Asset Sale and Purchase Agreement - EMAP Petersen Inc. and General Media Automotive Group Inc.
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ASSET SALE AND PURCHASE AGREEMENT
between
EMAP PETERSEN, INC.
and
GENERAL MEDIA AUTOMOTIVE GROUP, INC.
Dated as of February 9, 1999
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TABLE OF CONTENTS
Page
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Section 1. Sale and Purchase of Assets; Closing........................... 2
1.1 Sale and Purchase of Assets................................... 2
1.2 Excluded Assets............................................... 4
1.3 Assumption of Liabilities..................................... 4
1.4 Closing....................................................... 6
1.5 Purchase Price................................................ 6
1.6 Post Closing Adjustment....................................... 6
Section 2. Closing Conditions............................................. 8
2.1 Conditions to Obligation of Buyer............................. 8
2.2 Conditions to Obligation of Seller............................ 9
Section 3. Representations and Warranties of Seller....................... 10
3.1 Organization.................................................. 10
3.2 Authority; Consents and Approvals; No Violation............... 10
3.3 Absence of Undisclosed Liabilities............................ 11
3.4 Purchased Assets.............................................. 11
3.5 Accounts Receivable........................................... 11
3.6 Taxes......................................................... 12
3.7 Compliance with Laws; Litigation.............................. 12
3.8 Brokerage..................................................... 12
3.9 Employees..................................................... 12
3.10 Seller Financial Statements, Changes Since Latest
Balance Sheet................................................. 13
3.11 Absence of Certain Developments............................... 13
3.12 Environmental and Safety Matters.............................. 15
3.13 Contracts and Commitments..................................... 15
3.14 Intellectual Property Rights.................................. 17
3.15 Affiliated Transactions....................................... 18
3.16 Advertisers................................................... 18
Section 4. Representations and Warranties of the Buyer.................... 19
4.1 Organization.................................................. 19
4.2 Authority; Consents and Approvals; No Violation............... 19
4.3 Broker........................................................ 19
Section 5. Additional Agreements of Seller and Buyer...................... 20
5.1 Access to Properties and Records.............................. 20
5.2 Conduct of Business Pending the Closing....................... 20
5.3 Further Transfers; Transition Assistance...................... 20
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5.4 Discharge of Liabilities...................................... 21
5.5 Certain Payments.............................................. 21
Section 6. Remedies for Breach of this Agreement.......................... 21
6.1 Survival of Representations and Warranties.................... 21
6.2 Indemnification Provisions for Benefit of the Buyer Group..... 21
6.3 Indemnification Provisions for Benefit of Seller.............. 22
6.4 Matters Involving Third Parties............................... 22
6.5 Limitations on Amount......................................... 23
Section 7. Covenant Not to Compete, Solicit .............................. 23
Section 8. Definitions.................................................... 24
Section 9. Termination and Abandonment.................................... 26
9.1 Methods of Termination........................................ 26
9.2 Effect of Termination......................................... 27
Section 10. Miscellaneous Agreements...................................... 27
10.1 Good Faith Obligations........................................ 27
10.2 Confidentiality............................................... 27
10.3 Expenses...................................................... 28
10.4 Additional Acts............................................... 28
10.5 Extension, Waiver............................................. 28
10.6 Notices....................................................... 28
10.7 Employee Benefits............................................. 29
10.8 Entire Agreement.............................................. 30
10.9 Execution in Counterparts..................................... 30
10.10 Governing Law................................................. 30
10.11 Right to Supplement Schedules................................. 30
10.12 Construction and Interpretation............................... 30
10.13 No Third Party Beneficiaries.................................. 31
10.14 Assignment.................................................... 31
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Exhibits
Exhibit A - Form of Bill of Sale and Assignment
Exhibit B - Form of Trademark, Trade Name and Assumed Name Assignment
Exhibit C - Form of Assumption Agreement
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Schedules
Section No: Caption
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1.1(a)(vii) Included Assets Schedule
1.2(x) Excluded Assets Schedule
1.3(a)(vii) Assumed Liabilities Schedule
1.3(b)(viii) Excluded Liabilities Schedule
3.2 Permits Schedule
3.3 Liabilities Schedule
3.4 Purchased Assets Schedule
3.5 Accounts Receivable Schedule
3.6 Taxes Schedule
3.7 Litigation Schedule
3.11 Developments Schedule
3.13 Contracts Schedule
3.14 Intellectual Property Schedule
3.15 Affiliated Transactions Schedule
3.16 Advertisers Schedule
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ASSET SALE AND PURCHASE AGREEMENT
THIS ASSET SALE AND PURCHASE AGREEMENT (this "Agreement") is dated as of
the 9th day of February, 1999, between EMAP Petersen, Inc., a Delaware
corporation ("Buyer"), and General Media Automotive Group, Inc., a New York
corporation (the "Seller"). Capitalized terms not defined elsewhere in this
Agreement are defined in Section 8 below.
WHEREAS, Seller is the owner and publisher of the following four (4)
magazines (the "Magazines") being purchased hereunder: Open Wheel Magazine, Four
Wheeler Magazine, Drag Racing Monthly and Stock Car Racing Magazine; and
WHEREAS, Seller desires to sell to Buyer, and Buyer desires to purchase
from Seller, the assets used in connection with the business of publishing,
promoting and distributing the Magazines as such business is presently conducted
and all matters incident and relevant thereto (collectively referred to as the
"Business");
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
promises, representations, warranties and covenants set forth herein, and for
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties hereto agree as follows:
Section 1. Sale and Purchase of Assets; Closing.
1.1 Sale and Purchase of Assets.
(a) Purchased Assets. On the terms and subject to the conditions contained
in this Agreement, on the Closing Date, Buyer shall purchase from Seller, and
Seller shall sell, convey, assign, transfer and deliver to Buyer, free and clear
of all Liens (except for Permitted Liens), by bills of sale, assignments and
other instruments, all of the Seller's right, title and interest in all assets,
rights and properties of every kind and nature owned or leased by Seller as of
the Closing Date and whether tangible, intangible, real or personal and wherever
located and by whomever possessed that are used in connection with the Business,
but excluding all Excluded Assets (collectively, the "Purchased Assets"),
including without limitation, all of the following assets:
(i) all rights existing under each contract, agreement or
arrangement listed and expressly specified to be assumed by Buyer on the
attached Contracts Schedule;
(ii) all copyrights, trademarks, trade names and other intellectual
property and all rights thereof including, without limitation, the trade
names "Open Wheel Magazine", "Four Wheeler Magazine", "Drag Racing
Monthly", "Stock Car Racing Magazine" and "Four Wheeler Television" (and
all goodwill associated therewith) excluding all rights to the trademark
and corporate name "General Media";
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(iii) all subscription lists, owned mail lists, customer lists,
advertiser lists, vendor lists, goodwill;
(iv) all accounts receivable with respect to any Post-Closing Event;
(v) all notes receivable, rights to payment, choses in action,
claims against third parties;
(vi) all leasehold interests;
(vii) all computer equipment (both hardware and software), office
equipment, other equipment, furniture, fixtures, inventory and supplies
located at the Seller's offices at 3330 Ocean Park Boulevard, Santa
Monica, California and at Seaport Industrial Park, 65 Parker Street,
Newburyport, Massachusetts, and those set forth on the Included Assets
Schedule;
(viii) all claims, deposits, prepayments, warranties, guarantees,
refunds, causes of action, rights of recovery, rights of set-off and
rights of recoupment of every kind and nature, other than those relating
exclusively to Excluded Assets, Excluded Liabilities and Taxes;
(ix) all authorizations, franchises, approvals, permits, licenses,
orders, registrations, certificates, variances, and similar rights
obtained from federal, state or local governments or governmental agencies
or other similar rights that are transferable to Buyer, including without
limitation, those listed on the attached Permits Schedule; and all data
and records pertaining thereto;
(x) all insurance proceeds received after the Closing Date with
respect to damage, non-conformance of or loss to the Purchased Assets;
(xi) monthly profit and loss statements and monthly statistics since
January 1, 1997, and all files, documents, lists, drawings,
specifications, creative materials, advertising and promotional materials,
studies, reports and other printed or written materials, Seller-owned
film, negatives, editorial proofs and other editorial materials in
Seller's possession, and all rights to issues of the Magazines with
"on-sale" dates prior to the Closing Date (including all of Seller's
rights to articles printed in such Magazines), except to the extent
specifically excluded in Section 1.2;
(xii) all rights associated with any web sites relating to the
Magazines, including the right to use the domain names
DRAGRACINGMONTHLY.COM, FOURWHEELER.COM, FULLSIZE4X4.COM, OPENWHEEL.COM,
STOCKCARRACING.COM and SUPERSTOCK.COM in connection with such web sites;
and
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(xiii) all rights associated with the television program entitled
"Four Wheeler".
