<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 16, 1998
REGISTRATION NO. 333-56665
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
INFORMATION HOLDINGS INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 2731 06-1518007
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
------------------------
23 OLD KINGS HIGHWAY SOUTH
DARIEN, CONNECTICUT 06820
(203) 662-4203
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------------
MASON P. SLAINE
PRESIDENT AND CHIEF EXECUTIVE OFFICER
INFORMATION HOLDINGS INC.
23 OLD KINGS HIGHWAY SOUTH
DARIEN, CONNECTICUT 06820
(203) 662-4203
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------------
COPIES TO:
<TABLE>
<S> <C>
STEVEN J. GARTNER, ESQ. JONATHAN A. SCHAFFZIN, ESQ.
WILLKIE FARR & GALLAGHER CAHILL GORDON & REINDEL
787 SEVENTH AVENUE 80 PINE STREET
NEW YORK, NEW YORK 10019 NEW YORK, NEW YORK 10005
(212) 728-8000 (212) 701-3000
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act,
check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
MAXIMUM
MAXIMUM PROPOSED
PROPOSED AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF SECURITIES TO BE AMOUNT TO BE OFFERING PRICE OFFERING REGISTRATION
REGISTERED REGISTERED PER SHARE(1) PRICE (1) FEE
<S> <C> <C> <C> <C>
Common Stock, par value $.01..................... 4,887,500 $16.50 $80,643,750 $23,790(2)
</TABLE>
(1) Estimated solely for purposes of determining the registration fee.
(2) $19,697 of this amount has been previously paid.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PROSPECTUS
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BY ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED JULY 16, 1998
4,250,000 SHARES
INFORMATION HOLDINGS INC.
[LOGO]
COMMON STOCK
--------------
All of the shares of Common Stock of Information Holdings Inc., a Delaware
corporation (the "Company"), offered hereby are being offered by the Company.
Prior to this Offering (the "Offering"), there has been no public market for the
Common Stock. It is currently anticipated that the initial public offering price
will be between $14.50 and $16.50 per share. See "Underwriting" for a discussion
of the factors to be considered in determining the initial public offering price
of the Common Stock.
Upon consummation of the Offering, Warburg Pincus (as defined herein) will
own 58.8% of the outstanding Common Stock, assuming an initial public offering
price of $15.50 per share.
The Common Stock has been approved for listing on the New York Stock
Exchange ("NYSE") under the symbol "IHI," subject to official notice of
issuance.
SEE "RISK FACTORS" BEGINNING ON PAGE 11 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS OF THE COMMON STOCK OFFERED
HEREBY.
-----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC(1) DISCOUNT(2) COMPANY(3)
<S> <C> <C> <C>
Per Share.................................. $ $ $
Total(4)................................... $ $ $
</TABLE>
(1) Up to 72,841 shares (assuming an initial public offering price of $15.50 per
share) offered hereby are being offered by the Company on a non-underwritten
basis to certain directors of the Company at the Price to Public less the
Underwriting Discount.
(2) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended (the "Securities Act"). See "Underwriting."
(3) Before deducting expenses payable by the Company estimated at $1,360,000.
(4) The Company has granted to the Underwriters an option, exercisable within 30
days after the date of this Prospectus, to purchase up to 637,500 additional
shares of Common Stock on the same terms as set forth above, solely to cover
over-allotments, if any. If such option is exercised in full, the total
Price to Public, Underwriting Discount and Proceeds to Company will be
$ , $ and $ , respectively.
-------------------
The shares of Common Stock being offered by this Prospectus are offered by
the several Underwriters, subject to prior sale, when, as and if delivered to
and accepted by the Underwriters, and subject to approval of certain legal
matters by counsel for the Underwriters. The Underwriters reserve the right to
withdraw, cancel or modify such offer and to reject orders in whole or in part.
It is expected that delivery of the shares of Common Stock offered hereby will
be made in New York, New York on or about , 1998.
-------------------
MERRILL LYNCH & CO. BT ALEX. BROWN
------------
The date of this Prospectus is , 1998.
