CONTRIBUTION AND SHAREHOLDERS AGREEMENT
This Contribution and Shareholders Agreement (the "Agreement") is executed
as of this 16th day of December, 1996, and is by and between VALLEY RECORD
DISTRIBUTORS, INC., a California corporation ("Valley"), STEREOPHILE, INC., a
New Mexico corporation ("Stereophile"), and, for the sole purpose of Sections
4.9 and 4.10 hereof, Xxxxxx Xxxxx, the principal shareholder of Valley
("Shareholder").
RECITALS:
A. Stereophile is a publisher of magazines and periodicals, among which are
the Schwann Guides to recordings. Stereophile wishes to sell the rights to
publish all of the Schwann Guides except the CDRD Publications (the Schwann
Guides other than the CDRD Publications are referred to herein as the
"Publications"). The Publications include OPUS, ARTIST and SPECTRUM. The CDRD
Publications consist of two separate publications, COMPACT DISC REVIEW DIGEST
and BEST RATED CDS, which will continue to be published by Stereophile.
SPECTRUM shall be discontinued. Stereophile also owns intangible and tangible
assets which it uses in the publication of the Publications, as set forth on
EXHIBIT A and which are referred to herein as the "Publication Assets." The
rights to publish the Publications and to own and use the Publication Assets
shall hereafter sometimes be referred to as the "Business." The Business shall
NOT refer to any other aspect of Stereophile's business, including the
publication of the CDRD Publications, STEREOPHILE magazine or STEREOPHILE GUIDE
TO HOME THEATER.
B. Valley is in the business of distributing compact discs ("cds") and
tapes nationwide. Valley wishes to acquire the rights to publish the
Publications and to acquire the Publication Assets.
C. Stereophile and Valley have entered into this Agreement to form a new
corporation ("NewCo"), which will be owned by them, to cause the Publications
and the Publication Assets to be transferred to NewCo, to cause certain payments
to be made to Stereophile, to provide for the possible merger of NewCo into
Valley or its subsidiary, and to govern the relations between them.
D. The capital stock of Valley consists of a single class of common stock.
Shareholder owns more than fifty percent (50%) of the issued and outstanding
capital stock of Valley, and is executing this Agreement for the sole purpose of
providing certain agreements in the event he proposes to take certain specified
action with respect to some or all of his stock in Valley. The promises of
Shareholder in this regard are a material inducement to Stereophile to enter
into this Agreement.
COVENANTS:
In consideration of the recitals and mutual covenants contained herein, the
parties agree:
CONTRIBUTION AND SHAREHOLDERS AGREEMENT
VALLEY RECORD DISTRIBUTORS, INC. -- STEREOPHILE, INC.
1. FORMATION OF NEWCO. Prior to the Closing Date, the parties will cause
NewCo to be formed as a Delaware corporation with a board of directors to be
named by Valley. NewCo shall have authorized a single class of voting common
stock. The exact name for NewCo shall be "Schwann Acquisition Corp." At the
Closing, the parties will make capital contributions in return for the stock of
NewCo as follows:
1.1 TRANSFER OF ASSETS. Stereophile will transfer to NewCo the
Publication Assets and the rights to publish the Publications. Stereophile will
receive twenty percent of the stock of NewCo (the "Stereophile Holding"), the
sum of $150,000 cash, and a promissory note of NewCo in the amount of $100,000
payable in accordance with the terms and in the form set forth in EXHIBIT B-1
(the "Note").
1.2 PAYMENT OF CASH. Valley will transfer to NewCo not less than
$150,000 in cash, will guarantee the Note by a written Guaranty in the form
attached as EXHIBIT B-2, will transfer to NewCo the cash to pay such note at
maturity, and will provide sufficient working capital to NewCo to permit it to
engage in the routine operations of the Business for six months following the
Closing. Valley will receive eighty percent of the stock of NewCo (the "Valley
Holding").
2. ACTIVITIES OF NEWCO. Following the Closing, NewCo shall operate the
business of publishing the Publications. In addition, NewCo will take the
following actions.
2.1 PAYMENT TO STEREOPHILE. NewCo at Closing shall pay to Stereophile
$150,000 cash and shall execute and deliver the Note to Stereophile, as
contemplated in Section 1.1.
2.2 ASSUMPTION OF LIABILITIES. NewCo will assume all deferred
subscription liabilities for the Publications. NewCo will assume and perform the
obligations of Stereophile under the leases, advertising contracts and other
contracts included in the Publication Assets (including those described in
Section 6.6) other than prepaid ad liabilities. Except as expressly set forth in
this Agreement, neither NewCo nor Valley shall assume, pay or be obligated for
any other liabilities or obligations of Stereophile.
2.3 PREPAID ADVERTISING. NewCo will assume and perform all prepaid ad
liabilities for the Publications, but will deduct the amounts of all such
liabilities actually satisfied by NewCo from the principal of the Note, with
such principal reduction effective as of the Closing.
2.4 LICENSE OF TRADEMARK. NewCo shall license to Stereophile without
further cost the perpetual right to use the trademark SCHWANN on and in
connection with the printed magazine versions of the COMPACT DISC REVIEW DIGEST
and BEST RATED CDS. The license shall not extend to and Stereophile shall not
be entitled to use the xxxx in connection with the
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CONTRIBUTION AND SHAREHOLDERS AGREEMENT
VALLEY RECORD DISTRIBUTORS, INC. -- STEREOPHILE, INC.
promotion of computer on-line publications. If Stereophile shall sell all or a
controlling interest in either of the CDRD Publications or the right to publish
either of the CDRD Publications (other than in connection with a sale of all or
substantially all of Stereophile's stock or assets), this license to use the
SCHWANN trademark with respect to the publication that was sold shall
terminate.
2.5 SUBSCRIPTION FULFILLMENT. NewCo shall provide without cost to
Stereophile up to 500 one-year subscriptions to OPUS for use by Stereophile in
fulfilling subscription obligations to subscribers to SPECTRUM. Stereophile may
purchase additional subscriptions to OPUS for the purpose of fulfilling
subscription obligations to subscribers to SPECTRUM at the price of $28.00 per
year.
3. ACTIVITIES AND OBLIGATIONS OF STEREOPHILE. Following the Closing,
Stereophile may continue to conduct all of its businesses not transferred to
NewCo, including the publication OF COMPACT DISC REVIEW DIGEST.
3.1 RETENTION OF NAMES. Stereophile shall retain all rights to the
names COMPACT DISC REVIEW DIGEST, CDRD, and BEST RATED CDS (the "CDRD Marks").
Stereophile may continue the publication of either or both COMPACT DISC REVIEW
DIGEST and BEST RATED CDS, but need not do so. If at any time Stereophile
discontinues such publication, it shall be responsible for all costs of
discontinuing publication, including deferred subscription liabilities.
3.2 QUALITY CONTROL. Stereophile shall continue to maintain the
same or better quality of editorial content and production standards for
COMPACT DISC REVIEW DIGEST as long as the trademark SCHWANN continues to be
used on such publications. If such standards are not maintained, NewCo may
give written notice (specifying the particular failure to maintain quality),
and if standards are not restored within ninety (90) days after such notice
NewCo may terminate the right to use the SCHWANN xxxx in connection with
COMPACT DISC REVIEW DIGEST.
