, and no consent or approval of any Person, is
required in connection with the Seller's execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated hereby,
except (i) as set forth on Schedule 5.7 annexed hereto, (ii) the requirements
under the HSR Act or (iii) where the failure to obtain any authorization,
approval,
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order, license, permit, consent, registration, declaration or filing
would not have a material adverse effect on the ability of the parties to
consummate the transactions contemplated by this Agreement.
5.8 Financial Statements. The Seller has delivered to the Buyer copies
of (i) the audited consolidated balance sheet of the Company and the
Subsidiaries as at December 31, 1997 and the related audited consolidated
statements of income and the cash flows of the Company and the Subsidiaries for
the year then ended (the "December 31, 1997 Financial Statements") and (ii) the
unaudited consolidated balance sheet of the Company and the Subsidiaries at
March 31, 1998 and the related consolidated statements of income of the Company
and the Subsidiaries for the three-month period then ended (such audited and
unaudited statements, including the related notes and schedules thereto, as
applicable, are referred to herein as the "Financial Statements."). Each of the
Financial Statements is complete and correct in all material respects, has been
prepared in accordance with GAAP (subject to normal year-end adjustments in the
case of the unaudited statements) and presents fairly the financial position,
results of operations and cash flows (with respect to the December 31, 1997
Financial Statements) of the Company and the Subsidiaries as at the date and for
the period indicated. The unaudited balance sheet as at March 31, 1998 is herein
referred to as the "Balance Sheet," and March 31, 1998 is herein referred to as
the "Balance Sheet Date."
5.9 Absence of Undisclosed Liabilities. As at the Balance Sheet Date,
the Company did not have any material direct or indirect indebtedness,
liability, claim, loss, damage, deficiency, obligation or responsibility,
liquidated or unliquidated, secured or unsecured, accrued, absolute, contingent
or otherwise, including, without limitation, liabilities on account of taxes
(subject to
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normal year-end adjustments), other governmental charges or lawsuits brought
("Liabilities"), other than (i) Liabilities fully and adequately reflected or
reserved for on the Financial Statements (including Liabilities disclosed in the
footnotes thereto), (ii) Liabilities disclosed on Schedule 5.9 annexed hereto or
any other Schedule annexed hereto or otherwise addressed by any of the
representations, warranties or covenants made by the Seller in this Agreement,
(iii) Liabilities under this Agreement, (iv) Liabilities fully covered by
insurance, indemnification, contribution or comparable arrangements or (v)
Liabilities incurred since the Balance Sheet Date in the ordinary course of
business.
5.10 No Material Adverse Change. Between the Balance Sheet Date and the
date of this Agreement, there has been no material adverse change in the assets,
properties, business or condition (financial or otherwise), operations or
results of operations of the Company and the Subsidiaries which would materially
impair the overall conduct of the Company's business as currently conducted, nor
has there been any damage, destruction or loss materially affecting the assets,
properties, business or condition (financial or otherwise), operations or
results of operations of the Company and the Subsidiaries, whether or not
covered by insurance, other than as disclosed by the Seller to the Buyer;
provided, however, that no representation or warranty is made as to the effect
of seasonal fluctuations on the Company's business, general conditions in the
direct marketing industry, variations in customer order levels which have not
resulted in a change in overall order levels for such customers, or present or
future Laws, including, without limitation, Laws relating to postal rates and
procedures.
5.11 Taxes.
14
(a) Except as set forth on Schedule 5.11 annexed hereto, (i) each of the
Company and the Subsidiaries has filed all Tax Returns required to be filed by
it or requests for extensions to file such Tax Returns have been filed, granted
and have not expired, except to the extent that such failures to file or to have
extensions granted that remain in effect would not, individually or in the
aggregate, have a Material Adverse Effect; (ii) all Tax Returns filed by the
Company and each Subsidiary are complete and accurate except to the extent that
such failure to be complete and accurate would not, individually or in the
aggregate, have a Material Adverse Effect; and (iii) the Company and each
Subsidiary have paid (or the Company has paid on the Subsidiaries' behalf) all
Taxes due (whether or not required to be paid with a Tax Return), except for
such Taxes that would not individually or in the aggregate have a Material
Adverse Effect, and the Balance Sheet reflects an adequate reserve, in
accordance with GAAP, for all Taxes payable by the Company and the Subsidiaries
(subject to normal year-end adjustments) for all taxable periods and portions
thereof accrued through the date of the Balance Sheet.
(b) Except as set forth on Schedule 5.11 annexed hereto, no deficiencies
for any Taxes have been proposed, asserted or assessed against the Company or
any Subsidiary that are not adequately reserved for in accordance with GAAP, in
all cases applied on a basis consistent with the Balance Sheet, except for
deficiencies that would not, individually or in the aggregate, have a Material
Adverse Effect, and no requests for waivers of the time to assess any such Taxes
have been granted or are pending.
(c) The Company and each Subsidiary have withheld and paid all Taxes
required to have been withheld and paid in connection with amounts paid or owing
to any employee,
15
independent contractor, creditor, stockholder or other third party, except for
such Taxes that would not, individually or in the aggregate, have a Material
Adverse Effect, and have complied with all information reporting and backup
withholding requirements, except to the extent that failure to comply with such
requirements would not, individually or in the aggregate, have a Material
Adverse Effect.
5.12 Compliance with Laws. Each of the Company and the Subsidiaries is
in compliance with all Laws applicable to it or its business, except for such
non-compliances that would not, individually or in the aggregate, have a
Material Adverse Effect. All licenses, permits, order or approvals of any
Governmental Authority (collectively, the "Permits") of the Company and the
Subsidiaries are in full force and effect, except where the failure to have any
such Permits would not, individually or in the aggregate, have a Material
Adverse Effect.
5.13 Environmental Matters.
(a) Each of the Company and the Subsidiaries is and has, at all times from
and after February 21, 1996, been in compliance in all material respects with
all Environmental Laws. Except as set forth on Schedule 5.13 annexed hereto,
neither the Company, the Subsidiaries, nor the Seller has received any written
communication from any Governmental Authority that alleges that the Company or
any of the Subsidiaries is not in compliance with any Environmental Law. All
material Permits and other governmental authorizations required pursuant to the
Environmental Laws relating to any property currently owned or operated by
either the Company or the Subsidiaries (the "Company Facilities") have been
obtained and are currently in force.
16
(b) Except as set forth on Schedule 5.13 annexed hereto, from and after
February 21, 1996 there have been no releases of any Hazardous Substances at,
under or from any Company Facility.
(c) There are no consent decrees, consent orders, judgments, judicial or
administrative orders, agreements with (other than Permits) or Liens by any
Governmental Authority relating to any Environmental Law imposed against the
Company or any Subsidiary as a named party.
(d) True and correct copies of all written environmental reports, audits or
assessments which have been conducted since the Acquisition Date, either by the
Company or the Subsidiaries or any Person engaged by the Company or any
Subsidiary for such purpose, at any Company Facility have been made available to
the Buyer.
(e) "Environmental Laws" shall mean all applicable Laws relating to
pollution or protection of the environment (including, without limitation,
ambient air, surface water, ground water, land surface, or subsurface strata),
including, without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended ("CERCLA"), the Toxic
Substances Control Act, as amended, the Hazardous Materials Transportation Act,
as amended, the Resource Conservation and Recovery Act, as amended ("RCRA"), the
Clean Water Act, as amended, the Safe Drinking Water Act, as amended, the Clean
Air Act, as amended, the Atomic Energy Act of 1954, as amended, the Occupational
Safety and Health Act, as amended, and all analogous Laws.
17
(f) "Hazardous Substances" shall mean all pollutants, contaminants,
chemicals, wastes, and any other carcinogenic, ignitable, corrosive, reactive,
toxic or otherwise hazardous substances or materials (whether solids, liquids or
gases) subject to regulation, control or mediation under Environmental Laws.
5.14 Litigation. Except as set forth on Schedule 5.14 annexed hereto, and
except for claims substantially covered by insurance, indemnification,
contribution or comparable arrangements, there is no action, suit or proceeding
by or before any referee, mediator or arbitrator, or any court or governmental
or other regulatory or administrative agency or commission, pending or, to the
knowledge of the Seller, threatened, against the Company or the Subsidiaries or
relating to their respective assets, that, individually or in the aggregate,
would have a Material Adverse Effect or which would in any way seek to prevent,
enjoin, alter or delay the transactions contemplated hereby.
5.15 Agreements. Except in each case as set forth on Schedule 5.15
annexed hereto or any other Schedule annexed hereto, and except for this
Agreement, neither the Company nor any Subsidiary is a party to any contract:
(i) for the purchase of products, materials, supplies, services or equipment
involving the payment of more than $250,000 in any twelve (12) month period;
(ii) under which it is lessor or lessee of personal property involving the
payment of more than $125,000 in any twelve (12) month period; (iii) for capital
improvements or capital expenditures with any one contractor or subcontractor
involving the payment, during the twelve (12) month period commencing on the
date hereof, of more than $250,000 in any case or $750,000 in the aggregate;
(iv) for the borrowing of money or for a line of credit; (v) creating any
security interests or liens securing
18
obligations in excess of $125,000 in any case or $500,000 in the aggregate; (vi)
pursuant to which its right to compete with any Person in the conduct of its
business is restrained or restricted in any material way except for exclusive
sales representation, distribution, licensing and similar agreements made in the
ordinary course of business; (vii) involving any merger or consolidation of the
Company or any Subsidiary or the acquisition or sale of all or substantially all
the assets of the Company or any Subsidiary (other than contracts relating to
the KCET Disposition); or (viii) constituting a guarantee of any debt or
obligation of another by the Company or any Subsidiary (collectively, the
"Material Contracts"). Except in each case as set forth on Schedule 5.15 annexed
hereto, neither the Company nor any Subsidiary is in breach or default of any
provision of any Material Contract, except for any possible breaches or defaults
that would not, individually or in the aggregate, have a Material Adverse
Effect. None of the Company, any Subsidiary or the Seller has received written
notice canceling or terminating any Material Contract. To the Seller's
knowledge, no other party to any Material Contract is in breach or default of
such Material Contract, except for breaches or defaults that would not,
individually or in the aggregate, have a Material Adverse Effect, and no event
has occurred which, with or without the giving of notice, lapse of time or both,
would constitute a material default by such party thereunder.
