Exhibit 10.1
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT, dated as of August 24, 2004 (the "Agreement"),
by and among (i) Modern Holdings Incorporated, a Delaware corporation ("Buyer"),
and (ii) DAG Media, Inc., a New York corporation ("Seller").
W I T N E S S E T H
WHEREAS, Seller is the only stockholder of Blackbook Photography, Inc., a
New York corporation (the "Company");
WHEREAS, Seller wishes to sell its capital stock in the Company (the
"Stock") to Buyer and Buyer wishes to purchase such stock (the "Acquisition") on
the terms and subject to the conditions set forth herein; and
WHEREAS, the parties desire to make certain representations and warranties
and other agreements in connection with the Acquisition;
NOW, THEREFORE, Buyer and Seller hereby agree as follows:
Article 1
Definitions
1.1. Certain Matters of Construction. A reference to an Article, Section,
Exhibit or Schedule shall mean an Article of, a Section in, or Exhibit or
Schedule to, this Agreement unless otherwise expressly stated. The titles and
headings herein are for reference purposes only and shall not in any manner
limit the construction of this Agreement which shall be considered as a whole.
The words "include," "includes" and "including" when used herein shall be deemed
in each case to be followed by the words "without limitation."
1.2. Cross References. The following terms defined elsewhere in this
Agreement in the Sections set forth below shall have the respective meanings
therein defined:
Term Definition
---- ----------
Agreement Preamble
Acquisition Preamble
Affiliated Group Section 3.10
Buyer Preamble
Claim Notice Section 8.3
Closing Section 2.3
Code Section 3.11
Company Preamble
Company Balance Sheet Section 3.6
Company Common Stock Section 3.2
Company Contracts Section 3.20
Company Financial Statements Section 3.6
Company Proprietary Rights Section 3.17
Damages Section 8.2
Employee List Section 3.12
Encumbrances Section 3.15
ERISA Section 3.11
Escrow Agent Section 2.2
Escrow Agreement Section 8.6
Governmental Entity Section 3.5
Indemnification Escrow Amount Section 2.2
Indemnified Parties Section 8.2
Liabilities Section 3.7
Objection Notice Section 8.3
Permits Section 3.8
Pre-Closing Tax Period Section 6.12
Purchase Price Section 2.2
Xxxxx Escrow Amount Section 2.2
Seller Preamble
Seller Releasing Parties Section 6.11
Stock Preamble
Tax or Taxes Section 3.10
Tax Return Section 3.10
1.3. Certain Definitions. As used herein, the following terms shall have
the following meanings:
(a) Affiliate: with respect to any Person, any Person which,
directly or indirectly, controls, is controlled by, or is under common control
with, such Person.
(b) Cause: (i) conviction of or guilty plea to a felony, (ii)
commission of a fraudulent, illegal or dishonest act in the performance of
Executive's duties to the Company, as reasonably determined by the board of
directors of the Company, (iii) willful misconduct or gross negligence in the
performance of Executive's duties to the Company which reasonably could be
expected to be materially injurious to the business or operations of the Company
(monetarily or otherwise), or (iv) failure or refusal to attempt to perform his
duties to the Company if Executive does not cure such failure or refusal within
thirty (30) days after his receipt of written notice from the Company of such
failure (unless such act or omission, by its nature, may not be remedied, in
which case such notice shall not be required).
(c) Company Leases: each lease, sublease, license or other agreement
under which the Company uses, occupies or has the right to occupy any real
property or interest therein that (i) provides for aggregate future minimum
payments of $2,500 or more (ignoring any right of cancellation or termination)
or (ii) the cancellation or termination of which would have a Company Material
Adverse Effect.
(d) Company Material Adverse Effect: any change in or effect on the
business of the Company that is or could be expected to be materially adverse to
the business, results of operations or prospects of the Company.
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(e) Company Plans: all pension, profit sharing, retirement, deferred
compensation, welfare, legal services, medical, dental or other employee benefit
or health insurance plans, life insurance or other death benefit plans,
disability, stock option, stock purchase, stock compensation, bonus, vacation
pay, severance pay and other similar plans, programs or agreements, and every
material personnel policy, relating to any persons employed by the Company or in
which any person employed by the Company is eligible to participate and which is
currently maintained or that was maintained at any time in the last five
calendar years by the Company, Seller or any Affiliate of Seller.
(f) Control: (including with correlative meaning, controlled by and
under common control with): as used with respect to any Person, the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of such Person, whether through the ownership of voting
securities, by contract or otherwise.
(g) Environmental Laws: any and all statutes, regulations and
ordinances relating to the protection of public health, safety or the
environment.
(h) Executive: Xxx Xxxxx, President of the Company.
(i) GAAP: United States generally accepted accounting principles.
(j) Permitted Encumbrances: (i) liens for current taxes and other
statutory liens and trusts not yet due and payable, (ii) liens of carriers,
warehousemen, landlords and mechanics and other similar liens that were incurred
in the ordinary course of business and secure obligations not yet due or payable
and (iii) imperfections of title or other minor encumbrances that do not
materially detract from the value or impair the use of the asset subject thereto
or impair the operations of the Company.
(k) Person: an individual, a corporation, an association, a
partnership, an estate, a trust and any other entity or organization.
(l) Publications: publications created or distributed by or for the
Company, including the publications entitled Black Book Photography (also known
as The Black Book), Black Book Illustration, AR100 Award Show Book and The
Complete Creative Industry Directory (also known as The Creative Industry
Directory or The Complete Industry Directory).
(m) Subsidiary: any corporation, association, or other business
entity a majority (by number of votes on the election of directors or persons
holding positions with similar responsibilities) of the shares of capital stock
(or other voting interests) of which is owned by Buyer, the Company or their
respective Subsidiaries, as the case may be.
(n) to the knowledge of Seller: the actual knowledge of the officers
and directors of Seller and the Company, after making due inquiry with respect
thereto.
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Article 2
The Acquisition
2.1. Sale and Purchase of Stock. At the Closing, Seller shall deliver and
sell to Buyer the Stock, free and clear of all Encumbrances, against payment of
the Purchase Price by Buyer in accordance with this Article 2.
2.2. Payment of Purchase Price. The purchase price for the Stock (the
"Purchase Price") shall be as follows:
(a) Payment. At Closing, Buyer will pay Seller a total of $2,125,000
by check or wire transfer.
(b) Escrow Amounts.
(i) Buyer will deposit the sum of $50,000 (the
"Indemnification Escrow Amount") into escrow at the Closing with Mellon Trust of
New England, N.A. (the "Escrow Agent") as security for the full and timely
payment and performance by the Company of its obligations under Section 8 of
this Agreement. Unless and except to the extent that such funds are to be repaid
to Buyer as provided in Section 8 of this Agreement or are subject to pending
claims under such section, such amounts shall be released from escrow and paid
to Seller upon the expiration of twelve (12) months from the Closing.
(ii) Buyer will also deposit the sum of $75,000 (the "Xxxxx
Escrow Amount") into escrow with the Escrow Agent at the Closing. The Xxxxx
Escrow Amount shall be immediately payable in full to Buyer in the event that
Executive resigns his employment with the Company for any reason or is dismissed
by the Company for Cause, in each case on or before the date that is twelve (12)
months from the Closing. Unless such amount is to be repaid to Buyer as provided
herein or is subject to a pending dispute under Section 8.4, such amount shall
be released from escrow and paid to Seller promptly after such date. The
parties' agreement herein with respect to the Xxxxx Escrow Amount constitutes
their reasonable estimate of the loss to Buyer if Executive should so resign or
be dismissed and is not a penalty.
2.3. Closing. The closing of the Acquisition (the "Closing") shall take
place on August 24, 2004 at 10:00 a.m. or at such other date and time as may be
mutually agreed to by the parties.
Article 3
Representations and Warranties of Seller
Seller represents and warrants to Buyer as follows:
3.1. Corporate Status of the Company. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the state of
New York, with the requisite corporate power to carry on its business as now
being conducted. The Company is duly qualified and licensed to do business and
is in good standing in all jurisdictions in which the nature of the business
transacted by it makes qualification necessary. All jurisdictions in which the
Company is qualified to do business are set forth on Schedule 3.1.
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3.2. Capital Stock.
(a) Authorized Stock of the Company. The authorized capital stock of
the Company consists of 1,000 shares of common stock, par value $0.001 ("Company
Common Stock"), of which 1,000 shares are issued and outstanding. The
outstanding shares of Company Common Stock are owned of record and beneficially
by Seller. All of the outstanding shares of Company Common Stock have been duly
authorized and validly issued, were not issued in violation of any person's
preemptive rights, and are fully paid and nonassessable.
(b) Options and Convertible Securities of the Company. There are no
outstanding subscriptions, options, warrants, conversion rights or other rights,
securities, agreements or commitments obligating the Company to issue, sell or
otherwise dispose of shares of its capital stock, or any securities or
obligations convertible into, or exercisable or exchangeable for, any shares of
its capital stock. There are no voting trusts or other agreements or
understandings to which the Company or any Seller is a party with respect to the
voting of the shares of Company Common Stock, and the Company is not a party to
or bound by any outstanding restrictions, options or other obligations,
agreements or commitments to sell, repurchase, redeem or acquire any outstanding
shares of Company Common Stock or other equity securities of the Company.