3.3 SALE OF PUBLICATION. If Stereophile desires to sell either
COMPACT DISC REVIEW DIGEST or BEST RATED CDS (or an interest therein) to any
person, Stereophile shall give Valley a right of first refusal on such sale.
Valley will have thirty (30) days after the giving of written notice by
Stereophile to agree to match any offer and an additional fifteen (15) days to
close. The right of first refusal will not apply to a sale of all, or
substantially all, of the stock or assets of Stereophile. If Valley elects not
to exercise its rights pursuant to this Section, Stereophile may complete the
sale which was the subject of the notification but only at the price, on the
terms and to the buyer specified in the notification. Upon sale of either
COMPACT DISC REVIEW DIGEST or BEST RATED CDS to any person by Stereophile, the
license granted in this Agreement to Stereophile by Valley to use the SCHWANN
trademark in connection with the publication which was sold shall cease, and the
buyer shall not be entitled to nor have the right to use the SCHWANN trademark
for any purpose.
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CONTRIBUTION AND SHAREHOLDERS AGREEMENT
VALLEY RECORD DISTRIBUTORS, INC. -- STEREOPHILE, INC.
3.4 DISCONTINUANCE OF PUBLICATION. Stereophile shall discontinue
publication of SPECTRUM as of the Closing Date. Stereophile shall pay all costs
of discontinuing such publication, including deferred subscription liabilities.
Stereophile may use up to 500 one-year subscriptions to OPUS as provided by
NewCo in fulfillment of those subscription liabilities, so long as full
information necessary to start such subscriptions is provided to NewCo within
180 days of Closing. Notwithstanding such discontinuance, the rights to publish
SPECTRUM are being transferred at Closing to NewCo.
3.5 ACCOUNTS PAYABLE AND RECEIVABLE. Stereophile shall remain
obligated for and shall pay all accounts payable incurred in connection with the
publication of the Publications through the Closing. Stereophile shall also
remain obligated for and shall pay all wages, benefits, vacation, sick leave
and other benefit accruals through the date of Closing for all employees who
cease being employees of Stereophile, whether or not they become employees of
NewCo. Stereophile shall be entitled to collect and retain all accounts
receivable or other rights to receive money or property earned or accrued prior
to Closing.
4. REORGANIZATION AND MERGER; STOCK RIGHTS. For so long as Stereophile owns
stock of NewCo, NewCo shall not take any action and Valley shall not permit
NewCo to take any action which would result in the Stereophile Holding becoming
less than twenty percent of the total stock of NewCo outstanding.
4.1 THE MERGER. NewCo may be merged into Valley or a wholly owned
subsidiary of Valley in a transaction in which the Stereophile Holding will be
converted into common stock of Valley (such a transaction, undertaken in
accordance with the provisions of this Agreement, shall hereafter be referred to
as the "Merger").
4.2 TIME OF MERGER. Either Stereophile or Valley may require the
Merger to occur at any time after six months after Closing, or any time after
March 31, 1997, if Valley has completed an initial public offering of its
shares.
4.3 SHARES TO BE RECEIVED IN MERGER. If the Merger occurs,
Stereophile shall receive for the Stereophile Holdings 7,230 shares of Valley
common stock as adjusted for stock splits, reverse stock splits, stock
dividends or other reorganizations causing the number of shares represented
by an existing share to change, considering all securities convertible into
common stock as if they had been fully converted (the "Merger Shares").
4.4 REGISTRATION OF STOCK. If registration rights are granted to any
person with respect to capital stock of Valley, Stereophile shall receive
registration rights for the Merger Shares on terms no less favorable than those
granted to any other person, except that Stereophile shall not have the right to
initiate a demand registration.
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CONTRIBUTION AND SHAREHOLDERS AGREEMENT
VALLEY RECORD DISTRIBUTORS, INC. -- STEREOPHILE, INC.
4.5 REPURCHASE OPTION. At any time after the third anniversary of the
Closing (provided that by the time of the request for repurchase the Merger has
occurred but no initial public offering by Valley has been completed),
Stereophile may request Valley to repurchase any portion of or all Merger Shares
for the then fair market value thereof without discount for being a minority
interest. If Valley fails to repurchase such Merger Shares within ninety (90)
days of the request, Valley shall issue to Stereophile additional stock of
Valley equal to the number of Merger Shares held by Stereophile. If such
additional shares are issued to Stereophile, Stereophile will not thereafter be
entitled to make further repurchase demands under this Section 4.5. At any time
after the third anniversary of the Closing if no initial public offering by
Valley has been completed, Valley may repurchase the Merger Shares from
Stereophile for the then fair market value thereof without discount for being a
minority interest. If Valley completes an initial public offering within 180
days after the purchase by which Valley shares are offered at a price per share
higher than Stereophile received for the Merger Shares, Valley shall, on the
closing date of the initial public offering, pay Stereophile the difference
between the amount received by Stereophile and the amount Stereophile would have
received if it had sold the Merger Shares in the public offering.
4.6 ANTI-DILUTION. If, prior to the Merger, Valley sells or issues
any of its stock to an affiliate of Valley for a price less than such stock's
fair market value (other than as part of an employee stock option plan, an ESOP
contribution consistent with traditional sales to the ESOP in the past, or
pursuant to stock rights existing at the Closing Date), the amount of stock to
be issued to Stereophile as a result of the Merger shall be increased in
accordance with the Institutional Weighted Average Formula set forth in EXHIBIT
C. If Valley stock is issued for other than cash consideration, the sale price
for such shares will be the value of the assets received as determined in the
reasonable judgment of Valley's board of directors. This obligation shall
terminate upon the effective date of the Merger.
4.7 RESTRICTION ON STEREOPHILE SALES. Stereophile shall not sell,
pledge or transfer or offer to sell, pledge or transfer shares of NewCo or
Valley for a period of 18 months following the Closing Date except pursuant to
registration of the shares as provided in Section 4.4. Thereafter, Stereophile
shall not transfer, pledge, sell or otherwise dispose of any of the shares of
NewCo, or of Valley owned by it unless such shares are first offered in writing
to Valley. Such offer shall be at a price and under terms offered by an
unaffiliated third party, which offer shall be attached to the offer to Valley.
Valley shall have not less than thirty (30) days to accept or decline the offer,
and failure of Valley to respond within thirty (30) days shall constitute
declination. Stereophile may then complete the sale which was the subject of
the notification but only at the price, on the terms, and to the buyer specified
in the notification. Any stock certificates issued to Stereophile which are
subject to this provision shall have the restrictions stated thereon with
reference to this Agreement as well as legends required by applicable federal
and state securities laws. The provisions of this Section 4.7 with respect to
stock of Valley shall terminate upon the completion of an initial public
offering by Valley and shall not apply to any shares offered to Valley pursuant
to Section 4.5. This right of first refusal
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CONTRIBUTION AND SHAREHOLDERS AGREEMENT
VALLEY RECORD DISTRIBUTORS, INC. -- STEREOPHILE, INC.
will terminate if Valley declines to purchase any Merger Shares pursuant to a
request by Stereophile made pursuant to Section 4.5.