<PAGE>
[Graphic material, omitted in the electronic filing, depicts various logos of
CRC Press, as well as sample publishing products and related images in each of
the following areas: (i) Life Sciences; (ii) Engineering, Mathematics and
Physical Sciences; (iii) Journals and Newsletters; (iv) Environmental Sciences;
and (v) Business Publications.]
2
<PAGE>
INFORMATION IN THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS WHICH CAN
BE IDENTIFIED BY THE USE OF FORWARD-LOOKING TERMINOLOGY SUCH AS "MAY," "WILL,"
"SHOULD," "EXPECT," "INTEND," "ESTIMATE" OR "CONTINUE" OR THE NEGATIVE THEREOF
OR COMPARABLE TERMINOLOGY. THE MATTERS SET FORTH UNDER THE CAPTION "RISK
FACTORS" IN THE PROSPECTUS CONSTITUTE CAUTIONARY STATEMENTS IDENTIFYING
IMPORTANT FACTORS WITH RESPECT TO SUCH FORWARD-LOOKING STATEMENTS, INCLUDING
CERTAIN RISKS AND UNCERTAINTIES, THAT COULD CAUSE ACTUAL RESULTS TO DIFFER
MATERIALLY FROM THOSE IN SUCH FORWARD-LOOKING STATEMENTS.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK. SUCH
TRANSACTIONS MAY INCLUDE STABILIZATION, THE PURCHASE OF COMMON STOCK TO COVER
SYNDICATE SHORT POSITIONS AND THE IMPOSITION OF PENALTY BIDS. FOR A DESCRIPTION
OF THESE ACTIVITIES, SEE "UNDERWRITING."
3
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
4
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN
CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND HISTORICAL AND PRO FORMA
FINANCIAL STATEMENTS INCLUDED ELSEWHERE IN THIS PROSPECTUS. UNLESS THE CONTEXT
OTHERWISE REQUIRES, REFERENCES HEREIN TO THE "COMPANY" OR "IH" INCLUDE
INFORMATION HOLDINGS INC. AND ITS SUBSIDIARIES, INCLUDING THE LLC (AS DEFINED
HEREIN), AND REFERENCES HEREIN TO "COMMON STOCK" REFER TO THE COMPANY'S COMMON
STOCK, PAR VALUE $.01 PER SHARE. UNLESS OTHERWISE INDICATED, ALL INFORMATION
PRESENTED IN THIS PROSPECTUS ASSUMES THAT (I) THE EXCHANGE (AS DEFINED HEREIN)
AND CERTAIN CONTEMPORANEOUS TRANSACTIONS HAVE BEEN CONSUMMATED AND (II) THE
UNDERWRITERS' OVER-ALLOTMENT OPTION HAS NOT BEEN EXERCISED.
THE COMPANY
OVERVIEW
The Company is an information publishing business focused on providing
essential information to professional and academic end-users in attractive niche
markets. The Company was formed to capitalize on management's experience in
acquiring information publishing businesses and then increasing profitability
through a combination of organic revenue growth and improved operating
efficiencies. To date, the Company has acquired information publishing
businesses in the following niche markets: scientific, technical and medical
("STM") and professional through CRC Press; and intellectual property through
MicroPatent. For the year ended December 31, 1997, the Company had revenues, net
loss and EBITDA of $34.9 million, $4.9 million and $1.4 million, respectively.
These figures reflect the Adjustments (as defined on page 10), which reduced
revenues by $4.0 million and net income and EBITDA by $8.0 million.
CRC Press, acquired in January 1997 from The Times Mirror Company, is a
mid-sized STM and professional publisher with leading positions in several
attractive niche markets. CRC Press, with a 95-year history, has highly regarded
brand names and publishes some of the most recognizable STM titles in their
respective fields, including THE HANDBOOK OF CHEMISTRY AND PHYSICS (currently in
its 79th edition) and STANDARD MATHEMATICAL TABLES AND FORMULAE. In the first
half of 1997, two fold-in acquisitions were completed and combined with CRC
Press: St. Lucie Press, a publisher of professional titles; and Auerbach, a
provider of technology-oriented print and electronic subscription-based
products, which was acquired from The Thomson Corporation ("Thomson"). For the
three months ended March 31, 1998, CRC Press contributed approximately 83% of
the Company's revenues.