1.2 Excluded Assets. Notwithstanding the foregoing, the following assets
are expressly excluded from the purchase and sale contemplated hereby (the
"Excluded Assets") and, as such, are not included in the Purchased Assets:
(i) cash on hand, in bank accounts and cash equivalents;
(ii) Seller's rights under or pursuant to this Agreement;
(iii) Seller's prepaid taxes or refunds from any taxing authority;
(iv) any benefits from or rights to receive Seller's deferred income
taxes;
(v) any capital stock of Seller;
(vi) corporate charter, minute books, stock books, tax returns,
corporate seal and all corporate, accounting and financial records and
ledgers, provided that Seller shall provide Buyer (upon Buyer's reasonable
request) with copies of any of the foregoing relating to the Purchased
Assets which Buyer may reasonably request;
(vii) any right to receive mail and other communications addressed
to Seller; provided that Seller shall provide Buyer with any mail and
other communications relating exclusively to the Purchased Assets and
copies of any mail relating in part to the Purchased Assets or the
Business;
(viii) all contracts, agreements and arrangements which are (A)
listed on the Contracts Schedule as being retained by Seller or not
assumed by Buyer, or (B) are not disclosed on the Contracts Schedule as
being expressly assumed by Buyer;
(ix) accounts receivable with respect to any Pre-Closing Event;
(x) all other assets expressly listed on the attached Excluded
Assets Schedule.
1.3 Assumption of Liabilities.
(a) Assumed Liabilities. On the terms and subject to the conditions set forth
in this Agreement (including paragraph (b) below), as additional
consideration for the Purchased Assets, as of the Closing Date, Buyer
shall assume and pay or perform only the following debts, liabilities and
obligations of Seller (collectively, the "Assumed Liabilities"):
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(i) accounts payable incurred in the ordinary course of business
with respect to any Post-Closing Event, the amount of which shall be
set forth on the Closing Balance Sheet;
(ii) all obligations of Seller to provide advertising in all issues
of the Magazines having an "on-sale" date after the Closing Date,
including those which have been prepaid by Advertiser customers (the
amount of which prepaids shall be set forth on the Closing Balance
Sheet);
(iii) all obligations of Seller to provide advertising which Seller
is obligated to provide without receiving payment for such
advertisements (such as "make good" and "3 for 2" advertising
programs) in an amount not exceeding $75,000;
(iv) all obligations of Seller to provide by second class mail or
otherwise issues of the Magazines with an "on-sale" date after the
Closing Date to subscribers for the term of their subscriptions;
(v) commissions earned in the sale of advertising to the extent
arising from any Post-Closing Event;
(vi) any obligations of Seller under contracts that are listed on
the attached Contracts Schedule and which are expressly identified
on such schedule as being assumed by Buyer; and
(vii) other liabilities, as set forth and expressly identified to be
assumed by Buyer on the attached Assumed Liabilities Schedule.
(b) Excluded Liabilities. Notwithstanding the foregoing, Buyer shall not
assume and shall not be deemed to have assumed or in any way become liable for
any of Seller's debts, liabilities or obligations of any nature whatsoever
(other than the Assumed Liabilities), whether accrued, absolute or contingent,
whether known or unknown, whether due or to become due and whether related to
the Business or the Purchased Assets, and regardless of when or by whom asserted
(collectively, the "Excluded Liabilities") including, but not limited to, and
without limiting the generality of the foregoing, the following:
(i) any liability of Seller for Taxes;
(ii) any liability of Seller for costs and expenses incurred in
connection with this Agreement and the transactions contemplated
hereby;
(iii) any liability of Seller relating to the Excluded Assets;
(iv) any liability relating to any Pre-Closing Event;
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(v) any obligations under employment contracts entered into by
Seller prior to the Closing Date;
(vi) any obligation arising in tort or for breach of contract
occurring prior to the Closing Date and for obligations and
liabilities now existing or hereafter arising from or relating to
pending litigation listed on the attached Litigation Schedule;
(vii) obligations to employees for accrued wages, earned commissions
(other than commissions relating to any Post-Closing Event), accrued
vacation, accrued sick days, accrued personal days and severance
payments, bonuses and similar compensation liabilities (other than
with respect to any employee who is hired by Buyer as of the Closing
Date); and
(viii) all other liabilities set forth on the attached Excluded
Liabilities Schedule.
For purposes of this Section 1.3(b), "Seller" shall be deemed to include any
predecessors to Seller and any Person with respect to which Seller is a
successor in interest (including by operation of law, merger, liquidation,
consolidation, assignment, assumption or otherwise).
1.4 Closing. The closing (the "Closing") shall take place at the offices
of Thelen Reid & Priest, 40 West 57th Street, New York, NY 10019, at 10:30 a.m.
on February 19, 1999 (the "Closing Date") or on such other date as Buyer and
Seller mutually agree.
1.5 Purchase Price. The total purchase price (the "Purchase Price") to be
paid by Buyer for the Purchased Assets shall be $35,000,000 (the "Closing Date
Cash Payment"), plus assumption by Buyer of the Assumed Liabilities.
1.6 Post Closing Adjustment.
(a) There shall be a post-closing payment calculated and paid strictly in
accordance with this Section 1.6.
(b) Closing Balance Sheet. Within 60 days after the Closing Date, Seller
shall prepare and deliver to Buyer a balance sheet of the Seller (without giving
effect to the consummation of the transactions contemplated by this Agreement)
as of the Closing Date (the "Closing Balance Sheet") prepared using accounting
principles consistent with those used in preparing the Latest Balance Sheet,
together with a calculation of the Net Working Capital as defined herein. Seller
represents that the amount of the deferred subscription revenues reflected on
the Closing Balance Sheet shall not be materially less than the amount of the
deferred subscription revenues reflected on the Latest Balance Sheet.
(c) Buyer's Objections to Seller's Closing Balance Sheet; Dispute
Resolution. If Buyer objects to the Closing Balance Sheet and the calculation of
Net Working Capital by Seller, Buyer
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shall deliver to Seller, within twenty-five (25) business days of receipt of the
Closing Balance Sheet, written notice of Buyer's objections thereto, which
written notice shall specify the items disputed by Buyer in reasonable detail (a
"Notice of Objection"); and if Buyer fails to deliver to Seller a Notice of
Objection in such period Buyer will be deemed to have agreed to the Closing
Balance Sheet prepared by the Seller and the Seller's calculation of Net Working
Capital. If Buyer and Seller are unable to agree on the foregoing within thirty
(30) days of delivery of a Notice of Objection, Buyer and Seller shall select an
accounting firm mutually acceptable to both of them to resolve any remaining
objections. If Buyer and Seller are unable to agree on the choice of an
accounting firm; they shall select a "big six" accounting firm (or any of their
respective successors) by lot (after excluding their respective regular outside
accounting firms). The accounting firm so selected (the "Accounting Firm") shall
prepare a written report to the parties which shall address its resolution of
the disputed items in accordance with this Section 1.6 and shall make any
required adjustments to the Closing Balance Sheet and the calculation of Net
Working Capital to reflect the resolution of all disputed items. The parties
shall share the fees and expenses of the Accounting Firm as follows: the
percentage of such fees and expenses to be paid by Buyer shall equal the portion
of the contested amount of the Net Working Capital (as presented in the Notice
of Objection) not awarded to Buyer divided by the full amount of the Net Working
Capital contested by Buyer, and Seller shall pay the remainder. The Closing
Balance Sheet and the Net Working Capital, as adjusted to reflect any changes
agreed upon, or made by the Accounting Firm pursuant to this Section 1.6, shall
be, for all purposes, conclusive, final, binding and non-appealable by the
parties hereto.
(d) Net Working Capital Adjustment. To the extent that the Net Working
Capital is greater than $1,500,000, then, within five (5) days of the final
determination of the Closing Balance Sheet pursuant to Section 1.6(c), the Buyer
shall deliver to the Seller in immediately available funds an amount equal to
such excess. To the extent that the Net Working Capital is less than $1,500,000,
then, within five (5) days of the final determination of the Closing Balance
Sheet pursuant to Section 1.6(c), the Seller shall deliver to the Buyer in
immediately available funds an amount equal to such shortfall.
1.7 Allocation of Purchase Price. Buyer and Seller agree that the fair
market value of the Purchased Assets which constitute Class I, II and III Assets
(as such terms are defined in Section 1060 of the Internal Revenue Code of 1986,
as amended (the "Code"), and the regulations thereunder) shall be mutually
agreed to by the parties. Buyer and Seller further agree that (i) all amounts
payable under Section 1.5 hereof shall be allocated among the Purchased Assets
in the manner required by Treasury Regulation section 1.1060-IT based on the
fair market values mutually agreed to by the parties; (ii) such allocation shall
be binding on Buyer and Seller for all federal, state and local tax purposes;
(iii) Buyer and Seller shall file with their respective federal income tax
returns consistent IRS Forms 8594: Asset Acquisition Statement under Section
1060, including any required amendments or supplements thereto ("Form 8594"),
which shall reflect such allocation; and (iv) Buyer shall prepare such Forms
8594 and shall deliver Seller's copy to Seller on or before the Closing Date so
that Seller may file such form or any amendments or supplements thereto with its
federal income Tax returns.
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Seller also agrees to assist Buyer and provide Buyer with any information
reasonably necessary for the completion of such Forms 8594 prior to Closing.