3.3. Subsidiaries. The Company does not have any Subsidiaries. Other than
as reflected in the Company Balance Sheet, the Company does not own, directly or
indirectly, any shares or other equity interest or securities in any business
organization, entity or enterprise.
3.4. Certificate of Incorporation, Bylaws, Directors and Officers. The
Company has delivered to Buyer true and correct copies of the certificate of
incorporation and bylaws of the Company, including all amendments thereto, as in
effect on the date hereof. The minute book of the Company contains accurate
records of all meetings and consents in lieu of meetings of the board of
directors of the Company (and any committees thereof, whether permanent or
temporary) and of its shareholders since the date of its incorporation, and such
records accurately reflect all transactions referred to in such minutes and
consents. The stock book of the Company accurately reflects record ownership of
the Company's capital stock. Buyer has been provided with a copy of or access to
such minute book and stock book. Schedule 3.4 hereto sets forth a list of the
directors and officers of the Company.
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3.5. Noncontravention. Neither the execution and delivery of this
Agreement by the Seller, nor the performance by Seller of its obligations
hereunder, nor the consummation by Seller of the transactions contemplated
hereby will (i) conflict with or result in a violation of any provision of the
certificate of incorporation or bylaws of the Company, (ii) with or without the
giving of notice or the lapse of time, or both, conflict with, or result in any
violation or breach of, or constitute a default under, or result in any right to
accelerate or result in the creation of any Encumbrance pursuant to, or right of
termination under, any provision of any note, mortgage, indenture, lease,
instrument or other agreement, Company Plan, permit, concession, grant,
franchise, license, judgment, order, decree, statute, ordinance, rule or
regulation to which the Company is a party or by which it or any of its assets
or properties is bound or which is applicable to it or any of its assets or
properties.
3.6. Financial Statements. The Company has previously furnished Buyer with
(a) accurate and complete copies of the audited balance sheet of the Company as
of December 31, 2003 and the statements of operations and cash flows of the
Company for the year then ended and (b) accurate and complete copies of the
unaudited balance sheet of the Company as of June 30, 2004 and the statements of
operations and cash flows of the Company for the six months then ended.
Collectively, the financial statements referred to in the immediately preceding
sentence are sometimes referred to herein as the "Company Financial Statements"
and the unaudited balance sheet of the Company as of June 30, 2004 is sometimes
referred to herein as the "Company Balance Sheet". Each of the balance sheets
included in the Company Financial Statements (including any related notes)
fairly presents in all material respects the financial position of the Company
as of its date, and the other statements included in the Company Financial
Statements (including any related notes) fairly present in all material respects
the results of operations, cash flows and shareholders' equity, as the case may
be, of the Company for the periods therein set forth, in each case in accordance
with GAAP consistently applied (except as otherwise stated therein).
3.7. Absence of Material Adverse Changes and Undisclosed Liabilities.
(a) Changes. Since the date of the Company Balance Sheet, the
Company has not suffered any Company Material Adverse Effect, nor has there
occurred or arisen any event, condition or state of facts of any character that
could reasonably be expected to result in a Company Material Adverse Effect.
Without limiting the generality of the foregoing, except as set forth on
Schedule 3.7(a), since the date of the Company Balance Sheet, the Company has
not:
(i) sold, leased, transferred or assigned any of its assets,
tangible or intangible, other than in the ordinary course of business;
(ii) accelerated, terminated, modified, or canceled any
contract, lease, sublease, license, or sublicense (or series of related
contracts, leases, subleases, licenses, and sublicenses) involving more
than $2,500 to which the Company is a party;
(iii) canceled, compromised, waived, or released any right or
claim (or series of related rights and claims) either involving more than
$2,500 or outside the ordinary course of business;
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(iv) experienced material damage, destruction, or loss
(whether or not covered by insurance) to its property (other than ordinary
wear and tear not caused by neglect);
(v) created or suffered to exist any Encumbrance (other than
Permitted Encumbrances) upon any of its assets, tangible or intangible;
(vi) issued, sold, otherwise disposed of or reacquired any of
its capital stock, or granted or reacquired any options, warrants, or
other rights to purchase or obtain (including upon conversion or exercise)
any of its capital stock, or any securities convertible or exchangeable
into any of its capital stock or otherwise changed its capital structure
or stock ownership in any way;
(vii) declared, set aside, or paid any dividend or
distribution with respect to its capital stock (whether in cash or in
kind) or redeemed, purchased, or otherwise acquired any of its capital
stock;
(viii) made or committed to make any capital expenditures or
entered into any other material transaction outside the ordinary course of
business or involving an expenditure in excess of $2,500;
(ix) amended or modified in any respect any employment
contract or arrangement or any profit sharing, bonus, incentive
compensation, severance, employee benefit, multiemployer plan or other
Company Plan;
(x) entered into any employment agreement or collective
bargaining agreement or increased the compensation of any of its
directors, officers, employees or consultants; or
(xi) committed (orally or in writing) to any of the foregoing.
(b) Liabilities. To the knowledge of Seller, the Company has no
liabilities or obligations, fixed, accrued, contingent or otherwise of the type
required to be disclosed in the Company's financial statements in accordance
with GAAP (collectively, "Liabilities"), that are not fully reflected or
provided for on, or disclosed in the notes to, the balance sheets included in
the Company Financial Statements, except (i) Liabilities incurred in the
ordinary course of business since the date of the Company Balance Sheet, none of
which individually or in the aggregate has had or could reasonably be expected
to have a Company Material Adverse Effect and (ii) Liabilities expressly
disclosed on the Schedules delivered hereunder. Schedule 3.7(b) hereto sets
forth an accurate and complete list of the Company's Liabilities as of the
Closing, including its accounts payable, and the full dollar amount of each such
Liability so listed, determined in accordance with GAAP.
3.8. Compliance with Applicable Law, Certificate and Bylaws. The Company
has all requisite licenses, permits and certificates (collectively, "Permits")
from all United States or foreign governmental or public bodies or authorities
(each a "Governmental Entity") necessary to conduct its business as currently
conducted, and to own, lease and operate its properties in the manner currently
held and operated. The Company is in compliance in all material respects with
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all the terms and conditions related to such Permits. There are no proceedings
in progress, pending or, to the knowledge of Seller, threatened, which may
result in revocation, cancellation, suspension, or any material adverse
modification of any of such Permits. To the knowledge of Seller, the business of
the Company is not being conducted in violation of any applicable law, statute,
ordinance, regulation, rule, judgment, decree, order, Permit, concession, grant
or other authorization of any Governmental Entity. The Company is not in default
or violation of any provision of its certificate of incorporation or its bylaws.
3.9. Litigation and Audits. Except as set forth on Schedule 3.9, there is
(a) no investigation by any Governmental Entity with respect to the Company
pending or, to the knowledge of Seller, threatened, nor has any Governmental
Entity indicated to the Company an intention to conduct the same; (b) no claim,
action, suit, arbitration or proceeding pending or, to the knowledge of Seller,
threatened against or involving the Company, or any of its assets or properties,
at law or in equity, or before any arbitrator or Governmental Entity; and (c) no
judgments, decrees, injunctions or orders of any Governmental Entity or
arbitrator outstanding against the Company.
3.10. Tax Matters.
(a) The Company has filed all Tax Returns that it was required to
file under applicable laws and regulations. Each Affiliated Group has filed all
material income Tax Returns that it was required to file for each taxable period
during which the Company was a member of the group. All such Tax Returns were
correct and complete (A) in all respects in so far as they relate to the Company
and (B) in all material respects in so far as they do not relate to the Company,
and have been prepared in substantial compliance with all applicable laws and
regulations. All Taxes due and owing by the Company (whether or not shown on any
Tax Return) have been paid. All material income Taxes owed by any Affiliated
Group (whether or not shown on any Tax Return) have been paid for each taxable
period during which the Company was a member of the group. The Company is not
currently the beneficiary of any extension of time within which to file any Tax
Return. No claim has ever been made by an authority in a jurisdiction where the
Company does not file Tax Returns that it is or may be subject to taxation by
that jurisdiction. There are no liens for Taxes (other than Taxes not yet due
and payable) upon any of the assets of the Company.
(b) The Company has withheld and paid all Taxes required to have
been withheld and paid in connection with any amounts paid or owing to any
employee, independent contractor, creditor, stockholder, or other third party.
