Exhibit 99.2
EXECUTION VERSION
ASSET PURCHASE
AGREEMENT
This ASSET PURCHASE AGREEMENT, dated
as of December 6, 2006 (this “ Agreement ”), by
and among PRIMEDIA SPECIALTY GROUP INC., a Delaware corporation
(“ PSG ”), PRIMEDIA ENTHUSIAST PUBLICATIONS,
INC., a Pennsylvania corporation (“ PEP ”),
PRIMEDIA SPECIAL INTEREST PUBLICATIONS INC., a Delaware corporation
(“ PSIP ”), PRIMEDIA Inc. (“
PRIMEDIA ”; and, together with PSG, PEP and PSIP, the
“ Sellers ”, and each individually, a “
Seller ”) and INTERMEDIA OUTDOOR, INC., a Delaware
corporation (“ Purchaser ”).
WHEREAS, PRIMEDIA desires to sell certain hunting and
fishing properties from its “Outdoors” division, which
properties include certain assets which PRIMEDIA, its subsidiaries
and certain of its Affiliates (as defined in Rule 12b-2 of the
regulations promulgated under the Securities Exchange Act of 1934
(excluding portfolio companies, other than PRIMEDIA and its
subsidiaries and companies controlled by PRIMEDIA, of investment
partnerships controlled by Kohlberg Kravis Roberts & Co. LP))
use to publish and distribute the Publications, operate the
Websites, produce and distribute the TV Programs, host the Events
and conduct other activities related to the Business (as defined
herein), including but not limited to licensing, radio,
merchandising and list rental (collectively the “ Business
Activities ”);
WHEREAS , PSG, a wholly-owned subsidiary of PRIMEDIA,
publishes the publications listed on Schedule A (including
any and all supplements, special issues or editions, custom
publishing projects, derivatives or product extensions related
solely thereto, the “ PSG Publications ”),
operates and maintains the websites on Schedule A (“
PSG Websites ”), produces “ The Ducks
Unlimited Great Outdoors Festival ” and “
Whitetail University ” events (the “ PSG
Events ”) and produces and distributes the television
programs on Schedule A (“ PSG TV Programs
”);
WHEREAS , PEP, a wholly-owned subsidiary of PRIMEDIA,
publishes the
publications listed on Schedule
B (including any and all supplements, special issues or
editions, custom publishing projects, derivatives or product
extensions related solely thereto, the “ PEP
Publications ”) and operates and maintains the websites
on Schedule B (“ PEP Websites ”),
produces “ The Professional Walleye Trail ”
events (the “ PEP Events ”) and produces and
distributes the television programs on Schedule B (“
PEP TV Programs ”);
WHEREAS , PSIP, a wholly-owned subsidiary of PRIMEDIA,
publishes the publications listed on Schedule C (including
any and all supplements, special issues or editions, custom
publishing projects, derivatives or product extensions related
solely thereto, the “ PSIP Publications ” and
together with the PSG Publications and PEP Publications, the
“ Publications ”), operates and maintains the
websites on Schedule C (“ PSIP Websites
”), produces “ The Florida Sportsman Show
” events (the “ PSIP Events ”) and
produces and distributes the television programs on Schedule
C (“ PSIP TV Programs ”, and together with
the PSG Publications, PSG Websites, PSG Events, PSG TV Programs,
PEP Publications, PEP Websites, PEP Events, PEP TV Programs, PSIP
Publications, PSIP Websites, PSIP TV Programs and the Business
Activities, the “ Business ”);
WHEREAS , Purchaser desires to purchase from Sellers and
Sellers desire to sell, or cause to be sold, to Purchaser the
assets relating to the Business and Purchaser desires to assume and
Sellers desire to transfer, or cause to be transferred, certain
liabilities related to the Business; and
NOW, THEREFORE
in consideration of the mutual
covenants and the respective representations and warranties
contained herein, the parties hereby agree as follows:
ARTICLE I. PURCHASE AND SALE
OF THE ASSETS .
1.01 Assets Being
Sold . Upon the terms
and subject to the conditions of this Agreement, on the Closing
Date (as defined below), Sellers shall sell, convey, assign,
transfer and
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deliver, or cause any of their
Affiliates to sell, convey, assign, transfer and deliver, to
Purchaser free and clear of all Liens, and Purchaser shall purchase
and acquire from Sellers all of Sellers’ right, title and
interest, direct or indirect (including the right, title and
interest of any of their Affiliates), in and to all of the
following assets, properties and rights, owned, used or held for
use by Sellers or any of their Affiliates in connection with the
Business, except for the Excluded Assets (defined below), all to
the extent they shall exist on the Closing Date (such assets
collectively referred to herein as the “ Assets
”) in each case free and clear of any Liens other than
Permitted Liens (as defined in Section 6.14(a)(v)),
including:
(a)
all of Sellers’ or any of their Affiliates’ right,
title and interest in and to the Business, including the right to
conduct the Business Activities, and all Sellers’ or any of
their Affiliates’ rights in editorial materials, art,
photographic, audio visual, web content, graphic works and all
other content related to or used in the Business;
(b)
all rights of Sellers and any of their Affiliates under contracts
(including, without limitation, insertion orders) for the sale of
advertising with respect to the Business and all outstanding
proposals therefor;
(c)
all software, software systems, databases and database systems,
know-how, Seller-created enhancements (to the extent transferable)
and other proprietary or confidential information, data base
rights, publicity rights, and any other intellectual or property
rights of any kind or nature owned by Sellers or any of their
Affiliates and used or held for use solely in connection with the
Business;
(d)
all lists, mailing lists, documents and records of Sellers or any
of their Affiliates relating to all past, present or prospective
advertisers and subscribers with respect to the
Business;
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(e)
all promotional materials, rate cards, market research studies and
other research of Sellers or any of their Affiliates relating to
the Business;
(f)
the Domain Names and Marks (as each are defined in Section 4.10(a))
relating to the Business, including those set forth on Schedule
4.10(a) ;
(g)
all copyrights owned by Sellers or any of their Affiliates (whether
registered or not) relating to the Business, including all
copyrights relating to the Publications or the content displayed on
the Websites and any other original works of authorship owned by
Sellers or any of their Affiliates and used or held for use