5.16 Real Property. Schedule 5.16 annexed hereto sets forth list of (i)
all real property owned by the Company and the Subsidiaries ("Owned Real
Property"), and (ii) all leases, subleases or other agreements ("Real Property
Leases") under which the Company or any Subsidiary is lessor or lessee of any
real property, including, without limitation, the Islip Leased Property ("Leased
Property," and together with the Owned Real Property, the "Properties"). Except
as set forth
19
on Schedule 5.16 annexed hereto, neither the Company nor any Subsidiary is in
breach or default of any provision of any Real Property Lease, except for
breaches or defaults that would not individually or in the aggregate have a
Material Adverse Effect. Neither the Company, any Subsidiary nor the Seller has
received written notice canceling or terminating any Real Property Lease. To the
Seller's knowledge, no other party to any Real Property Lease is in breach or
default of such Real Property Lease, and no event has occurred which, with or
without the giving of notice lapse of time or both, would constitute a material
default by such party thereunder, except for breaches of defaults that would
not, individually or in the aggregate, have a Material Adverse Effect.
5.17 Fixed Assets. Schedule 5.17 annexed hereto sets forth a true and
complete listing of all equipment, machinery, motor vehicles, fixtures and other
fixed assets owned by the Company or any Subsidiary having a net book value in
excess of $500,000.
5.18 Proprietary Rights. The Company and the Subsidiaries possess all
Proprietary Rights necessary for the conduct of their businesses as presently
conducted. Except as set forth on Schedule 5.18 annexed hereto, each of the
Company and the Subsidiaries owns and possesses all right, title and interest in
and to, or possesses the valid right to use, all Proprietary Rights, except
where the failure to own or possess such right would not have a Material Adverse
Effect. Except for licenses entered into in the ordinary course of the Company's
or the Subsidiaries' business, neither the Company nor any Subsidiary has
granted to any Person the right to use any Proprietary Right which is material
to the Company's or the Subsidiaries' business. Except as set forth on Schedule
5.18 annexed hereto, no claims have been asserted by any third party based on
the use by, or challenging the ownership of, the Company or any Subsidiary of
any Proprietary Right that the
20
Company or any Subsidiary licenses or uses, except for such claims that would
not, individually or in the aggregate, have a Material Adverse Effect. Except as
set forth on Schedule 5.18 annexed hereto, all trademark registrations for
trademarks that are still in use by the Company are in full force and effect,
except where the failure to have such registrations in full force and effect
would not, individually or in the aggregate, have a Material Adverse Effect.
5.19 Title To Properties. The Company or a Subsidiary, as the case may
be, is the owner of record of the Owned Real Property, is the owner of record of
the leasehold estate to the Islip Leased Property and is the owner of, and has
good and marketable title to, all of the other assets and properties reflected
on the Financial Statements, in each case free and clear of any Lien, except for
(i) assets and properties disposed of, or subject to purchase or sales orders,
in the ordinary course of business since the Balance Sheet Date; (ii) Liens
incurred in the ordinary operation of the Company's business; (iii) Liens for
Taxes and assessments not yet payable; (iv) Liens for Taxes, assessments and
charges and other claims, the validity of which is being contested in good
faith; (v) Liens the existence of which, individually or in the aggregate, do
not have a Material Adverse Effect; (vi) Liens set forth on Schedule 5.19
annexed hereto; and (vii) Liens, inclusive of covenants, restrictions of record,
encroachments and states of facts, set forth in title insurance policies
described on Schedule 5.19 annexed hereto for the Owned Real Property and the
Islip Leased Property (Liens referred to in clauses (i) through (vii) of this
Section 5.19 are collectively referred to herein as "Permitted Liens").
5.20 Employee Benefit Plans.
21
(a) List of Plans. Set forth in Schedule 5.20(a) annexed hereto is an
accurate and complete list of all (i) "employee benefit plans," within the
meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended, and the rules and regulations thereunder ("ERISA"); and (ii) bonus,
stock option, stock purchase, restricted stock, incentive, fringe benefit,
"voluntary employees' beneficiary associations" ("VEBAs"), under Section
501(c)(9) of the Code, profit-sharing, pension, or retirement, deferred
compensation, medical, life, disability, accident, salary continuation,
severance, accrued leave, vacation, sick pay, sick leave, supplemental
retirement and unemployment benefit plans, programs, arrangements, commitments
and/or practices (whether or not insured); for active, retired or former
employees or directors, whether or not any such plans, programs, arrangements,
commitments, contracts, agreements and/or practices (referred to in (i) or (ii)
above) are otherwise exempt from the provisions of ERISA; that have been
established, sponsored, maintained or contributed to (or with respect to which
an obligation to contribute has been undertaken) or with respect to which any
potential liability is borne by the Company and/or any Subsidiary (including,
for this purpose and for the purpose of all of the representations in this
Section 5.20, any predecessors to the Company or any Subsidiary), the Seller or
any of its subsidiaries or affiliates, and all employers (whether or not
incorporated) that would be treated together with the Company, any Subsidiary
and/or the Seller as a single employer within the meaning of Section 414 of the
Code (the "Controlled Group"), to which the Company and/or any Subsidiary
contributes or with respect to which the Company and/or any Subsidiary has any
obligation or liability (including for this purpose and for purposes of the
representations in this
22
Section 5.20, any indirect, potential, or contingent or secondary liability)
("Employee Benefit Plans").
(b) Except (i) as set forth in Schedule 5.20(b) annexed hereto and (ii) to
the extent that any breach of the representations set forth in this Section
5.20(b) would not have a Material Adverse Effect:
(i) Status of Plans. Each Employee Benefit Plan (including any related
trust) complies in form with the requirements of all applicable laws,
including, without limitation, ERISA and the Code, and has at all times
been maintained and operated in compliance with its terms and the
requirements of all applicable laws, including, without limitation, ERISA
and the Code. No complete or partial termination of any Employee Benefit
Plan has occurred or is expected to occur, and, to the Seller's knowledge,
no proceedings have been instituted, and no condition exists and no event
has occurred that could constitute grounds, under Title IV of ERISA, to
terminate, or appoint a trustee to administer, any Employee Benefit Plan.
Neither the Company nor any Subsidiary has any commitment, intention or
understanding to create, modify or terminate any Employee Benefit Plan.
Except as required to maintain the tax-qualified status of any Employee
Benefit Plan intended to qualify under Section 401(a) of the Code, no
condition or circumstance exists that would prevent or restrict the
amendment or termination of any Employee Benefit Plan. No event has
occurred and no condition or circumstance has existed that would reasonably
be expected to result in an increase in the benefits under or the expense
of maintaining any Employee Benefit Plan from the level of benefits or
expense incurred for the most recent fiscal year ended thereof. No Employee
Benefit Plan is a plan described in Section 4063(a) of ERISA.
23
(ii) Liabilities.
(1) No Employee Benefit Plan subject to Section 412 or 418B of
the Code or Section 302 of ERISA has incurred any accumulated funding
deficiency within the meaning of Section 412 or 418B of the Code or
Section 302 of ERISA, respectively, or has applied for or obtained a
waiver from the Internal Revenue Service ("IRS") of any minimum
funding requirement or an extension of any amortization period under
Section 412 of the Code or Section 303 or 304 of ERISA. Except for
payments of premiums to the Pension Benefit Guaranty Corporation
("PBGC"), which have been timely paid in full, neither the Company nor
any other member of the Controlled Group has incurred any unsatisfied
liability to the PBGC in connection with any Employee Benefit Plan,
including, without limitation, any liability under Section 4069 or
4212(c) of ERISA or any penalty imposed under Section 4071 of ERISA,
and neither the Company nor any other member of the Controlled Group
has ceased operations at any facility or withdrawn from any such
Employee Benefit Plan in a manner which could subject it to liability
under Section 4062, 4063 or 4064 of ERISA, or knows of any facts or
circumstances that might give rise to any liability of the Company or
any Subsidiary to the PBGC under Title IV of ERISA that could
reasonably be anticipated to result in any claims being made against
the Buyer by the PBGC.
(2) Neither the Company nor any other member of the Controlled
Group has incurred any unsatisfied withdrawal liability (including any
contingent or secondary withdrawal liability) within the meaning of
Section 4201 or 4204 of ERISA to any Employee Benefit Plan which is a
"multiemployer plan" (as such term is defined in Section
24
4001(a)(3) of ERISA) ("Multiemployer Plan"), and no event has occurred
and no condition or circumstance has existed, that presents a material
risk of the occurrence of any withdrawal from or the partition,
termination, reorganization or insolvency of any such Multiemployer
Plan which could result in any liability of the Company or any
Subsidiary to any such Multiemployer Plan.
(3) Neither the Company nor any Subsidiary maintains any Employee
Benefit Plan which is a "group health plan" (as such term is defined
in section 5000(b)(1) of the Code or Section 607(1) of ERISA) that has
not been administered and operated in all respects in compliance with
the applicable requirements of Part 6 of Subtitle B of Title I of
ERISA and Section 4980B of the Code ("COBRA"), and neither the Company
nor any Subsidiary is subject to any liability, including, without
limitation, additional contributions, fines, taxes, penalties or loss
of tax deduction as a result of such administration and operation. No
Employee Benefit Plan which is such a group health plan is a "multiple
employer welfare arrangement," within the meaning of Section 3(40) of
ERISA. Each Employee Benefit Plan that is intended to meet the
requirements of Section 125 of the Code meets such requirements, and
each program of benefits for which employee contributions are provided
pursuant to elections under any Employee Benefit Plan meets the
requirements of the Code applicable thereto. Neither the Company
nor any Subsidiary maintains any Employee Benefit Plan which is an
"employee welfare benefit plan" (as such term is defined in
Section 3(1) of ERISA) that has provided any "disqualified benefit"
(as such term
25
is defined in Section 4976(b) of the Code) with respect to which an
excise tax could be imposed.
(4) Neither the Company nor any Subsidiary maintains any Employee
Benefit Plan (whether qualified or non-qualified under Section 401(a)
of the Code) providing for post-employment or retiree health, life
insurance and/or other welfare benefits and having unfunded
liabilities, and neither the Company nor any Subsidiary have any
obligation to provide any such benefits to any retired or former
employees or active employees following such employees' retirement or
termination of service, except as required by COBRA. Neither the
Company nor any Subsidiary has any unfunded liabilities pursuant to
any Employee Benefit Plan that is a "pension plan" (as defined in
Section 3(2) of ERISA) and is not intended to be qualified under
Section 401(a) of the Code.
(5) Neither the Company nor any Subsidiary has incurred any
liability for any tax or excise tax arising under Chapter 43 of the
Code, and no event has occurred and no condition or circumstance has
existed that could give rise to any such liability.