(c) Neither Seller nor any director or officer (or employee
responsible for Tax matters) of the Company expects any authority to assess any
additional material Taxes against any Affiliated Group for any taxable period
during which the Company was a member of the group. No foreign, federal, state,
or local tax audits or administrative or judicial Tax proceedings are pending or
being conducted with respect to the Company. The Company has not received from
any foreign, federal, state, or local taxing
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authority (including jurisdictions where the Company has not filed Tax Returns)
any (i) written notice indicating an intent to open an audit or other review,
(ii) request for information related to Tax matters, or (iii) notice of
deficiency or proposed adjustment for any amount of Tax proposed, asserted, or
assessed by any taxing authority against the Company. There is no dispute or
claim concerning any material Tax liability of any Affiliated Group for any
taxable period during which the Company was a member of the group either (A)
claimed or raised by any authority in writing or (B) as to which Seller and the
directors and officers (and employees responsible for Tax matters) of Seller has
knowledge based upon personal contact with any agent of such authority. Except
as disclosed on Schedule 3.10(c), no Affiliated Group has waived any statute of
limitations in respect of any material Taxes or agreed to any extension of time
with respect to a material Tax assessment or deficiency for any taxable period
during which any of the Company was a member of the group. Schedule 3.10(c)
lists all federal, state, local, and foreign income Tax Returns filed with
respect to the Company for taxable periods ended on or after December 31, 2000,
indicates those Tax Returns that have been audited, and indicates those Tax
Returns that currently are the subject of audit. Seller has delivered to Buyer
correct and complete copies of all federal income Tax Returns, examination
reports, and statements of deficiencies assessed against or agreed to by the
Company filed or received since December 31, 2000.
(d) The Company has not filed a consent under Code ss.341(f)
concerning collapsible corporations. The Company is not a party to any
agreement, contract, arrangement or plan that has resulted or would result,
separately or in the aggregate, in the payment of (i) any "excess parachute
payment" within the meaning of Code ss.280G (or any corresponding provision of
state, local or foreign Tax law) and (ii) any amount that will not be fully
deductible as a result of Code 162(m) (or any corresponding provision of state,
local or foreign Tax law). The Company has not been a United States real
property holding corporation within the meaning of Code ss.897(c)(2) during the
applicable period specified in Code ss.897(c)(1)(A)(ii). The Company has not
been a member of an Affiliated Group filing a consolidated federal income Tax
Return other than a group the common parent of which is Seller. Seller has filed
a consolidated federal income Tax Return with the Company for the taxable year
immediately preceding the current taxable year. The Company does not have any
liability for the Taxes of any person other than the Company (A) under Reg.
ss.1.1502-6 (or any similar provision of state, local, or foreign law), (B) as a
transferee or successor, (C) by contract, or (D) otherwise.
(e) The unpaid Taxes of the Company (i) did not, as of June 30,
2004, exceed the reserve for Tax liability (rather than any reserve for deferred
Taxes established to reflect timing differences between book and Tax income) set
forth on the face of the Company Balance Sheet (rather than in any notes
thereto) and (ii) do not exceed that reserve as adjusted for the passage of time
through the date of the Closing in accordance with the past custom and practice
of the Company in filing its Tax Returns. Since the date of the Company Balance
Sheet, the Company has not incurred any liability for Taxes arising from
extraordinary gains or losses, as that term is used in GAAP, outside the
ordinary course of business consistent with past custom and practice.
(f) The Company has not distributed stock of another person, or has
had its stock distributed by another person, in a transaction that was purported
or intended to be governed in whole or in part by Code ss.355 or ss.361.
(g) Certain Definitions.
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(1) "Affiliated Group" means any affiliated group within the
meaning of Code ss.1504(a) or any similar group defined under a similar
provision of state, local or foreign laws.
(2) "Tax" or "Taxes" means any federal, state, local, or
foreign income, gross receipts, license, payroll, employment, excise,
severance, stamp, occupation, premium, windfall profits, environmental
(including taxes under Code ss.59A), customs duties, capital stock,
franchise, profits, withholding, social security (or similar),
unemployment, disability, real property, personal property, sales, use,
transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest,
penalty, or addition thereto, whether disputed or not and including any
obligations to indemnify or otherwise assume or succeed to the Tax
liability of any other person.
(3) "Tax Return" means any return, declaration, report, claim
for refund, or information return or statement relating to Taxes,
including any schedule or attachment thereto, and including any amendment
thereof.
3.11. Company Plans. The Company has no Company Plans other than those
listed on Schedule 3.11 hereto. Each Company Plan has been maintained, funded
and administered in accordance with the terms of such Company Plan and complies
in form and in operation in all material respects with the applicable
requirements of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), the Internal Revenue Code of 1986, as amended (the "Code") and all
other applicable laws. Each Company Plan that is intended to meet the
requirements of a "qualified plan" under Code ss. 401(a) has received a
favorable determination letter from the Internal Revenue Service. There is no
material pending or, to the knowledge of Seller, threatened litigation relating
to the Company Plans. The Company has not maintained, sponsored or contributed
to any Company Plan that is a "defined benefit plan" as defined in ERISA ss.
3(35).
3.12. Employment-Related Matters.
(a) Employee Payments. All salaries, wages, back pay, vacation pay,
bonuses, commissions and other compensation payable by the Company to the
employees of and consultants to the Company and any previous employees of or
consultants to the Company through the date of Closing, including any retention
bonus or other compensation payable in connection with the Closing, have been or
will be paid in full or waived in writing as of the date of the Closing.
(b) Employee List. The Company has heretofore delivered to Buyer a
correct and complete list (the "Employee List") containing the name of each
current employee of the Company, and each such employee's position, length of
service and current annual salary. No third party has asserted any claim, or, to
the knowledge of Seller, has any reasonable basis to assert any valid claim,
against the Company that either the continued employment by, or association
with, the Company or any of the present officers or employees of, or consultants
to, the Company contravenes any agreements or laws applicable to unfair
competition, trade secrets or proprietary information.
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(c) Labor Disputes and Compliance. The Company has not at any time
had, nor to the knowledge of Seller is there now threatened, any walkout,
strike, union activity, picketing, work slowdown or any other similar
occurrence. The Company has complied in all material respects with all
applicable laws, rules and regulations relating to the employment of labor,
including those relating to wages, hours and collective bargaining. The Company
has withheld all amounts required by law or agreement to be withheld from the
wages or salaries of its employees and it has paid all such amounts to the
appropriate governmental agency, insurer or other person in accordance with such
laws or agreements.
3.13. Environmental Laws. To the knowledge of Seller, the Company is in
compliance in all material respects with all applicable Environmental Laws. The
Company has not received any communication that alleges that the Company is not
in compliance in all respects with all applicable Environmental Laws in effect
on the date hereof.
3.14. No Broker's or Finder's Fees. Except as set forth on Schedule 3.14,
neither the Company nor Seller has paid or become obligated to pay any fee or
commission to any broker, finder, financial advisor or intermediary in
connection with the transactions contemplated by this Agreement.
3.15. Assets Other Than Real Property.
(a) Title. The Company has good and marketable title to all of the
tangible assets shown on the Company Balance Sheet and listed in Schedule
3.15(a), in each case, free and clear of any mortgage, pledge, lien, claim,
charge, security interest, lease or other encumbrance (collectively,
"Encumbrances"), except for (a) assets disposed of since the date of the Company
Balance Sheet in the ordinary course of business and in a manner consistent with
past practices and not material in amount, (b) liabilities, obligations and
Encumbrances reflected in the Company Balance Sheet or otherwise in the Company
Financial Statements, (c) Permitted Encumbrances, and (d) liabilities,
obligations and Encumbrances set forth on Schedule 3.7(b) hereto.
(b) Accounts Receivable. Schedule 3.15(b) sets forth an accurate and
complete list of the Company's accounts receivable as of the date hereof. All of
such receivables have arisen in the ordinary course of the Company's business
and to the knowledge of Seller are valid, collectible and payable in full in the
amounts shown on Schedule 3.15(b), net of the allowance for doubtful accounts
set forth on such Schedule, and subject to the Company's performance of any
related fulfillment obligation reflected on such Schedule. To the knowledge of
Seller, no account receivable is subject to any defense, counterclaim, set-off,
discount, dispute or condition of any nature, except as described in this
paragraph.
(c) Condition. All materials, equipment and personal property owned
by the Company and used in its business are in good operating condition and
repair.
3.16. Real Property. The Company does not own or have any interest in any
real property.
3.17. Intellectual Property.
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(a) Right to Intellectual Property. The Company owns, or has valid
and enforceable rights to use, all patents, trademarks, trade names, service
marks, copyrights, and any applications therefor, domain names, URLs,
technology, know-how, trade secrets, and tangible or intangible proprietary
information or material that are used in the business of the Company as
currently conducted or as currently proposed to be conducted by the Company (the
"Company Proprietary Rights"), free and clear of any and all Encumbrances.
Following the Closing, the Company will continue to own or have valid and
enforceable rights to use all Company Proprietary Rights necessary for the
lawful conduct of its business as currently conducted and as currently proposed
to be conducted, without any infringement or conflict with the rights of others.
(b) List of Company Proprietary Rights. Set forth on Schedule
3.17(b) hereto is a complete list of all patents, trademarks, trade names,
service marks, registered copyrights, domain names, URLs and any applications
therefor, and tangible proprietary information included in the Company
Proprietary Rights, specifying, where applicable, the jurisdictions in which
each such Company Proprietary Right has been issued or registered or in which an
application for such issuance and registration has been filed, including the
respective registration or application numbers and the names of all registered
owners.
(c) Royalties. The Company is not obligated to pay any royalties or
other compensation to any third party in respect of its ownership, use or
license of any of the Company Proprietary Rights.