primarily in connection with the Business (the “ Business
Copyrights ”);
(h)
all of Sellers’ or any of their Affiliates’ rights and
obligations under (i) contracts related solely to the Business,
including, without limitation, those listed on Schedule
1.01(h)(i) , (ii) the Real Estate Leases (as defined in Section
4.11(a)(v)), and (iii) the portions of those contracts listed on
Schedule 1.01(h)(ii) , relating to the Business but which
are being retained by Sellers or any of their Affiliates, except
that Purchaser will be assigned Sellers’ or such
Affiliates’ rights thereunder as they relate to the Business
(the “ Shared Contracts ”), which rights shall
be assigned to Purchaser only pursuant to a form of agreement
containing substantially the same terms and conditions as contained
in the agreements assigning the Shared Contracts on Schedule
7.02(l) or such other form as may be agreed to between Sellers
and Purchaser ((i), (ii) and (iii), collectively, the “
Assumed Contracts ”);
(i)
all of the goodwill and going concern value and other intangible
assets of the Business;
(j)
all owned furniture, fixtures and equipment related to the Business
and located at the Business’ facilities listed on Schedule
1.01(j) ;
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(k)
all existing files, accounting records, correspondence, internal
reports and records related to the Business, including databases
and records (whether in printed form or computer media);
(l)
all works in progress, finished goods, back issues and merchandise
related inventory of the Business;
(m)
all Owned Property;
(n)
all rights, claims or causes of action under or pursuant to all
warranties, representations and guarantees made by suppliers,
manufacturers and contractors to the extent relating to the
Business or the Assets;
(o)
all accounts receivable, prepaid expenses, advance payments,
escrows, credits and security deposits of the Business, and other
Closing Date Assets, as set forth on the Closing Date
Statement;
(p)
to the extent transferable, all permits, licenses, franchises,
approvals, certificates (including certificates of occupancy for
owned or leased real property), consents, waivers, concessions,
exemptions, orders, registrations, notices or other authorizations
issued to, or required to be obtained or maintained by, the Sellers
or any of their Affiliates by a Governmental Authority with respect
to the conduct or operation of the Business as currently conducted
or the ownership or use of the Assets, including without limitation
the Owned Real Property, and all pending applications therefor and
amendments, modifications and renewals thereof
(“Permits”);
(q)
all rights to the content of the TV Programs (whether owned or
licensed) and all tangible embodiments thereof, including, without
limitation, digital files, the library of master tapes, the
inventory of video tapes, DVDs and CD-ROMs containing
same;
(r)
all lists, whether leased, licensed (in each case only to the
extent transferable)
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or owned, by the Sellers or any of
their Affiliates, documents and records (in both printed form and
computer media) of the Sellers or any of their Affiliates relating
to past, present and prospective customers of the
Business;
(s)
all Closing Date Assets; and
(t)
any and all other assets, real or personal, tangible or intangible,
not listed above that are used or held for use by Sellers or any of
their Affiliates solely in connection with the Business.
1.02
Excluded Assets . The “ Assets ” shall
not include (and Sellers or any of their Affiliates shall retain
all right in), any assets of Sellers or any of their Affiliates not
used in the Business, and any of the following assets, (the “
Excluded Assets ”), which Purchaser acknowledges shall
be excluded from the Assets:
(a)
Sellers’ and their Affiliates’ corporate books and
records of internal corporate proceedings, income tax records, work
papers and books and records that Seller is required by law to
retain;
(b)
all of Sellers’ and their Affiliates’ cash and cash
equivalents;
(c)
all of Sellers’ and their Affiliates’ bank
accounts;
(d)
all accounting records and internal reports, other than Assets,
relating to the business activities of Sellers and their
Affiliates;
(e)
all software, software systems, databases and database systems, to
the extent they exist, whether owned, leased or licensed by Sellers
or any of their Affiliates’, which are not used solely with
respect to the Business;
(f)
any assets of Sellers or their Affiliates listed on Schedule
1.02(f) ;
(g)
all hosting software and hardware equipment which is not solely
related to
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the Business; and
(h)
all Plans and Employee Benefit Programs.
1.03
Assumed Liabilities . At the Closing Date, Purchaser agrees to assume
and pay, discharge, perform or otherwise satisfy the following
liabilities and obligations of Sellers or their Affiliates relating
to the Business according to their respective terms: (a) all
liabilities and obligations arising out of the operation of the
Business by Purchaser after the Closing Date; (b) all obligations
to fulfill any and all (i) subscriptions (at the cost thereof) and
(ii) advertising commitments (in each case, whether fully performed
or wholly or partially executed as of the Closing Date) under the
Assumed Contracts, including without limitation all advertising
insertion orders included in the Assumed Contracts (provided such
obligations under the Shared Contracts are only in respect of
rights Purchaser has been assigned); (c) all obligations first
arising after the Closing of Sellers or any of their Affiliates
relating to the Business under the Assumed Contracts (provided such
obligations under the Shared Contracts are only in respect of
rights Purchaser has been assigned), including, without limitation,
all obligations first arising after the Closing under the Real
Estate Leases (as defined in Section 4.11(a)(v)); (d) all
liabilities to the extent included on the Closing Date Statement as
defined in Section 2.02(a)(i); (e) all expenses in connection with
the Transferred Employees to the extent specifically provided in
Section 6.03 herein; (f) all liabilities from any litigation,
proceedings, investigations, actions, suits, orders at law or in
equity to the extent arising out of the operation of the Business
by Purchaser after the Closing Date; and (g) all Closing Date
Liabilities. The foregoing liabilities being assumed by Purchaser
are referred to hereinafter collectively as the “ Assumed
Liabilities .”