MicroPatent, acquired in July 1997, is a leading source of intellectual
property information products and services. Its high-quality patent and
trademark databases are used extensively by legal and research professionals and
corporations. The Internet, MicroPatent's fastest-growing distribution channel,
accounted for 34% of its total revenues in the first quarter of 1998, as
compared to 14% in the first quarter of 1997. The Company believes that its
profitable PATENTWEB-TM- service is among the most comprehensive intellectual
property information services on the Internet. For the three months ended March
31, 1998, MicroPatent contributed approximately 17% of the Company's revenues.
MANAGEMENT
The Company was formed in December 1996 by Mason P. Slaine and Warburg,
Pincus Ventures, L.P. ("Warburg Pincus"). Mr. Slaine, the Company's President
and Chief Executive Officer, has more than 15 years of experience in the
information publishing industry in both corporate and entrepreneurial
environments. From 1994 to 1996, he served as President of Thomson Financial
Services ("Thomson Financial"), a unit of Thomson which is a leading provider of
financial information, research, analysis and software products worldwide. Under
his leadership, Thomson Financial completed numerous acquisitions and increased
its sales and operating profit from $407 million and $74 million in 1993 to $790
million and $166 million in 1996, respectively.
5
<PAGE>
Prior to joining Thomson Financial, Mr. Slaine led a number of highly
successful acquisitions in the information publishing industry. In 1982, he,
along with partners, acquired Dealers' Digest, Inc., a financial publishing
company, for $800,000, reengineered its operations and sold it four years later
for $40 million. In 1987, he founded Rand Data Services, Inc., a financial
information company, with an equity investment of $1.5 million and merged it in
1988 into Thomson's Securities Data Company, Inc., for which he and his
associates received aggregate consideration (including earn-outs through 1991)
of approximately $25 million. In 1988, he and a partner acquired CHEMICAL WEEK
MAGAZINE, a trade magazine serving the chemical industry, for $9.5 million, of
which $1 million was contributed equity. Mr. Slaine reengineered CHEMICAL WEEK's
operations and sold it in three stages between 1991 and 1996 for aggregate
consideration of approximately $23 million. The financial results of Mr.
Slaine's past acquisitions are not intended to be indicative of the future
financial results of the Company.
Vincent A. Chippari, the Company's Executive Vice President and Chief
Financial Officer, has extensive experience in information publishing, business
management, consulting and finance, including seven years in various senior
level operating and financial capacities with Thomson. Messrs. Slaine and
Chippari are complemented by strong operating management. Dennis Buda, President
of CRC Press, and Steven Wolfson, President of MicroPatent, each have more than
20 years of experience in the information publishing industry. See
"Management--Executive Officers and Directors." Upon consummation of the
Offering, the executive officers of the Company will own an aggregate of
approximately 15.4% of the outstanding Common Stock, assuming an initial public
offering price of $15.50 per share. See "Security Ownership of Certain
Beneficial Owners and Management."
GROWTH AND OPERATING STRATEGY
The principal elements of the Company's growth strategy are to (i) acquire
businesses in attractive niche markets, (ii) organically grow revenues and
profit, (iii) improve operating efficiencies and (iv) attract and retain
superior management.
ACQUIRE BUSINESSES IN ATTRACTIVE NICHE MARKETS. The Company actively seeks
to identify and acquire information publishing businesses with attractive
market, product and customer characteristics. The Company targets professional
and academic end-users who have a critical need to keep abreast of current
developments in their particular fields. While the Company continually develops
and introduces new products, the majority of the Company's revenues are
generated from recurring sources, such as subscriptions and sales of previously
released publications ("backlist"). The Company believes that markets in which
information is critical to success, such as the STM market served by the
Company, have supported consistent price increases over the past decade.
Examples of additional niche markets that the Company may target include
business information, healthcare information, regulatory information and
technology-related information. Upon the expiration of Mr. Slaine's non-compete
agreement with Thomson at the end of 1999, the Company may also pursue
opportunities in financial information publishing. See "Management--Slaine
Non-competition Agreement."