4.8 RESTRICTION ON VALLEY SALES. Valley shall not transfer, pledge,
sell or otherwise dispose of any of the shares of NewCo owned by it for a period
of six months following the Closing Date. Thereafter, if Valley shall determine
to sell the shares owned by it in NewCo to any other person, it shall notify
Stereophile of its intention. Valley shall not complete any such sale until
after 30 days following notice to Stereophile. During the 30 day period,
Stereophile may require the Merger to take place. If Stereophile does not make a
demand for the Merger, Valley may complete the sale which was the subject of
the notification but only at the price, on the terms, and to the buyer specified
in the notification. Any stock certificates issued to Valley which are subject
to this provision shall have the restrictions stated thereon with reference to
this Agreement. The provisions of this Section 4.8 shall terminate upon the
completion of the Merger.
4.9 COME-ALONG. If at any time prior to the completion of an initial
public offering by Valley, Shareholder agrees to sell more than fifty percent
(50%) of the total outstanding shares of the capital stock of Valley (whether
owned beneficially or of record) to any unaffiliated purchaser, Shareholder
shall notify Stereophile at least thirty (30) days prior to the proposed sale.
Shareholder shall include in the notice the price to be paid, the terms of the
sale, and the percentage of the capital stock beneficially owned by him and all
persons affiliated with him (the "Percentage") Upon request by Stereophile
within ten (10) days of receipt of the notice, Shareholder will cause the
purchase by the unaffiliated purchaser of the same percentage of Valley shares
owned by Stereophile at the same price and on the same terms (unless the Merger
has not occurred, in which case Stereophile may demand that the Merger occur
before the sale to the unaffiliated party is completed). If the proposed
purchaser is unwilling to purchase the additional shares of Stereophile,
Shareholder will cause the necessary number of shares owned by Stereophile to be
substituted for shares of the Shareholder to be sold or Shareholder will himself
buy such shares from Stereophile at the price and terms offered by the proposed
purchaser. This obligation shall terminate upon the completion of an initial
public offering by Valley.
4.10 BRING-ALONG. If Shareholder or any person affiliated with him
sells more than fifty percent (50%) of the total outstanding shares of capital
stock of Valley to an unaffiliated purchaser at any time prior to the completion
of an initial public offering by Valley, Stereophile will, upon request of
Shareholder, sell its shares of Valley to the purchaser at the same price and on
the same conditions as Shareholder obtains for his stock. This obligation
shall terminate upon the completion of an initial public offering by Valley.
4.11 CONFIDENTIALITY. Stereophile shall maintain the
confidentiality of confidential or proprietary business information
concerning Valley which is obtained by Stereophile as a result of its being a
stockholder of Valley. Prior to Closing, Valley shall
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CONTRIBUTION AND SHAREHOLDERS AGREEMENT
VALLEY RECORD DISTRIBUTORS, INC. -- STEREOPHILE, INC.
provide Stereophile with a written statement of reasonable policy as to
confidential and proprietary information. Such policy requirements shall be
imposed on all future non-management shareholders of Valley. Valley may amend
such policy from time to time as it applies to all non-management shareholders.
This obligation shall terminate upon the completion of an initial public
offering by Valley.
5. CLOSING DATE. The closing of the transactions contemplated by this
Agreement to occur on the Closing Date shall occur at the offices of Xxxx
Xxxxxxxxx in Phoenix, Arizona, on December 16, 1996, or at such other time or
place as may be agreed on by the parties. Each party shall pay its own costs and
expenses incurred in the transactions contemplated by this Agreement.
6. REPRESENTATIONS AND WARRANTIES OF STEREOPHILE. To induce Valley to
enter into this Agreement and to perform the transactions contemplated
hereunder, Stereophile represents as follows (unless otherwise stated in the
following representations and warranties, all such representations and
warranties are and shall be true and correct as of the date of Closing as though
made on the date of Closing):
6.1 ORGANIZATION. Stereophile is a corporation duly organized,
validly existing and in good standing under the laws of the state of New Mexico
and has all requisite corporate power and authority to own, lease and operate
its properties, including the Publication Assets, and to carry on its business
as now being conducted, and is duly qualified and in good standing to do
business in each jurisdiction in which the nature of its business or the
ownership or the leasing of its properties makes such qualification necessary,
or if not so duly qualified, its failure to be so qualified will not have a
material adverse effect on the Publication Assets or the Business.
6.2 AUTHORITY; CONSENTS AND APPROVALS; NO VIOLATIONS. Stereophile has
the full corporate power and authority and legal right to execute and deliver
this Agreement and all other agreements, instruments or other documents executed
by Stereophile in connection herewith (the "Stereophile Documents"), to transfer
the Assets pursuant to this Agreement, and otherwise to perform its obligations
hereunder and under the other Stereophile Documents. The execution and delivery
of this Agreement and the other Stereophile Documents has been duly authorized
by Stereophile's Board of Directors, and no other proceeding or action on the
part of Stereophile is necessary to authorize this Agreement, the sale of the
Assets hereunder or the other transactions contemplated hereunder. This
Agreement and each of the other Stereophile Documents has been (or upon Closing
will be) validly executed and delivered by Stereophile and constitute valid
and binding obligations of Stereophile, except to the extent that the
binding nature thereof may be subject to the limitations which might result
from bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to creditors' rights now or thereafter in effect, and except for the
limitations on the remedy of specific performance and other forms of
equitable relief. No permit, authorization, consent or approval of, or
declaration or filing
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CONTRIBUTION AND SHAREHOLDERS AGREEMENT
VALLEY RECORD DISTRIBUTORS, INC. -- STEREOPHILE, INC.
with any public body, agency, court or authority is necessary for the lawful,
proper and valid consummation by Stereophile of the other transactions
contemplated hereunder. The execution and delivery of this Agreement and the
other Stereophile Documents, the sale of the Publication Assets, and the
consummation of the other transactions and matters contemplated hereunder and
thereunder do not and will not violate any provision of Stereophile's Articles
of Incorporation or Bylaws, any statute, rule or regulation, any order or decree
of any public body, agency, court or authority by which Stereophile or any of
its properties, is bound, or violate, conflict with, result in a breach of or
constitute (with or without due notice or lapse of time) a default under any
agreement, license, contract, franchise, permit, indenture, lease, or other
instrument to which Stereophile is a party, or by which it or any of the
Publication Assets is bound.
6.3 FINANCIAL INFORMATION. Stereophile has previously furnished to
Valley financial information relating to the Publications and to the Business.
All such financial information is true and correct in all material respects.
6.4 ASSETS. Except as set forth in SCHEDULE 6.4, to the knowledge and
belief of Stereophile, the tangible assets included in the Publication Assets
are in good working order and repair. Except for assets excluded from the
Publication Assets in EXHIBIT A, the Publication Assets include all assets used
by Stereophile in the Business.
6.5 TAX MATTERS. Stereophile has filed all tax returns and paid all
taxes which are required by any federal, state or local taxing authority
thorough the Closing Date which would affect the Publication Assets or which
might become the liability of NewCo or Valley as successors to the Publications
or the Business.