1.04
Excluded Liabilities . Notwithstanding anything contained in this
Agreement to the contrary, except for the Assumed Liabilities, the
Purchaser shall not assume or be
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obligated to pay, perform or
otherwise discharge (and the Sellers and their Affiliates shall
retain, pay, perform or otherwise discharge without recourse to the
Purchaser) any liabilities or obligations of the Sellers or their
Affiliates of any kind, character or description whatsoever,
whether direct or indirect, known or unknown, absolute or
contingent, matured or unmatured, and currently existing or
hereinafter arising (the “ Excluded Liabilities
”), including, but not limited to, the following: (a) any
liabilities in respect of any Tax relating to the Assets or the
Business that are incurred or are attributable to any taxable
period, or any portion of any taxable period prior to the Closing
Date, (b) any liability of Sellers or their Affiliates for legal,
accounting or broker’s or other advisors’ fees incurred
in connection with the negotiation of this Agreement or the
consummation of the transactions contemplated hereby, (c) any
liability owing by Sellers or their Affiliates to any of their
respective current or former directors or officers, current or
former shareholders or Affiliates of any such party, including any
current or former directors, officers or shareholders of such
shareholder or Affiliate or any other division or business unit of
Sellers and their Affiliates, (d) obligations in respect of
Sellers’ or their Affiliates’ bank accounts, (e) any
and all claims, liabilities and obligations relating to the
Excluded Assets, (f) any liability in respect of notes, bonds,
indebtedness for borrowed money, derivatives, off balance sheet
financing arrangements, hedges or swaps or guarantees in respect of
any of the foregoing, (g) any liability not expressly assumed by
the Purchaser pursuant to Section 6.03 arising in respect of or
relating to Transferred Employees, or any Plan or Employee Benefit
Program, (h) any liability arising from or related to any breach,
failure to perform, torts related to the performance of, violations
of Law, infringements or indemnities under, guaranties pursuant to
and overcharges or underpayments under, any Assumed Contract prior
to the Closing Date, (i) any liability arising from or related to
any compliance or noncompliance prior to the Closing Date with any
Law applicable to any Seller, any Affiliate of any Seller, the
Business or
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the Assets, and (j) any liability
arising from or related to any claim, action, suit, inquiry,
proceeding, audit or investigation by or before any Governmental
Authority, or any other arbitration, mediation or similar
proceeding against any Seller, any Affiliate of any Seller, the
Business or the Assets pending as of the Closing Date or based upon
any action, event, circumstance or condition arising prior to the
Closing Date.
ARTICLE II. PURCHASE PRICE AND
PAYMENT
2.01
Purchase Price .
(a)
In consideration of the sale, transfer, conveyance and assignment
of the Assets to Purchaser at the Closing, subject to the terms and
conditions of this Agreement and in reliance upon the
representations and warranties made herein by Sellers, Purchaser
agrees to assume the Assumed Liabilities and to pay to Sellers, on
the Closing Date, an amount equal to One Hundred Seventy Million
United States Dollars ($170,000,000) (the “ Purchase
Price ”). The Purchase Price is subject to
adjustment as set forth in Section 2.02.
(b)
All payments to be made on the Closing Date pursuant to this
Section 2.01 are being made by wire transfer of immediately
available clearing house funds in the city of New York to the
account or accounts specified in writing by Sellers at least two
(2) business days prior to Closing.
2.02
Working Capital Adjustment .
(a)
Definitions . For the purposes of this Agreement, the
following terms shall have the following respective
meanings:
(i) “
Closing Date Statement ” shall mean the final
statement of Closing Date Assets and Closing Date
Liabilities.
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(ii) “
Closing Date Assets ” shall mean the aggregate amount
of those assets of Sellers on the Closing Date under the captions
“Account Receivable, Net,” “Inventory,”
“Prepaid Expenses,” “Net Direct Response
Advertising,” and “Deposits” and calculated in
accordance with Schedule 2.02 , in each case as determined
in accordance with United States generally accepted accounting
principles consistently applied (“GAAP”) and using the
same accounting practices, policies and procedures used in
preparing the Internal Financial Statements attached hereto as
Schedule 4.08(a) and Schedule 4.08(b) (collectively,
the “Seller Accounting Policies”), except that all
intercompany amounts shall be excluded and all cash collected in
response to the DM Campaigns (as defined in Section 6.21) shall be
included; provided that in the event of a conflict between GAAP (as
modified by Schedule 4.08(b) ) and consistent application
thereof, GAAP (as modified by Schedule 4.08(b) ) shall
prevail.
(iii) “
Closing Date Liabilities ” shall mean the aggregate
amount of those liabilities of the Company on the Closing Date
under the captions “Accounts Payable,”
“Compensation Payable,” “Deferred Revenue”
(excluding “Deferred Subscription Revenue”) and
“Miscellaneous Current Liabilities” and calculated in
accordance with Schedule 2.02 , in each case as determined
in accordance with GAAP and the Seller Accounting Policies, except
that all intercompany amounts shall be excluded and no amounts
shall be included in respect of liabilities retained or assumed by
Sellers or Sellers’ Affiliates; provided that in the event of
a conflict between GAAP (as modified by Schedule 4.08(b) )
and consistent application thereof, GAAP (as modified by
Schedule 4.08(b) ) shall prevail.