ORGANICALLY GROW REVENUES AND PROFIT. The Company seeks to acquire
information publishing businesses with significant short- and long-term growth
prospects. The Company's strategy is to acquire valuable content and leverage
such content across new distribution platforms and through expansion of product
lines. For example, the Company has launched new electronic versions of
successful print products, increased sales of core products based on new
distribution agreements, began Internet delivery of products and launched new
products targeting segments of its existing customer base.
IMPROVE OPERATING EFFICIENCIES. The Company seeks to improve operating
efficiencies by combining administrative functions, eliminating redundant
facilities, negotiating more favorable contract terms with suppliers,
implementing systems improvements and upgrading management. In addition, the
Company seeks to leverage its infrastructure by acquiring companies or product
lines which can be supported by its
6
<PAGE>
existing operations. To date, CRC Press has acquired two such companies, St.
Lucie Press and Auerbach, as well as a line of engineering titles from Krause
Communications and the McGee line of business titles.
ATTRACT AND RETAIN SUPERIOR MANAGEMENT. The Company seeks to employ
professional management with substantial information publishing expertise, both
in entrepreneurial and corporate settings. The Company's philosophy is to
provide its operating units with significant decision-making authority, so that
key operating policies are made close to the Company's customers and operations.
This enables the Company to attract superior entrepreneurial talent who can grow
the business by capitalizing on market opportunities.
BACKGROUND
Information Ventures LLC, a Delaware limited liability company (the "LLC"),
was formed in December 1996 by Mason P. Slaine and Warburg Pincus (together, the
"Initial Stockholders"). In order to effect the Offering through a corporation
rather than a limited liability company, immediately prior to the consummation
of the Offering, the members of the LLC will contribute all of their direct or
indirect equity interests therein to the Company, a newly formed Delaware
corporation, in exchange for an aggregate of 12,200,000 shares of Common Stock
(the "Exchange"). Following the Exchange, the Company will own, directly or
indirectly, all of the equity interests in the LLC and its subsidiaries.
Contemporaneously with the Exchange, the Company will make certain incentive
payments to Dennis Buda. See "Management-- Employment Agreements."
Warburg Pincus and its affiliates comprise a specialized financial services
organization that manages approximately $7.0 billion of investments in its
private equity investing activities. Upon consummation of the Offering, the
Initial Stockholders will own an aggregate of 73.9% of the outstanding Common
Stock. As a result, the Initial Stockholders will have the abilitiy to control
the Company, including the election of directors, and direct its affairs and
business. See "Risk Factors--Control by Principal Stockholders; Anti-takeover
Provisions."
The Company's principal executive office is located at 23 Old Kings Highway
South, Darien, Connecticut 06820, and its telephone number is (203) 662-4203.
7
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common Stock Offered by the
Company (1).................... 4,250,000 shares
Common Stock to be Outstanding
After the Offering (1)(2)...... 16,466,129 shares
Use of Proceeds.................. The net proceeds to be received by the Company from the
Offering, estimated to be approximately $59.9 million,
will be used for general corporate purposes, including
acquisitions. See "Use of Proceeds."
NYSE Symbol...................... "IHI"
</TABLE>
- ------------------------
(1) Does not include up to 637,500 shares subject to an over-allotment option
granted by the Company to the Underwriters.
(2) Does not include an aggregate of 408,878 shares of Common Stock (assuming an
initial public offering price of $15.50 per share) issuable at a price per
share equal to the initial public offering price upon the exercise of stock
options to be granted upon consummation of the Offering. See "Management--
1998 Stock Option Plan" and "Shares Eligible for Future Sale."
RISK FACTORS
See "Risk Factors" for a description of certain risks to be considered
before making an investment in the Common Stock.