Section 2. Closing Conditions.
2.1 Conditions to Obligation of Buyer. The obligation of Buyer to
consummate the transactions to be performed by it in connection with the Closing
is subject to the satisfaction of the following conditions as of the Closing:
(a) Representations and Warranties, Performance of Covenants. The
representations and warranties made by Seller set forth in Section 3 hereof
shall be true and correct at and as of the Closing Date except to the extent
stated to be true as of another date (in which case, they shall be true and
correct as of such date), and Seller shall have performed in all material
respects all of the covenants and agreements required to be performed by it
pursuant to this Agreement on or prior to the Closing Date.
(b) Opinion of Counsel to Seller. Buyer shall have received from Loeb &
Loeb LLP, an opinion with respect to certain limited matters, addressed to
Buyer, dated the Closing Date and in form and substance reasonably satisfactory
to Buyer and Seller.
(c) No Liens. Buyer shall have received from Seller releases of all Liens
relating to the Purchased Assets (other than the Permitted Liens).
(d) Third-Party Approvals. Any and all approvals and consents (including,
without limitation, consents of the Seller's bondholders) which are necessary
and if not obtained or maintained would have more than an immaterial effect on
the consummation of the transactions contemplated herein or on Buyer's ownership
of the Purchased Assets after the Closing Date, or which are required in order
to prevent a breach of or default under, or a termination or modification of, or
acceleration of the terms of, any material contract to be assumed by Buyer,
shall have been obtained (in each case, in accordance with such terms thereof.)
(e) Governmental Approvals. All filings, notices, licenses and other
consents (collectively, the "Governmental Approvals") of, to or with, any
governmental entity or any other Person (including, without limitation, approval
pursuant to the Hart-Scott-Rodino Antitrust Improvement Act of 1976, as amended
(the "HSR Act")) which are required for, and if not obtained or maintained would
have more than an immaterial effect on the consummation of the transactions
contemplated by this Agreement or on Buyer's ownership of the Purchased Assets
after the Closing Date, or which are required in order to prevent any breach of
or default under or a right of termination or modification of any contract to
which Seller is a party and to which any portion of the property of the Business
is subject, shall have been duly made or obtained (in each case, in accordance
with the terms thereof.)
(f) Transfer Instruments. Seller shall have delivered to Buyer all
appropriately executed instruments of sale, transfer, assignment, conveyance and
delivery, assignments of
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leases, assignments and all other instruments of conveyance which are necessary
to effect transfer to Buyer of the Purchased Assets (including without
limitation the Bill of Sale and Assignment in substantially the form attached
hereto as Exhibit A and the Trademark, Trade Name and Assumed Name Assignment in
substantially the form attached hereto as Exhibit B), free and clear of all
Liens, other than Permitted Liens (including assignment documents acceptable for
recordation in the United States Patent and Trademark Office or the United
States Copyright Office).
(g) Corporate Governance Documents. Seller shall have delivered to Buyer
certified copies of resolutions of Seller's board of directors authorizing and
approving Seller's entering into this Agreement and the transactions
contemplated hereby by Seller.
(h) Proceedings. All corporate and other proceedings taken or required to
be taken by the Seller in connection with the Seller Documents and the
transactions contemplated thereunder to be consummated at or prior to the
Closing shall have been taken and no action or proceeding shall be pending or
threatened in writing which could reasonably be expected to prohibit the
consummation of the transactions contemplated hereby.
(i) Other Closing Documents. Seller shall have delivered to Buyer a
certificate to the effect that the conditions specified in Sections 2.1(a) and
2.1(h) have been fully satisfied.
2.2 Conditions to Obligation of Seller. The obligations of Seller to
consummate the transactions to be performed by it in connection with the Closing
is subject to the satisfaction of the following conditions as of the Closing:
(a) Representations and Warranties, Performance of Covenants. The
representations and warranties made by Buyer and set forth in Section 4 hereof
shall be true and correct at and as of the Closing Date, and Buyer shall have
performed in all material respects all of the covenants and agreements required
to be performed by it under this Agreement on or prior to the Closing Date.
(b) Closing Payment. Buyer shall have delivered to Seller the Closing Date
Cash Payment.
(c) Assumption Documents. Buyer shall have executed and delivered to
Seller any and all assumption documents (including without limitation the
Assumption Agreement in substantially the form attached hereto as Exhibit C)
required in connection with the Assumed Liabilities and the contracts being
assigned to and assumed by Buyer hereunder, and such documents shall be in full
force and effect as of the Closing Date.
(d) Government Approval. All Governmental Approvals that are required (i)
for, and if not obtained or maintained would have more than an immaterial effect
on, the consummation of the transactions contemplated by this Agreement,
including approval pursuant to the HSR Act and (ii) in order to prevent a breach
of or default under or a right of termination or modification
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of any contract to which Seller is a party and to which any portion of the
property of the Business is subject shall have been duly made or obtained.
(e) Corporate Governance Documents. Buyer shall have delivered to Seller
certified copies of resolutions of Buyer's sole managing member authorizing and
approving Buyer's entering into this Agreement and the transactions contemplated
hereby.
(f) Proceedings. All corporate and other proceedings taken or required to
be taken by the Buyer in connection with the Buyer Documents and the
transactions contemplated thereunder to be consummated at or prior to the
Closing shall have been taken and no action or proceeding shall be pending or
threatened in writing which could reasonably be expected to prohibit the
consummation of the transactions contemplated hereby.
(g) Other Closing Documents. Buyer shall have delivered to Seller a
certificate to the effect that the conditions specified in Sections 2.2(a) and
2.2(f) have been fully satisfied.
Section 3. Representations and Warranties of Seller. To induce Buyer to
enter into this Agreement and to consummate the transactions contemplated
hereunder, Seller represents and warrants to Buyer as follows (unless otherwise
stated in the following representations and warranties, all such representations
and warranties are and shall be true and correct as of the date hereof and as of
the Closing):
3.1 Organization. Seller is a corporation duly organized, validly existing
and in good standing under the laws of the State of New York and has all
requisite corporate power and authority to own, lease and operate its
properties, including the Purchased 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
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 Purchased Assets or the Business.
3.2 Authority; Consents and Approvals; No Violation. Seller has the full
corporate authority and legal right to execute and deliver this Agreement and
all other agreements, instruments or other documents executed by Seller in
connection herewith (the "Seller Documents"), to sell the Purchased Assets
pursuant to this Agreement and otherwise to perform its obligations hereunder
and under the other Seller Documents. The execution and delivery of this
Agreement and the other Seller Documents has been duly authorized by Seller and
no other proceeding or action on the part of Seller is necessary to authorize
this Agreement, the sale of the Purchased Assets hereunder or the other
transactions contemplated hereunder. This Agreement and each of the other Seller
Documents has been (or upon Closing will be) validly executed and delivered by
Seller and constitute binding obligations of Seller, except to the extent that
the binding nature thereof may be subject to the limitations which might result
from bankruptcy, insolvency, reorganization or other similar laws relating to
creditors rights now or thereafter in effect, and except limitations on the
remedy of specific performance and other forms of equitable relief. The
execution and delivery of this Agreement and the other Seller
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Documents, the sale of the Purchased Assets and the consummation of the other
transactions and matters contemplated hereunder and thereunder do not and will
not violate any provision of Seller's articles of incorporation or by laws.
Except as set forth on the Permits Schedule, and other than those permits,
authorizations, consents or approvals, which if not obtained would not cause
other than an immaterial effect on the transactions contemplated hereunder, no
permit, authorization, consent or approval of, or declaration or filing with any
public body, agency, court or authority is necessary for the lawful, proper and
valid consummation by Seller of the other transactions contemplated hereunder.
The execution and delivery of this Agreement and the other Seller Documents, the
sale of the Purchased Assets, and the consummation of the other transactions and
matters contemplated hereunder and thereunder do not and will not violate any
statute, rule or regulation, any order or decree of any public body, agency,
court or authority by which Seller or any of its property, is bound, or violate,
conflict with, result in a breach of or constitute (with or without due notice
or lapse of time) a default under any agreement, license, contract, franchise,
permit, indenture, lease, or other instrument to which Seller is a party, or by
which it or any of the Purchased Assets is bound, except to the extent that any
such event will not have a material adverse effect on the Business,
3.3 Absence of Undisclosed Liabilities. Except as disclosed on the
attached Liabilities Schedule, Seller has no known liability of any nature,
fixed or contingent, not reflected in the Seller Financial Statements and notes
thereto, except for liabilities incurred in the ordinary course of business
since the date of the Latest Balance Sheet and other liabilities which
individually and in the aggregate are not material in amount or nature. Since
the date of the Latest Balance Sheet, Seller has continued to pay its expenses
on a basis consistent with its prior practice.