(6) No asset of the Company or any Subsidiary is subject to any
lien arising under Section 302(f) of ERISA or Section 412(n) of the
Code, and no event has occurred and no condition or circumstance has
existed that could give rise to any such lien. Neither the Company nor
any Subsidiary has been required to provide any security under Section
307 of ERISA or Section 401 (a)(29) or 412(f) of the Code, and no
event has
26
occurred and no condition or circumstance has existed that could give
rise to any such requirement to provide any such security.
(7) There are no actions, suits, claims or disputes pending, or,
to the knowledge of the Seller or the Company, threatened, anticipated
or expected to be asserted against or with respect to any Employee
Benefit Plan or the assets of any such plan (other than routine claims
for benefits and appeals of denied routine claims). No civil or
criminal action brought pursuant to the provisions of Title I,
Subtitle B, Part 5 of ERISA is pending, threatened, anticipated, or
expected to be asserted against the Company or any Subsidiary or any
fiduciary of any Employee Benefit Plan, in any case with respect to
any Employee Benefit Plan. No Employee Benefit Plan or any fiduciary
thereof has been the direct or indirect subject of an audit,
investigation or examination by any governmental or quasi-governmental
agency.
(iii) Contributions. Full payment has been timely made of all amounts
which the Company or any Subsidiary is required, under applicable law or
under any Employee Benefit Plan or any agreement relating to any Employee
Benefit Plan to which the Company or any Subsidiary is a party, to have
paid as contributions or premiums thereto as of the last day of the most
recent fiscal year of such Employee Benefit Plan ended prior to the date
hereof. All such contributions and/or premiums have been fully deducted for
income tax purposes and no such deduction has been challenged or disallowed
by any governmental entity, and to the knowledge of the Seller or the
Company and the Subsidiaries no event has occurred and no condition or
circumstance has existed that could give rise to any such challenge or
disallowance. The Company
27
has made adequate provision for reserves to meet contributions and premiums
and any other liabilities that have not been paid or satisfied because they
are not yet due under the terms of any Employee Benefit Plan, applicable
law or related agreements. Benefits under all Employee Benefit Plans are as
represented and have not been increased subsequent to the date as of which
documents have been provided.
(iv) Funded Status; Withdrawal Liability.
(1) As of the date of this Agreement, the current value of the
accumulated benefit obligations (based upon actuarial assumptions
which are in the aggregate reasonable in all respects and which have
been furnished to and relied upon by the Buyer) under each Employee
Benefit Plan which is covered by Title IV of ERISA and which is a
"single employer plan" (as such term is defined in Section 4001(a)(15)
of ERISA) ("Single Employer Plan") did not exceed the current fair
value of the assets of each such Single Employer Plan allocable to
such accrued benefits, and since the date of the Working Capital
Statement, there has been (x) no change in the financial condition of
any Single Employer Plan, (y) no change in the actuarial assumptions
with respect to any Single Employer Plan and (z) no increase in
benefits under any Single Employer Plan as a result of plan
amendments, written interpretations or announcements (whether written
or not), change in applicable law or otherwise, which individually or
in the aggregate, would result in the current value of any Single
Employer Plan's accrued benefits exceeding the current value of all
such Single Employer Plan's assets. No Employee Benefit Plan holds as
an asset any interest in any annuity contract, guaranteed investment
contract or any other investment or
28
insurance contract, policy or instrument issued by an insurance
company that, to the knowledge of the Seller or the Company, is the
subject of bankruptcy, conservatorship, insolvency, liquidation,
rehabilitation or similar proceedings.
(2) As of the date of this Agreement, using actuarial assumptions
and computation methods consistent with Part I of Subtitle E of Title
IV of ERISA, neither the Company nor any other members of the
Controlled Group would have any liability to any Multiemployer Plans
in the event of a complete withdrawal therefrom, as of the close of
the most recent fiscal year of each Multiemployer Plan ended prior to
the date hereof. To the knowledge of the Company or the Seller, there
has been no change in the financial condition of any Multiemployer
Plan, in any such actuarial assumption or computation method or in the
benefits under any Multiemployer Plan as a result of collective
bargaining or otherwise since the close of each such fiscal year
which, individually or in the aggregate, would increase such
liability.
(v) Tax Qualification. Each Employee Benefit Plan intended to be
qualified under Section 401(a) of the Code has, as currently in effect,
been determined to be so qualified by the IRS. Each trust established in
connection with any Employee Benefit Plan which is intended to be exempt
from Federal income taxation under Section 501(a) of the Code has, as
currently in effect, been determined to be so exempt by the IRS. Each VEBA
has been determined by the IRS to be exempt from Federal income tax under
Section 501(c)(9) of the Code. To the knowledge of the Seller and the
Company, since the date of each most recent determination referred to in
this paragraph (b)(5), no event has occurred and no condition or
circumstance has existed that
29
resulted or is likely to result in the revocation of any such determination
or that could adversely affect the qualified status of any such Employee
Benefit Plan or the exempt status of any such trust or VEBA.
(vi) Transactions. No "reportable event" (as such term is defined in
Section 4043 of ERISA) for which the 30-day notice requirement has not been
waived by the PBGC has occurred or is expected to occur with respect to any
Employee Benefit Plan which could reasonably be expected to subject the
Company or any Subsidiary to any liability. Neither the Company nor any
Subsidiary nor any of their respective directors, officers, employees or,
to the knowledge of the Seller or the Company, other persons who
participate in the operation of any Employee Benefit Plan or related trust
or funding vehicle, has engaged in any transaction with respect to any
Employee Benefit Plan or breached any applicable fiduciary responsibilities
or obligations under Title I of ERISA that would subject any of them to a
tax, penalty or liability for prohibited transactions or breach of any
obligations under ERISA or the Code or would result in any claim being made
under, by or on behalf of any such Employee Benefit Plan by any party with
standing to make such claim.
(vii) Triggering Events. The execution of this Agreement and the
consummation of the transactions contemplated hereby, do not constitute a
triggering event under any Employee Benefit Plan, policy, arrangement,
statement, commitment or agreement, whether or not legally enforceable,
which (either alone or upon the occurrence of any additional or subsequent
event) will or may result in the termination of any Employee Benefit Plan
or any payment (whether of severance pay or otherwise), "parachute payment"
(as such term is defined in Section 280G of the
30
Code), acceleration, vesting or increase in benefits to any employee or
former employee or director of the Company or any Subsidiary. No Employee
Benefit Plan provides for the payment of severance, termination, change in
control or similar-type payments or benefits.
(c) Documents. The Seller or the Company has provided access to,
delivered or caused to be delivered to the Buyer or its counsel true and
complete copies of all material documents in connection with each Employee
Benefit Plan, including, without limitation (where applicable): (i) all
Employee Benefit Plans as in effect on the date hereof, together with all
amendments thereto, including, in the case of any Employee Benefit Plan not
set forth in writing, a written description thereof; (ii) all current
summary plan descriptions, summaries of material modifications, and
material communications; (iii) all current trust agreements, declarations
of trust and other documents establishing other funding arrangements (and
all amendments thereto and the latest financial statements thereof); (iv)
the most recent IRS determination letter obtained with respect to each
Employee Benefit Plan intended to be qualified under Section 401(a) of the
Code or exempt under Section 501 (a) or 501(c)(9) of the Code; (v) the
annual report on IRS Form 5500 series or 990 for each of the last three
years for each Employee Benefit Plan required to file such form; (vi) the
most recently prepared actuarial valuation report for each Employee Benefit
Plan covered by Title IV of ERISA; (vii) the most recently prepared annual
financial statements; and (viii) all material contracts and agreements
relating to each Employee Benefit Plan, including, without limitation,
service provider agreements, insurance contracts, annuity contracts,
investment management agreements, subscription agreements, participation
agreements, and record keeping agreements and collective bargaining
agreements.
31
5.21 Executive Employees.
(a) Schedule 5.21 annexed hereto is a correct and complete list of the
names, titles and current annual salary rates of and bonuses paid to all present
executive officers and employees of the Company and the Subsidiaries whose
annual salary (excluding bonuses) as of January 1, 1998 is in excess of
$100,000.
(b) Except as set forth on Schedule 5.21 annexed hereto, neither the
Company nor any Subsidiary has any written employment agreement or any written
severance agreement with respect to any Employee whose annual salary (excluding
bonuses) as of January 1, 1998 is in excess of $100,000.
5.22 Labor Matters.
(a) Schedule 5.22 annexed hereto is a correct and complete list of all
written collective bargaining agreements to which the Company or any Subsidiary
is a party or by which any of them is bound. The Company has delivered copies of
all such agreements to the Buyer. Neither the Company nor any Subsidiary is in
default with regard to any of such agreements, except for such defaults that
would not, individually or in the aggregate, have a Material Adverse Effect.
(b) Each of the Company and the Subsidiaries is in compliance in all
material respects with all Laws respecting employment and employment practices,
terms and conditions of employment, wages and hours, and is not engaged in any
material unfair labor or unlawful employment practice, except for such
non-compliance that would not, individually or in the aggregate, have a Material
Adverse Effect. Except as set forth on Schedule 5.14 or Schedule 5.22 annexed
hereto, there is no unlawful employment practice charge pending against the
Company or
32
any Subsidiary before the U.S. Equal Employment Opportunity Commission ("EEOC")
or EEOC recognized state "referral agency." Except as set forth on Schedule 5.14
or Schedule 5.22 annexed hereto, or as would not, individually or in the
aggregate, have a Material Adverse Effect, there is no unfair labor practice
charge or complaint against the Company or any of the Subsidiaries pending
before the National Labor Review Board ("NLRB"). There is no labor strike,
dispute, slowdown or stoppage pending, or, to the knowledge of the Seller,
threatened against the Company or any of the Subsidiaries, and no NLRB
representation petition has been filed or, to the knowledge of the Seller, is
impending respecting their respective employees. Except as set forth on Schedule
5.14 or Schedule 5.22 annexed hereto, or as would not, individually or in the
aggregate, have a Material Adverse Effect, no employee related grievances or
arbitration proceeding is pending and no written claims therefor exist.
5.23 Operations of the Company. Except as set forth on Schedule 5.23
annexed hereto, from the Balance Sheet Date through the date of this Agreement
the Company and the Subsidiaries have conducted their business in the ordinary
course consistent with past practices. From January 1, 1998 through the date of
this Agreement, the Company has not declared, paid, set aside or made any
dividend or other distribution or payment with respect to, or split, combined,
redeemed or reclassified, or purchased or otherwise acquired any shares of its
capital stock or its other securities, nor has it incurred or paid any
indebtedness other than the cash overdraft.