6.6 CONTRACTS.
a. To the knowledge and belief of Stereophile after due
investigation and inquiry, SCHEDULE 6.6 hereto contains a true and complete
listing of the following as they relate to Stereophile or the Publication Assets
(collectively, the "Contracts"):
(1) a copy of Stereophile's current standard form of
advertising agreement and any prior standard form of advertising agreement used
in connection with the Publications and still in effect for any account;
(2) any advertising contract not on a standard form
disclosed pursuant to Section 6.6(a)(1) or not at a rate disclosed on the
Stereophile's current rate card disclosed pursuant to Section 6.6(a)(3), other
than contracts which individually do not, and would not if entered into at the
current card rate require payments totaling more than $1,500; and any agreement,
written or oral, to exchange or provide advertising in the Publications for
consideration other than cash;
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CONTRIBUTION AND SHAREHOLDERS AGREEMENT
VALLEY RECORD DISTRIBUTORS, INC -- STEREOPHILE, INC.
(3) the current advertising rate card for the Publications
and all advertising rate cards used in connection with the Publications since
January 1, 1995;
(4) except for advertising contracts, all contracts,
agreements or other commitments to which Stereophile is a party or by which it
or its property is bound which involves the Business or which affect or may
materially affect in the future any of the Publication Assets;
(5) all leases, options to purchase, or agreements to lease
or purchase any property which is part of the Publication Assets;
(6) all property which is part of the Publication Assets
[other than property held under a lease disclosed in SCHEDULE 6.6 pursuant to
Section 6.6(a)(5)] used by Stereophile but not owned by Stereophile;
(7) all permits (including second class mailing permits),
licenses, franchises, authorizations, approvals and other certificates of
authority held by Stereophile to the extent the same is required or useful for
the conduct of the Business;
(8) all patents, registered or unregistered trademarks,
trade names, registered copyrights and internet domain names, and all pending
applications which are part of the Publication Assets or used in the Business;
(9) all written employment, consulting or independent
contractor agreements and a summary of all such agreements that are oral (other
than oral agreements containing no terms other than employment at will) with
persons involved with publishing the Publications on behalf of Stereophile;
(10) any other agreement or instrument to which Stereophile
is a party and which is material to the continued publication of the
Publications, or with respect to which a default thereunder would materially or
adversely affect the business of publishing the Publications, including, but not
limited to, any contract for printing or production services; and
(11) a list of all deferred subscription liabilities to each
of the Publications, which may be appended to SCHEDULE 6.6 within 15 days after
Closing when all such liabilities are determined.
b. Except as may be disclosed in SCHEDULE 6.6, Stereophile is
not in default under any of the Contracts which is material to the Business.
6.7 AGREEMENTS WITH RESPECT TO ASSETS. Other than this Agreement,
there are no existing options, rights, contracts, commitments,
understandings, arrangements, or
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CONTRIBUTION AND SHAREHOLDERS AGREEMENT
VALLEY RECORD DISTRIBUTORS, INC., -- STEREOPHILE INC.
executory agreements of any nature to which Stereophile is a party or by which
it is bound, relating to the sale, delivery, lease (as lessor) or transfer of
any of the Publication Assets, except in the ordinary course of Stereophile's
business.
6.8 BROKER. No agent, broker or other person acting pursuant to
authority of Stereophile is entitled to any commission or finder's fee in
connection with this Agreement or the transactions contemplated hereunder.
6.9 EMPLOYEE MATTERS. SCHEDULE 6.9 contains the name, residence
address, social security number and current rate of compensation of
Stereophile's present employees who are engaged primarily in publication of
the Publications and who Stereophile will no longer employ following the
Closing Date and the capacity in which each person is employed and a job
description for each such person. Except as disclosed in SCHEDULE 6.9: (a) to
Stereophile's knowledge, no employee is represented by any union or other
labor organization; (b) there is no unfair labor practice charge pending or,
to Stereophile's knowledge, threatened against Stereophile relating to any of
Stereophile's employees; (c) there is no labor strike, dispute, slowdown or
stoppage relating to any of its employees actually pending or, to
Stereophile's knowledge, threatened against or involving Stereophile; (d) no
labor grievance relating to any of its employees is pending against
Stereophile; and (e) Stereophile has not in the past three years experienced
any work stoppage or organizational activity relating to its employees. The
termination of any employee as a result of the transactions contemplated by
this Agreement will not breach or result in a claim or cause of action
arising under any written or oral employment agreement, other than the
obligation to pay all wages and benefits accrued through the date of Closing,
all of which shall be duly and timely paid by Stereophile.
6.10 INFRINGEMENT. Stereophile has not in connection with the
Publications infringed, and is not infringing on any trade name, trademark,
service xxxx, patent, copyright or other proprietary right belonging to any
other person, firm or corporation.
6.11 LEGAL COMPLIANCE. There is no pending or, to the knowledge of
Stereophile, threatened litigation and administrative or judicial proceedings of
any nature involving the Publication Assets. There are no other facts or
circumstances which are likely to result in, and there is no basis for, any
future civil, administrative or criminal claim or proceeding against the
Publication Assets. To the knowledge of Stereophile, Stereophile has operated,
is presently operating, and will continue to operate the business of publishing
the Publications through the Closing in material compliance with all conditions
and requirements of all applicable federal, state and local laws, statutes,
ordinances, rules, regulations, permits, licenses, certificates and other
authorizations. NewCo will be required to obtain business and tax permits to
operate the Business.
6.12 OWNERSHIP OF ASSETS. Except as set forth in SCHEDULE 6.12,
Stereophile has good and marketable title to, or a valid leasehold interest in,
all of the Publication Assets,
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CONTRIBUTION AND SHAREHOLDERS AGREEMENT
VALLEY RECORD DISTRIBUTORS, INC. -- STEREOPHILE INC.
and all of the Publication Assets are owned or held free and clear of all
title defects or objections, mortgages, claims, liens, pledges, charges,
security interests, co-ownership interests, options to purchase or other
encumbrances of any kind or character, except liens for current taxes,
assessments and governmental charges not yet due and payable. Stereophile
shall cause all objections, mortgages, claims, liens, pledges, charges,
options or other encumbrances against or upon the Publication Assets to be
released and all other title defects to be cured. With respect to the
business of publishing the Publications, Stereophile shall be responsible for
payroll and withholding and paying as and when due all taxes not due and
payable as of the date of Closing, but which were incurred or accrued prior
to or through the date of Closing.
6.13 NO UNTRUE STATEMENT. No representation or warranty by Stereophile
in this Agreement or any instrument, certificate, exhibit, schedule or list
attached hereto or furnished or to be furnished to Valley pursuant to the terms
of this Agreement, contains or will contain any untrue statement of a material
fact. In the event any such representation or warranty is discovered at any
time, before or after the Closing, to contain any material misstatement,
Stereophile shall advise Valley in writing immediately of such misstatement.
Unless Valley is advised of such misstatement in writing prior to Closing, by
advising Valley of any such misstatement, Stereophile shall not be relieved of
any liability which may arise under this Agreement for breach of any
representation or warranty. Stereophile acknowledges that Valley is entering
into this Agreement in reliance upon its representations, warranties and
covenants made in this Agreement. All representations, warranties and covenants
of Stereophile contained herein shall survive the Closing and the sale of the
Assets to NewCo.
7. REPRESENTATIONS AND WARRANTIES OF VALLEY. To induce Stereophile to enter
into this Agreement and to consummate the transactions contemplated hereunder,
Valley represents and warrants to, and covenants with, Stereophile as follows
(unless otherwise stated in the following representations and warranties, all
such representations and warranties shall be true and correct as of the date
hereof and as of the Closing and shall survive the Closing).