3.4 Purchased Assets. Except as set forth on the attached Purchased Assets
Schedule, (x) all of the tangible Purchased Assets are in good working condition
and repair, subject to normal wear and tear and (y) the Purchased Assets
constitute all of the material assets that are necessary for the conduct of the
Business as it has been conducted by the Seller prior to the date hereof. Except
as set forth in the Seller Financial Statements or on the Purchased Assets
Schedule, Seller has good and marketable title to all of the Purchased Assets,
and all of the Purchased Assets are held free and clear of all tide defects or
objections, mortgages, claims, liens, pledges, charges, security interests,
co-ownership interests, or other encumbrances of any kind or character, except
for certain lessors' interests (as set forth on the Purchased Assets Schedule),
a lien for current taxes, assessments and governmental charges not yet due and
payable. Other than pursuant to this Agreement, there are no existing options,
rights, contracts, commitments, understandings, arrangements or executory
agreements of any nature to which Seller is a party or by which it is bound,
relating to the sale, delivery, lease (as lessor) or transfer of any of the
Purchased Assets, except those that exist in the ordinary course of Seller's
business.
3.5 Accounts Receivable. Except as set forth on the attached Accounts
Receivable Schedule, all accounts receivable reflected on the Latest Balance
Sheet and all accounts receivable to be reflected on Seller's books and records
as of the Closing Date (net of allowances
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for doubtful accounts as reflected thereon and as determined in accordance with
Seller's customary accounting policies consistently applied) are or shall be
valid receivables arising in the ordinary course of business, and are or shall
be current, subject to no known valid counterclaims or set-offs, at the
aggregate recorded amount therefor as shown on the Latest Balance Sheet and on
Seller's books and records as of the Closing Date, as the case may be (net of
allowances for doubtful accounts as reflected thereon and as determined in
accordance with Seller's customary accounting policies consistently applied). On
the Closing Date, no person will have any Lien on such receivables or any part
thereof, other than liens reflected on the Latest Balance Sheet, or any liens or
other matters disclosed on the Accounts Receivable Schedule and make good
obligations arising in the ordinary course of business.
3.6 Taxes. Except as set forth on the attached Taxes Schedule, Seller has
filed all tax returns which are required to be filed and to its knowledge, paid
all Taxes of any kind due and payable to (or claimed to be due and payable by)
all federal, state, county, local, foreign or other taxing authorities, other
than Taxes, if any, which are not yet due and are reflected as liabilities in
the Seller Financial Statements or which have arisen as a result of ordinary and
customary business operations since the date of the Seller Financial Statements.
Except current obligations not yet due, to the knowledge of the Seller, all
material Taxes and other material assessments and levies which Seller is or was
required by law to withhold or collect have been duly withheld or collected and
to the extent required have been paid over to the proper governmental
authorities. "Tax" or "Taxes" means any federal, state, local or foreign income,
gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, property, windfall, profits, environmental, customs,
capital stock, franchise, employees' income withholding, foreign or domestic
withholding, social securities, unemployment, disability, real property,
personal property, sales, use, transfer, value added, alternative or add-on
minimum or other similar tax, governmental fee, governmental assessment or
governmental charge of any kind whatsoever, including any interest, penalties or
additions to Tax.
3.7 Compliance with Laws; Litigation. Except as disclosed on the attached
Litigation Schedule, to the best of Seller's knowledge, the Business is not
operated in violation of any applicable law, ordinance or regulation which
violation or the consequences thereof may materially and adversely affect the
ability of the Business to continue to operate as the Business currently is
operated. Except as disclosed on the Litigation Schedule, no litigation or
administrative or arbitration proceeding is pending or to the knowledge of the
Seller has been threatened against Seller with respect to, or in any way
affecting, the Business.
3.8 Brokerage. Except for the obligation of General Media, Inc., to MB
Asia Capital Corporation (which obligation the parties agree is an Excluded
Liability), there are and shall be no valid claims for brokerage commissions,
finders' fees or similar compensation in connection with the transactions
contemplated by this Agreement based on any arrangement or agreement to which
Seller is a party or to which Seller is subject.
3.9 Employees. To the knowledge of the Seller, as of the Closing Date, no
employee of Seller who is being employed by Buyer on the Closing Date (the names
of which employees
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Buyer shall communicate to Seller at least 5 business days prior to the Closing
Date) had any plans to terminate employment with Seller prior to the Closing
Date. Seller has no material labor relations problems with the employees of
Seller who are to be employed by Buyer on the Closing Date. Neither the Seller,
nor, to Seller's knowledge, any of its employees to be employed by Buyer on the
Closing Date are subject to any non-compete, nondisclosure, confidentiality,
employment, consulting or other agreement or judgment, decree or order of any
court or administrative agency, relating to, affecting or in conflict with the
present business activities of Seller or such person's duties to Seller, except
for agreements between Seller and its present and former employees. Seller has
not received any notice in writing alleging that any violation of any such
agreements has occurred.
3.10 Seller Financial Statements, Changes Since Latest Balance Sheet.
Seller has furnished to Buyer (x) the unaudited balance sheets of Seller as of
December 31, 1995, December 31, 1996 and December 31, 1997 and the unaudited
statements of income of Seller for the twelve month periods ended December 31,
1995, December 31, 1996 and December 31, 1997, and (y) the unaudited balance
sheet of Seller as of September 30,1998, which balance sheet is dated October
31, 1998 (the "Latest Balance Sheet") and the unaudited statement of income for
Seller for the nine month period ended September 30, 1998. Each of the foregoing
financial statements (the "Seller Financial Statements") (including in all cases
the notes thereto, if any) is consistent with the books and records of Seller
(which, in turn, are accurate and complete in all material respects) and present
fairly in all material respects the financial condition, results of operations
and cash flows of Seller in accordance with GAAP applied on a consistent basis
as of the dates and for the periods set forth therein, and in the case of the
Latest Balance Sheet subject to the absence of footnote disclosures and subject
to changes resulting from normal year-end adjustments for recurring accruals
(none of which would, alone or in the aggregate, have a material adverse effect
on the financial condition or operating results of Seller.) Since the date of
the Latest Balance Sheet, there has not been, to the knowledge of Seller, any
material adverse change in the financial condition or results of operations of
Seller (other than changes occurring in the ordinary course of its business
which, both individually and in the aggregate, have not been materially
adverse).
3.11 Absence of Certain Developments. Except as expressly contemplated by
this Agreement or the transactions contemplated hereby or as set forth on the
attached Developments Schedule, since the date of the Latest Balance Sheet,
Seller has not:
(a) borrowed any amount or incurred or become subject to any, material
liabilities (in each case, with respect to the Business), except current
liabilities incurred in the ordinary course of business consistent with past
practice;
(b) mortgaged or pledged any of its properties or assets or subjected them
to any Lien, except for Permitted Liens;
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(c) sold, assigned, transferred, leased, licensed or otherwise encumbered
any of its tangible assets, except in the ordinary course of business consistent
with past practice, or canceled any material debts or claims;
(d) sold, assigned, transferred, leased, licensed or otherwise encumbered
any Intellectual Property Rights or other intangible assets, or to the knowledge
of Seller, abandoned or permitted to lapse any Intellectual Property Rights;
(e) with respect to any employees of Seller which Buyer notifies Seller
that it intends to hire on the Closing Date, made or granted any bonus (other
than stay bonuses to be paid by Seller at Closing) or any wage or salary
increase (except as required by pre-existing contracts described on the attached
Contracts Schedule or except in the case of ordinary course increases of not
more than 10% in the aggregate with respect to any such employee) or made or
granted any increase in any employee benefit plan or arrangement or amended or
terminated any existing employee benefit plan or arrangement or adopted any new
employee benefit plan or arrangement except any such increase, amendment or
termination effecting Seller's employees generally;
(f) suffered any extraordinary losses or waived any rights of material
value (whether ordinary course of business or consistent with past practice) in
excess of $25,000 in aggregate;
(g) made commitments for capital expenditures with respect to the Business
in excess of $25,000 in the aggregate;
(h) delayed or postponed the payment of any accounts payable or any other
liability, or obligation or agreed or negotiated with any party to extend the
payment date of any accounts payable or accelerated the collection of any
accounts or notes receivable, except in the ordinary course of business;
(i) suffered any damage, destruction or casualty loss with respect to the
Business exceeding $25,000 in the aggregate, whether or not covered by
insurance;
(j) made any change in any method of accounting or accounting policies
(including without limitation with respect to the collection of accounts
receivable), other than those required by GAAP which have been disclosed in
writing to Buyer;
(k) entered into any agreement or arrangement prohibiting or restricting
it from freely engaging in, or otherwise restricting the conduct of the
Business;
(l) entered into any contract other than in the ordinary course of
business consistent with past practice, or materially changed any business
practice;
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(m) delayed, postponed, canceled or modified the production and execution
of any subscriber direct mail or renewal campaigns which Seller had initiated
with respect to the Business; or
(n) agreed, whether orally or in writing, to do any of the foregoing.
3.12 Environmental and Safety Matters.
(a) Seller has not received any written notice, report or information
regarding any actual violation of Environmental and Safety Requirements or any
liabilities relating to it or its facilities (in each case only with respect to
the Purchased Assets) arising under Environmental and Safety Requirements.
(b) To the knowledge of Seller, none of the following exists at any
property or facility owned, occupied or operated by Seller in connection with
the operation of the Purchased Assets: underground storage tanks;
asbestos-containing material in any form or condition; materials or equipment
containing polychlorinated biphenyls; or landfills, surface impoundments or
other disposal areas.