5.24 Banks, Brokers and Proxies. Schedule 5.24 annexed hereto sets forth
(i) the name of each bank, trust company and securities or other broker with
which the Company maintains accounts; (ii) the name of each Person authorized by
the Company to effect transactions therewith
33
or to have access to any safe deposit box or vault; and (iii) all proxies,
powers of attorney or other like instruments to act on behalf of the Company in
matters concerning its business or affairs.
5.25 Brokers and Finders. The Seller represents and warrants to the Buyer
that, except for Xxxxx & Company Incorporated, no broker, finder, agent or
similar intermediary has acted on behalf of the Company or the Seller in
connection with this Agreement or the transactions contemplated hereby, and that
there are no brokerage commissions, finders' fees or similar fees or commissions
payable in connection therewith based on any agreement, arrangement or
understanding with the Company or the Seller, or any action taken by the Company
or the Seller, other than fees payable to Xxxxx & Company Incorporated for which
the Seller shall be liable.
5.26 Affiliated Transactions. Except as set forth on Schedule 5.26
annexed hereto, no officer, director, stockholder or Affiliate of the Company or
any of the Subsidiaries, or any individual in such officer's, director's,
stockholder's or Affiliate's immediate family is a party to any material
agreement, contract, commitment or transaction with the Company or the
Subsidiaries or has a material interest in any material property used by the
Company or the Subsidiaries.
6. Representations and Warranties of the Buyer. The Buyer represents and
warrants to the Seller as follows:
6.1 Due Incorporation. The Buyer is a corporation duly organized, validly
existing and in good standing under the Laws of the State of Delaware.
6.2 Power and Capacity. The Buyer has all requisite power, authority and
approval to execute and deliver this Agreement, to consummate the transactions
contemplated hereby and to perform fully its obligations hereunder. The
execution, delivery and performance of this Agreement
34
by the Buyer have been duly authorized by all necessary corporate action of the
Buyer. This Agreement and each document and instrument contemplated by this
Agreement to be executed by the Buyer, when executed and delivered in accordance
with the provisions hereof (assuming due authorization, execution and delivery
by the Seller), shall constitute the valid and binding obligations of the Buyer
enforceable against the Buyer in accordance with their respective terms subject
to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and similar laws affecting creditors' rights and remedies generally
and subject, as to enforceability, to general principles of equity, including
principles of commercial reasonableness, good faith and fair dealing (regardless
of whether enforcement is sought in a proceeding at law or in equity).
6.3 Freedom to Contract. The execution, delivery and performance of this
Agreement by the Buyer do not, and the performance by it of its obligations
hereunder in accordance with its terms and conditions will not, (i) violate or
conflict with any provision of the certificate or articles of incorporation or
by-laws of the Buyer, (ii) violate any of the terms, conditions or provisions of
any Law binding upon the Buyer or any of its properties or (iii) conflict with
or result in a violation or breach of, or constitute (with or without due notice
or lapse of time or both) a default (or give rise to any right of termination,
cancellation or acceleration) under, any of the terms, conditions or provisions
of any note, bond, indenture, debenture, security agreement, trust agreement,
lien, mortgage, lease, agreement, license, franchise, permit, guaranty, joint
venture agreement, or other written agreement, instrument or obligation, to
which the Buyer is a party or by which it or any of its properties are bound,
except, with respect to clause (iii) of this sentence, as set forth on Schedule
6.3 annexed hereto. No governmental authorization, approval, order, license,
permit, consent,
35
registration, declaration or filing with any Governmental Authority, and no
consent or approval of any Person, is required in connection with the Buyer's
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby, except (i) as set forth on Schedule 6.3
annexed hereto, (ii) the requirements under the HSR Act or (iii) where the
failure to obtain any authorization, approval, order, license, permit, consent,
registration, declaration or filing would not have a material adverse effect on
the ability of the parties to consummate the transactions contemplated hereby.
6.4 Litigation. There is no action, suit or proceeding by or before any
referee, mediator or arbitrator, or any court or governmental or other
regulatory or administrative agency or commission, pending or, to the knowledge
of the Buyer, threatened, against the Buyer or relating to its assets, which
would in any way seek to prevent, enjoin, alter or delay the transactions
contemplated hereby.
6.5 Acquisition of Shares for Investment. The Buyer is acquiring the
Shares for investment and not with a view toward, or for sale in connection
with, any distribution thereof, nor with any present intention of distributing
or selling the Shares. The Buyer agrees and understands that the Shares have not
been registered under the Securities Act of 1933, as amended (the "Securities
Act"), and may not be sold, transferred, offered for sale, pledged, hypothecated
or otherwise disposed of (i) without registration under the Securities Act,
except pursuant to an exemption from such registration available under the
Securities Act, and (ii) except in accordance with applicable provisions of
state securities Laws.
36
6.6 Financing. The Buyer has received, and has delivered a true and
complete copy to Seller of, a Commitment Letter from Credit Suisse First Boston,
whereby Credit Suisse First Boston has committed to provide bank financing for
the transactions contemplated by this Agreement. Assuming receipt of funds in
accordance with the terms of such Commitment Letter, the Buyer will have all
funds necessary to consummate the transactions contemplated by this Agreement.
XxXxxx De Leeuw & Co. IV, L.P. (the "Fund") has agreed to provide the Buyer with
the requisite equity financing necessary to consummate the transactions
contemplated by this Agreement.
6.7 Brokers and Finders. The Buyer represents and warrants to the Seller
that no broker, finder, agent or similar intermediary has acted on its behalf in
connection with this Agreement or the transactions contemplated hereby, and that
there are no brokerage commissions, finders' fees or similar fees or commissions
payable in connection therewith based on any agreement, arrangement or
understanding with the Buyer, or any action taken by the Buyer.
7. Covenants of the Parties. The parties hereby covenant and agree as follows:
7.1 Conduct of Business Pending Closing. From the date hereof until the
Closing Date, the Seller will cause the Company and the Subsidiaries to:
(a) maintain their existence in good standing;
(b) maintain the general character of their businesses and conduct
their businesses in the ordinary and usual manner subject to seasonal
fluctuations, general economic conditions and variations in customer order
levels;
(c) maintain proper business and accounting records consistent with
past practices;
37
(d) maintain their properties in substantially the same repair and
condition, as on the date of this Agreement, subject to normal wear and
use;
(e) use commercially reasonable efforts to preserve the Company's and
the Subsidiaries' businesses intact;
(f) refrain from paying or increasing any bonuses, salaries, or other
compensation to any director, officer, employee or stockholder or entering
into any employment, severance or similar agreement with any director,
officer or employee, other than in the ordinary course of business
consistent with past practice;
(g) refrain from adopting or increasing any profit sharing, bonus,
deferred compensation, savings, insurance, pension, retirement or other
employee benefit plan for or with any employees of the Company or the
Subsidiaries, other than in the ordinary course of business consistent with
past practice;
(h) refrain from entering into any material contract or commitment,
other than (1) contracts or commitments with respect to the disposition of
the 60% interest in KCET owned by DIMAC DIRECT, Inc. (the "KCET
Disposition") or (2) in the ordinary course of business consistent with
past practice;
(i) refrain from canceling or waiving any claim or right of
substantial value which individually or in the aggregate is material to the
Company or the Subsidiaries, other than with respect to the KCET
Disposition;
(j) refrain from making any material change in accounting methods or
practices, other than changes required by law or GAAP;
38
(k) refrain from selling, leasing or otherwise disposing of any
material asset or property of the Company or any Subsidiary, other than (1)
with respect to the KCET Disposition or (2) in the ordinary course of
business consistent with past practice;
(l) refrain from making any capital expenditure or commitment therefor
in excess of $250,000;
(m) refrain from writing off as uncollectible any notes or accounts
receivable, other than in the ordinary course of business consistent with
past practice;
(n) refrain from incurring or paying any indebtedness for borrowed
money other than the cash overdraft;
(o) refrain from declaring, paying, setting aside or making any
dividend or other distribution or payment with respect to, or splitting,
combining, redeeming or reclassifying, or purchasing or otherwise acquiring
any shares of its capital stock or its other securities;
(p) refrain from making any payments before their due date in order to
accelerate a tax deduction; and
(q) refrain from agreeing in writing to do any of the foregoing.
7.2 Seller's Notice of Certain Events. The Seller shall promptly notify
the Buyer of:
(a) any breach of the terms of this Agreement or any fact, condition
or circumstance which would make any of the representations and warranties
of either the Buyer or the Seller contained herein untrue, inaccurate or
misleading, of which the Seller has knowledge;
(b) any actions, suits or proceedings commenced or, to the Seller's
knowledge, threatened against, relating to, involving or otherwise
affecting the Company which, if pending on the
39
date of this Agreement, would have been required to be disclosed pursuant
to Section 5.14 hereof or which relate to the consummation of the
transactions contemplated by this Agreement; or
(c) any material adverse change in the business, assets, condition
(financial or otherwise), operations or results of operations of the
Company (other than seasonal fluctuations, general economic conditions and
variations in customer order levels which have not resulted in a change in
overall order levels for such customer).
7.3 Buyer's Notice of Certain Events. The Buyer shall promptly notify the
Seller of:
(a) any breach of the terms of this Agreement or any fact, condition
or circumstance which would make any of the representations and warranties
of either the Buyer or the Seller contained herein untrue, inaccurate or
misleading, of which the Buyer has knowledge;
(b) any actions, suits or proceedings commenced or, to the Buyer's
knowledge, threatened against, relating to, involving or otherwise
affecting the Buyer which relate to the consummation of the transactions
contemplated by this Agreement; or
(c) any event, condition or circumstance which is reasonably likely to
have, or does have, the effect of impairing the ability of the Buyer to
consummate the transactions contemplated by this Agreement.
7.4 Company Access. Prior to the Closing Date, the Buyer shall be
entitled, through its employees and representatives, to gain access to the
assets, properties, business and operations of the Company and the Subsidiaries,
and such examination of the books, records and financial condition of the
Company and the Subsidiaries as the Buyer requests upon reasonable notice to the
Seller. Any such access shall be at reasonable times and under reasonable
circumstances, and the Company, the
40
Subsidiaries and the Seller shall cooperate fully therein. Any and all
information or documents obtained by the Buyer from the Company or the
Subsidiaries, concerning their respective assets, properties, businesses and
operations pursuant to this Section 7.4 shall at all times be subject to the
confidentiality provisions set forth in Section 7.10 hereof. If this Agreement
terminates for any reason, any documents obtained from the Company or the
Subsidiaries or otherwise in the Buyer's possession or under the Buyer's control
shall be promptly returned to the Seller within two (2) Business Days following
such termination.