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(iv) “
Deficiency ” shall mean the amount, if any, by which
the Working Capital Amount (as defined below) is less than the
Target Working Capital Amount (as defined below), as set forth on
the Closing Date Statement, as modified as a result of the
resolution of any Disputed Items (as defined below).
(v) “
Excess ” shall mean the amount, if any, by which the
Working Capital Amount is greater than the Target Working Capital
Amount as set forth on the Closing Date Statement, as modified as a
result of the resolution of any Disputed Items.
(vi) “
Target Working Capital Amount ” shall mean an amount
equal to $5,943,000.
(vii) “
Working Capital Amount ” shall mean an amount equal to
the Closing Date Assets less the Closing Date Liabilities.
The Working Capital Amount can be represented by a positive or a
negative number.
(b)
Effect of Deficiency/Excess . The Purchase Price shall
be reduced dollar-for-dollar by the amount of the Deficiency, if
any, or increased dollar-for-dollar by the amount of the Excess, if
any.
(c)
Determination of Final Closing Date Statement .
(i) No
later than ninety (90) days after the Closing Date, PRIMEDIA shall
deliver to Purchaser the preliminary Closing Date Statement, with
reasonable supporting documentation, setting forth the Closing Date
Assets and Closing Date Liabilities. Purchaser shall have
forty-five (45) days from receipt of the Closing Date Statement to
notify PRIMEDIA of any objections to any item or items on the
Closing Date Statement. Any such notice (a “ Notice
of Disagreement ”) shall be in
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writing and shall
specify in reasonable detail, and with reasonable supporting
documentation, the item or items in dispute (a “ Disputed
Item ” or “ Disputed Items ”), the
reasons for any such dispute and the adjustments which, in
Purchaser’s opinion, should be made to the Closing Date
Statement in order to comply with the requirements of this
Agreement. Any Disputed Item shall be resolved in the manner
set forth in Section 2.02(d) below.
(ii) If (A)
Purchaser does not deliver a Notice of Disagreement to Purchaser
within forty-five (45) days of Purchaser’s receipt of the
preliminary Closing Date Statement or (B) Purchaser acknowledges in
writing that the Closing Date Statement is accurate or (C)
Purchaser and Sellers and, if necessary, the Arbitrator resolve all
Disputed Items in accordance with Section 2.02(d) below, then the
Closing Date Statement shall be final, binding and conclusive on
the parties.
(d)
Arbitration . Promptly after the delivery of a Notice
of Disagreement, Purchaser and Sellers shall endeavor in good faith
to resolve all Disputed Items. If Purchaser and Sellers, are
unable to resolve all Disputed Items within thirty (30) days after
receipt by Purchaser of the Notice of Disagreement, then the
Parties shall, within ten (10) business days thereafter, appoint a
representative of KPMG LLP to arbitrate the dispute (the “
Arbitrator ”) and deliver a notice to the Arbitrator
of all items remaining in dispute (the “ Arbitrator
Notice ”). Purchaser and PRIMEDIA will be deemed to
have agreed with all items and amounts contained in the Closing
Date Statement other than the disputed items described in the
Arbitrator Notice, and the Arbitrator shall not be authorized to
consider any adjustments to any of the items in the Closing Date
Statement other than the disputed items described in the Arbitrator
Notice within the range of the difference between the
Purchaser’s position with respect thereto and
PRIMEDIA’s position with respect thereto.
Within
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twenty (20) days
after the selection of the Arbitrator, PRIMEDIA and Purchaser shall
present to the Arbitrator their respective positions with respect
to any and all unresolved Disputed Items, including such materials
as the Arbitrator may request. The Arbitrator shall, within
sixty (60) days after the submission of the evidentiary materials,
submit its written decision on each Disputed Item to PRIMEDIA and
Purchaser. Any determination by the Arbitrator with respect to any
Disputed Item shall be final, binding and conclusive on each party
to this Agreement. Except as specifically provided to the
contrary in this Section 2.02(d) or otherwise specifically agreed
to by the parties in writing, the arbitration shall be conducted in
New York, New York. The costs of any dispute resolution
pursuant to this Section 2.02(d), including the fees and expenses
of the Arbitrator and of any enforcement of the determination
thereof, shall be borne by the parties in inverse proportion as
they may prevail on the matters resolved by the Arbitrator, which
proportionate allocation shall be calculated on an aggregate basis
based on the relative dollar values of the amounts in dispute and
shall be determined by the Arbitrator at the time the determination
of such firm is rendered on the merits of the matters
submitted.
(e)
Resolution of Deficiency/Excess . If it is finally
determined pursuant to the provisions of this Section 2.02 that
there is a Deficiency, then within ten (10) days after the Closing
Date Statement is deemed final, Sellers shall pay to Purchaser the
amount of the Deficiency. If it is finally determined
pursuant to the provisions of this Section 2.02 that there is an
Excess, then within ten (10) days after the Closing Date Statement
is deemed final, Purchaser shall pay to Sellers the amount of the
Excess.
(f)
Payment . All payments for the Deficiency or the
Excess shall be made by wire transfer of immediately available
funds to the account or accounts designated by Purchaser or
Sellers, as the case may be, within ten (10) days after the final
determination of the Closing Date
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Statement and shall be accompanied
by a payment of simple interest thereon calculated at the annual
rate of 6% (assuming a 360 day year) from the Closing Date to the
actual date of payment.