(d) Licenses. Set forth on Schedule 3.17(d) is a complete list of
all licenses, sublicenses and other agreements as to which the Company is a
party and pursuant to which the Company or any other person is authorized to use
any Company Proprietary Right, and includes (i) the date and term thereof, (ii)
the identity of all parties thereto, and (iii) a description of the nature and
subject matter thereof. True and correct copies of all such licenses,
sublicenses and agreements have been provided to Buyer.
(e) Protection of Company Proprietary Rights. The Company has at all
times diligently protected its rights in the Company Proprietary Rights and has
maintained the confidentiality of its trade secrets and other confidential
Company Proprietary Rights, and there have been no acts or omissions by the
Company, the result of which would be to compromise the rights of the Company to
apply for or enforce appropriate legal protection of such Company Proprietary
Rights. Without limiting the generality of the foregoing, the Publications
contain copyright notices sufficient to maintain copyright protection on the
copyrighted portions of the Company Proprietary Rights.
(f) No Conflict. No claims with respect to the Company Proprietary
Rights have been asserted or, to the knowledge of Seller, are threatened by any
person nor are there any valid grounds for any bona fide claims (i) to the
effect that the Publications or any portion thereof, or the Company's conduct of
its business, infringe on any copyright, patent, trademark, service xxxx, domain
name, URL or trade secret, (ii) against the use by the Company of any
trademarks, service marks, trade names, domain names, URLs, trade secrets,
copyrights, patents, technology or know-how and applications used in the
Company's business as currently conducted or as proposed to be conducted by the
Company, or (iii) challenging the ownership by
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the Company, validity or effectiveness of any of the Company Proprietary Rights.
To the knowledge of the Company and Seller, there is no unauthorized use,
infringement or misappropriation of any of the Company Proprietary Rights by any
third party, including any employee or former employee of the Company. No
Company Proprietary Right or product of the Company is subject to any
outstanding decree, order, judgment, or stipulation restricting in any manner
the use or exploitation thereof by the Company.
(g) Employee Agreements. To the knowledge of Seller, no employee,
officer or consultant of the Company is in material violation of any term of any
employment or consulting contract, proprietary information agreement,
non-competition agreement, or any other contract or agreement relating to the
relationship of any such employee, officer or consultant with the Company or any
previous employer.
(h) Certain Software. The software necessary for the layout and
pagination of all Company directories is licensed to the Company and available
on the Company's computer system.
3.18. Statement of Publication. The Company has heretofore delivered to
Buyer a statement of publication for each issue of the Publications. Each such
statement of publication is complete and correct in all material respects.
3.19. Mailing Lists. A complete and correct list of all mailing lists used
in connection with the Publications, other than those obtained from third
parties, is available on the Blackbook's computer system. The Company's use of
such mailing lists has not infringed or conflicted with any copyright, trademark
or trade secrecy, privacy or other right of any third party.
3.20. Agreements, Contracts and Commitments.
(a) Company Agreements. Except as set forth on Schedule 3.20(a)
hereto, the Company is not a party to:
(i) any bonus, deferred compensation, pension, severance,
profit-sharing, stock option, employee stock purchase or retirement plan,
contract or arrangement or other Company Plan;
(ii) any employment agreement with any present employee,
officer, director or consultant (or former employees, officers, directors
and consultants to the extent there remain at the date hereof obligations
to be performed by the Company);
(iii) any agreement for personal services or employment with a
term of service or employment specified in the agreement or any agreement
for personal services or employment in which the Company has agreed on the
termination of such agreement to make any payments greater than those that
would otherwise be imposed by law;
(iv) any agreement of guarantee or indemnification;
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(v) any agreement or commitment containing a covenant limiting
or purporting to limit the freedom of the Company (a) to compete with any
person in any geographic area, (b) to engage in any line of business, or
(c) to hire or solicit for employment any individual;
(vi) any Company Lease or personal property lease under which
the Company is lessee;
(vii) any joint venture or profit-sharing agreement;
(viii) except for trade indebtedness incurred in the ordinary
course of business and reflected on the Company Balance Sheet, any loan or
credit agreements providing for the extension of credit to the Company or
any instrument evidencing or related in any way to indebtedness incurred
in the acquisition of companies or other entities or indebtedness for
borrowed money by way of direct loan, sale of debt securities, purchase
money obligation, conditional sale, lease, guarantee, or otherwise that
individually is in the amount of $2,500 or more;
(ix) any license or royalty agreement other than those
disclosed on Schedule 3.17(d);
(x) any agreement or arrangement with any third party to
develop any intellectual property or other asset expected to be used or
currently used or useful in the Company's business;
(xi) any agreement or arrangement for the Company to develop
any intellectual property or other asset for any third party;
(xii) any agreement or arrangement providing for the payment
of any commission based on sales;
(xiii) any agreement for the sale or license by or to the
Company of materials, products, services or supplies that involves future
payments to the Company of more than $2,500;
(xiv) any agreement for the purchase by the Company of any
materials, equipment, services, or supplies, that either (A) involves a
binding commitment by the Company to make future payments totaling in
excess of $2,500 and cannot be terminated by it without penalty upon less
than one month's notice or (B) was not entered into in the ordinary course
of business;
(xv) any agreement or commitment for the acquisition,
construction or sale of fixed assets owned or to be owned by the Company
that involves future payments by it totaling more than $2,500;
(xvi) any agreement or commitment to which present or former
directors or officers (or their Affiliates or members of their immediate
families) or Affiliates (or directors or officers of an Affiliate) are
also parties;
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(xvii) any agreement not described above (ignoring, solely for
this purpose, any dollar amount thresholds in those descriptions)
involving the payment or receipt by the Company of more than $2,500; or
(xviii) any agreement not described above that was not made in
the ordinary course of business and that is material to the financial
condition, business, operations, assets, results of operations or
prospects of the Company.
(b) Validity. Except as set forth on Schedule 3.20(b), all
contracts, leases, instruments, licenses and other agreements or documents
described on Schedule 3.17(d) or Schedule 3.20(a) (the "Company Contracts") are
valid, enforceable and in full force and effect and the Company has not, nor, to
the knowledge of Seller, has any other party thereto, breached any provision of,
or defaulted under the terms of any such contract, lease, instrument, license or
other agreement or document. The execution and delivery of this Agreement by the
Company, and the consummation of the transactions contemplated hereby, will not
cause the Company to be in violation or default under any Company Contract nor
entitle any other party thereto to terminate or modify any Company Contract.
Schedule 3.20(b) identifies each Company Contract that requires the consent of a
third party in connection with the transactions contemplated hereby.
3.21. Banking Relationships. Schedule 3.21 hereto shows the names and
locations of all banks and trust companies in which the Company has accounts,
lines of credit or safety deposit boxes and, with respect to each account, line
of credit or safety deposit box, the names of all persons authorized to draw
thereon or to have access thereto.
3.22. Suppliers, Distributors and Sales Agents. The relationships of the
Company with its suppliers, distributors and sales agents are satisfactory
commercial working relationships. Since the date of the Company Balance Sheet,
no material supplier, distributor or sales agent of the Company has canceled or
otherwise modified its relationship with the Company and, to the knowledge of
Seller, no supplier, distributor or sales agent of the Company has any intention
to do so, and, to the knowledge of Seller, the consummation of the transactions
contemplated hereby will not adversely affect such relationships.
3.23. Certain Transactions. The Company is not indebted, directly or
indirectly, to any of its officers or directors or to their respective spouses
or children in any amount whatsoever, except for indebtedness to employees for
accrued salaries and bonuses not yet payable or for reasonable business expenses
actually incurred. None of said officers or directors, or any members of their
immediate families, are indebted to the Company or, to the knowledge of Seller,
have any direct or indirect ownership interest in any firm or business entity
which is affiliated with or with which the Company has a business relationship,
or any firm or corporation which competes with the Publications; provided, that
ownership of 1% or less of the outstanding voting securities of a publicly
traded corporation shall not constitute such a direct or indirect interest. To
the knowledge of Seller, no officer or director, or any member of his or her
immediate family, is, directly or indirectly, interested in any material
contract with the Company.
3.24. Acquired Business. Upon consummation of the Acquisition, the Buyer
will acquire the entire business of the Company as heretofore conducted and as
proposed to be
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conducted, and the Buyer will then own and have the right to use all tangible
and intangible assets and properties heretofore used or necessary for the normal
continued conduct of the Company's business as now conducted by it and as
proposed to be conducted.
3.25. Full Disclosure. Neither this Agreement nor any written statement,
report or other document furnished or to be furnished by the Company or Seller
pursuant to this Agreement or in connection with the transactions contemplated
hereby contains, or will contain, any untrue statement of a material fact or
omits to state a material fact necessary to make the statements contained herein
or therein not false or misleading. There is no fact known to Seller which has
not been disclosed to Buyer in writing that materially adversely affects, or so
far as Seller can now foresee will materially adversely affect, (a) the ability
of Seller to perform this Agreement or (b) the financial condition, business,
operations, assets, properties, results of operations or prospects of the
Company.
3.26. Financial Projections. The financial projections that Seller has
provided to Buyer were prepared in good faith using assumptions that Seller
believes to be reasonable. Notwithstanding the foregoing, however, Seller makes
no representation or warranty regarding the actual future financial performance
of the Company.