7.5 Consent to Jurisdiction and Service of Process. Any legal action,
suit or proceeding arising out of or relating to this Agreement or the
transactions contemplated hereby may be instituted in any state or federal court
located in New York County, State of New York, and each party agrees not to
assert, by way of motion, as a defense or otherwise, in any such action, suit or
proceeding, any claim that it is not subject personally to the jurisdiction of
such court, that its property is exempt or immune from attachment or execution,
that the action, suit or proceeding is brought in an inconvenient forum, that
the venue of the action, suit or proceeding is improper or that this Agreement
or the subject matter hereof may not be enforced in or by such court, and hereby
waives any offsets or counterclaims in any such action, suit or proceeding. Each
party further irrevocably submits to the jurisdiction of any such court in any
such action, suit or proceeding. Any and all service of process and any other
notice in any such action, suit or proceeding shall be effective against any
party if given in accordance with Section 14.5 hereof. Nothing herein contained
shall be deemed to affect the right of any party to serve process in any manner
permitted by law or to commence legal proceedings or otherwise proceed against
any other party in any jurisdiction other than New York.
41
7.6 Expenses. The parties to this Agreement shall, except as otherwise
specifically provided herein, bear their respective expenses incurred in
connection with the preparation, execution and performance of this Agreement and
the transactions contemplated hereby, including, without limitation, all fees
and expenses of agents, representatives, counsel and accountants.
7.7 Independent Investigation. The Buyer acknowledges and agrees that (i)
as of the Closing Date, it shall have been furnished with or given adequate
access to such information as it has requested; (ii) as of the Closing Date, it
shall have made its own inquiry and investigation into, and, based thereon, will
have formed an independent judgment concerning, the Shares, the Company and the
Subsidiaries, and their respective businesses; and (iii) it will not assert any
claim against the Seller, the Company, the Subsidiaries or any of their
respective directors, officers, employees, agents, stockholders, Affiliates,
consultants or representatives, or hold any such Persons liable for any
inaccuracies, misstatements or omissions with respect to information (other
than, with respect to the Seller, the representations and warranties contained
in this Agreement) furnished by such Persons unless such inaccuracies or
misstatements constitute fraud.
7.8 Post-Closing Access. In order to facilitate the resolution of any
claims made by or against or incurred by the Seller prior to the Closing, after
the Closing, upon two (2) Business Days advance notice, the Buyer shall, at no
charge to the Seller, (i) afford the officers, employees and authorized agents
and representatives of the Seller reasonable access, during normal business
hours, to the offices, properties, books and records, of the Buyer, the Company
and the Subsidiaries and any of their respective successors; (ii) furnish to the
officers, employees and authorized agents and representatives of the Seller such
additional financial and other information regarding the Company
42
and the Subsidiaries including any successors, the assets, properties, goodwill
and business of the Company and the Subsidiaries and any successors, and their
respective businesses as the Seller may from time to time reasonably request;
and (iii) make available to the Seller, the employees of the Buyer, the Company
and the Subsidiaries whose assistance, testimony or presence is necessary to
assist the Seller in evaluating any such claims and in defending such claims,
including the presence of such Persons as witnesses in hearings or trials for
such purposes.
7.9 Books and Records. The Buyer agrees that it shall preserve and keep
all books and records of the Company and the Subsidiaries in the Buyer's
possession for a period of at least seven (7) years from the Closing Date. After
such seven (7) year period, before the Buyer shall dispose of any of such books
and records, at least ninety (90) days prior written notice to such effect shall
be given by the Buyer to the Seller, and the Seller shall be given an
opportunity, at its cost and expense, to remove and retain all or any part of
such books and records as the Seller may select. During such seven (7) year
period, duly authorized representatives of the Seller shall, upon reasonable
notice, have access thereto during normal business hours to examine, inspect and
copy such books and records. If, in order properly to prepare documents required
to be filed with governmental authorities or its financial statements, it is
necessary that any party hereto or any successors be furnished with additional
information relating to the Company or the Subsidiaries or their respective
businesses, and such information is in the possession of any other party hereto,
such party agrees to use its best efforts to furnish such information to such
requesting party, at the cost and expense of the party being furnished such
information.
43
7.10 Confidentiality. The terms of the letter agreement dated as of
January 15, 1998 (the "Confidentiality Agreement") between Xxxxx & Company
Incorporated, as agent for The News Corporation Limited and its Affiliates, and
XxXxxx XxXxxxx & Co. are hereby incorporated by reference and shall continue in
full force and effect and be binding on all parties to this Agreement until the
Closing, at which time such Confidentiality Agreement and the obligations of the
Buyer, and the Seller under this Section 7.10 shall terminate; provided,
however, that the Confidentiality Agreement shall terminate only in respect of
that portion of the Confidential Material (as defined in the Confidentiality
Agreement) exclusively relating to the transactions contemplated by this
Agreement. If this Agreement is, for any reason, terminated prior to the
Closing, the Confidentiality Agreement and this Section 7.10 shall continue in
full force and effect in respect of such Confidential Material.
7.11 Regulatory and Other Authorizations; Consents. Each party hereto
will use its commercially reasonable efforts to obtain all authorizations,
consents, orders and approvals of all federal, state, local and foreign
regulatory bodies and officials that may be or become necessary for its
execution and delivery of, and the performance of its obligations pursuant to,
this Agreement and will cooperate fully with the other parties hereto in
promptly seeking to obtain all such, authorizations, consents, orders and
approvals. If required, each party hereto agrees to make an appropriate filing
of a Notification and Report Form pursuant to the HSR Act with respect to the
transactions contemplated hereby within five (5) Business Days of the date
hereof and to supply promptly any additional information and documentary
material that may be requested pursuant to the HSR Act. The parties
44
hereto will not take any action that will have the effect of delaying, impairing
or impeding the receipt of any required approvals.
7.12 Title Insurance. The Buyer covenants and agrees that, if it obtains
owner's or leasehold title insurance policies as applicable for any of the Owned
Property or the Islip Leased Property, the Buyer shall do so at its sole cost
and expense.
7.13 Supplements to Schedules. The Seller and the Buyer shall have the
right from time to time prior to the Closing to supplement or amend any schedule
annexed hereto with respect to any matter hereafter arising which, if existing
or known on the date of this Agreement, would have been required to be set forth
or described in such schedule.
7.14 Non-Solicitation. For the period commencing on Closing Date and
ending on the second anniversary thereof, the Seller shall not, directly or
indirectly, on its own behalf or on behalf of any other Person, hire, solicit,
or encourage to leave the employ of the Company or any Subsidiary any Person who
is an employee of the Company or any Subsidiary during such period while such
Person is an employee of the Company.
7.15 Capital Expenditures; Capital Leases. The Seller hereby agrees that
during the period from the date of this Agreement through the Closing Date, it
shall cause the Company and the Subsidiaries to spend $200,000 on capital
expenditures and to pay $676,000 principal and interest on capital leases.
8. Conditions Precedent to the Obligation of the Buyer to Close. The
obligation of the Buyer to enter into and complete the Closing is subject, at
its option, to the fulfillment on or prior to the Closing Date of the following
conditions, any one or more of which may be waived by it:
45
8.1 Representations and Warranties True as of the Closing Date. The
representations and warranties of the Seller contained in this Agreement which
are qualified as to "materiality" or "Material Adverse Effect" shall be true and
correct in all respects, and the representations and warranties of the Seller
which are not so qualified shall be true in all material respects, in each case
on and as of the Closing Date with the same force and effect as though made on
and as of the Closing Date; provided, however, that to the extent that any
representation or warranty is made herein as of a specified date, such
representation or warranty shall be true as of such specified date; and provided
further that to the extent that any representation or warranty has been
qualified by a reference to any schedule annexed hereto which has been
supplemented or amended by the Seller after the date hereof, such representation
or warranty shall be true and correct as described above without giving effect
to such supplemented or amended schedule.
8.2 Compliance with this Agreement. The Seller shall have performed and
complied in all material respects with all covenants and agreements required by
this Agreement to be performed or complied with by the Seller on or prior to the
Closing Date.
8.3 Officer's Certificate. The Seller shall have delivered to the Buyer
a certificate, dated as of the Closing Date and signed by an officer of the
Seller, certifying that the conditions specified in Sections 8.1 and 8.2 hereof
have been fulfilled.
8.4 Opinion of Counsel to the Company and the Seller. The Buyer shall
have received the opinion of Squadron, Ellenoff, Plesent & Xxxxxxxxx, LLP,
counsel to the Company and the Seller, dated the date of the Closing, addressed
to the Buyer, in form and substance reasonably satisfactory to the Buyer.
46
8.5 Litigation. No action, suit or proceeding shall have been
instituted before or by any Governmental Authority to restrain, modify or
prevent the carrying out of the transactions contemplated hereby, or to seek
damages or a discovery order in connection with such transactions.
8.6 Delivery of Stock Certificates. The Seller shall have delivered to
the Buyer at the Closing stock certificates representing all of the Shares duly
endorsed in blank or accompanied by stock powers duly executed in blank, in
proper form for transfer.
8.7 HSR Act. The waiting period under the HSR Act shall have expired or
early termination with respect thereto shall have been granted.
8.8 Consents. The Seller shall have received each consent or approval
required to be given by any third party in connection with the consummation of
the transactions contemplated hereby, where the failure to receive such consent
or approval would have a Material Adverse Effect.
8.9 KCET Disposition. The Buyer shall have received evidence
satisfactory to it that the KCET Disposition shall have been consummated.
8.10 Material Adverse Change. Since the date of this Agreement, there
shall not have been or occurred any material adverse change in the assets,
properties, business or condition (financial or otherwise), operations or
results of operations of the Company and the Subsidiaries which would materially
impair the overall conduct of their business as currently conducted, nor shall
there have been any damage, destruction or loss materially affecting the assets,
prospectus, business or condition (financial or otherwise), operations or
results of operations of the Company and the Subsidiaries, whether or not
covered by insurance; provided, however, that the effects of seasonal
fluctuations on the Company's business, general conditions in the direct
marketing industry, variations in customer
47
order levels which have not resulted in a change in overall order levels for
such customer, or present or future Laws, including, without limitation, Laws
relating to postal matters and procedures shall not be deemed to have been a
material adverse change for purposes of this Section 8.10.