7.1 ORGANIZATION. Valley is a corporation duly organized, validly
existing and in good standing under the laws of the State of California and has
all requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as now being conducted, and is duly
qualified and in good standing to do business in each jurisdiction in which the
nature of its business or the ownership or leasing of its properties makes such
qualification necessary, or if not so duly qualified, its failure to be so
qualified will not have a material adverse effect on its business, operations or
financial condition.
7.2 AUTHORITY; CONSENTS AND APPROVALS; NO VIOLATION. Valley has the
full corporate power and authority to execute and deliver this Agreement and to
perform its obligation and consummate the transactions contemplated hereunder.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby by Valley have been duly authorized by the
Board of Directors of Valley, and no other corporate proceeding
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CONTRIBUTION AND SHAREHOLDERS AGREEMENT
VALLEY RECORD DISTRIBUTORS, INC. -- STEREOPHILE INC.
on the part of Valley is necessary to authorize such agreements or such
transactions. This Agreement has been duly and validly executed and delivered by
Valley and constitutes a valid and binding obligation of Valley except to the
extent that the binding nature thereof may be subject to the limitations which
might result from bankruptcy, insolvency, reorganization, moratorium or other
similar laws relating to creditors' rights now or thereafter in effect, and
except for the limitations on the remedy of specific performance and other forms
of equitable relief. No permit, authorization, consent or approval of any public
body or authority within the United States is necessary for the consummation by
Valley of the transactions contemplated hereunder. The execution and delivery of
this Agreement, and the consummation of the transactions contemplated
hereunder, will not violate any provision of Valley's Articles of Incorporation
or Bylaws, any statute, rule or regulation, any order or decree of any public
body or authority by which Valley is bound or conflict with, result in a breach
of or constitute (with or without due notice or lapse of time) a default under
any license, franchise, permit, indenture, agreement or other instrument to
which Valley is a party, or by which it or any of its properties is bound, and
which is material to the business of Valley taken as a whole.
7.3 BROKER. No agent, broker or other person acting pursuant to
authority of Valley is entitled to any commission or finder's fee in connection
with the transactions contemplated by this Agreement.
7.4 FINANCIAL AND OTHER INFORMATION. All financial and other
information concerning Valley disclosed by Valley to Stereophile is, and at
Closing will be, true and correct in all material respects.
7.5 STOCK OF VALLEY. As at the date hereof, and as at the date of
Closing, Valley's capital shares consist solely of, and will consist solely of,
612,517 shares of common stock presently issued and outstanding and 103,214
shares of common stock which are subject to issuance pursuant to options
presently outstanding. No other class of shares is authorized by Valley's
Articles of Incorporation. Valley has reserved 7,230 shares of its common stock
for issuance in connection with the Merger, should the Merger occur. There are
no other outstanding options, warrants or rights to purchase Valley's common
stock, obligations of Valley to issue its common stock, or shares of common
stock reserved for issuance, other than obligations to reserve for and issue to
Stereophile.
7.6 ARTICLES AND BYLAWS. Valley has delivered to Stereophile true and
correct copies of its current Articles of Incorporation and Bylaws, and all
amendments thereto, or restatements thereof.
8. COVENANTS OF STEREOPHILE. Stereophile covenants and agrees with Valley
as follows:
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CONTRIBUTION AND SHAREHOLDERS AGREEMENT
VALLEY RECORD DISTRIBUTORS, INC. -- STEREOPHILE, INC.
8.1 ACCESS TO PROPERTIES AND RECORDS. Stereophile shall permit Valley
and its representatives (at Valley's sole cost and expense), from and after the
date of execution of this Agreement, reasonable access during normal business
hours to all of the properties, books, contracts, documents and records of
Stereophile relating to the Business, the opportunity to inspect, copy and
audit such books and records and to otherwise make reasonable investigation of
the Business and the Publication Assets, and to furnish to Valley and its
representatives any additional available financial statements of, and all
reasonable information with respect to the Business that Valley or its
representatives may request.
8.2 CONDUCT OF BUSINESS PENDING THE CLOSING. Until the Closing,
Stereophile will preserve the Business organization intact and will use
reasonable efforts to retain all present key employees. Except as otherwise
permitted by this Agreement or as consented to by Valley in writing, until the
Closing:
a. the Business will be conducted only in the ordinary course
which, without limitation, shall include compliance with all applicable laws,
regulations and administrative orders of any state or municipality the
noncompliance with which could, individually or in the aggregate, have a
material or adverse effect upon the Business, and the maintenance in force of
all insurance policies, fidelity bonds and performance bonds currently in force
and effect;
b. consistent with conducting the Business in accordance with
good business judgment, Stereophile shall use its best efforts to keep available
to the Business the goodwill of suppliers, advertisers, customers and others
having business relations with the Business;
c. Stereophile shall refrain from taking any action to dissuade
any of the employees, agents, advertisers, customers, clients, representatives,
distributors, creditors and suppliers of the Business from remaining associated
with, or of inducing any of the foregoing persons to terminate an association
with, NewCo or the Business; and
d. except as otherwise provided in this Agreement, Stereophile
shall not:
(1) enter into any contract or commitment, incur any
liability, absolute or contingent, waive any right or enter into any other
transaction which would materially or adversely affect the Publication Assets or
the Business;
(2) commit to sell or lease or agree to sell or lease or
otherwise dispose of any of the property included in the Publication Assets,
except for sales of inventory or other tangible personal property in the
ordinary course of the conduct of the Business;
(3) mortgage or pledge any of the Publication Assets;
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CONTRIBUTION AND SHAREHOLDERS AGREEMENT
VALLEY RECORD DISTRIBUTORS, INC. -- STEREOPHILE, INC.
(4) take or omit to take any action which, if taken or
omitted prior to the date hereof, would constitute a breach of Stereophile's
representations or warranties or cause any of them to be untrue or misleading;
and
(5) make any commitments to take any of the actions
specified in this Section.
8.3 ASSURANCES OF CONTINUITY. Until closing Stereophile shall use
its best efforts to introduce representatives of Valley to such of the Business'
advertisers, customers, lessors, suppliers and other persons with whom
Stereophile does business as may be reasonably requested by Valley, and assist
the representatives of Valley to obtain assurances from such persons that they
will continue to conduct business with Valley, as such business was conducted
prior to the Closing.
8.4 PAYMENT OF LIABILITIES. After Closing, Stereophile shall pay, or
cause to be paid, all liabilities and obligations of Stereophile with respect to
the Business which accrued prior to the Closing, as or before the same become
due other than those to be assumed or paid by NewCo.
8.5 DOCUMENTS TO BE DELIVERED. Stereophile shall deliver or cause to
be delivered to Valley at or prior to the Closing:
a. A good standing certificate with respect to Stereophile from
the Secretary of State of the State of New Mexico dated within ten (10) days
prior to Closing;
b. Such evidence that Stereophile has taken all necessary actions
to approve and authorize this Agreement and the transactions contemplated
hereunder as Valley may reasonably request;
c. An assignment and xxxx of sale and a trademark assignment in
the form of Exhibits D and E hereto, respectively, for the sale, assignment,
conveyance and transfer of the Publication Assets to NewCo;
d. Duly executed and acknowledged (if required) originals of
other agreements which are to be executed or delivered at or prior to the
Closing by Stereophile and are not otherwise specifically mentioned in this
Section; and
e. Such evidence of satisfaction of all conditions to Closing as
Valley may reasonably request.