2.03
Allocation of Purchase Price . Purchaser and Sellers
hereby mutually agree to allocate the Purchase Price prior to the
Closing Date, including any adjustment to the Purchase Price, in
accordance with Section 1060 of the Internal Revenue Code of 1986,
as amended (the “ Code ”) and the Treasury
Regulations promulgated thereunder, and any similar provision of
state, local or foreign law, as appropriate. Such allocation
shall be amended to take into account any adjustment to the
Purchase Price hereunder. Prior to the applicable filing
deadline, Purchaser and Sellers shall jointly complete IRS Form
8594 and shall separately file such form with their respective
federal income tax returns for the tax year in which the Closing
occurs in a timely manner and in accordance with the agreed upon
allocation. Subject to the requirements of applicable law,
each of Purchaser and Sellers shall refrain from taking any
position that is inconsistent with the terms of any such
allocation. If either the Sellers or Purchaser receive notice
from a taxing authority challenging such allocation, such party
shall timely notify the other party of such receipt. The
parties recognize that the Purchase Price does not include
Purchaser’s acquisition expenses or Sellers’
disposition expenses and that Purchaser and Sellers shall allocate
such expenses appropriately.
ARTICLE III.
CLOSING .
3.01
Closing Date .
Unless otherwise agreed by Sellers and Purchaser, the closing (the
“ Closing ”) of the transactions contemplated by
this Agreement shall take place at the office of Sellers, 745 Fifth
Avenue, New York, New York 10151, at 10:00 a.m. three (3) business
days following the date on which all the conditions set forth in
Section 7.01 below have been satisfied, which date may be extended
by the Purchaser to a date no later than thirty (30) days following
the
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delivery of the Audited Financial
Statements (as defined in Section 6.18(a)) to Purchaser in order to
allow the Purchaser to obtain debt financing; provided that
Purchaser and Sellers shall take all reasonable best efforts to
have the Closing occur prior to December 31, 2006, as further
described in Section 6.11 below. For purposes of this
Agreement, all calculations to be made as of the Closing Date shall
be made as of 11:59 p.m. on the Closing Date. The actual time
and date of Closing are referred to herein as the “
Closing Date .” At the Closing: (i) the parties shall
execute and deliver to each other the documents referred to in
Sections 7.02 and 7.03 hereof; and (ii) Purchaser shall deliver to
Sellers the Purchase Price.
ARTICLE IV. REPRESENTATIONS
AND WARRANTIES OF SELLERS.
Sellers, jointly and severally,
represent and warrant to Purchaser that:
4.01
Organization and Qualification of Sellers .
Each Seller is a corporation duly
organized, validly existing and in good standing under the laws of
the State of Delaware, and has the full power and authority to own,
lease and operate the Assets and to conduct the Business as it is
now being conducted and to execute and deliver this Agreement and
the other agreements and instruments referred to in this Agreement
that Sellers are executing and delivering (the “
Sellers’ Additional Agreements ”) and to carry
out the transactions contemplated hereby and thereby. Each
Seller is in good standing and qualified to do business in each
jurisdiction where the nature of its businesses requires such
qualification, except where the failure to be in good standing or
to be so qualified would not, individually or in the aggregate, be
reasonably likely to have a Material Adverse Effect. A
“ Material Adverse Effect ” shall mean a
material adverse effect on the business, assets, results of
operations or condition (financial or otherwise) of the Business,
taken as a whole, excluding any such effects arising out of or
resulting from changes in the general economy, acts of war or
terrorism or general market conditions unless such general market
condition affects the
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Business disproportionately; or
entering into this Agreement, the announcement thereof or the
consummation of the transactions contemplated hereby.
4.02
Authorization of Agreement . The execution, delivery and performance
by Sellers of this Agreement and Sellers’ Additional
Agreements and the consummation by Sellers of the transactions
contemplated hereby and thereby, have been duly authorized by all
necessary corporate action of Sellers. This Agreement and
Sellers’ Additional Agreements have been duly executed and
delivered by each Seller, as applicable, and constitute legal,
valid and binding obligations of each Seller, enforceable in
accordance with their respective terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or affecting
the rights of creditors generally and by general equitable
principles (regardless of whether such enforceability is considered
in a proceeding in equity or at law) and by an implied covenant of
good faith and fair dealing.
4.03
No Conflicts . Assuming compliance with the notification
requirements of the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the rules and regulations promulgated
thereunder (the “ HSR Act ”) and that all
Required Consents (as defined in Section 7.02(l)) have been
obtained, except as set forth on Schedule 4.03 attached
hereto, neither the execution, delivery or performance of this
Agreement or any of Sellers’ Additional Agreements, nor the
consummation by Sellers of the transactions contemplated hereby or
thereby, nor compliance by Sellers with the terms and provisions
hereof or thereof, will (i) conflict with the Certificate of
Incorporation or By-Laws of any Seller, (ii) conflict with, or
result in the breach or termination of, or constitute a default (or
with or without notice or lapse of time or both, constitute a
default) under, require any consent of any individual, corporation,
limited or general partnership, limited liability company, limited
liability partnership, trust, association or other entity (“
Person ”)
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pursuant to, give to others any
right of termination, amendment, modification, acceleration or
cancellation of, allow the imposition of any fees or penalties,
require the offering or making of any payment or redemption, give
rise to any increased, guaranteed, accelerated or additional rights
or entitlements of any Person or otherwise adversely affect the
rights of Sellers or the Business under, or result in the creation
of any Lien on any of the Assets pursuant to any (x) Material
Contract or (y) other note, bond, indenture, license or lease
relating to the Business to which a Seller is a party or by which
it is bound, (iii) constitute a material violation by any Seller of
any law or statute or any judgment, ruling, order, writ,
injunction, decree, rule, code, executive order or regulation
(collectively, “ Laws ”), of any court or
governmental authority (“ Governmental Authority
”) applicable to Sellers or the Business; or (iv) result in
the creation of any mortgage, pledge, security interest, claim,
lien, charge, equitable interest, option, right of first refusal,
adverse claim, easement, encroachment, covenant, condition and
restriction or encumbrance of any kind, including any restriction
on or transfer or other assignment, as security or otherwise, of or
relating to use, quiet enjoyment, voting, transfer, receipt of
income or exercise of any other attribute of ownership (each a
“ Lien ”) upon any of the Assets.