(c) Seller has not treated, stored, disposed of, arranged for or permitted
the disposal of, transported, handled or released any hazardous substance or
owned, occupied or operated any facility or property (and to the knowledge of
the Seller, no such property or facility is contaminated by any such substance)
(in each case only with respect to the operation of the Purchased Assets) in a
manner that has given or could give rise to any liabilities (including any
liability for response costs, corrective action costs, personal injury, natural
resource damages, property damage or attorneys fees or any investigative,
corrective or remedial obligations) pursuant to CERCLA or any other
Environmental or Safety Requirements.
(d) Seller has not, either expressly or to the knowledge of the Seller by
operation of law, assumed or undertaken any liability or corrective,
investigatory or remedial obligation of any other Person relating to any
Environmental or Safety Requirements with respect to the Purchased Assets.
(e) To the knowledge of the Seller, no environmental lien has been
attached to any of the Purchased Assets.
3.13 Contracts and Commitments.
(a) Except as expressly contemplated by this Agreement or as set forth on
the attached Contracts Schedule Seller is not a party to or bound by any of the
following whether written or oral which relate to either an Assumed Liability or
a Purchased Asset:
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(i) pension, profit sharing, stock option, employee stock purchase
or other plan or arrangement providing for deferred or other compensation
to employees or any other employee benefit plan, arrangement or practice,
whether formal or informal;
(ii) collective bargaining agreement or any other contract with any
labor union, or severance agreements, programs, policies or arrangements;
(iii) any written management agreement, contract for the employment
of any officer, individual employee or other Person on a full-time,
part-time, consulting or other basis providing annual cash or other
compensation in excess of $25,000 annually or providing for the payment of
any cash or other compensation or benefits upon the consummation of the
transactions contemplated hereby;
(iv) lease or agreement under which Seller is lessee of or holds or
operates any property, real or personal, owned by any other Person, except
for any lease of personal property under which the aggregate annual rental
payments do not exceed $25,000;
(v) lease or agreement under which Seller is lessor and which
permits any third party to hold or operate any property, real or personal,
owned or controlled by Seller;
(vi) license or royalty agreements;
(vii) nondisclosure or confidentiality agreements;
(viii) local service agreements (including cleaning, guard service,
lawn and snow removal) and maintenance agreements (including vehicle and
equipment maintenance agreements) involving annual payments in excess of
$25,000;
(ix) contract or group of related contracts with the same party or
group of affiliated parties for the purchase of raw materials,
commodities, supplies, products, equipment or other personal property or
for the receipt of services under which the undelivered balance of such
products and services has a selling price in excess of $25,000;
(x) contract or group of related contracts with the same party or
group of affiliated parties for the sale of raw materials, commodities,
supplies, products or other personal property or for the furnishing of
services under which the undelivered balance of such products or services
due from the Seller has a selling price in excess of $25,000;
(xi) other contract or group of related contracts with the same
party or group of affiliated parties continuing over a period of more than
six months from the date or dates thereof, not terminable by Seller upon
30 days or less notice without penalty or involving more than $25,000;
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(xii) contract or group of related contracts requiring the payment
of any fee, penalty or other amount by Seller in the event of any failure
to perform or late performance of such contract or contracts by Seller;
(xiii) contract relating to the marketing, sale, advertising or
promotion of its products which requires payments in excess of $25,000 per
year;
(xiv) assignment, license (other than implied licenses to
suppliers), indemnification or other agreement with respect to any
intangible property (including any Intellectual Property Rights);
(xv) broker, agent, sales representative, sales or distribution
agreement or agreement relating to the export and/or import of any goods
or equipment;
(xvi) non-competition agreement prohibiting Seller from freely
engaging in any business or competing anywhere in the world; or
(xvii) other agreement which is material to its operation or
involves an annual consideration in excess of $50,000, whether or not in
the ordinary course of business.
(b) To the knowledge of the Seller, all of the contracts, agreements and
instruments set forth or required to be set forth on the attached Contracts
Schedule to be assumed by Buyer are as against Seller valid, binding and
enforceable in accordance with their respective terms. Except as set forth on
the Contracts Schedule or as a result of the consummation of the transactions
contemplated hereby, Seller, to its knowledge, has performed all material
obligations required to be performed by it and is not in default under or in
breach of nor in receipt of any claim of default or breach under any contract,
agreement or instrument to which Seller is subject and which is to be assumed by
Buyer; to the knowledge of Seller, no event has occurred which with the passage
of time or the giving of notice or both would result in a default, breach or
event of noncompliance by Seller under any material contract, agreement or
instrument to which Seller is subject and which is to be assumed by Buyer; and
Seller has no knowledge of any breach or cancellation by the other parties to
any material contract, agreement, instrument or commitment to which it is a
party and which is to be assumed by Buyer.
(c) Buyer's special counsel has been supplied with a true and correct copy
of each of the written instruments, plans, contracts and agreements and an
accurate description of each of the oral arrangements, contracts and agreements
which are referred to on the attached Contracts Schedule and which is to be
assumed by Buyer, together with all amendments, waivers or other changes
thereto.
3.14 Intellectual Property Rights.
(a) The attached Intellectual Property Schedule contains a complete and
accurate list of all (a) patented or registered Intellectual Property Rights
owned or, to Seller's knowledge,
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used by Seller, and (b) pending patent applications and applications for other
registrations of Intellectual Property Rights filed by or on behalf of Seller.
The Intellectual Property Schedule also contains a complete and accurate list of
all written licenses and other rights granted by Seller to any third party with
respect to any Intellectual Property Rights and all written licenses and other
rights granted by any third party to Seller with respect to any Intellectual
Property Rights, in each case identifying the subject Intellectual Property
Rights. Except as set forth on the Intellectual Property Schedule, no loss or
expiration of any Intellectual Property Right is pending or, to the knowledge of
the Seller, threatened. Seller has taken commercially reasonable steps to
maintain and protect the Intellectual Property Rights which it owns and uses.
(b) Except as set forth on the Intellectual Property Schedule, (i) there
have been no claims made, or to the knowledge of the Seller, threatened against
Seller asserting the invalidity, misuse or unenforceability of any of the
material Intellectual Property Rights owned or used by Seller, and (ii) Seller
has not received any notices of any infringement or misappropriation by, or
conflict with, any third party with respect to any Intellectual Property Rights
(including any demand or request that Seller license any rights from a third
party).
(c) To the knowledge of the Seller, the conduct of Seller's businesses has
not infringed, misappropriated or conflicted with and does not infringe,
misappropriate or conflict with any material Intellectual Property Rights of
other Persons.
(d) To the knowledge of the Seller, the transactions contemplated by this
Agreement will have no material adverse effect on Seller's right, title or
interest in and to the Intellectual Property Rights listed on the Intellectual
Property Schedule and all of such Intellectual Property Rights shall be owned or
available for use by Buyer in accordance with the terms of any lease, license or
other right granted to Seller.
3.15 Affiliated Transactions. Except as set forth on the attached
Affiliated Transactions Schedule, no officer, director, shareholder, or
Affiliate of Seller or, to Seller's knowledge, any individual related by blood,
marriage or adoption to any such individual or any entity in which any such
Person or individual owns any beneficial interest, is a party to any agreement,
contract, commitment or transaction with Seller or has any material interest in
any material property used by Seller with respect to the Business (including any
Intellectual Property Rights).
3.16 Advertisers. Except as set forth on the attached Advertisers
Schedule, Seller has not received any written notice from any material
advertiser to the effect that such advertiser will stop, materially decrease the
rate of, or materially change the terms (whether related to payment, price or
otherwise) with respect to, purchasing advertising space from Seller (with
respect to the Magazines) (whether as a result of the consummation of the
transactions contemplated hereby, or otherwise). The Advertisers Schedule sets
forth the top ten (10) advertisers (by dollar volume) with respect to the
Magazines for the calendar years ended December 31, 1996, December 31, 1997 and
December 31, 1998.
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Section 4. Representations and Warranties of the Buyer. To induce Seller
to enter into this Agreement and to consummate the transactions contemplated
hereunder, Buyer represents and warrants to Seller as follows (unless otherwise
stated in the following representations and warranties, all such representations
and warranties shall be true and correct as of the date hereof and as of the
Closing and shall survive the Closing).
4.1 Organization. Buyer is a Delaware corporation, duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
all requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as now being conducted, and is duly
qualified and in good standing to do business in each jurisdiction in 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.