8.11 Indebtedness. The Buyer shall have received evidence satisfactory
to it that the outstanding amount of all indebtedness for money borrowed of the
Company shall be zero, it being understood and agreed that indebtedness for
money borrowed shall not be deemed to include capital lease obligations or cash
over-draft.
8.12 Intercompany Accounts. The payable of the Company to the Seller
shall have been contributed to the capital of the Company, and the income tax
receivable-parent from the Seller or News America Incorporated that is recorded
on the Company's books shall be recorded as a reduction of the capital of the
Company.
9. Conditions Precedent to the Obligation of the Seller to Close. The
obligation of the Seller to enter into and complete the Closing is subject, at
its option, to the fulfillment of the following conditions, any one or more of
which may be waived:
9.1 Representations and Warranties True as of the Closing Date. The
representations and warranties of the Buyer contained in this Agreement which
are qualified as to "materiality" or "Material Adverse Effect" shall be true and
correct in all respects, and the representations and warranties of the Buyer
which are not so qualified shall be true in all material respects, in each case
on and as of the Closing Date with the same force and effect as though made on
as of the Closing Date; provided, however, that to the extent that any
representation or warranty is made herein as of a specified date, such
representation or warranty shall be true as of such specified date; and provided
48
further that to the extent that any representation or warranty has been
qualified by a reference to any schedule annexed hereto which has been
supplemented or amended by the Buyer after the date hereof,
such representation or warranty shall be true and correct as described above
without giving effect to such supplemented or amended schedule.
9.2 Compliance with this Agreement. The Buyer shall have performed and
complied in all material respects with all covenants and agreements required by
this Agreement to be performed or complied with by it on or prior to the Closing
Date.
9.3 Officer's Certificate. The Buyer shall have delivered to the Seller
a certificate, dated as of the Closing Date and signed by an officer of the
Buyer, certifying that the conditions specified in Sections 9.1 and 9.2 hereof
have been fulfilled.
9.4 Opinion of Counsel to the Buyer. The Seller shall have received the
opinion of White & Case, LLP, counsel to the Buyer, dated the date of the
Closing, addressed to the Seller, in form and substance reasonably satisfactory
to the Seller.
9.5 Litigation. No action, suit or proceeding shall have been
instituted before or by any Governmental Authority to restrain, modify or
prevent the carrying out of the transactions contemplated hereby, or to seek
damages or a discovery order in connection with such transactions.
9.6 HSR Act. The waiting period under the HSR Act shall have expired or
early termination with respect thereto shall have been granted.
9.7 Payment of Purchase Price. The Buyer shall have paid to the Seller
the Purchase Price in immediately available funds in accordance with Section
4(a) hereof.
49
9.8 Consents. The Buyer shall have received each consent or approval
required to be given by any third party in connection with the consummation of
the transactions contemplated hereby, where the failure to receive such consent
or approval would have a material adverse effect on the Buyer's ability to
consummate the transactions contemplated hereby.
10. Survival of Representations and Warranties; Indemnification.
10.1 Survival of Representations and Warranties. The representations
and warranties contained in Section 5 and 6 of this Agreement (other than the
representation contained in Section 5.2, which shall survive the Closing) shall
not survive the execution and delivery hereof and the Closing hereunder.
10.2 Indemnification. From and after the Closing Date, the Seller
hereby agrees to indemnify the Buyer and its subsidiaries (including the
Company), and their respective successors and assigns and hold them harmless at
all times against and in respect of any and all claims, damages, losses and
liabilities and costs and expenses arising out of, resulting from or relating to
(i) KCET and (ii) payments to be made to X.X. XxXxxxx & Co., Inc. pursuant to
the XxXxxxx Earn-Out Agreement, in connection with work generated prior to the
Closing Date, other than payments that have been accrued as current liabilities
on the Working Capital Statement for work performed during the period from April
1, 1998 through the Closing Date, with the amount determined in a manner
consistent with past practices.
10.3 Notice to the Indemnitor. Promptly after the assertion of any
claim by a third party or occurrence of any event which may give rise to a claim
for indemnification from an indemnitor (the "Indemnitor") under Section 10.2, an
indemnified party (the "Indemnified Party") shall notify the
50
Indemnitor in writing of such claim (other than any claims with respect to
Section 10.2(ii) of which the Seller is already aware) and shall describe in
reasonable detail the facts and circumstances with respect to the subject matter
of such claim or action and the basis on which indemnification is sought
pursuant to this Agreement.
10.4 Rights of Parties to Settle or Defend. The Indemnitor shall have the
right to direct, through counsel of its own choosing, the defense or settlement
of any claim or proceeding at its own expense for which the Indemnified Party is
seeking indemnification pursuant to this Agreement. If the Indemnitor elects to
assume the defense of such claim, the Indemnified Party shall have the right to
be represented, at its own expense by its own counsel and accountants, their
participation to be subject to the reasonable direction of the Indemnitor. In
either case, the Indemnified Party shall make available to the Indemnitor and
its attorneys and accountants, at all reasonable times during normal business
hours, all books, records and other documents in its possession relating to such
claim and shall otherwise cooperate with the Indemnitor in the defense or
settlement thereof. If the Indemnitor elects to direct the defense of any such
claim or proceeding, the Indemnified Party shall not pay or permit to be paid
any part of any claim or demand arising from such asserted liability, unless the
Indemnitor consents in writing to such payment or unless the Indemnitor, subject
to the last sentence of this Section 10.4, withdraws from the defense of such
asserted liability, or unless a final judgment from which no appeal may be taken
by or on behalf of the Indemnitor is entered against the Indemnified Party for
such liability. Notwithstanding the foregoing, the Indemnitor shall not settle
any third-party claim (other than solely by the payment of money) without the
Indemnified Party's
51
prior written consent, which consent shall not be unreasonably withheld. If the
Indemnitor shall fail to defend, or if, after commencing or undertaking any such
defense, the Indemnitor fails to prosecute or withdraws from such defense, the
Indemnified Party shall have the right to undertake the defense or settlement
thereof. If the Indemnified Party assumes the defense of any such claim or
proceeding pursuant to this Section 10.4 and proposes to settle such claim or
proceeding prior to a final judgment thereon or to forego any appeal with
respect thereto, then the Indemnified Party shall give the Indemnitor prompt
written notice thereof.
10.5 Settlement Proposals. In the event the Indemnified Party desires to
settle any such third-party claim, the Indemnified Party shall advise the
Indemnitor in writing of the amount it proposes to pay in settlement thereof
(the "Proposed Settlement"). If such Proposed Settlement is unsatisfactory to
the Indemnitor, it shall have the right, at its expense, to contest such claim
by giving written notice of such election to the Indemnified Party within ten
(10) days after the Indemnitor's receipt of the advice of the Proposed
Settlement. If the Indemnitor does not deliver such written notice within ten
(10) days after receipt of such advice, the Indemnified Party may offer the
Proposed Settlement to the third party making such claim. If the Proposed
Settlement is not accepted by the party making such claim, any new Proposed
Settlement figure which the Indemnified Party may wish to present to the party
making such claim shall first be presented to the Indemnitor who shall have the
right, subject to the conditions hereinabove set forth in this Section 10.5, to
contest such claim.
10.6 Tax and Other Benefits. Payments by the Indemnitor pursuant to
Section 10.2 hereof shall be limited to the amount of any liability or damage
that remains after deducting therefrom (i) any current Tax benefit to the
Indemnified Party or any Affiliate thereof, and (ii) any insurance proceeds
52
and any indemnity, contribution or other similar payment recoverable by the
Indemnified Party or its Affiliates from any third party with respect thereto.
If a Tax benefit is recognized by the Indemnified Party or any Affiliate in a
tax period subsequent to the period in which the indemnity payment occurs, the
Indemnified Party shall pay the Indemnitor the amount of such benefit actually
realized in the subsequent period.
11. Tax Matters.
11.1 Liability For Taxes.
(a) Except as otherwise provided in Section 11.1(c) hereof, the
Seller shall be liable for, shall pay and shall indemnify and hold the Buyer and
the Company harmless against all claims for Taxes and reasonable costs and
expenses relating thereto of the Company or the Subsidiaries (i) for any taxable
period or portion thereof ending after the Acquisition Date, but on or before
the Closing Date, due or payable with respect to the operations, assets or
business of the Seller or its Affiliates (including the Company) on or before
the Closing Date, (ii) relating to the deductibility of costs and expenses paid
by the Company in connection with the acquisition of the Company by the Seller,
and (iii) for liability of the Company and the Subsidiaries pursuant to Treasury
Regulations Section 1.1502-6 or any analogous state, local or foreign law or
regulation (excluding Taxes attributable to the activities of the Company or its
Subsidiaries) by reason of the Company or the Subsidiaries having been a member
of any combined, consolidated or unitary group as to which the Seller or News
Publishing Australia Limited or their Affiliates (other than the Company or its
Subsidiaries) was the common parent (each, a "Tax Claim").
53
(b) The Buyer shall be liable for, shall pay and shall indemnify and
hold the Seller harmless against (i) any and all Taxes of the Company for any
taxable period or portion thereof after the Closing Date; and (ii) any and all
Taxes not incurred in the ordinary course of business attributable to the acts
or omissions of the Buyer, the Buyer's Affiliates or the Company occurring on
the Closing Date but after the Closing.
(c) Notwithstanding any provision to the contrary contained in this
Agreement, the Seller shall be required to indemnify and hold the Buyer and the
Company harmless under Sections 11.1(a)(i) and 11.1(a)(ii) hereof only to the
extent that the aggregate of such claims exceeds $250,000. Notwithstanding the
foregoing, in no event shall the aggregate amount required to be paid by the
Seller to the Buyer or the Company or its Subsidiaries pursuant to Sections
11.1(a)(i) and 11.1(a)(ii) hereof exceed five percent (5%) of the Purchase Price
paid hereunder.
11.2 Allocation. In the case of Taxes that are payable with respect to a
taxable period that begins before the Closing Date and ends after the Closing
Date, the portion of any such Tax that is allocable to the portion of the period
ending on the Closing Date shall be determined based on the actual activities
and operations of the Company and the Subsidiaries and shall be deemed equal to
the amount which would be payable if the taxable year ended on the Closing Date;
provided, however, that real and personal property Taxes (which are not based on
income) shall be determined by reference to the relative number of days in the
taxable period.