4.04
No Consents . No order, permission, consent, approval,
license, authorization, registration, or validation of, or filing
with, or notice to, or exemption by, any Governmental Authority is
required to authorize, or is required in connection with, the
execution, delivery or performance by Sellers of this Agreement or
any of Sellers’ Additional Agreements, other than filings
required under the HSR Act.
4.05
Compliance with Laws . Except as set forth on Schedule 4.05
attached hereto, each Seller is in material compliance with all
applicable Laws, as the same apply to the Business or Assets.
Except as set forth on Schedule 4.05 , no Seller has
received any written notice
17
from any Governmental Authority, and
to each Seller’s knowledge, none is threatened, alleging that
any Seller (with respect to the Business and/or Assets) has
violated, or has not complied with, any applicable Laws.
4.06
Litigation . Except as set forth on Schedule 4.06
attached hereto, there are no actions, suits, proceedings or
investigations pending or, to any Seller’s knowledge,
threatened in writing before any court or other Governmental
Authority against or affecting the Business or Assets, which (i)
involve an amount in excess of $50,000, or (ii) could materially
adversely impact Purchaser’s post-Closing operation of the
Business if decided adversely to the Sellers.
4.07
No Brokers . No Seller has incurred any obligation or
liability, contingent or otherwise, for brokers’ or
finders’ fees or commissions in connection with the
transactions contemplated by this Agreement other than fees to be
paid solely by Sellers or their Affiliates.
4.08
Financial Statements . (a) Attached hereto as Schedule
4.08(a) are: (i) the unaudited Statements of Income for the
Business for the years ended December 31, 2005 and December 31,
2004 and for the nine months ended September 30, 2006 and (ii) the
unaudited Statement of Assets and Liabilities for the Business as
of December 31, 2005 and September 30, 2006 ((i) and (ii),
collectively, the “ Internal Financial Statements
”). The Internal Financial Statements shall be subject
to the notes as presented in Schedule 4.08(b) .
(b) Except as set forth in the
related notes and schedules thereto and as disclosed on Schedule
4.08(b) , each of the Internal Financial Statements have been
prepared (i) in accordance with the books and records maintained by
Sellers consistent with past practices and (ii) in accordance with
GAAP consistently applied. The Internal Financial Statements
present fairly, in all material respects, the financial condition
of the Business for the periods and as of the dates indicated and
the results of operations of the Business for the periods then
ended.
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(c) Except as set forth in the
related notes and schedules thereto and as disclosed on Schedule
4.08(c) , the Audited Financial Statements when delivered
pursuant to Section 6.18 (i) will have been prepared (A) in
accordance with the books and records maintained by Sellers
consistent with past practices, and (B) in accordance with GAAP
consistently applied and (ii) shall not be materially inconsistent,
taken as a whole, with the Internal Financial Statements. The
Audited Financial Statements when delivered pursuant to Section
6.18 will present fairly, in all material respects, the financial
condition of the Business for the periods and as of the dates
indicated and the results of operations of the Business for the
periods then ended.
4.09
Undisclosed Liabilities . Except (a) for the Excluded Liabilities;
(b) for the liabilities set forth in the September 30, 2006
Statement of Assets and Liabilities; (c) as set forth on the Notes
to the Statement of Assets and Liabilities listed on Schedule
4.08(b) or Schedule 4.09 ; (d) for obligations of future
performance under any Assumed Contract; arising in accordance with
the terms thereof and not as a result of a pre-Closing breach
thereof; or (e) for liabilities incurred in the ordinary course of
business consistent with past practice since September 30, 2006,
neither the Business nor the Assets is subject to any liability,
whether absolute, determined, indeterminable, accrued, known or
unknown, fixed, contingent or otherwise and whether due or to
become due.
4.10
Intellectual Property .
(a)
Schedule 4.10(a) attached hereto contains an accurate and
complete description of the following intellectual property rights,
whether protected, created or arising under the laws of the United
States or any other jurisdiction: (i) all registered trademarks and
all material unregistered trademarks, service marks, logos, trade
names and brand names owned by or licensed to Sellers, individually
or jointly, and used or held for use primarily in connection with
the Business and all existing and pending federal and state
trademark applications (the “ Marks ”) and, (ii)
all
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domain names owned, individually or
jointly, by Sellers or their Affiliates and used primarily in
connection with the Business (“ Domain Names
”). The Marks and Domain Names relating to the Business
shall be collectively referred to herein as the “
Registered Intellectual Property ” and the Registered
Intellectual Property, Business Copyrights and other intellectual
property owned, individually or jointly, by Sellers or their
Affiliates and used primarily in connection with the Business shall
be collectively referred to herein as the “ Business
Intellectual Property ”. None of the Sellers owns
or licenses any United States or foreign patents or patentable
inventions related to the Business.
(b)
Except as set forth on Schedule 4.10(b) , (i) Sellers own
and possess all right, title and interest in and to, or as of the
Closing, will own and possess all right, title, and interest in and
to, free and clear of all Liens, all of the Business Intellectual
Property, including the Registered Intellectual Property, (ii) with
the exception of those Marks set forth on Schedule 4.10(b)
which Sellers have licensed to a third party, Sellers have the sole
and exclusive right to use the Business Intellectual Property,
(iii) there are no copyrights used in the Business, the loss of
which, individually or in the aggregate, would prevent Purchaser
from operating the Business in substantially the same manner as the
Business currently is being operated by the Sellers and (iv) the
consummation of the transactions contemplated hereby will not
conflict with, alter or impair in any material respect, the
Business Intellectual Property. The Business Intellectual
Property contains all the material intellectual property necessary
for the operation of the Business as presently conducted.