8
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA
The summary historical financial data of the Company as of and for the year
ended December 31, 1997 and as of and for the three months ended March 31, 1998
were derived from its audited financial statements. The summary historical
financial data as of and for the three months ended March 31, 1997 has been
derived from unaudited financial statements, which in the opinion of management
include all adjustments, consisting only of normal recurring adjustments,
necessary for a fair presentation of the results for such period. The summary
unaudited pro forma financial data for the year ended December 31, 1997 includes
adjustments to reflect the results of operations as if each acquisition was
consummated as of January 1, 1997 and certain other adjustments as more fully
described on the financial pages of this Prospectus. The unaudited pro forma
data is not designed to represent and does not represent what the Company's
results of operations actually would have been had the transactions described
herein under "Unaudited Pro Forma Condensed Consolidated Statement of
Operations" been completed as of January 1, 1997 or to project the Company's
results of operations at any future date or for any future period. The Company
acquired Auerbach on June 5, 1997 and MicroPatent on July 2, 1997 in
transactions accounted for under the purchase method of accounting. The results
of operations of these businesses were included in the Company's results from
their respective dates of acquisition. Accordingly, the operating results for
the three months ended March 31, 1997 and the three months ended March 31, 1998
are not fully comparable. The summary historical financial data should be read
in conjunction with, and are qualified by reference to, "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and the financial
statements and notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
THE COMPANY (1)
--------------------------------------------
<S> <C> <C> <C> <C>
YEAR ENDED THREE MONTHS
DECEMBER 31, ENDED MARCH 31,
---------------------- --------------------
<CAPTION>
1997 1997 1997 1998
ACTUAL PRO FORMA ACTUAL ACTUAL
--------- ----------- --------- ---------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C> <C>
OPERATING DATA:
Revenues (2).......................................................... $ 34,869 $ 39,483 $ 8,698 $ 10,728
Cost of sales......................................................... 11,492 13,315 2,668 2,858
Operating expenses.................................................... 28,040 33,771 5,864 7,250
--------- ----------- --------- ---------
Operating income (loss)............................................... (4,663) (7,603) 166 620
Interest (expense) income, net........................................ (130) (140) (127) 37
Other (expense) income................................................ (115) (126) -- --
--------- ----------- --------- ---------
Income (loss) before taxes............................................ (4,908) (7,869) 39 657
Net income (loss) (3)(4).............................................. (4,911) (7,872) 39 601
Pro forma earnings (loss) per share (5)............................... (.30) (.48) -- .04
</TABLE>
<TABLE>
<CAPTION>
AS OF MARCH 31, 1998
-------------------------
ACTUAL AS ADJUSTED(6)
--------- --------------
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.............................................................. $ 9,803 $ 69,707
Total assets........................................................................... 47,592 107,496
Total debt............................................................................. 4,132 4,132
Total equity........................................................................... 29,157 89,061
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31,
YEAR ENDED ----------------------
DECEMBER 31, 1997 1998
1997 ACTUAL ACTUAL
--------------- ----------- ---------
<S> <C> <C> <C>
OTHER DATA:
Depreciation and amortization (7)........................ $ 6,222 $ 859 $ 1,841
Capital expenditures (7)................................. 2,817 398 342
Net cash provided by operating activities (8)............ 8,570 1,292 1,080
Net cash used by investing activities (8)................ (33,584) (15,578) (502)
Net cash provided (used) by financing activities (8)..... 35,294 19,174 (1,055)
EBITDA (9)............................................... 1,444 1,025 2,461
</TABLE>
(FOOTNOTES ON FOLLOWING PAGE)
9
<PAGE>
(FOOTNOTES FOR PRECEDING PAGE)
- ------------------------
(1) In conjunction with the acquisition and reorganization of CRC Press and
other businesses and certain compensation issues, the Company recorded
significant adjustments in 1997 and early 1998, which are not expected to
continue in the future. These adjustments (the "Adjustments") reduced
revenues by $4,017 and increased expenses by $4,013, and therefore reduced
net income by $8,030, for the year ended December 31, 1997. The Adjustments
reduced revenues by $693 and $54 and increased expenses by $1,968 and $146,
and therefore reduced net income by $2,661 and $200, for the three-month
periods ended March 31, 1997 and March 31, 1998, respectively. The
Adjustments affecting revenues were required by purchase accounting in
connection with the acquisitions of CRC Press and MicroPatent and reflect
the revaluation of acquired deferred subscription revenues based on the cost
to fulfill subscriptions. This revaluation is a non-cash adjustment which
reduces revenues in the twelve months following acquisition. The Adjustments
affecting expenses relate to: severance and reorganization costs from the
consolidation of certain functions and reductions in workforce; special
bonuses granted to an officer; contingent compensation paid to an officer of
a subsidiary; and certain additional purchase accounting-related
adjustments. Historical operating loss and EBITDA of $4,663 and $1,444,
respectively, for the year ended December 31, 1997 include the effect of the
Adjustments of $8,030.