8.6 PAYMENT OF TAX LIABILITIES. Stereophile shall pay when due all AD
VALOREM or property taxes on the Publication Assets pro rata for 1996 through
the date of
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CONTRIBUTION AND SHAREHOLDERS AGREEMENT
VALLEY RECORD DISTRIBUTORS, INC. -- STEREOPHILE, INC.
Closing, all sales, use or transaction privilege taxes payable with respect to
the Business through Closing including all such taxes, if any, assessed in
connection with this transaction, all payroll taxes and withholdings on
compensation of persons employed in the Business accrued through Closing and all
other taxes with respect to the Business or operation, or the Publication
Assets, incurred or accrued through the Closing, and upon request provide Valley
with a copy of the returns or filings with respect thereto.
8.7 NO OTHER NEGOTIATIONS. Prior to the Closing, unless and until
such time as the obligations of Stereophile to proceed with the transactions
contemplated hereunder shall be terminated, Stereophile agrees that it will
not (a) contact, initiate, or engage in any discussion with any person or
entity (whether or not such discussions were as the result of solicitation,
contact or initiation by such other person or entity), other than the parties
hereto and their agents and representatives, which relate to the purchase or
acquisition of the Publication Assets or any part thereof, or the Business or
any interest therein, (b) discuss any of the proposed terms of this Agreement
with any person or entity other than the parties hereto and their agents and
representatives.
8.8 GOOD FAITH OBLIGATIONS. Stereophile agrees to proceed diligently
and in good faith to consummate the transactions contemplated by this Agreement,
and otherwise to cause the Closing to occur, and it will use all reasonable
efforts to take or cause to be taken all actions, and do or cause to be done
all things, necessary, proper or advisable to consummate the transactions
contemplated by this Agreement; PROVIDED, HOWEVER, that Stereophile shall not
be obligated to waive any conditions to its obligation to close set forth in
Section 11 of this Agreement.
9. COVENANTS OF VALLEY. Valley covenants and agrees with Stereophile as
follows:
9.1 DOCUMENTS TO BE DELIVERED AT CLOSING. At or prior to the Closing,
Valley will cause to be delivered to Stereophile:
a. Good standing certificate with respect to Valley from the
California Secretary of State dated within ten (10) days of Closing;
b. Evidence satisfactory to Stereophile that NewCo has been
validly formed, is in good standing in the state under whose laws it was formed,
and that it has validly approved and authorized all actions to be taken by it as
contemplated by this Agreement;
c. Evidence satisfactory to Stereophile that Valley has taken all
necessary corporate and other action to approve and authorize this Agreement
and the transactions contemplated hereunder;
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CONTRIBUTION AND SHAREHOLDERS AGREEMENT
VALLEY RECORD DISTRIBUTORS, INC. -- STEREOPHILE, INC.
d. Duly executed and acknowledged (if required) originals of all
other agreements which are to be executed or delivered at or prior to the
Closing by Valley and which are not otherwise specifically referenced in this
Section 9.1; and
e. NewCo shall have delivered the portion of the purchase price
payable at Closing, the Note, and stock certificates representing twenty percent
of the issued and outstanding stock of NewCo.
9.2 GOOD FAITH OBLIGATIONS. Valley agrees to proceed diligently and
in good faith to consummate the transactions contemplated by this Agreement, and
otherwise to cause the Closing to occur, and it will use all reasonable efforts
to take or cause to be taken all actions, and do or cause to be done all
things, necessary, proper or advisable to consummate the transactions
contemplated by this Agreement; PROVIDED, HOWEVER, that Valley shall not be
obligated to waive any conditions to its obligation to close set forth in
Section 10 of this Agreement.
10. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF VALLEY TO CLOSE. The
obligations of Valley to close and consummate the transactions contemplated
hereunder shall be subject to the fulfillment at or prior to the Closing of each
of the following conditions:
10.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. All representations
and warranties of Stereophile contained herein or in the exhibits, schedules or
documents attached hereto or described herein or otherwise made in writing
pursuant to this Agreement shall be true and correct as of the Closing, with the
same force and effect as though made at and as of the Closing, except for
changes expressly contemplated or permitted by this Agreement. If at or prior
to the Closing Stereophile shall supplement or correct any schedule to this
Agreement as allowed by Section 6.13 hereof, such schedule, as supplemented or
corrected, and all matters referred to or disclosed therein, must prove to be
satisfactory to Valley in the exercise of its good faith judgment.
10.2 COMPLIANCE WITH OBLIGATIONS. Stereophile shall have performed and
complied with all of the covenants, agreements, obligations and conditions
required by this Agreement to be performed or complied with by it at or prior to
the Closing, and Valley shall have received all of the agreements, instruments
and other documents required by Section 8.5 to be executed or delivered to it
prior to the Closing. Stereophile shall not be in breach of any term or
provision of this Agreement.
10.3 GOING BUSINESS INTACT. Except for any adverse consequences of
the announcement of the sale of the Assets to Valley, the Business'
organization, personnel and relations with suppliers, advertisers and others,
shall have been preserved intact and shall not have been impaired in any
material or adverse respect.
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CONTRIBUTION AND SHAREHOLDERS AGREEMENT
VALLEY RECORD DISTRIBUTORS, INC. -- STEREOPHILE, INC.
10.4 ABSENCE OF ACTIONS OR PROCEEDINGS. There shall be no actual or
threatened action or proceeding by or before any court, governmental body or
arbitration tribunal which shall seek to restrain, prohibit or invalidate any of
the transactions contemplated by this Agreement or which might affect the right
of NewCo to own or operate the Assets or the Business or which, in the judgment
of the board of directors of Valley made in good faith and based upon advice of
its counsel, makes it inadvisable to proceed with the Closing.
10.5 NO MATERIAL ADVERSE CHANGE OR OCCURRENCE. There shall have been
no material adverse change in the results of the operations or financial
condition of the Business.
10.6 CONDITION OF ASSETS. Stereophile shall have maintained the
tangible items of the Publication Assets from the date of this Agreement to the
date of Closing in their represented condition.
10.7 CONSENTS AND APPROVALS; ITEMS SATISFACTORY TO OTHER PARTIES.
All consents or approvals of any third party which are necessary or, in the
reasonable judgment of Valley, advisable to consummate the transactions
contemplated hereunder shall have been received and be satisfactory to
Valley. Any condition, schedule, disclosure, agreement, document or other
item or matter which is subject to the approval or satisfaction of any other
party hereto as a condition to such other party's obligation to close shall
have been approved by or be satisfactory to such other party.
10.8 ACTION BY LENDER. Valley shall have notified Valley's principal
lender of this proposed transaction, including the possible merger of NewCo into
Valley, and no objection shall have been received from the principal lender to
this Agreement or to the transactions contemplated herein.
11. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF STEREOPHILE TO CLOSE. The
obligations of Stereophile to close and consummate the transactions contemplated
hereunder shall be subject to the fulfillment at or prior to the Closing of each
of the following conditions:
11.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. All representations
and warranties of Valley contained in this Agreement or otherwise made in
writing pursuant to this Agreement shall be true and correct at the Closing,
with the same force and effect as though made at and as of the Closing, except
for changes contemplated or permitted by this Agreement.