Article 4
Additional Representations And Warranties of Seller
Seller further represents and warrants to Buyer as follows:
4.1. Title to Stock. Seller has good and marketable title to the Stock,
free and clear of all Encumbrances.
4.2. Corporate Status of Seller. Seller is a corporation duly organized,
validly existing and in good standing under the laws of the State of New York,
with the requisite corporate power to own, operate and lease its properties and
to carry on its business as now being conducted.
4.3. Authority for Agreement; Noncontravention.
(a) Authority. Seller has the corporate power and authority to enter
into this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
board of directors of Seller and no other corporate proceedings on the part of
Seller are necessary to authorize the execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby. This Agreement and
the other agreements contemplated hereby to be signed by Seller have been duly
executed and delivered by Seller and constitute valid and binding obligations of
Seller enforceable against Seller in accordance with their respective terms,
subject to the qualifications that enforcement of the rights and remedies
created hereby and thereby are subject to (i) bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium and other laws of general
application affecting the rights and remedies of creditors and (ii) general
principles of equity (regardless of whether enforcement is considered in a
proceeding in equity or at law).
- 16 -
(b) No Conflict. Neither the execution and delivery of this
Agreement by Seller, nor the performance by Seller of its obligations hereunder,
nor the consummation by Seller of the transactions contemplated hereby will
conflict with or result in a violation of (a) any provision of the certificate
of incorporation or by-laws of Seller, or (b) any note, mortgage, indenture,
lease, instrument or other agreement, Permit, concession, grant, franchise,
license, judgment, order, decree, statute, ordinance, rule or regulation to
which Seller is a party or by which or any of its assets or properties is bound
or which is applicable to Seller or any of its assets or properties. No
authorization, consent or approval of, or filing with or notice to, any
Governmental Entity is necessary for the execution and delivery of this
Agreement by Seller or the consummation by Seller of the transactions
contemplated hereby.
4.4. Company Proprietary Rights. Seller does not own or claim to have any
interest in any of the Company's Proprietary Rights.
Article 5
Representations and Warranties of Buyer
Buyer represents and warrants to Seller as follows:
5.1. Corporate Status of Buyer. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the state of Delaware,
with the requisite corporate power to own, operate and lease its properties and
to carry on its business as now being conducted.
5.2. Authority for Agreement; Noncontravention.
(a) Authority. Buyer has the corporate power and authority to enter
into this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
board of directors of Buyer and no other corporate proceedings on the part of
Buyer are necessary to authorize the execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby. This Agreement and
the other agreements contemplated hereby to be signed by Buyer have been duly
executed and delivered by Buyer and constitute valid and binding obligations of
Buyer enforceable against Buyer in accordance with their respective terms,
subject to the qualifications that enforcement of the rights and remedies
created hereby and thereby are subject to (i) bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium and other laws of general
application affecting the rights and remedies of creditors and (ii) general
principles of equity (regardless of whether enforcement is considered in a
proceeding in equity or at law).
(b) No Conflict. Neither the execution and delivery of this
Agreement by Buyer, nor the performance by Buyer of its obligations hereunder,
nor the consummation by Buyer of the transactions contemplated hereby will
conflict with or result in a violation of (a) any provision of the certificate
of incorporation or by-laws of Buyer, or (b) any note, mortgage, indenture,
lease, instrument or other agreement, Permit, concession, grant, franchise,
license, judgment, order, decree, statute, ordinance, rule or regulation to
which Buyer is a party or by which or any of its assets or properties is bound
or which is applicable to Buyer or any of its
- 17 -
assets or properties. No authorization, consent or approval of, or filing with
or notice to, any Governmental Entity is necessary for the execution and
delivery of this Agreement by Buyer or the consummation by Buyer of the
transactions contemplated hereby.
5.3. No Broker's or Finder's Fees. Buyer has not paid or become obligated
to pay any fee or commission to any broker, finder, financial advisor or
intermediary in connection with the transactions contemplated by this Agreement.
5.4. Availability of Funds. Buyer currently has access to sufficient funds
in cash or cash equivalents and will at the Closing have sufficient immediately
available funds, in cash, to pay the Purchase Price and to pay any other amounts
payable pursuant to this Agreement.
Article 6
Additional Agreements
6.1. Expenses. Seller shall be responsible for all costs and expenses
(including fees and disbursements of consultants, investment bankers, and other
financial advisors, brokers and finders, counsel and accountants) incurred by it
or the Company in connection with the matters contemplated hereby. Buyer shall
be responsible for all costs and expenses (including fees and disbursements of
consultants, investment bankers, and other financial advisors, brokers and
finders, counsel and accountants) incurred by it in connection with the matters
contemplated hereby.
6.2. Non-Disclosure. Seller shall hold in strict confidence, and not
disclose to any third party or use except for the benefit of the Company or
Buyer, any and all confidential and proprietary information of the Company and
Buyer.
6.3. Non-Competition; Non-Solicitation. During the period commencing on
the Closing and ending five years after the Closing, neither Seller nor any of
its Affiliates shall directly or indirectly, whether as principal, agent,
stockholder, co-venturer, owner, manager, operator or partner, (a) enter into or
engage, compete with or interfere with the business of the Company (as conducted
as of the Closing) or publish any publication that competes with the
Publications (as they exist as of the Closing); provided that this Section 6.3
shall not restrict Seller or its Affiliates from holding a passive equity, debt
or revenue interest of 1% or less in any other person or entity that engages in
any of the foregoing activities so long as neither Seller nor its Affiliates has
any active participation in the business of such person; or (b) solicit or
attempt to divert or take away from the Company the business, patronage or
services of any persons or entities who are customers, suppliers or sales agents
of the Company; or (c) solicit, induce, attempt to hire, or hire any employee or
consultant of Buyer or the Company (other than a person whose employment by or
services to Buyer or the Company has been terminated for a period of at least
twelve months), or assist in such hiring by any other person or business entity
or encourage any such employee or consultant to terminate his or her employment
with or retention by Buyer or the Company. Seller agrees and acknowledges that
the potential harm to Buyer of its non-enforcement of this Section 6.3 outweighs
any harm to Buyer of Seller's enforcement hereof by injunction or otherwise.
Seller expressly acknowledges and agrees that each and every restraint imposed
by this Agreement is reasonable with respect to subject matter, time period and
geographical area. If, at the time of enforcement of any provision of this
Section 6.3, a court
- 18 -
shall hold that the duration, scope or area restrictions stated herein are
unreasonable under the circumstances then existing, Buyer and Seller hereby
agree that the maximum duration, scope or area reasonable under such
circumstances shall be substituted for the stated duration, scope or area and
that the court shall be allowed to revise the restrictions contained herein to
cover the maximum period, scope and area permitted by law. Buyer and Seller also
hereby agree that money damages would not be an adequate remedy for any breach
of this Section 6.3 or Section 6.4. Therefore, in the event of a breach or
threatened breach of this Section 6.3 or Section 6.4, the non-breaching party or
its successors or assigns may, in addition to other rights and remedies existing
in their 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 (without posting a bond or other security).
6.4. Trade Names of the Company. Seller and its Affiliates will not, at
any time after the Closing, individually, jointly or in association with others
use as a trade name, a corporate name or name of another business entity, the
names of the Publications or any name which is substantially similar to any such
name for any purpose whatsoever. Seller and its Affiliates shall not question or
contest the right of the Company to continue to do business under its present
corporate name or to continue to use the names of any of the Publications.
6.5. Resignations; Bank Accounts. Each member of the board of directors of
the Company and each officer of the Company shall resign as a director and
officer of the Company, effective as of the Closing. Seller, and any other bank
signatories shall take such action as may be necessary at or after the Closing
to revoke their signing authority on all Company bank accounts and to substitute
such individuals as new signatories as may be designated by the Buyer.
6.6. Right of Access. Seller shall provide to Buyer and its accountants,
counsel, and other representatives full access to all of the properties, books,
contracts, commitments and records prior to and after the Closing so as to
facilitate the acquisition of the Company and the operation of the Company
post-Closing. During the period prior the Closing, Seller and Company shall use
reasonable efforts to furnish promptly to buyer all other information concerning
the Company ands its business properties, and personnel as Buyer may reasonable
request.
6.7. Public Announcements. Except for announcements or filings required by
law or Nasdaq rule, without the consent of the other party, each party will not
issue or permit any of its subsidiaries, directors, officers, employees or
agents to issue any press release or other information to the press or any third
party with respect to this Agreement or the transactions contemplated hereby.
6.8. Further Assurances. If at any time after the Closing any further
assignments, conveyances, transfers or assurances in law, or any other actions
or things, may be reasonably necessary to transfer, assign, convey or deliver
to, or to vest, perfect or confirm in (a) the Company, any right, title or
interest of Seller in or to any assets or properties sold to Buyer hereunder, or
(b) Buyer any right, title or interest of Seller, of record or otherwise, in or
to the Stock then, in either such case, Seller, at its sole cost and expense,
shall use its commercially reasonable efforts to promptly execute, deliver and
record, or cause to be executed, delivered and
- 19 -
recorded, any and all such further instruments of assignment, conveyance and
transfer and take, or cause to be taken, all actions and do, or cause to be
done, all things, as may be reasonably requested by Buyer to transfer, assign,
convey or deliver the same to, or to vest, perfect or confirm the same in, the
Company, or Buyer, as applicable.