(2) Revenues for the three months ended March 31, 1997 and the year ended
December 31, 1997 include an initial stocking order by a new international
distributor aggregating $3,307, which is not expected to continue in the
future.
(3) Historical income taxes of the Company are not significant. Prior to the
Exchange, the Company was a limited liability company and, accordingly, was
not subject to U.S. federal or certain state income taxes.
(4) The Company's results of operations for the fiscal quarter in which the
Offering is consummated will be adversely affected by the payment of
approximately $1.0 million in cash and shares of Common Stock as incentive
payments to Dennis Buda. See "Management--Employment Agreements."
(5) No historical earnings per share data are presented as the Company does not
consider such historical data meaningful. Pro forma basic earnings (loss)
per share were computed by using 16,466,129 shares of Common Stock
outstanding after giving effect to the Exchange, the Offering and shares
issuable under an employment agreement, as if such shares were outstanding
on January 1, 1997, assuming an initial public offering price of $15.50 per
share.
(6) As adjusted amounts give effect to the issuance and sale of 4,250,000 shares
of Common Stock in the Offering (assuming an initial public offering price
of $15.50 per share), after deducting underwriting discounts and estimated
offering expenses.
(7) Depreciation and amortization include balances related to property and
equipment, intangible assets and pre-publication costs incurred in book
publishing operations. Capital expenditures include property and equipment
and pre-publication costs.
(8) For details of operating, investing and financing activities, see the
Company's Consolidated Statements of Cash Flow for the year ended December
31, 1997 and for the three months ended March 31, 1998, included elsewhere
in this Prospectus.
(9) "EBITDA" is defined as income before interest expense/income, income taxes,
depreciation and amortization. EBITDA is not a measure of performance under
generally accepted accounting principles ("GAAP") and should not be
considered in isolation or as a substitute for net income, cash flow from
operations or other income or cash flow data prepared in accordance with
GAAP. Items excluded from the calculation of EBITDA are significant
components in understanding and evaluating the Company's financial
performance. While EBITDA should not be considered as a measure of
profitability or liquidity, the Company understands that EBITDA is
customarily used in evaluating the equity value of publishing companies. The
EBITDA measure presented herein may not be comparable to similarly titled
measures of other companies.
10
<PAGE>
RISK FACTORS
PROSPECTIVE INVESTORS SHOULD TAKE INTO ACCOUNT THE CONSIDERATIONS SET FORTH
BELOW AS WELL AS THE OTHER INFORMATION SET FORTH IN THIS PROSPECTUS BEFORE
PURCHASING ANY OF THE SHARES OF COMMON STOCK OFFERED HEREBY.
LIMITED OPERATING HISTORY; OPERATING LOSSES
The Company has completed numerous acquisitions since it commenced
operations in January 1997. Consequently, the financial results of the Company
and its subsidiaries included in this Prospectus are not necessarily indicative
of their future financial condition or results of operations. As a result of
adjustments in the aggregate amount of $8.0 million recorded in conjunction with
the acquisition and reorganization of businesses and certain compensation
issues, the Company reported a pre-tax loss of $4.9 million for the year ended
December 31, 1997. The predecessor to the Company also reported pre-tax losses
in 1993, 1995 and 1996 of $3.9 million, $14.1 million and $11.1 million,
respectively. See "Selected Historical Financial Data." Although the Company
achieved profitability for the three months ended March 31, 1998, there can be
no assurance that the Company will sustain profitability in the future.