11.2 COMPLIANCE WITH OBLIGATIONS. Valley shall have performed and
complied with all the covenants, agreements, obligations and conditions required
by this Agreement to be performed or complied with by it at or prior to the
Closing and Stereophile shall have received all of the agreements, instruments
and other documents required by Section 9.1 to be executed or delivered by
Valley to it at or prior to the Closing. Valley shall not be in breach of any
term or provision of this Agreement.
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CONTRIBUTION AND SHAREHOLDERS AGREEMENT
VALLEY RECORD DISTRIBUTORS, INC. -- STEREOPHILE, INC.
11.3 ABSENCE OF ACTIONS OR PROCEEDINGS. There shall be no actual or
threatened action or proceeding by or before any court, governmental body or
arbitration tribunal which shall seek to restrain, prohibit or invalidate any of
the transactions contemplated hereunder which in the judgment of Stereophile
made in good faith and based upon advice of its counsel, makes it inadvisable to
proceed with the transactions contemplated by this Agreement.
11.4 CONSENTS AND APPROVALS; ITEMS SATISFACTORY TO OTHER PARTIES. All
consents or approvals of any third party which are necessary or, in the
reasonable judgment of Stereophile, advisable to consummate the transactions
contemplated hereunder, or to proceed with the Closing, shall have been received
and be satisfactory to Stereophile. Any condition, schedule, disclosure,
agreement, document or other item or matter which is subject to the approval or
satisfaction of any other party hereto as a condition to such other party's
obligation to close shall have been approved by or be satisfactory to such other
party.
11.5 NEWCO ACTIONS. All actions necessary to form NewCo and to cause
it to be obligated to perform all actions required of it by this Agreement shall
have been taken.
11.6 TAX TREATMENT. Stereophile shall have reasonably assured itself
that the transaction contemplated by this Agreement shall be a tax-free
transaction under Section 351 of the Internal Revenue Code except to the extent
that Stereophile receives boot. Valley shall not take, and shall not allow NewCo
to take, a tax position inconsistent with such treatment.
12. REMEDIES FOR BREACH OF REPRESENTATIONS OR WARRANTIES.
12.1 CANCELLATION. If any of the conditions precedent set forth in
Section 10 are not satisfied or waived by Valley prior to the scheduled Closing,
then Valley may cancel this Agreement by notice to Stereophile. If any of the
conditions precedent set forth in Section 11 are not satisfied or waived by
Stereophile prior to the scheduled Closing, then Stereophile may cancel this
Agreement by notice to Valley. If this Agreement is cancelled pursuant to the
provisions of this section, such cancellation shall be effected only by the
cancelling party giving written notice of the cancellation as required by this
section. Upon such cancellation, each party shall return all documents to the
party who supplied the documents. Upon such cancellation, the obligations to
purchase and to sell the Publication Assets and the other obligations set forth
in this Agreement will terminate, and, except as provided elsewhere in this
Agreement, neither party shall have any further obligation hereunder.
12.2 BREACH OF REPRESENTATIONS AND WARRANTIES GENERALLY. If the
Closing shall have occurred, then in the event of a breach of any of the
representations, warranties or covenants made by any party to this Agreement,
or in the event any party to this Agreement fails to perform any covenant or
agreement contained in this Agreement or any agreement or
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CONTRIBUTION AND SHAREHOLDERS AGREEMENT
VALLEY RECORD DISTRIBUTORS, INC. -- STEREOPHILE, INC.
instrument provided for hereunder, the non-breaching party shall be entitled to
proceed against the breaching party for such legal or equitable relief as it may
be entitled.
12.3 INDEMNIFICATION FOR LIABILITIES. If the Closing occurs, Valley
shall indemnify, defend and hold harmless Stereophile from, against and in
respect of claims against Stereophile relating to the liabilities which arise
from the operation of the Business after the Closing; and Stereophile shall
indemnify, defend and hold harmless Valley from, against and in respect of the
liabilities of the Business which arise before or are based on actions or
omissions occurring prior to the Closing.
13. OTHER PROVISIONS.
13.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All of the respective
representations, warranties, covenants and agreements of the parties to this
Agreement to indemnify shall survive the Closing, the consummation of the
transactions contemplated hereunder, and the delivery of any instruments
required by this Agreement.
13.2 CONFIDENTIALITY. Each of the parties to this Agreement shall keep
the terms, provisions and conditions of this Agreement confidential and shall
not disclose the same to any third parties except as may be required by law or
except to such party's attorneys, accountants and, to the extent necessary,
persons providing financing. Notwithstanding the foregoing, after Closing,
Valley may, in its sole discretion, issue a press release and otherwise announce
its purchase hereunder. Valley shall provide any such press release or other
public announcements to Stereophile for review and comment prior to release. The
covenants of the parties under this section shall continue from the date of this
Agreement and shall survive the Closing. Stereophile shall continue to maintain
and keep confidential all financial information relating to Valley which Valley
has provided to Stereophile. Valley shall continue to maintain the
confidentiality of all financial information relating to Stereophile (other than
relating solely to the Business) which Stereophile has provided to Valley.
13.3 RISKS OF LOSS; PRORATIONS; EXPENSES. Any damage to the
Publication Assets, or any single asset or any part thereof, prior to the
Closing shall be borne by Stereophile. In the event of any material loss or
material damage to the Assets prior to the Closing, Valley shall have the option
to cancel this Agreement by notice to Stereophile, and the provisions of Section
12.1 shall apply. Each party shall bear its own costs and expenses, including
attorneys' and accountants' fees, in connection with the negotiation, due
diligence investigation, documentation and consummation of the sale and purchase
of the Publication Assets and the other transactions contemplated by this
Agreement.
13.4 ADDITIONAL ACTS. In addition to the obligations required to be
performed by the parties hereto under the other provisions of this Agreement,
the parties agree to perform, without further consideration, such other acts and
to execute, acknowledge and deliver such
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CONTRIBUTION AND SHAREHOLDERS AGREEMENT
VALLEY RECORD DISTRIBUTORS, INC. -- STEREOPHILE, INC.
other instruments and documents, subsequent to the Closing, as may be reasonably
required to carry out the provisions and purposes of this Agreement and to
fully and properly transfer the Assets and title thereto.
13.5 EXTENSION; WAIVER. The parties hereto may extend the time for, or
waive the performance of, any of the obligations of any parties hereto, waive
any inaccuracies in the representations or warranties of any parties hereto, or
waive compliance by any parties hereto with any of the covenants or conditions
contained in this Agreement. However, any such extension or waiver shall be in
writing and signed by all of the parties hereto. No such waiver shall operate
or be construed as a waiver of any subsequent act or omission of any party
hereto.
13.6 NOTICES. Any notice to a party pursuant to this Agreement
shall be given by one of the following means: (a) certified or registered
United States mail, postage prepaid, (b) private courier or express service
requesting evidence of receipt as a part of its service, or (c) by telecopy,
with a copy also to be given by first class United States mail, postage
prepaid, or by any means permitted under subparagraphs (a) or (b) of this
section. Notices shall be given to the parties at the following addressees:
If to Valley: Valley Record Distributors, Inc.
0000 Xxxxx Xxxxx Xxxxx
Xxxx Xxxxxx Xxx 0000
Xxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxx Xxxx
Telecopy #: (000) 000-0000
with a mandatory copy to:
Howard, Rice, Nemerovsi Xxxxxx, Xxxx & Xxxxxx
Three Embarcadero Center, Xxxxxxx Xxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxx
Telecopy #: (000) 000-0000
If to Stereophile: Stereophile, Inc.