6.9. Interim Performance. Between the date of this Agreement and the
Closing, Seller shall use commercially reasonable efforts to preserve intact the
Company's business organization, employees, operations, goodwill, customers,
sales agents and others with whom it has business relationships, and Seller
shall cause the Company to carry on its business in the ordinary course and in
substantially the same manner as currently being conducted. Without limiting the
foregoing, Seller shall cause the Company to pay all invoices in a manner
consistent with past practices and shall cause the Company not to, without the
prior written consent of Buyer:
(a) enter into any contract or commitment or take any other action
that is not in the ordinary course of business or that, at the time the Company
enters into such contract or commitment or takes such action, may reasonably be
expected to have an adverse impact on the transactions contemplated by this
Agreement;
(b) change the capital structure or stock ownership of the Company
in any way, including, without limitation, issuing or reacquiring any of its
capital stock or any options, warrants or other securities exercisable or
exchangeable for, or convertible into, shares of its capital stock or
accelerating the exercise period of any such option, warrant or other security;
(c) pay any dividend or distribution;
(d) enter into financial arrangements for the benefit of its
shareholders except in the ordinary course of business consistent with past
practice;
(e) dispose of any significant part of its assets;
(f) increase the compensation of or pay any bonus to any officer,
director or employee of the Company;
(g) fail to pay or delay the payment of any salary, employee
benefit, account payable or other liability other than in the ordinary course of
business;
(h) make any payment in respect of the loan from Seller to the
Company; or
(i) agree, whether in writing or otherwise, to take any action
described in paragraphs (a) through (h) above.
6.10. Satisfaction of Closing Conditions. Seller shall promptly seek all
necessary approvals, consents and authorizations of third parties required for
the consummation of the transactions contemplated hereby. Seller shall not take
any action, or permit the Company to take any action, that would, or is
reasonably likely to, result in any of Seller's representations and warranties
set forth in this Agreement being untrue or in any of the conditions to the
Closing
- 20 -
set forth herein not being satisfied or that could hinder or delay the
consummation of the transactions contemplated by this Agreement.
6.11. Release. Effective upon the Closing, Seller and its Affiliates (the
"Seller Releasing Parties") hereby release, acquit and forever discharge the
Company from liability on or for any and all claims, demands, causes of action,
damages, costs, expenses, compensation, and all other liabilities of any kind or
nature whatsoever, direct or indirect, known or unknown, contingent or absolute,
which any Seller Releasing Party has had, now has, or may hereafter have for any
reason whatsoever, for or on account of, in consequence of, or arising out of
acts or omissions on or prior to the Closing by the Company and/or any of its
officers, directors or Affiliates, past or present, other than obligations under
the Agreement. Following the Closing, neither the Company, Buyer nor any
Affiliate of Buyer shall have any obligation to indemnify or hold harmless any
person who served as an officer or director of the Company or Seller prior to
the Closing in respect of any claim or action arising out of or related to such
service.
6.12. Tax Matters. The following provisions shall govern the allocation of
responsibility as between Buyer and Seller for certain tax matters following the
Closing:
(a) Tax Indemnification. Seller shall indemnify the Company, Buyer,
and each Buyer Affiliate and hold them harmless from and against, any loss,
claim, liability, expense, or other damage attributable to (i) all Taxes (or the
non-payment thereof) of the Company for all taxable periods ending on or before
the date of the Closing and the portion through the end of the date of the
Closing for any taxable period that includes (but does not end on) such date
(the "Pre-Closing Tax Period"), (ii) all Taxes of any member of an affiliated,
consolidated, combined or unitary group of which the Company (or any predecessor
of any of the foregoing) is or was a member on or prior to the date of the
Closing, including pursuant to Treasury Regulation ss.1.1502-6 or any analogous
or similar state, local, or foreign law or regulation, and (iii) any and all
Taxes of any person (other than the Company) imposed on the Company as a
transferee or successor, by contract or pursuant to any law, rule, or
regulation, which Taxes are imposed in connection with an event or transaction
occurring before the Closing.
(b) Responsibility for Filing Tax Returns for Periods through
Closing Date. Seller shall include the income of the Company (including any
deferred items triggered into income by Reg. ss.1.1502-13 and any excess loss
account taken into income under Reg. ss.1.1502-19) on Seller's consolidated
federal income Tax Returns for all periods through the date of the Closing and
pay any federal income Taxes attributable to such income. For all taxable
periods ending on or before such date, Seller shall cause the Company to join in
Seller's consolidated federal income tax return and, in jurisdictions requiring
separate reporting from Seller, to file separate company state and local income
tax returns. All such Tax Returns shall be prepared and filed in a manner
consistent with prior practice, except as required by a change in applicable
law. Buyer shall have the right to review and comment on any such Tax Returns
prepared by Seller. Buyer shall cause the Company to furnish information to
Seller as reasonably requested by Seller to allow Seller to satisfy its
obligations under this section in accordance with past custom and practice. The
Company and Buyer shall consult and cooperate with Seller as to any elections to
be made on returns of the Company for periods ending on or before the date of
the Closing. Buyer shall cause the Company to file income Tax Returns, or shall
include the Company in its
- 21 -
combined or consolidated income tax returns, for all periods other than periods
ending on or before the date of the Closing.
(c) Cooperation on Tax Matters.
(i) Buyer, the Company , and Seller shall cooperate fully, as
and to the extent reasonably requested by the other party, in connection
with the filing of Tax Returns pursuant to this Section 6.12 and any
audit, litigation or other proceeding with respect to Taxes. Such
cooperation shall include the retention and (upon the other party's
request) the provision of records and information which are reasonably
relevant to any such audit, litigation or other proceeding and making
employees available on a mutually convenient basis to provide additional
information and explanation of any material provided hereunder. The
Company and Seller agree (A) to retain all books and records with respect
to Tax matters pertinent to the Company relating to any taxable period
beginning before the date of the Closing until the expiration of the
statute of limitations (and, to the extent notified by Buyer or Seller,
any extensions thereof) of the respective taxable periods, and to abide by
all record retention agreements entered into with any taxing authority,
and (B) to give the other party reasonable written notice prior to
transferring, destroying or discarding any such books and records and, if
the other party so requests, the Company or Seller, as the case may be,
shall allow the other party to take possession of such books and records.
(ii) Buyer and Seller further agree, upon request, to use
their best efforts to obtain any certificate or other document from any
governmental authority or any other person as may be necessary to
mitigate, reduce or eliminate any Tax that could be imposed (including,
but not limited to, with respect to the transactions contemplated hereby).
(iii) Buyer and Seller further agree, upon request, to provide
the other party with all information that either party may be required to
report pursuant to Code ss.6043 and all treasury regulations promulgated
thereunder.
(d) Tax Sharing Agreements. All Tax sharing agreements or similar
agreements with respect to or involving the Company shall be terminated as of
the date of the Closing and, after such date, the Company shall not be bound
thereby or have any liability thereunder.
(e) Certain Taxes and Fees. All transfer, documentary, sales, use,
stamp, registration and other such Taxes, and all conveyance fees, recording
charges and other fees and charges (including any penalties and interest)
incurred in connection with consummation of the transactions contemplated by
this Agreement shall be paid by Seller when due, and Seller will, at its
expense, file all necessary Tax Returns and other documentation with respect to
all such Taxes, fees and charges, and, if required by applicable law, Buyer
will, and will cause its Affiliates to, join in the execution of any such Tax
Returns and other documentation.
- 22 -
6.13. Payment of Printing and Distribution Costs. Buyer shall cause the
Company to pay when due the Company's outstanding unpaid Liabilities for
printing and distribution costs for the Illustration Guide and the AR 100 Guide
described in Section 7.2(l).
Article 7
Conditions Precedent
7.1. Conditions Precedent to the Obligations of Each Party. The
obligations of the parties hereto to effect the Acquisition shall be subject to
the fulfillment at or prior to the Closing of the following conditions:
(a) No Injunction. No injunction or restraining or other order
issued by a court of competent jurisdiction that prohibits or materially
restricts the consummation of the Acquisition or the other transactions
contemplated hereby shall be in effect (each party agreeing to use all
reasonable efforts to have any injunction or other order immediately lifted),
and no action or proceeding shall have been commenced or threatened in writing
seeking any injunction or restraining or other order that seeks to prohibit,
restrain, invalidate or set aside consummation of the Acquisition or any of the
other transactions contemplated hereby.
(b) Illegality. There shall not have been any action taken, and no
statute, rule or regulation shall have been enacted, by any state or federal
government agency that would prohibit or materially restrict the consummation of
the Acquisition or the other transactions contemplated hereby.