4.2 Authority; Consents and Approvals; No Violation. Buyer has the full
corporate power and authority to execute and deliver this Agreement and all
other agreements, instruments or other documents executed by Buyer in connection
with this Agreement (the "Buyer Documents") and to perform its obligation and
consummate the transactions contemplated hereunder and thereunder. The execution
and delivery of this Agreement and the other Buyer Documents and the
consummation of the transactions contemplated hereby and thereby have been duly
authorized by Buyer, and no other corporate proceeding on the part of Buyer is
necessary to authorize such agreements or such transactions. This Agreement and
each of the other Buyer Documents has been (or upon Closing will be) duly and
validly executed and delivered by Buyer and constitutes a valid and binding
obligation of Buyer except to the extent that the binding nature thereof may be
subject to the limitations which might result from bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to creditors' rights
now or thereafter in effect, and except for the limitations on the remedy of
specific performance and other forms of equitable relief. Except as set forth in
item 2 of the Permits Schedule 3.2, no permit, authorization, consent or
approval of any public body or authority within the United States is necessary
for the consummation by Buyer of the transactions contemplated hereunder. The
execution and delivery of this Agreement and the other Buyer Documents and the
consummation of the transactions contemplated hereunder and thereunder, will not
violate any provision of Buyer's Certificate of Incorporation or by-laws, any
statute, rule or regulation, any order or decree of any public body or authority
by which Buyer 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 Buyer is a
party, or by which it or any of its properties is bound, and which is material
to the business of Buyer taken as a whole.
4.3 Broker. Buyer has not engaged any agent, broker or other Person nor is
any Person acting pursuant to the authority or on behalf of Buyer, who may be
entitled to any commission, finder's or other fee in connection with this
Agreement or the transactions contemplated hereunder.
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Section 5. Additional Agreements of Seller and Buyer. Seller and Buyer
covenant and agree, as follows:
5.1 Access to Properties and Records. Seller shall permit Buyer and its
representatives (at Buyer's sole cost and expense), from and after the date of
execution of this Agreement (including without limitation in connection with
Buyer's review and analysis of the Closing Balance Sheet pursuant to Section 1.6
above), upon adequate notice to Seller, reasonable access during normal business
hours to all of the properties, books, contracts, documents and records of
Seller relating to the Business, and upon approval of Seller's chief financial
officer, the opportunity to inspect, copy and question appropriate employees of
Seller concerning such books and records, to meet with employees concerning
their possible employment by Buyer and to otherwise continue to make reasonable
investigation of Seller, the Business, and the Purchased Assets, and to obtain
from Seller and its representatives any additional available financial
statements of, and all reasonable information with respect to, the Business that
Buyer or its representatives may request.
5.2 Conduct of Business Pending the Closing. Until the Closing, Seller
will preserve the business organization intact and will use reasonable efforts
to retain all present key employees. Except as otherwise permitted or
contemplated by this Agreement or as consented to by Buyer in writing, and to
the extent within Seller's reasonable control, until the Closing Seller shall
not take any of the actions set forth in Section 3.11 above, and the Business
will otherwise be conducted only in the ordinary course and in continued
compliance with all applicable laws, regulations and administrative orders of
any state or municipality the noncompliance with which could, individually or in
the aggregate, have a material adverse effect upon the Business. Furthermore,
consistent with conducting the Business in accordance with good business
judgment, Seller shall use commercially reasonable efforts to keep available to
the Business the goodwill of suppliers, advertisers, customers and others having
business relationships with the Business and Seller 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 inducing any of the foregoing persons to
terminate an association with Buyer or the Business, except to the extent that
any of the foregoing will not be hired or engaged by the Buyer or are not
included within the Purchased Assets.
5.3 Further Transfers; Transition Assistance.
(a) Seller and Buyer shall each execute and deliver such further
instruments of conveyance and transfer and take such additional action as the
other may reasonably request to effect, consummate, confirm or evidence the
transfer to Buyer of the Purchased Assets, the assumption by Buyer of the
Assumed Liabilities (including with respect to obtaining and maintaining all
licenses, permits, authorizations, accreditations and consents necessary or
desirable in connection with the conduct by Buyer of the Business), and Seller
shall, at Buyer's expense, execute such reasonable documents as may be necessary
to assist Buyer in preserving or perfecting its rights in the Purchased Assets
and its ability to conduct the Business. Without
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limiting the generality of the foregoing, Seller and Buyer agree to cooperate
with each other and to provide each other with all information and documentation
reasonably necessary to permit the preparation and filing of all federal, state,
local, and other tax returns with respect to the Business; provided that each
party shall reimburse the other party, for such other party's reasonable
out-of-pocket expenses in connection therewith. The Seller agrees that
subsequent to the Closing it shall refer all customer inquiries with respect to
the Business to Buyer.
5.4 Discharge of Liabilities. Since the date of the Latest Balance Sheet,
Seller has conducted (and Seller shall continue to conduct through the Closing
Date) the Business in a reasonable and prudent manner and shall pay all accounts
payable and collect accounts receivable in the ordinary course of business,
consistent with past practices. From and after the Closing, Seller shall pay all
of Seller's debts, obligations and other liabilities existing as of the Closing
Date (other than the Assumed Liabilities) in a manner consistent with the usual
and ordinary course of Seller's Business as such existed immediately prior to
the Closing and in accordance with past custom and practice.
5.5 Certain Payments. Seller shall pay all sales and use Taxes resulting
from the purchase and sale contemplated hereunder and Buyer shall pay all fees
required to be paid by the parties hereto in connection with the filing under
the HSR Act.
Section 6. Remedies for Breach of this Agreement.
6.1 Survival of Representations and Warranties. All of the representations
and warranties of Buyer and Seller contained in this Agreement shall survive the
Closing and continue in full force and effect for a period of twenty-four (24)
months after the Closing and shall in no event be affected by any investigation,
inquiry or examination made for or on behalf of Buyer, except that Section 3.1
[Organization], Section 3.2 [Authority; Consents and Approvals; No Violation],
and Section 3.6 [Taxes] shall survive until the expiration of the applicable
statute of limitations.
6.2 Indemnification Provisions for Benefit of the Buyer Group. In addition
to any other right or remedy available to the Buyer Group (as defined below) at
law or in equity, the Seller and General Media, Inc. shall jointly and severally
indemnify Buyer and its officers, employees and Affiliates (collectively, the
"Buyer Group") against and hold them harmless from, and pay on behalf of or
reimburse them as and when incurred for, any Adverse Consequences they may
suffer, sustain or become subject to as the result of, arising out of, relating
to, or caused by the breach or non-fulfillment by the Seller of any
representation, warranty, covenant or agreement contained in this Agreement
(including any obligation with respect to the Excluded Liabilities), any other
Seller Document or any other instrument or document furnished to Buyer by Seller
pursuant to any Seller Document. Notwithstanding anything to the contrary
contained herein, the Seller shall not be required to indemnify the Buyer Group
with respect to any Adverse Consequence to the extent arising from a breach of
the representations or warranties contained in Section 3 hereof or any covenant
or agreement of the Seller unless Buyer gives Seller written notice of such
breach (x) prior to the expiration of twenty-four (24) months after
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the Closing Date, except that this clause (x) shall not apply to any breach of
any representation or warranty made in Section 3.1 [Organization]; Section 3.2
[Authority; Consents and Approvals; No Violation]; and Section 3.6 [Taxes]
hereof, and (y) prior to the expiration of the relevant time limit for
initiating a claim or commencing a proceeding under the statute of limitations
of the applicable law, in the case of any breach of any representation or
warranty made in Section 3.1 [Organization]; Section 3.2 [Authority; Consents
and Approvals; No Violation]; and Section 3.6 [Taxes] hereof.
6.3 Indemnification Provisions for Benefit of Seller. In addition to any
right and remedy available to the Seller Group (as defined below), Buyer shall
indemnify Seller and its officers, employees and Affiliates (collectively, the
"Seller Group") and hold it harmless against and pay on behalf of or reimburse
it as and when incurred for, any Adverse Consequences they may suffer, sustain
or become subject to as the result of, arising out of, relating to, or caused by
a breach or nonfulfillment by Buyer of any representation, warranty, covenant or
agreement contained in this Agreement, any Buyer Document or any certificate
delivered to Seller by Buyer pursuant to any Buyer Document. Notwithstanding
anything to the contrary contained herein, Buyer shall not be required to
indemnify Seller with respect to any Adverse Consequence related to any breach
of the representations or warranties contained in Section 4 hereof or any
covenant or agreement of the Buyer unless Seller gives Buyer written notice of
such breach prior to the expiration of twenty-four (24) months after the Closing
Date.
6.4 Matters Involving Third Parties.
(a) If any third party shall notify any Party (the "Indemnified Party")
with respect to any matter (a "Third Party Claim") which may give rise to a
claim for indemnification against any other Party (the "Indemnifying Party")
under this Section 6, then the Indemnified Party shall promptly notify the
Indemnifying Party thereof in writing; provided, however, that no delay on the
part of the Indemnified Party in notifying any Indemnifying Party shall relieve
the Indemnifying Party from any obligation hereunder unless (and then solely to
the extent) the Indemnifying Party thereby is prejudiced.
(b) Any Indemnifying Party will have the right to defend the Indemnified
Party against the Third Party Claim with counsel of its choice reasonably
satisfactory to the Indemnified Party so long as (i) the Indemnifying Party
notifies the Indemnified Party in writing within 15 days after the Indemnified
Party has given notice of the Third Party Claim to the Indemnifying Party that
the Indemnifying Party will indemnify the Indemnified Party in accordance with
this Section 6, (ii) the Third Party Claim involves primarily money damages and
does not seek an injunction or other equitable relief which would have a
materially adverse effect on the Buyer and (iii) the Indemnifying Party conducts
the defense of the Third Party Claim actively and diligently.