Except as set forth on Schedule 4.10(b) , there are no
material copyrights, trademarks or other intellectual properties
owned by any Seller or any affiliate of any Seller and used or held
for use in connection with the Business that is not included in
Assets being purchased and acquired by Purchaser on the Closing
Date. Each of the Sellers has taken all commercially
reasonable steps to
20
protect its rights in the Business
Intellectual Property. The Business has no material trade
secrets. Sellers have taken all necessary action to maintain
and protect the Registered Intellectual Property so as not
adversely to affect the validity or enforceability of the
Registered Intellectual Property. All Trademarks registered
in the United States, and for which applications to register have
been filed in the United States which are being used, have been
continuously used in the form appearing in, and in connection with,
the goods and services listed in their respective registration
certificates and applications therefor. To Sellers’
knowledge, there has been no prior use of any material Mark by any
third party that would confer upon such third party superior rights
in such Mark. All necessary registration, maintenance,
renewal and license fees, if any, currently due in connection with
the Registered Intellectual Property have been paid and all
necessary applications, documents, recordations and certificates in
connection with such Registered Intellectual Property have been
filed with the relevant copyright, trademark or other authorities
in the United States or foreign jurisdictions, as the case may be,
for the purposes of maintaining or prosecuting such Registered
Intellectual Property.
(c)
The Registered Intellectual Property is valid and subsisting and,
except as set forth on Schedule 4.10(c) (and, in the case of
any such Intellectual Property used but not owned by the Sellers,
to Sellers’ knowledge), (i) there are no claims or
proceedings pending or, to Sellers’ knowledge, threatened
against Sellers by any person or entity with respect to the
ownership, validity, enforceability, effectiveness or use of any
Business Intellectual Property and (ii) the conduct of the
Business, including the use and commercial exploitation of the
Business Intellectual Property in connection therewith does not
infringe, misappropriate, violate or dilute, and has not infringed,
misappropriated, violated or diluted any trademarks, copyrights or
any other intellectual property or any rights of privacy, rights of
publicity or other rights of any person or entity, nor
has
21
any Seller received any demand or
request that it license any rights from any person or entity or
that otherwise alleges that any such infringement,
misappropriation, violation or dilution is or may be occurring or
has or may have occurred, nor to the Sellers’ knowledge, is
there a reasonable basis therefor. Except as set forth on
Schedule 4.10(c) , none of the Marks has been abandoned by
Sellers and none of the Business Intellectual Property is subject
to any outstanding order, decree, judgment, stipulation, injunction
or written restriction or agreement restricting the scope of use
thereof.
(d)
Except as set forth on Schedule 4.10(d) , (i) to the
knowledge of Sellers, no other person or entity is materially
infringing, misappropriating, violating or diluting any of the
Business Intellectual Property, (ii) Sellers have not granted any
exclusive licenses, options or agreements or any other material
licenses, options or agreements (other than non-exclusive licenses
and permissions for one-time or limited use granted in the ordinary
course of business) to any person or entity relating to use of any
of the Business Intellectual Property, and (iii) Sellers are not,
in connection with the conduct of the Business, bound by or a party
to any material options, licenses or agreements of any kind
relating to the intellectual property of any other person, except
for agreements relating to off-the-shelf computer software licensed
under standard “shrink-wrap” type licenses to the
Sellers in the ordinary course of business. Purchaser shall
have the right to use and exploit all material Business
Intellectual Property immediately following the Closing to the same
extent as the Sellers have used and exploited such Business
Intellectual Property prior to the Closing. No loss or
expiration of any of the material Business Intellectual Property is
pending or, to the Sellers’ knowledge pending or reasonably
foreseeable.
4.11
Contracts and Commitments .
(a)
Schedule 4.11 attached hereto lists: (i) all contracts
relating to the Business, other than Excluded Assets, whether or
not made in the ordinary course of business that (A)
require
22
any of the Sellers or their
Affiliates to pay in excess of $25,000 on an annual basis or in
excess of $50,000 over the current contract term, or (B) is
material to the business, operations, assets, financial condition,
results of operations or prospects of the Business, taken as a
whole, (ii) each partnership, joint venture, contribution, or other
agreement to which any Seller is a party or is otherwise bound
involving a sharing of profits, losses, costs or liabilities by the
Seller or any of its Affiliates or any third party, relating to the
Business; (iii) each written contract or other agreement to which
any Seller is a party and containing terms which impose or purport
to impose non-competition obligations upon the Business; (iv) each
written warranty, guaranty or other similar undertaking with
respect to contractual performance extended by Sellers with respect
to the Business, (v) all real property leases, subleases, under
leases, licenses or other occupancy agreements, and all amendments,
modifications and supplements thereof (each, a “ Real
Estate Lease ”) to which any Seller or any of its
Affiliates is a party relating to the Business, (vi) any contract
relating to or evidencing indebtedness of the Business or the
Seller or any of its Affiliates in connection with the Business,
including mortgages, other grants of security interests, guarantees
or notes, and (vii) contracts with any of the Sellers, any
Affiliates of any Sellers or any current officer, director, general
partner or managing member of the Sellers or any Affiliate of any
of the Sellers with respect to the Business ((i) — (vii)
collectively, “ Material Contracts
”).
(b)
Except as set forth on Schedule 4.11(b) , no Seller has
obtained any letter of credit or surety bond for, or given any
irrevocable power of attorney, in each case, relating to the
Business, to any person, firm or corporation for any purpose
whatsoever, in each case, that is outstanding or will be in effect
on the Closing Date.