7.2. Conditions Precedent to Obligation of Buyer to Effect the
Acquisition. The obligation of Buyer to effect the Acquisition shall be subject
to the fulfillment at or prior to the Closing of the following additional
conditions:
(a) Representations and Warranties. The representations and
warranties of Seller contained in this Agreement shall be true and correct on
and as of the Closing, except for changes contemplated by this Agreement and
except for those representations and warranties which address matters only as of
a particular date (which shall remain true and correct as of such date), with
the same force and effect as if made on and as of the Closing; and Seller shall
have delivered to Buyer a certificate to that effect, dated the date of the
Closing and signed by an executive officer of Seller.
(b) Agreements and Covenants. Seller shall have performed all of its
agreements and covenants set forth herein that are required to be performed at
or prior to the Closing; and Seller shall have delivered to Buyer a certificate
to that effect, dated the date of the Closing and signed by an executive officer
of Seller.
(c) Diligence. Buyer shall have received all information concerning
the Company and its subsidiaries and respective business, properties and
personnel as Buyer may have reasonably requested on or before the Closing, and
Buyer shall be fully satisfied with the results of its investigation regarding
the Company.
(d) Legal Opinion. Buyer shall have received an opinion from Morse,
Zelnick, Rose & Lander, counsel to the Company, in substantially the form of
Exhibit A hereto.
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(e) Escrow Agreement. Seller and the Escrow Agent shall have
executed the Escrow Agreement (as defined in Section 8.5).
(f) Transition Services Agreement. Seller and the Company shall have
executed an agreement providing for the delivery by Seller to the Company of
certain transition services, in form and substance acceptable to Buyer.
(g) Closing Documents. The Company and Seller shall have delivered
to Buyer such closing documents as Buyer shall reasonably request (other than
additional opinions of counsel).
(h) Resignations. Buyer shall have received the written resignations
of the directors of the Company as contemplated by this Agreement.
(i) Third Party Consents. Any and all third party consents or
approvals required from third parties relating to contracts, agreements,
licenses, leases, and other instruments to the Company shall have been obtained
by the Company and shall be effective and shall not have been suspended,
revoked, or stayed by action of any such third party.
(j) Employee Arrangements. Xxx Xxxxx and Magi Xxxxxx shall have each
entered into an employment arrangement with the Company on terms and conditions
satisfactory to Buyer.
(k) Sales Agency Agreement. Seller shall have provided to Buyer a
fully executed copy of the Sales Agency Agreement among the Company, Xxxxxxx
Xxxxxxxxxxxx and Advertising Media Consultants, Inc., and the parties to such
agreement shall have entered into an amendment thereto increasing the notice
required for termination of such agreement from 5 days to 60 days.
(l) Liabilities of the Company. The Company shall have paid the
printing and distribution costs for the Illustration Guide budgeted for payment
in August, in the amount of approximately $70,000. In addition, the Company's
outstanding unpaid Liabilities for printing and distribution costs for the
Illustration Guide and the AR 100 Guide shall not exceed $140,000 in the
aggregate. Seller shall have contributed to the capital of the Company all
inter-company Liabilities owed by the Company to Seller through the date of the
Closing so that the Company shall have no further obligation with respect
thereto.
7.3. Conditions to Obligations of Seller to Effect the Acquisition. The
obligation of Seller to effect the Acquisition shall be subject to the
fulfillment at or prior to the Closing of the following additional conditions:
(a) Representations and Warranties. The representations and
warranties of Buyer contained in this Agreement shall be true and correct on and
as of the Closing, except for changes contemplated by this Agreement and except
for those representations and warranties which address matters only as of a
particular date (which shall remain true and correct as of such date), with the
same force and effect as if made on and as of the Closing; and Buyer shall have
delivered to Seller a certificate to that effect, dated the date of the Closing
and signed by its President or Chief Executive Officer.
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(b) Agreements and Covenants. Buyer shall have performed all of its
agreements and covenants set forth herein that are required to be performed at
or prior to the Closing; and Buyer shall have delivered to Seller a certificate
to that effect, dated the date of the Closing and signed by its President or
Chief Executive Officer.
(c) Escrow Agreement. Buyer and Escrow Agent shall have executed the
Escrow Agreement (as defined in Section 8.5).
Article 8
Survival of Representations; Indemnification
8.1. Survival of Representations. The representations, warranties,
covenants and agreements contained herein, will survive the Closing and continue
in full force and effect for a period of one year after the Closing; provided
however that (a) the representations and warranties in Section 3.10 and the
covenants in Section 6.12 shall survive until expiration of the statute of
limitations period, (b) the representations and warranties in Sections 3.2 and
4.1 shall survive indefinitely and (c) the covenants of the parties set forth in
Sections 6.2, 6.3, 6.4, 6.8 and 6.11 shall survive indefinitely. Notwithstanding
the foregoing, any representation, warranty, covenant or agreement that would
otherwise terminate will continue to survive if a claim shall have been timely
given in good faith based on facts reasonably expected to establish a valid
claim under this Article 8 on or prior to such termination date, until the
related claim for indemnification has been satisfied or otherwise resolved as
provided in Article 8.
8.2. Indemnification. Seller hereby agrees to indemnify, defend and hold
harmless Buyer and its respective Affiliates, officers, directors, employees,
representatives and agents (the "Indemnified Parties") from and against any and
all claims, costs, losses, expenses, liabilities, taxes, fines, penalties or
other damages, including, without limitation, interest, penalties and reasonable
attorneys' fees and disbursements (collectively "Damages") by reason of or
otherwise arising out of:
(a) any breach of, or inaccuracy in, any representation or warranty
contained in Article 3 or Article 4 or otherwise made by Seller in this
Agreement, including the Schedules hereto or any certificates delivered by the
Company or Seller pursuant to this Agreement, in each case as each such
representation or warranty would read if all qualifications as to materiality
were deleted therefrom;
(b) any breach or failure in performance by Seller of any covenant,
agreement or obligation of Seller contained in this Agreement; or
(c) the litigation matters described on Exhibit B, and any other
claim, action or proceeding based upon or related to the facts that are the
subject matter of such litigation matters.
The amounts for which the Indemnified Parties may seek indemnification under
this Section 8.2 shall extend to, and as used herein the term "Damages" shall
include, reasonable attorneys' fees and disbursements, reasonable accountants'
fees, costs of litigation and other expenses incurred by them in the defense of
any claim asserted against them and any amounts paid in settlement or compromise
of any claim asserted against them to the extent that the claim asserted is or
would
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have been subject to the indemnification provisions hereof. Any payment of
indemnification required to be made pursuant to this Section 8.2 will be made
out of any of the Indemnification Escrow Amount then held by the Escrow Agent.
To the extent that the amount of such payment exceeds the Indemnification Escrow
Amount, the balance of such payment shall be made by Seller, provided, however,
that the aggregate liability of Seller for Damages hereunder shall not exceed
the Purchase Price.
8.3. Indemnification Escrow - Claims. If Buyer reasonably believes that it
is entitled to obtain recovery for Damages from the Indemnification Escrow
Amount, Buyer shall submit a written notice of such claim to Seller and the
Escrow Agent (the "Claim Notice"). The Claim Notice shall describe the material
facts pertaining to the claim and the amount of the Damages or, if such amount
is not ascertainable at the time such Claim Notice is delivered, a reasonable
estimate of the amount of the Damages. If Seller does not submit a good faith
objection to the claim within 30 days after the receipt of the Claim Notice (an
"Objection Notice"), the Escrow Agent shall be authorized to release the amount
so claimed from escrow and deliver those funds to Buyer and, to the extent the
amount so claimed exceeds the Indemnification Escrow Amount, Seller shall pay
such excess within 10 days. If Seller submits an Objection Notice within the
time specified above, the amount subject to the claim shall be held in escrow
until such time as Buyer and Seller agree that the funds may be released from
escrow or there is a judicial determination that such funds shall be released,
in which case the funds shall be released from escrow in accordance with such
agreement or determination. Buyer agrees that it shall submit no claims for
recovery of Damages unless the aggregate amount of such claims exceeds $10,000.
8.4. Xxxxx Escrow - Claim. If Executive resigns his employment with the
Company for any reason or is dismissed by the Company for Cause, in each case on
or before the date that is twelve (12) months from the Closing, Buyer shall
submit a written notice of such fact to Seller and the Escrow Agent (the "Xxxxx
Claim Notice"). The Xxxxx Claim Notice shall describe the material facts
pertaining to Executive's termination of employment with the Company. If Seller
does not submit a good faith objection to the claim within 30 days after the
receipt of the Claim Notice (a "Xxxxx Objection Notice"), the Escrow Agent shall
be authorized immediately to release the entire Xxxxx Escrow Amount from escrow
and deliver those funds to Buyer. If Seller submits a Xxxxx Objection Notice
within the time specified above, the Xxxxx Indemnification Amount shall be held
in escrow until such time as Buyer and Seller agree that the funds may be
released from escrow or there is a judicial determination that such funds shall
be released, in which case the funds shall be released from escrow in accordance
with such agreement or determination.
8.5. Release of Funds from Escrow. Except to the extent that some or all
of the funds in escrow are the subject of a pending dispute and are to be
retained in escrow pursuant to Section 8.3 or Section 8.4, all funds held in
escrow shall be released and delivered to Seller twelve (12) months following
the Closing.