11.3 Filing of Tax Returns; Change of Tax Year. The parties hereto
covenant and agree that (i) the Seller shall prepare and file with the
applicable Governmental Authorities all Tax Returns relating to the Company and
the Subsidiaries with respect to any taxable period that ends after the
54
Acquisition Date and on or before the Closing Date on a basis consistent with
past practice with respect to items reflected on such Tax Returns; and (ii) the
Buyer shall prepare and file with the applicable Governmental Authorities all
other Tax Returns relating to the Company and the Subsidiaries. With respect to
a Tax Return prepared by the Buyer which includes a taxable period or portion
thereof before the Closing Date, the Seller shall have a reasonable opportunity
to review and approve such return (such approval not to be unreasonably withheld
or delayed) and such return shall be filed on a consistent basis with past
similar returns. An exact copy of the Tax Return for such periods shall be
provided to the Seller no later than ten (10) days after such return is filed.
Notwithstanding anything to the contrary herein, the Buyer shall not, and shall
not permit the Company or the Subsidiaries to, file any amended Tax Return of
the Company or the Subsidiaries (or otherwise change such Tax Returns) with
respect to taxable periods or portions thereof ending on or prior to the Closing
Date unless (i) the Seller consents in writing (which consent shall not be
unreasonably withheld) and (ii) the amended Tax Return does not result in an
indemnifiable Tax under Section 11.1(a) hereof.
11.4 Payment. Payment by the Seller of any amounts due under
Sections 11.1(a), 11.2 and 11.3 hereof in respect of Taxes shall be made (i) at
least three (3) days before the due date of the applicable estimated or final
Tax Return required to be filed by the Buyer, the Company or the Subsidiaries,
as the case may be, after the Closing Date on which is required to be reported
income or other amounts for a period or portion thereof ending on or before the
Closing Date for which the Seller is responsible under Section 11.1(a), 11.2 or
11.3 hereof, provided that no such payment shall be due from the Seller prior to
five (5) Business Days following receipt of written notice from the
55
Buyer, or (ii) within five (5) Business Days following the date of (x) an
agreement between the Seller and the Buyer that an amount is payable pursuant to
Section 11.1(a) hereof, (y) an assessment of a Tax by a taxing authority, or (z)
a "determination" as defined in Section 1313(a) of the Code. Payment by the
Buyer of any amounts due under Section 11.1(b) hereof shall be made (i) at least
three (3) days before the due date of the applicable estimated or final Tax
Return required to be filed by the Buyer, the Company or the Subsidiaries, as
the case may be, after the Closing Date on which is required to be reported
income or other amounts for a period or portion thereof after the Closing Date
for which the Buyer is responsible under Section 11.1(b) hereof, provided that
no such payment shall be due from the Buyer prior to five (5) Business Days
following receipt of written notice from the Seller, or (ii) within five (5)
Business Days following the date of (x) an agreement between the Seller and the
Buyer that an amount is payable pursuant to Section 11.1(b) hereof, (y) an
assessment of a Tax by a taxing authority, or (z) a "determination" as defined
above.
11.5 Refunds. Any refunds received by the Buyer or the Company, the
Subsidiaries or their successors (and any equivalent benefit to any such company
through a current reduction in their liability for Taxes in a post-Closing Date
period) of Taxes relating to taxable periods or portions thereof ending on or
before the Closing Date shall be for the account of the Seller, and the Buyer
shall pay over to the Seller any such refund or the amount of any such benefit
within five (5) Business Days of the receipt thereof. The Buyer shall cooperate
with the Seller in pursuing such refunds where it will not result in an adverse
effect to the Buyer, the Company or the Subsidiaries, in the Buyer's sole
discretion.
11.6 Contests.
56
(a) Notice to the Seller. After the Closing, the Buyer shall
promptly notify the Seller in writing of the commencement of any Tax audit or
administrative or judicial proceeding or of any demand or claim on the Buyer,
the Company or the Subsidiaries which, if determined adversely to the taxpayer
or after the lapse of time would be grounds for indemnification under Section
11.1(a) hereof. Such notice shall contain factual information (to the extent
known to the Buyer, the Company or the Subsidiaries) describing the asserted Tax
liability in reasonable detail and shall include copies of any notice or other
document received from any taxing authority in respect of any such asserted Tax
liability. If the Buyer fails to give the Seller prompt notice of an asserted
Tax liability as required by this Section 11.6(a), then if such failure to give
prompt notice results in a detriment to the Seller, any amount which the Seller
is otherwise required to pay the Buyer pursuant to Section 11.1(a) hereof with
respect to such liability shall be reduced by the amount of such detriment.
(b) Rights of the Parties to Settle or Defend. The Seller may elect
to direct, through counsel of its own choosing and at its own expense, any
audit, claim for refund and administrative or judicial proceeding involving any
asserted liability with respect to which indemnity may be sought under Section
11.1(a) hereof (any such audit, claim for refund or proceeding relating to an
asserted Tax liability are referred to herein collectively as a "Contest"). If
the Seller elects to direct the Contest of an asserted Tax liability, it shall
within thirty (30) days of receipt of the notice of asserted Tax liability
notify the Buyer of its intent to do so, and the Buyer shall cooperate and shall
cause the Company, the Subsidiaries or their successors to cooperate in each
phase of such Contest. If the Seller elects not to direct the Contest and fails
to notify the Buyer of its election as herein provided or contests its
obligation to indemnify under Section 11.1(a) hereof, the Buyer, the Company
57
or the Subsidiaries may pay, compromise or contest, at their own expense, such
asserted liability. However, in such case, neither the Buyer, the Company nor
the Subsidiaries may settle or compromise any asserted liability without
providing prompt written notice thereof to the Seller. In any event, each of the
Buyer (or the Company or the Subsidiaries) and the Seller may participate, at
its own expense, in the Contest. If the Seller chooses to direct the Contest,
the Buyer shall promptly empower and shall cause the Company and the
Subsidiaries and their successors promptly to empower (by power of attorney and
such other documentation as may be appropriate) such representatives of the
Seller as it may designate to represent the Buyer, the Company, the Subsidiaries
or their successors in the Contest insofar as the Contest involves an asserted
Tax liability for which the Seller would be liable under Section 11.1(a) hereof.
If Seller settles or otherwise compromises a Tax issue relating to the Company
or its Subsidiaries indemnified under Section 11.1(a) which results in an
adverse tax effect to the Company or its Subsidiaries in a post-closing period,
the Seller shall indemnify and hold the Company and its Subsidiaries harmless
for such adverse tax effect without regard to the limitation in Section 11.1(c)
hereof.
11.7 Payments for Certain Audit Adjustments. If an audit adjustment,
claim for refund or amended return ("Adjustment") after the date hereof shall
both increase a Tax liability which is allocated to the Seller under Section
11.1(a) hereof (or reduce losses or credits otherwise available to the Seller)
for a period ending on or before the Closing Date and decrease a Tax liability
of the Buyer, the Company or the Subsidiaries (or increase losses or credits
otherwise available to any such corporation) for a period ending after the
Closing Date, then, when and to the extent that the Buyer (or the Company or the
Subsidiaries) derives a benefit from such decrease (through a reduction of
58
Taxes, refund of Taxes paid or credit against Taxes due), the Buyer shall
promptly pay to the Seller an amount equal to the amount of such refund,
reduction or credit in excess of the $250,000 deductible described in Section
11.1(c) hereof. The determination of the amount of the Tax liability (or Tax
benefit) of the Buyer, the Company or the Subsidiaries for a post-closing period
described above shall be within the Buyer's sole discretion.
11.8 Cooperation and Exchange of Information. The Seller and the Buyer
will provide each other with such cooperation and information as either of them
reasonably may request of the other in filing any Tax Return, amended return or
claim for refund, determining a liability for Taxes or a right to a refund of
Taxes or participating in or conducting any audit or other proceeding in respect
of Taxes. Such cooperation and information shall include providing copies of
relevant Tax Returns or portions thereof, together with accompanying schedules
and related work papers and documents relating to rulings or other
determinations by taxing authorities. Each party shall make its employees
available on a mutually convenient basis to provide explanations of any
documents or information provided hereunder. Each party will retain all returns,
schedules and work papers and all material records or other documents relating
to Tax matters of the Company and the Subsidiaries for their taxable periods
ending after the Closing Date and for all prior taxable periods until seven (7)
years following the due date (without extension) for such returns. After such
date, notice of intent to discard will be given and the Seller may request such
records. Any information obtained under this Section 11.9 shall be kept
confidential, except as may be otherwise necessary in connection with the filing
of returns or claims for refund or in conducting an audit or other proceeding.
59
11.9 Conveyance Taxes. The Buyer and the Seller agree to assume equally
any liability for and to share equally the payment of all sales, transfer,
stamp, real property transfer or gains and similar Taxes incurred as a result of
the sale of the Shares contemplated hereby.
11.10 No Section 338(h)(10) Election. The Seller and the Buyer shall not
join in an election pursuant to Section 338(h)(10) of the Code or in any similar
election under any Law.
11.11 Disputes. In the event that a dispute arises between the Seller and
the Buyer as to the amount of Taxes or indemnification or any other matter
relating to Taxes attributable to the Company and its Subsidiaries, the parties
shall attempt in good faith to resolve such dispute, and any agreed upon amount
shall be paid to the appropriate party. If such dispute is not resolved within
thirty (30) days thereafter, the parties shall submit the dispute to an
independent accounting firm mutually chosen by the Buyer and the Seller for
resolution, which resolution shall be final, conclusive and binding on the
parties; provided, however, that the independent accounting firm shall be
empowered only to settle the numerical discrepancy between the parties and shall
have no authority to interpret any term or provision of this Agreement or to
settle any dispute relating to the interpretation of any term or provision of
this Agreement. Notwithstanding anything in this Agreement to the contrary, the
fees and expenses of the independent accounting firm in resolving the dispute
shall be borne equally by the Seller and the Buyer.
11.12 Exclusive Tax Remedy. Notwithstanding anything in this Agreement
to the contrary, absent fraud, the Buyer and the Seller hereby agree that the
sole and exclusive remedy with respect to all claims for Taxes shall be pursuant
to this Article 11, and to the extent there is any conflict with any other
provisions of the Agreement, this Article 11 shall control.
60
11.13 Treatment of Indemnity Payments. To the extent permitted by
applicable law, the parties to this Agreement agree that any indemnity payments
made under Section 10 or Section 11 hereof shall be treated as adjustments to
the Purchase Price.