(c)
Each Material Contract is a legal, valid, binding and enforceable
agreement and is in full force and effect. Except as set
forth on Schedule 4.11(c) none of the Sellers
have
23
received any written notice of
termination or written notice of any default or event that with
notice or lapse of time, or both, would constitute a default by any
of the Sellers under any Material Contract that would permit
termination, give rise to a material penalty or materially
adversely modify the terms thereof. None of the Sellers is in
default under any Material Contract, nor, to the Sellers’
knowledge, is any other party to any Material Contract in breach of
or default thereunder and no event has occurred that, with the
lapse of time or the giving of notice or both, would constitute a
breach or default by any of the Sellers or any other party
thereunder.
(d)
Sellers have heretofore delivered or made available to Purchaser
true and correct copies of all of the Material Contracts (including
those Assumed Contracts that are Material Contracts), including all
amendments, supplements and modifications thereto and provided
access to other contracts of the Business.
4.12 Employee
Benefits .
(a)
Schedule 4.12 lists:(i) all employment, change in control or
severance agreements between any Seller and any Employee (as
defined in Section 6.03(a)) relating to the Business, excluding any
agreements which remain the sole obligation of Sellers or PRIMEDIA
(the “ Employment Agreements ”);
(ii)
all collective bargaining or other labor agreements covering any
employees of the Business;
(iii)
each “Employee Benefit Plan” as such term is defined in
Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended (“ ERISA ”) that is covered by
ERISA and that is maintained or provides benefits for any employee
of the Business or with respect to any plan covered by Title IV of
ERISA or Section 412 of the Code, any entity that,
24
together with the Seller would be
treated as a single employer under Section 414 of the Code or
Sections 4001(a) or (b) of ERISA (an “ ERISA Affiliate
”), (a “ Plan ”; collectively, the “
Plans ”); and
(iv)
each plan or arrangement not subject to ERISA maintained for the
benefit of any Employee which provides for retirement benefits,
termination bonuses, deferred compensation, bonuses, stock options,
vacation, employee insurance coverage or any similar compensation
or welfare benefit plan (individually, an “ Employee
Benefit Program ”; collectively, the “ Employee
Benefit Programs ”).
(b)
Each Plan and Employee Benefit Program has been maintained and
administered at all times in material compliance with all
applicable Laws, including but not limited to ERISA and the Code,
applicable to such Plan and Employee Benefit Program.
(c)
No “ Reportable Event ” (as such term is used in
Section 4043 of ERISA), “ Prohibited Transaction
” (as such term is used in Section 406 of ERISA or Section
4975 of the Code) or “ Accumulated Funded Deficiency
” (as such term is used in Section 412 of ERISA or Section
4971 of the Code) has occurred with respect to any Plan and there
exists no condition or set of circumstances which could result in a
“ Reportable Event ” or any liability under
Title IV of ERISA with respect to the Seller or any ERISA
Affiliate.
(d)
Neither Sellers nor any ERISA Affiliate has, within the last five
(5) years, ever contributed to, sponsored, maintained or
participated in any Plan or Employee Benefit Programs which (i) is
a “ Multi Employer Plan ,” as defined in Section
3(37) of ERISA; (ii) is subject to Title IV of ERISA or Section 412
of the Code or (iii) provides for post-retirement health or life
insurance or benefits.
(e)
Complete and correct copies of all Plans and Employee Benefit
Programs listed on Schedule 4.12 have been delivered or made
available to Purchaser.
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(f)
There are no work stoppages or, to Sellers’ knowledge,
threatened work stoppages, and to Sellers’ knowledge, no
union organizing effort is under way with respect to any Employees
of the Sellers related to the Business.
(g)
No amount that could be received as a result of the transactions
contemplated by this Agreement by any “ disqualified
individual ” (as such term is defined in the regulations
promulgated under Section 280G of the Code) under any agreement,
any Plan or any Employee Benefit Program or otherwise will result
in an “ excess parachute payment ” (as such term
is defined in Section 280G(b)(1) of the Code).
4.13
Absence of Certain Changes . Except as and to the extent set forth on
Schedule 4.13 , since December 31, 2005, (i) the Sellers
have conducted the Business only in the ordinary course consistent
with past practice; (ii) there has not been any change, event or
development that, individually or in the aggregate, has had or is
reasonably likely to have a Material Adverse Effect; (iii) neither
the Business nor the Assets have suffered any loss, damage,
destruction or other casualty affecting any material properties or
assets thereof or included therein, whether or not covered by
insurance; and (iv) the Sellers have not:
(a)
incurred any obligations or liabilities (whether absolute, accrued
or contingent and whether due or to become due) that, individually
or in the aggregate, are material to the Business taken as a
whole;
(b)
written off as uncollectible any notes or accounts receivable or
any portion thereof that, individually or in the aggregate, are
material to the Business taken as a whole;
(c)
sold or transferred any properties or assets, real, personal,
fixed, tangible or intangible that, individually or in the
aggregate, are material to the Business taken as a
whole;
(d)
made any capital expenditures or commitments for capital assets
that,
26
individually or in the aggregate,
are material to the Business taken as a whole;
(e)
made any change in any Seller Accounting Policies, except as
required by Law or GAAP;
(f)
(i) entered into any employment, deferred compensation or other
similar agreement (or any amendment to any such existing agreement)
applicable to any employee of the Business, (ii) amended any of the
Plans or Employee Benefit Programs described on Schedule
4.12 or adopted any new employee benefit plan or program
relating to the Business or (iii) except as reflected on
Schedule 6.03 , granted any general increase in
compensation, bonus or other benefits payable to any employee of
the Business, other than ordinary course increases in pay provided
to each employee pursuant to ordinary course review
cycles;
(g)
terminated or threatened to terminate any significant advertiser or
sponsor; or
(h)
agreed, whether in writing or otherwise, to take any action
referred to in this Section 4.13 in the future.
4.14
Transactions with Affiliates . Except as described on Schedule 4.14 or
Schedule 1.02(f) , there are no services currently being
provided to Sellers or any of their Affiliat