(c) So long as the Indemnifying Party is conducting the defense of the
Third Party Claim in accordance with Section 6.4(b) above, (i) the Indemnified
Party may at its own expense retain separate co-counsel and participate in the
defense of the Third Party Claim, (ii) the
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Indemnified Party will not consent to the entry of any judgment or enter into
any settlement with respect to the Third Party Claim without the prior written
consent of the Indemnifying Party (which consent shall not be withheld
unreasonably) and (iii) the Indemnifying Party will not consent to the entry of
any judgment or enter into any settlement with respect to the Third Party Claim
without the prior written consent of the Indemnified Party (which consent shall
not be withheld unreasonably).
(d) In the event any of the conditions in Section 6.4(b) above is or
becomes unsatisfied, however, (i) the Indemnified Party may defend against, and
consent to the entry of any judgment or enter into any settlement with respect
to, the Third Party Claim in any manner it may deem appropriate (and the
Indemnified Party need not consult with, or obtain any consent from, any
Indemnifying Party in connection therewith), (ii) the Indemnifying Parties will
reimburse the Indemnified Party promptly and periodically for the costs of
defending against the Third Party Claim (including attorneys' fees and
expenses), and (iii) the Indemnifying Parties will remain responsible to the
Indemnified Party in accordance with this Section 6.
6.5 Limitations on Amount. Seller will have no liability pursuant to
Section 6.2 with respect to any breach or non-fulfillment of any representation,
warranty, covenant or agreement until the total of all Adverse Consequences with
respect to such matters exceeds $500,000 and in no event will the Seller be
liable pursuant to Section 6.2 for the first $200,000 of Adverse Consequences or
for any amount of Adverse Consequences in excess of $10,000,000 in the
aggregate. Notwithstanding anything to the contrary contained herein, Seller's
liability for Adverse Consequences relating to, or caused by, any of the
Excluded Liabilities shall not be subject to any limitation on the maximum
amount.
Section 7. Covenant Not to Compete, Solicit.
7.1 The Seller agrees that during the period beginning on the Closing Date
and ending on the second anniversary of the Closing Date (the "Non-Competition
Period"), each Seller Entity shall not, directly or indirectly, either for
itself or for any other Person, permit its name to be used by or participate in
the business of (i) publishing any periodical or other document identical or
similar to the Magazines or any similar automotive magazine published by Buyer
during the Non-Competition Period anywhere in the United States. For purposes of
this Agreement, the term "participate" includes any direct or indirect interest
in any enterprise, whether as an officer, director, employee, partner, sole
proprietor, agent, representative, independent contractor, consultant,
franchiser, franchisee, creditor, owner or otherwise; provided that the term
"participate" shall not include ownership of less than 2% of the stock of a
publicly held corporation whose stock is traded on a national securities
exchange or in the over-the-counter market. The Seller agrees that this covenant
is reasonable with respect to its duration, geographical area and scope.
7.2 During the Non-Competition Period, Seller agrees that none of the
Seller Entities shall (i) induce or attempt to induce any employee of Seller
hired by Buyer in connection with this transaction to leave his or her employ,
or in any way interfere with the relationship between
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Buyer and any such employee, (ii) hire any person who was formerly an employee
of the Seller and hired by the Buyer in connection with the transaction
contemplated herein at any time during the Non-Competition Period without the
express prior written consent of Buyer, which consent shall not be unreasonably
refused or withheld or (iii) induce or attempt to induce any supplier, licensee,
licensor, franchisee or other business relationship of Buyer acquired from
Seller in connection with the transactions contemplated herein to cease doing
business with it or in any way interfere with the relationship between Buyer and
any such person or business relationship (including without limitation, making
any negative statements or communications about Buyer, its Affiliates or its
subsidiaries).
7.3 The Seller hereby agrees and acknowledges that Buyer has protectable
interests (in the form of trade secrets, strategy, customer lists, etc.)
relating to the Business and that Buyer would suffer irreparable harm from a
breach by any Seller Entity of any of the covenants or agreements contained in
this Section 7. In the event of an alleged or threatened breach by any Seller
Entity of any of the provisions of this Section 7, Buyer or its successors or
assigns may, in addition to all other rights and remedies existing in its favor,
apply to any court of competent jurisdiction for specific performance and/or
injunctive or other relief in order to enforce or prevent any violations of the
provisions hereof. Seller agrees that these restrictions are reasonable.
7.4 Seller agrees that the covenants made in this Section 7 shall be
construed as an agreement independent of any other provision of this Agreement
and shall survive any order of a court of competent jurisdiction terminating any
other provision of this Agreement.
Section 8. Definitions. Wherever used in this Agreement the following
terms and phrases have the following respective meanings:
"Adverse Consequences" shall mean any and all damages, losses, claims,
liabilities, costs and expenses (including, without limitation, accountant's,
attorney's and third parties' fees).
"Affiliate" shall mean, with respect to any Person, (i) each Person that,
directly or indirectly, owns or controls, whether beneficially, or as a trustee,
guardian or other fiduciary, 5% or more of the stock having ordinary voting
power in the election of directors of such Person, (ii) each Person that
controls, is controlled by or is under common control with such Person or any
Affiliate of such Person, and (iii) each of such Person's officers, directors,
joint ventures and partners. For the purpose of this definition, "control" of a
Person shall mean the possession, directly or indirectly, of the power to direct
or cause the direction of its management or policies, whether through the
ownership or voting securities, by contract or otherwise.
"Environmental Requirements" means all federal, state, local and foreign
statutes, regulations, ordinances and other provisions having the force or
effect of law, all judicial and administrative orders and determination, all
contractual obligations concerning pollution or protection of the environment,
including without limitations all those relating to the presence, use,
production, generation, handling, transportation, treatment, storage, disposal,
distribution,
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labeling, testing, processing, discharge, release, threatened release, control,
or cleanup of any hazardous materials, substances or wastes, chemical substances
or mixtures, pesticides, pollutants, contaminants, toxic chemicals, petroleum
products or by-products, asbestos, polychlorinated biphenyl's, noise or
radiation.
"GAAP" means generally accepted accounting principles in the United States
as then in effect.
"Intellectual Property Rights" means all of the following which are owned
by, or issued or licensed to Seller and which are used in the Business, together
with all income, royalties, damages and payments thereunder due and payable
after the Closing Date (including such damages and payments for present or
future infringements or misappropriations thereof, the right to sue and recover
for infringements or misappropriations thereof by third parties and any and all
corresponding rights that, now or hereafter, may be secured throughout the
world): patents, patent applications, and any reissue, continuation,
continuation-in-part, revision, extension or reexamination thereof, trademarks,
service marks, trade dress, logos and trade names, together with all goodwill
associated therewith (including without limitation, the trademarks and trade
names "Open Wheel Magazine", "Four Wheeler Magazine", "Drag Racing Monthly" and
"Stock Car Racing Magazine", and all translations, adaptations, derivations and
combinations of the foregoing and all logos related to the foregoing, copyrights
and copyrighted works; mask works; and all registrations, applications and
renewals for any of the foregoing; trade secrets and confidential and
proprietary information (including ideas, formulae, recipes, compositions,
know-how, related processes and techniques, research and development
information, drawings, specifications, designs, plans, proposals and technical
data and manuals) and computer software (including data and related
documentation); together with all associated goodwill with respect thereto and
all related books, records, drawings or other indicia, however evidenced, in
each case including the items set forth on the attached Intellectual Property
Schedule, excluding the corporate name and trademark "General Media" or any
variation thereof.
"Liens" means any mortgage, pledge, security, interest, encumbrance, lien
or charge of any kind, including without limitation, any conditional sale or
other title retention agreement, any lease in the nature thereof and the filing
of or agreement to give any financing statement under the Uniform Commercial
Code of any jurisdiction and including any lien or charge arising by statute or
other laws, which secures the payment of a debt (including without limitation,
any Tax) or the performance of an obligation.
"Net Working Capital" means the amount by which current assets included
within the Purchased Assets exceeds current liabilities included within the
Assumed Liabilities (excluding for purposes of such determination, the amount of
deferred subscription revenues with respect to the Magazines) reflected on the
Closing Balance Sheet.
"Permitted Liens" means (i) liens securing the obligations of Seller
reflected as liabilities on the Closing Balance Sheet, to the extent not
satisfied after such date, and expressly assumed by Buyer pursuant to Section
1.3(a) hereof, and (ii) other imperfections of title, restrictions or
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encumbrances, if any, which imperfections, restrictions or encumbrances, do not,
individually or in the aggregate, impair the continued use and operation of the
Purchased Assets and do not affect the merchantability of the title to the
Purchased Assets and (iii) the licensor, franchiser or grantor rights under any
lease, license or contract right.
"Person" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization and a Government Entity or any
department, agency or political subdivision thereof.