12. Cooperation; Further Assurances. From and after the Closing, the Seller, on
the one hand, and the Buyer, on the other hand, agree to execute and deliver
such further documents and instruments and to do such other acts and things as
the Buyer or the Seller, as the case may be, may reasonably request in order to
effectuate the transactions contemplated by this Agreement. In the event any
party shall be involved in litigation, threatened litigation or government
inquiries with respect to a matter involving the Company or the Subsidiaries,
the other party shall also make available to such first party, at reasonable
times and subject to the reasonable requirements of its own business, such of
its information relevant to the matters, provided such first party shall
reimburse the providing party for its reasonable costs for employee time
incurred in connection therewith if more than one Business Day is required.
Following the Closing, the parties will cooperate with each other in connection
with tax audits and in the defense of any legal proceedings, consistent with the
other provisions for defense of claims provided in Article 11 hereof to the
extent such cooperation does not cause unreasonable expense, unless such expense
is borne by the requesting party.
13. Termination of Agreement.
13.1 Termination. This Agreement may be terminated and the transactions
contemplated herein may be abandoned (i) by mutual consent of the Seller and the
Buyer; or (ii) by the Seller or the Buyer by either giving written notice to the
other if the Closing Date shall not have occurred on or before June 26, 1998;
provided, however, that the right to terminate this Agreement under this Section
61
13.1 shall not be available to any party whose failure to fulfill any obligation
under this Agreement shall have been the cause of, or shall have resulted in,
the failure of the Closing to occur prior to such date.
13.2 No Liabilities in the Event of Termination. In the event of any
termination of this Agreement as provided in Section 13.1 hereof, this Agreement
shall forthwith become wholly void and of no further force and effect and there
shall be no liability on the part of any of the parties hereto or their
respective Affiliates, officers or directors by reason of the execution hereof
(i) except as set forth in Sections 7.3, 7.4, 7.5, 7.9 and 13.2 and Article 14
hereof, which sections and article shall survive the termination of this
Agreement, and (ii) nothing herein shall relieve any party hereto from liability
for any breach hereof.
14. Miscellaneous.
14.1 Knowledge. As used in this Agreement, the term "knowledge," with
respect to the Seller or the Company, means the actual knowledge, after due
inquiry, of any of the Company's executive officers set forth on Schedule
14.1(I) annexed hereto and, with respect to the Buyer, means the actual
knowledge of any of its executive officers set forth on Schedule 14.1(II)
annexed hereto.
14.2 No Rescission. Anything herein to the contrary notwithstanding,
absent fraud, no breach of any representation, warranty, covenant or agreement
contained herein shall give rise to any right on the part of any party hereto,
after the consummation of the purchase and sale of the Shares contemplated
hereby, to rescind this Agreement or any of the transactions contemplated
hereby.
14.3 Post-Closing Liabilities; Mitigation of Damages. The Seller shall
have no liability under any provision of this Agreement for any liabilities
62
and damages to the extent that such liabilities and damages relate to actions
taken by the Buyer or its Affiliates, including, without limitation, the Company
and the Subsidiaries, after the Closing Date, and in no event shall the Seller
be liable for consequential damages. Each party hereto shall take and shall
cause its Affiliates to take all reasonable steps to mitigate all possible
liabilities and damages upon and after becoming aware of any event which could
reasonably be expected to give rise to such liabilities and damages.
14.4 Entire Agreement. This Agreement (together with the Schedules and
Exhibits annexed hereto) contains, and is intended as, a complete statement of
all of the terms of the arrangements between the parties with respect to the
matters provided for, and supersedes any previous agreements and understandings
between the parties with respect to those matters.
14.5 Governing Law. This Agreement shall be governed by, and construed
and enforced in accordance with the Laws of the State of New York, without
regard to its principles of conflicts of law.
14.6 Headings and Titles. The section headings and article titles of this
Agreement are for reference purposes only and are to be given no effect in the
construction or interpretation of this Agreement.
14.7 Notices. All notices and other communications under this Agreement
shall be in writing and shall be deemed given when delivered personally, mailed
by registered mail, return receipt requested, or sent by recognized overnight
delivery service to the parties at the following addresses (or to such other
address as a party may have specified by notice given to the other party
pursuant to this provision):
(a) If to the Buyer, to:
63
DMAC Acquisition Corp.
c/x XxXxxx De Leeuw & Co., Inc.
000 Xxxx 00xx Xxxxxx
Xxxxxx-xxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx Xx Xxxxx
Telecopier No.: (000) 000-0000
with a copy to:
White & Case, LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx Xxxxxx, Esq.
Telecopier No.: (000) 000-0000
(b) If to the Seller, to:
Heritage Media Corporation
c/o News America Incorporated
1211 Avenue of the Americas
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxx, Esq.
Senior Executive Vice President
and Group General Counsel
The News Corporation Limited
Telecopier No.: (000) 000-0000
with a copy to:
Squadron, Ellenoff, Plesent & Xxxxxxxxx, LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx X. Xxxxxxxx, Esq.
Telecopier No.: (000) 000-0000
14.8 Separability. If at any time any of the covenants or the provisions
contained herein shall be deemed invalid or unenforceable by the Laws of the
jurisdiction wherein it is to be enforced, such covenants or provisions shall be
considered divisible as to such portion and such covenants or provisions shall
become and be immediately amended and reformed to include only such covenants or
provisions as are enforceable by the court or other body having jurisdiction of
this Agreement; and
64
the parties agree that such covenants or provisions, as so amended and reformed,
shall be valid and binding as though the invalid or unenforceable portion had
not been included herein.
14.9 Amendment; Waiver. No provision of this Agreement may be amended or
modified except by an instrument or instruments in writing signed by the parties
hereto. Any party may waive compliance by another with any of the provisions of
this Agreement. No waiver of any provision hereof shall be construed as a waiver
of any other provision. Any waiver must be in writing.
14.10 Publicity. Prior to the Closing Date, the Buyer, on the one hand,
and the Seller and the Company, on the other, shall not issue any press release
or public announcement of any kind concerning the transactions contemplated by
this Agreement without the prior written consent of the other unless such
disclosure is required to be made by law.
14.11 Assignment and Binding Effect. Neither of the parties hereto may
assign any of its rights or delegate any of its duties under this Agreement
without the prior written consent of the others. All of the terms and provisions
of this Agreement shall be binding on, and shall inure to the benefit of, the
respective successors and permitted assigns of the parties
14.12 No Benefit to Others. The representations, warranties, covenants
and agreements contained in this Agreement are for the sole benefit of the
parties hereto and their respective successors and assigns and they shall not be
construed as conferring and are not intended to confer any rights on any other
Persons.
14.13 Counterparts. This Agreement may be executed in two counterparts,
each of which shall be deemed an original, and each party thereto may become a
party hereto by executing a counterpart hereof. This Agreement and any
counterpart so executed shall be deemed to be one and the same instrument.
14.14 Interpretation. Article titles, headings to sections and any table
of contents are inserted for convenience of reference only and are not
intended to be a part of or to affect the meaning or interpretation hereof.
The Schedules and Exhibits referred to herein shall be construed with and as
65
an integral part of this Agreement to the same extent as if they were set forth
verbatim herein. Unless a Schedule annexed hereto is expressly intended to
include items, documents, matters or statements that are "material" or that
would have a "Material Adverse Effect," or words of similar import, the
inclusion of any item, document, matter or statement on any Schedule annexed
hereto shall not be deemed to imply that such item, document, matter or
statement is "material" or will have a "Material Adverse Effect," or words of
similar import. As used herein, except as the context may otherwise require,
"include," "includes" and "including" are deemed to be followed by "without
limitation" whether or not they are in fact followed by such words or words of
like import; "hereof," "herein," "hereunder" and comparable terms refer to the
entirety hereof and not to any particular article, section or other subdivision
hereof or attachment hereto; references to any gender include the other; the
singular includes the plural and vice versa; references to any agreement or
other document are to such agreement or document as amended and supplemented
from time to time; and references to "Article," "Section" or another subdivision
or to an "Exhibit" or "Schedule" are to an article, section or subdivision
hereof or an "Exhibit" or "Schedule" annexed hereto.
14.15 Guaranty by the Fund. The Fund hereby guarantees (i) the due and
punctual payment in full and not merely the collectibility of all sums to be
paid prior to or at the Closing by the Buyer under the terms of this Agreement
in an amount not to exceed $72,000,000 in the aggregate; and (ii) the
performance and observance of all covenants to be observed and performed prior
to or at the Closing by the Buyer pursuant to this Agreement or pursuant to any
other document or instrument delivered by the Buyer or any of the Buyer's
Affiliates in connection herewith. The liability of the Fund is primary, direct
and immediate and not conditional or contingent upon the pursuit by the Seller
of any remedies which it may have against the Buyer with respect to the
obligations arising out of this Agreement. No exercise or non-exercise by the
Seller of any right given it hereunder or any other instrument or document
delivered to the Seller pursuant hereto shall in any way affect the obligation
of the Fund. Without limiting the generality of the foregoing, the Seller shall
not be required to make
66
a demand on the Buyer or any other party or otherwise pursue remedies against
the Buyer before or after enforcing their rights and remedies hereunder against
the Fund. The Fund hereby expressly waives notice of default under the terms of
this Agreement and any other document delivered in connection herewith, demand
for payment, performance of, or enforcement of any terms or provisions of this
Agreement or any other document delivered herewith, and all other demands and
notices otherwise required by law. The obligation of the Fund to make payment in
accordance with the terms of this Section 14.15 shall not be impaired, modified,
changed, released in any manner whatsoever by any impairment, modification,
change, release or limitation from liability of the Buyer or its estates in
bankruptcy or reorganization resulting from the operation of any present or
future provision of the United States bankruptcy laws or similar statute or from
the decision of any court.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
HERITAGE MEDIA CORPORATION
By: /s/ Xxxx X. Xxxxxx
---------------------------------
Name: Xxxx X. Xxxxxx
-------------------------------
Title:
------------------------------
DMAC ACQUISITION CORP.
By: /s/ Xxxxx Xx Xxxxx
---------------------------------
Name: Xxxxx Xx Xxxxx
-------------------------------
Title: President
------------------------------
AGREED TO AND ACKNOWLEDGED
WITH RESPECT TO SECTION 14.15:
XXXXXX DE LEEUW & CO. IV, L.P.
By: /s/ Xxxxx Xx Xxxxx
----------------------------
Name: Xxxxx Xx Xxxxx
--------------------------
Title: Managing Director
-------------------------
68