8.6. Execution of Escrow Agreement - Instructions. Buyer and Seller agree
to execute such form of escrow agreement setting forth the rights and duties of
the Escrow Agent as the Escrow Agent shall reasonably request (the "Escrow
Agreement"), provided that such agreement shall not be inconsistent with the
terms and conditions of this Agreement. Each party agrees to execute such
instructions as are necessary or as the Escrow Agent requests to allow the
- 26 -
Escrow Agent to perform its duties and to carry out the terms of the Escrow
Agreement and this Agreement. Buyer shall be responsible for paying the fees
charged by the Escrow Agent for the performance of the Escrow Agent's services.
Article 9
Termination; Effect of Termination
9.1. Termination. This Agreement may be terminated, and the transactions
contemplated hereby may be abandoned:
(a) at any time before the Closing, by mutual written agreement of
Seller and Buyer;
(b) at any time before the Closing without liability to the
terminating party, by Seller or Buyer, in the event that any order or law
becomes effective restraining, enjoining or otherwise prohibiting or making
illegal the consummation of any of the transactions contemplated by this
Agreement upon notification of the non-terminating party by the terminating
party;
(c) at any time before the Closing, by Buyer in the event of a
material breach of this Agreement by Seller if Seller fails to cure such breach
within fifteen (15) days following notification thereof by Buyer; or
(d) at any time after September 30, 2004, without liability to the
terminating party, by Seller or Buyer upon notification of the non-terminating
party by the terminating party if the Closing shall not have occurred on or
before such date and such failure to consummate is not caused by a breach of
this Agreement by the terminating party.
9.2. Effect of Termination. If this Agreement is validly terminated
pursuant to Section 9.1, all further obligations of the parties under this
Agreement will terminate, and there will be no liability or obligation on the
part of Seller or Buyer (or any of their respective officers, directors,
employees, agents or other representatives or Affiliates), except for claims of
breach of this Agreement arising under this Agreement prior to termination and
for the provisions of Articles 9 and 10, which shall survive the termination
hereof. The termination of this Agreement shall not be deemed an exclusive
remedy available to a party for breach of this Agreement.
Article 10
Miscellaneous
10.1. Fees and Expenses. All costs and expenses incurred in connection
with this Agreement and the transactions contemplated hereby shall be paid by
the party incurring such costs and expenses, except as specifically provided to
the contrary in this Agreement. Notwithstanding the foregoing, all such costs
and expenses incurred by the Company, including any bonus or other compensation
payable to officers, directors, employees or consultants of the Company in
respect of the transactions contemplated hereby, shall be paid by Seller.
- 27 -
10.2. Amendments and Supplements. This Agreement may not be amended,
modified or supplemented by the parties hereto in any manner, except by an
instrument in writing signed by Buyer, the Company and Seller.
10.3. Waiver. The terms and conditions of this Agreement may be waived
only by a written instrument signed by the party waiving compliance. The failure
of any party hereto to enforce at any time any of the provisions of this
Agreement shall in no way be construed to be a waiver of any such provision, nor
in any way to affect the validity of this Agreement or any part hereof or the
right of such party thereafter to enforce each and every such provision. No
waiver of any breach of or non-compliance with this Agreement shall be held to
be a waiver of any other or subsequent breach or non-compliance. The rights and
remedies herein provided are cumulative and are not exclusive of any rights or
remedies that any party may otherwise have at law or in equity.
10.4. Governing Law. This Agreement shall be governed by, and construed
and enforced in accordance with, the substantive laws of the State of New York,
without regard to its principles of conflicts of laws.
10.5. Notice. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered by hand, sent by facsimile
transmission with confirmation of transmission, or sent via a reputable
overnight courier service with confirmation of receipt requested, to the parties
at the following addresses (or at such other address for a party as shall be
specified by like notice), and shall be deemed given on the date on which
delivered by hand or otherwise on the date of confirmed receipt or transmission:
To Buyer:
Xx. Xxxxx Xxx
Modern Holdings Incorporated
000 Xxxx Xxxxxx, 00xx Xxxxx, Xxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile: (000) 000-0000
With a copy to:
Xxxxxxxxx X. Xxxx, Esq.
Xxxxx Xxxx LLP
000 Xxxxxxx Xxxxxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Facsimile: (000) 000-0000
To the Company or Seller:
Xx. Xxxxx Ran
DAG Media, Inc.
000-00 Xxxxxx Xxxx. Xxxxx 00
Xxx Xxxxxxx, Xxx Xxxx 00000
Facsimile: (000) 000-0000
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With a copy to:
Xxxxxxx X. Xxxxxxx, Esq.
Morse, Zelnick, Rose & Lander
000 Xxxx Xxxxxx
Xxxxx 0000
Xxx Xxxx, XX 00000
Facsimile: (000) 000-0000
10.6. Entire Agreement. This Agreement and the documents and instruments
and other agreements among the parties hereto as contemplated by or referred to
herein constitute the entire agreement among the parties with respect to the
subject matter hereof and supersede all other prior agreements and
understandings, both written and oral, between the parties with respect to the
subject matter hereof. Each party hereto acknowledges that, in entering into
this Agreement and completing the transactions contemplated hereby, such party
is not relying on any representation, warranty, covenant or agreement not
expressly stated in this Agreement or in the agreements, certificates and other
documents among or between the parties contemplated by or referred to herein.
10.7. Binding Effect; Assignability. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and assigns. This Agreement is not intended to confer upon any person other than
the parties hereto (and such parties' and members' respective successors and
assigns) any rights or remedies hereunder, except as otherwise expressly
provided herein. Neither this Agreement nor any of the rights and obligations of
the parties hereunder shall be assigned or delegated, whether by operation of
law or otherwise, without the written consent of all parties hereto.
10.8. Validity. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provisions of this Agreement, each of which shall remain in full force and
effect.
10.9. Counterparts. This Agreement may be executed in one or more
counterparts, all of which together shall constitute one and the same agreement.
* * * * *
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IN WITNESS WHEREOF, the parties have caused this Stock Purchase Agreement
to be executed as an agreement under seal as of the date first above written.
MODERN HOLDINGS INCORPORATED
By:
-----------------------------------
Name:
-----------------------------------
Title:
-----------------------------------
DAG MEDIA, INC.
By:
-----------------------------------
Name:
-----------------------------------
Title:
-----------------------------------
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Exhibit A
Matters To Be Addressed in Opinion of Seller's Counsel
1. Each of Seller and the Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of New York.
2. Seller has all requisite corporate power to execute and deliver and to
perform its obligations under the Stock Purchase Agreement (the "Agreement") and
each of the other agreements, documents and instruments delivered by it in
connection with the consummation of the transactions contemplated by the
Agreement (together with the Agreement, the "Purchase Documents"), and to
consummate the transactions contemplated thereby.
3. Seller has taken all corporate action necessary to authorize the
execution and delivery by it of, and the performance by it of its obligations
under, each of the Purchase Documents.
4. Seller has duly executed and delivered each of the Purchase Documents
and each such Purchase Document constitutes the legal, valid and binding
obligation of Seller, enforceable against Seller in accordance with its terms.
5. The authorized capital stock of the Company consists of 1,000 shares of
common stock, par value $0.001 per share, of which, immediately prior to the
Closing, 1,000 shares (the "Shares") are issued and outstanding and owned of
record by Seller. The Shares represent all of the issued and outstanding capital
stock of the Company and have been duly authorized and validly issued and are
fully paid and non-assessable. Upon the purchase of the Shares in accordance
with the terms and conditions of the Agreement and delivery to you of the
certificates therefor duly endorsed for transfer, assuming you do not have
notice of any adverse claim to the Shares, you will acquire the Shares free of
any adverse claim. To our knowledge, no options, warrants, agreements,
conversion rights or other rights to subscribe for, purchase or acquire any of
the capital stock of the Company are authorized or outstanding.
6. To our knowledge, except as set forth in Schedule 3.9 to the Agreement,
there is no governmental action or proceeding and no litigation pending or
threatened against the Company or any of its properties or assets.
7. Except as obtained and in effect at the Closing, no consent, approval,
authorization or order of, or the making of any declaration or filing with, any
governmental agency or body is required for the valid execution and delivery by
Seller of, or the performance by Seller of its obligations under, any of the
Purchase Documents.
8. The execution and delivery by Seller of the Purchase Documents do not,
and the performance by Seller of the terms thereof will not, (i) violate the
terms of its Certificate of Incorporation or by-laws, each as currently in
effect, (ii) violate any federal or state law, statute or governmental
regulation or any judicial or administrative decree, judgment or order known to
us and applicable to Seller or the Company or (iii) result in any material
violation or material breach of, constitute a material default under, give rise
to any right of termination or acceleration (with or without notice or the lapse
of time or both) pursuant to, or otherwise require any notice under, any term or
provision of any Company Contract.
- 31 -
Exhibit B
Litigation Matters
Charge of Discrimination of Xxxxx Xxxxxx against Seller and the Company, filed
with the U.S. Equal Employment Opportunity Commission (Case No. 160-2004-01987)
Case filed by Neopost Leasing, Inc. against the Company in the Civil Court of
the City of New York, County of Queens (Index No. 56913/04)
- 32 -