"Post-Closing Event" means the sale of any magazine, advertising or other
product with respect to which the following occurs after the Closing Date:
(i) the "on-sale" date of such issue of any of the Magazines;
(ii) the "air" date of the broadcast of the television program "Four
Wheeler"; or
(iii) the "fulfillment" date with respect to such other product of
the Seller.
"Pre-Closing Event" means the sale of any magazine, advertising or other
product with respect to which the following occurs on or before the Closing
Date:
(i) the "on-sale" date of such issue of any of the Magazines;
(ii) the "air" date of the broadcast of the television program "Four
Wheeler"; or
(iii) the "fulfillment" date with respect to such other product of
the Seller.
"Safety Requirements" means all federal, state, local and foreign
statutes, regulations, ordinances and other provisions having the force or
effect of law, all judicial and administrative orders and determinations, and
all contractual obligations concerning public health and safety and worker
health and safety.
"Seller Entities" shall mean the Seller and its direct and indirect
parents.
Section 9. Termination and Abandonment.
9.1 Methods of Termination. This Agreement may be terminated and abandoned
at any time prior to the Closing Date:
(i) by mutual written consent of Seller and Buyer;
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(ii) by Seller, upon notice in writing to Buyer, if any of the
conditions set forth in Section 2.2 hereof shall not have been met at
Closing or compliance has not been waived in writing by Seller;
(iii) by Buyer, upon notice in writing to Seller, if any of the
conditions set forth in Section 2.1 hereof shall not have been met at
Closing or compliance has not been waived in writing by Buyer; or
(iv) by any party hereto if the transactions under this Agreement
are not consummated by March 5, 1999 without default by either party;
provided, however, that the right to terminate this Agreement under this Section
9.1 shall not be available to a party if its failure to comply with and perform
its agreements, covenants and undertakings contained herein has been the cause
of, or resulted in, the failure of the closing to occur on or before the Closing
Date.
9.2 Effect of Termination.
(a) If this Agreement is terminated by mutual consent or under
circumstances where no party is liable to another with respect to such
termination or matters upon which such termination is based, then each party
shall bear its own costs and expenses with respect to this Agreement and the
transactions contemplated hereby.
(b) Notwithstanding anything else herein to the contrary, if this
Agreement is terminated on account of the breach hereof by any party, all
remedies, either under this Agreement or by law or otherwise afforded to any
party which shall include specific performance, shall be cumulative and not
alternative.
Section 10. Miscellaneous Agreements.
10.1 Good Faith Obligations. Buyer and Seller agree to proceed diligently,
and in good faith to consummate the transactions contemplated hereunder and
otherwise to cause the Closing to occur, and will use all reasonable efforts to
take or cause to be taken all actions, and to do or cause to be done all things
necessary, proper or advisable to cause the Closing to be consummated, provided,
however, that neither Buyer nor Seller shall be obligated to waive any
conditions to its obligations to close set forth in this Agreement.
10.2 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 other representatives.
Notwithstanding the foregoing, after the Closing, either party may issue a press
release and otherwise announce the transaction, provided that such party must
receive prior consent (which consent shall not be unreasonably withheld) of the
other party after giving such party a reasonable amount of time to review the
proposed press release. The
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covenants of the parties under this Section 10.2 shall continue from the date of
this Agreement and shall survive the Closing. Seller shall continue to maintain
and keep confidential all financial information relating to Buyer which Buyer
has provided to Seller. Buyer shall continue to maintain the confidentiality of
any financial information concerning Seller. Buyer shall continue to maintain
the confidentiality of any financial information concerning Seller.
10.3 Expenses. Each party shall bear its own costs and expenses, including
attorneys' and accountants' fees, in connection with the negotiation, due
diligence investigation, documentation and consummation of the sale and purchase
of the Purchased Assets and the other transactions contemplated by this
Agreement.
10.4 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 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
Purchased Assets and the Assumed Liabilities and title thereto.
10.5 Extension, Waiver. The parties hereto may extend the time for, or
waive the performance of, any of the obligations of any other party hereto,
waive any inaccuracies in the representations or warranties of any other party
hereto, or waive compliance by any other party hereto with any of the covenants
or conditions contained in this Agreement. However, any such extension or wavier
shall be in writing and signed by all of the parties hereto. No such waiver
shall operate or be construed as a waiver of any subsequent act or omission of
any party hereto.
10.6 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 telescope, with a copy
also to be given by first class United States mail, postage prepaid or by any
means permitted under subparagraphs (a) or (b) of this Section 10.6. Notices
shall be given to the parties at the following addresses:
(a) if to Seller:
General Media, Inc.
11 Penn Plaza
New York, New York 10001
Attention: Mr. Patrick Gavin
Executive Vice President & Chief Operating Officer
Facsimile: 212-702-6276
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with a copy to:
Laurence B. Sutter, Esq.
Senior Vice President & General Counsel
General Media, Inc.
11 Penn Plaza
New York, New York 10001
Facsimile: 212-702-6274
with a mandatory copy to:
Thelen Reid & Priest LLP
40 West 57th Street
New York, New York 10019-4097
Attention: Richard I. Solomon, Esq.
Facsimile: 212-603-2001
(b) if to Buyer:
EMAP Petersen, Inc.
6420 Wilshire Boulevard
Los Angeles, California 90048-5515
Attention: Richard S Willis
Executive Vice President
Facsimile: (323) 782-2526
with a mandatory copy to:
Kirkland & Ellis
200 East Randolph
Chicago, Illinois 60601
Attention: John A. Weissenbach, Esq.
Michael L. Newquist, Esq.
Facsimile: (312) 861-2200
10.7 Employee Benefits. Buyer does not assume, and Seller agrees to be
solely responsible for, any and all liabilities and obligations, including but
not limited to obligations to give notice relating to health care continuation
coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended to employees of Seller who are not hired by the Buyer which relate to,
arise out of, or are in connection with, this transaction or the events
contemplated by this Agreement. Seller shall be obligated to and shall give in a
timely manner all notices and take all action with respect to, the termination
by Seller of any of its employees not hired by Buyer as of the Closing Date or
termination of any employee benefit or retirement plan required by any law,
statute, ordinance or regulation, or any employment agreement or
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policy, and Seller shall make any severance or other payment due with respect to
or as a result of such termination to such employees.
10.8 Entire Agreement. This Agreement (including the exhibits and
schedules hereto) and the other Seller Documents and the other Buyer Documents
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 except that the
Confidentiality Agreement dated November 4, 1998, between Petersen Companies,
Inc. and General Media, Inc. shall remain in effect. This Agreement may be
modified or amended only by a written instrument executed by all parties hereto.
Notwithstanding the foregoing, in the event the Closing does not occur, any
prior agreement with respect to confidentiality of information furnished by any
party shall continue to be binding on all parties thereto.
10.9 Execution in Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same agreement.
10.10 Governing Law. THE LAW OF THE STATE OF NEW YORK SHALL GOVERN ALL
QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY, INTERPRETATION AND
ENFORCEABILITY OF THIS AGREEMENT AND THE EXHIBITS AND SCHEDULES HERETO, AND THE
PERFORMANCE OF THE OBLIGATIONS IMPOSED BY THIS AGREEMENT, WITHOUT GIVING EFFECT
TO ANY CHOICE OF LAW OR CONFLICT OF LAW RULES OR PROVISIONS (WHETHER OF THE
STATE OF NEW YORK OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF
THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF NEW YORK.
10.11 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
the other party 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 the other party hereto
and shall be subject to the other provisions of this Agreement with respect to
such schedule.
10.12 Construction and Interpretation. The Agreement is the result of
negotiations between the parties and their legal counsel. and the terms and
provisions hereof shall be interpreted and construed in accordance with their
usual and customary meanings. The parties each waive the application of any rule
of law which otherwise would be applicable in connection with the interpretation
and construction of this Agreement that ambiguous or conflicting terms or
provisions should be interpreted or construed against the party who, or whose
attorney, prepared the executed agreement or any earlier draft of same. The
headings of the paragraphs and sections of this Agreement are included for
purposes of convenience only and shall not affect the construction or
interpretation of any of its provisions.
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10.13 No Third Party Beneficiaries. This Agreement is for the sole benefit
of the parties hereto and their permitted successors and assigns, and nothing
herein expressed or implied shall give or be caused to give any Person (other
than the parties hereto and such successors and assigns) any legal or equitable
rights hereunder.
10.14 Assignment. This Agreement and all of the provisions hereof shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns (including all successors and assigns in the
event of a liquidation or dissolution of Seller), except that neither this
Agreement nor any of the rights, interests or obligations hereunder may be
assigned or delegated by either party without the prior written consent of the
other party hereto.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
GENERAL MEDIA AUTOMOTIVE GROUP, INC.
By: /s/ Robert C. Guccione
----------------------------------------
Robert C. Guccione
Chairman
EMAP PETERSEN, INC.
By: /s/ Richard S. Willis
----------------------------------------
Richard S. Willis
Executive Vice President
For the Purposes of Section 6 only.
GENERAL MEDIA, INC.
By: /s/ Robert C. Guccione
----------------------------------
Robert C. Guccione
Chairman
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