000 Xxxxxxx Xxxxxx
Xxxxx Xx, Xxx Xxxxxx 00000
mailing address: X.X. Xxx 0000
Xxxxx Xx, Xxx Xxxxxx 00000
Attention: Xxxxx Xxxxxxx
Telecopy #: (000) 000-0000
with a mandatory copy to:
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CONTRIBUTION AND SHAREHOLDERS AGREEMENT
VALLEY RECORD DISTRIBUTORS, INC. -- STEREOPHILE, INC.
Xxxxxxx X. Xxxxxxxxx, Esq.
Xxxx Xxxxxxxxx
000 X. Xxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000-0000
Telecopy #: (000) 000-0000
13.7 EMPLOYMENT LIABILITIES.
a. Valley does not assume, and Stereophile hereby retains, any
and all employment related costs, obligations, and liabilities of Stereophile or
the Business incurred on or prior to Closing or which relate to events,
occurrences, conditions, actions, or inactions which took place or were in
effect on or prior to Closing (whether or not reported, filed, billed, or paid
for on or prior to Closing), including, without limitation, wages, salaries,
commissions, accrued vacation and sick pay accrued for periods prior to Closing,
costs, obligations and liabilities relating to the closing of any of
Stereophile's facilities or places of business, the termination or relocation of
employees of Stereophile, severance rights of employees of Stereophile,
employment discrimination, unfair labor practices, wage and hour laws, health
and safety, workers compensation, wrongful discharge, plant closing,
compensation, fringe benefits, insurance, employee benefit plans, pensions,
retiree medical, severance pay, vacations, torts, accidents, disabilities,
injuries, sickness, exposure to harmful conditions, breach of oral or written
employment contracts or collective bargaining agreements, or breaches of any
law, statute, judgment, decree, injunction, order, writ, rule or regulation of
any court or governmental authority.
b. Valley does not assume, and Stereophile agrees to be solely
responsible for, any and all liabilities and obligations, including but not
limited to obligations to give notice, relating to health care continuation
coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended ("COBRA") which relate to, arise out of, or are in connection with, this
transaction or the events contemplated by this Agreement.
13.8 BINDING EFFECT. Upon execution hereof by all parties hereto,
this Agreement shall inure to the benefit of, be binding on and be enforceable
against the parties and their respective heirs, legal representatives,
successors and assigns.
13.9 ENTIRE AGREEMENT. This Agreement (including the exhibits and
schedules hereto) and the instruments and documents delivered pursuant hereto,
and the other agreements contemplated or required hereby, constitute the entire
agreement and understanding between the parties with respect to the subject
matter hereof, and supersede any prior agreements and understandings relating to
the subject matter hereof. This Agreement may be modified or amended only by a
written instrument executed by all parties hereto.
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CONTRIBUTION AND SHAREHOLDERS AGREEMENT
VALLEY RECORD DISTRIBUTORS, INC. -- STEREOPHILE, INC.
13.10 EXECUTION IN COUNTERPARTS. This Agreement may be executed in two
or more counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same agreement.
13.11 ATTORNEYS' FEES; COSTS OF LITIGATION. If any arbitration, legal
action or any other proceeding is brought for the enforcement of this Agreement,
or because of in alleged dispute, breach, default or misrepresentation in
connection with any of the provisions of this Agreement, the successful or
prevailing party or parties shall be entitled to recover reasonable attorneys'
fees and other costs incurred in that action or proceeding, in addition to any
other relief to which it or they may be entitled.
13.12 RIGHT TO SUPPLEMENT SCHEDULES. Each party hereto shall have the
right to supplement or correct any schedule to this Agreement which relates to
any representation, warranty or disclosure made by such party pursuant to this
Agreement. Any such supplement or correction to a schedule shall be delivered to
all other parties hereto prior to the Closing, shall be accompanied by true and
complete copies of all agreements, instruments or other documents or items
referred to therein, shall be subject to the approval of all other parties
hereto and shall be subject to the other provisions of this Agreement with
respect to such schedule.
13.13 CONSTRUCTION AND INTERPRETATION. This Agreement is the result
of negotiations between the parties and their legal counsel, and the terms and
provisions hereof shall be interpreted and construed in accordance with their
usual and customary meanings. The parties each waive the application of any rule
of law which otherwise would be applicable in connection with the interpretation
and construction of this Agreement that ambiguous or conflicting terms or
provisions should be interpreted or construed against the party who, or whose
attorney, prepared the executed agreement or any earlier draft of same. The
headings of the paragraphs and sections of this Agreement are included for
purposes of convenience only and shall not affect the construction or
interpretation of any of its provisions.
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CONTRIBUTION AND SHAREHOLDERS AGREEMENT
VALLEY RECORD DISTRIBUTORS, INC, -- STEREOPHILE, INC.
In witness whereof, the parties have executed this Agreement as of the
date first above written.
VALLEY RECORD DISTRIBUTORS, INC.
By /s/ J. Xxxxxxxx Xxxx
-----------------------------------
Its CFO
-----------------------------------
STEREPHILE, INC.
By /s/ Xxxxxxxx Xxxxxxxxx
-----------------------------------
Its CHAIRMAN
-----------------------------------
/s/ Barnet Xxxxx
--------------------------------------
Shareholder
-23-
EXHIBIT A
The following shall constitute the Publication Assets:
GENERALLY
(i) the SCHWANN trademark and trade name, and all goodwill associated therewith,
and all other trademarks and trade names used in the business of publishing the
Publications, and all goodwill associated therewith; (ii) all advertiser lists,
subscriber lists, dealer lists, back issues, computer databases and recording
catalogs used principally for the Publications; (iii) computers and computer
software licenses used by Stereophile solely in connection with the
Publications; (iv) printing and distribution contracts for the Publications,
advertising contracts and other contracts necessary for or used in the operation
of the Publications, all of which are listed in Schedule 6.6; and (v) other
tangible and intangible assets owned or held under lease by Stereophile which
are used only in connection with the Publications.
DATABASES
Opus Main Database
Opus Artist Database
Spectrum Database
Archived song listings for non-classical releases from approximately
1985 to 1994 in ASCII format
Collected reference materials for the Publication
[Does not include CDRD databases]
TRADEMARKS
Unregistered -
SCHWANN
SCHWANN OPUS
SCHWANN SPECTRUM
SCHWANN ARTIST
A-1
FINANCIAL RECORDS
Copies of available financial records, as needed
TANGIBLE ASSETS
Inventory of prior issues as requested by NewCo
Office furniture for 8-10 people used for the Publication, including
Canon NP6025 Copier
Ten (10) personal computers (Pentium and 486 class or MACs) used for
the Publication, and related printers, peripherals and software
licenses
Eight (8) phone telephone system
EXCLUDED ASSETS
The following assets of Stereophile which are or may have been used in
the Business are NOT included in the Publication Assets:
Cash
Bank Accounts
Accounts Receivable
Computer Programs described as follows:
SCS (Single Copy Sales) software program
Quark desktop publishing software program
Photoshop software program
Adobe Illustrator software program
AccPac accounting software program
Fonts
Advertising accounting tracking program
A-2