DEPENDENCE ON KEY PERSONNEL
The Company believes that its success depends principally upon the efforts
and abilities of Mason P. Slaine, its co-founder, President and Chief Executive
Officer. In addition, the Company believes that its success will depend to a
significant extent upon the efforts and abilities of Vincent A. Chippari, its
Executive Vice President and Chief Financial Officer. Neither individual has
served as chief executive officer or chief financial officer, respectively, of a
public company. The successful operations of the Company's subsidiaries will
also depend on the senior management teams of such subsidiaries who are
currently in the employ of the Company and those the Company will hire in
connection with future acquisitions. The inability to hire and retain qualified
employees in connection with future acquisitions or to replace the loss of the
services of one or more key employees could have a material adverse effect on
the Company's financial condition and results of operations. The Company does
not currently maintain key person life insurance with respect to any of its
employees.
RISKS ASSOCIATED WITH ACQUISITIONS
The Company's growth will depend in part on its ability to consummate
acquisitions, integrate such acquisitions into existing operations, manage
expansion, achieve operating efficiencies and control costs in its operations.
This strategy will entail reviewing and potentially reorganizing the
infrastructure, management and financial controls of acquired operations. The
Company's financial condition and results of operations could be adversely
affected by unforeseen expenses, difficulties, complications and delays
frequently encountered in connection with the acquisition and integration of new
businesses. Acquisition-related costs could include severance payments to
employees of acquired companies, restructuring charges, assumption of
liabilities and amortization of goodwill and other acquired intangible assets,
as well as non-recurring acquisition costs, including accounting, legal and
other advisory fees. In addition, acquisitions may place a strain upon the
management resources and systems of the Company, requiring that the Company hire
additional personnel, implement new systems or upgrade existing systems.
There can be no assurance that the Company will identify acquisition
candidates that result in successful business combinations or that acquisitions
will be consummated on acceptable terms. The Company competes for acquisition
targets with other companies, many of which are larger than the Company and have
greater financial resources. In addition, the Company seeks to acquire
businesses at what it considers to be attractive valuations, a policy which has
caused, and may in the future cause, the Company to be outbid for otherwise
desirable businesses. In general, the magnitude, timing and nature of future
acquisitions will depend upon various factors, including the availability of
suitable acquisition candidates, the negotiation of acceptable terms, the
Company's financial capabilities at the time of the
11
<PAGE>
acquisition bid, the availability of skilled employees to manage the acquired
businesses and general economic and business conditions. There can be no
assurance that the Company will continue to be successful in completing
attractive acquisitions, integrating acquired businesses and improving their
profitability.
The Company anticipates that it will finance future acquisitions through
cash on hand, borrowings and issuances of capital stock. The Company does not
currently have any commitments with respect to any acquisition financing, and
there can be no assurance that sufficient financing will be available, or, if
available, that it will be available on acceptable terms. In addition,
stockholders of the Company may experience dilution in the event that equity
securities are issued in connection with acquisitions. If adequate funds are not
available, the Company may be required to significantly curtail its acquisition
program.
COMPETITION
The Company faces significant competition with respect to its STM and
professional and intellectual property businesses. In addition to competing for
sales on the basis of editorial quality of its publications, the Company
competes for the signing of noted authors. Many of the Company's competitors are
substantially larger than the Company and have greater financial, technical,
editorial, personnel and marketing resources, longer operating histories and
greater name recognition than the Company's. If the Company is unable to compete
effectively under these conditions, its financial condition and results of
operations will be materially adversely affected. See "Business--Competition."
RISKS RELATED TO AVAILABILITY OF SOURCE DATA
Much of the source data for MicroPatent's information services is publicly
available in raw form at little or no cost. To the extent users of patent and
trademark data choose to extract the data they need from such public sources
rather than utilize MicroPatent's services, MicroPatent's financial condition
and results of operations could be adversely affected. See
"Business--Competition."
RISKS RELATED TO CHANGES IN TECHNOLOGY
To the extent that the Company's businesses utilize the Internet and other
electronic media, they are subject to rapid changes in technology. There can be
no assurance that the development of new or improved technologies and products
by competitors will not have a material adverse effect on the Company's
electronically-based businesses, nor can there be any assurance that the Company
can remain competitive once such technologies and products are introduced.
RISKS ASSOCIATED WITH INTERNATIONAL EXPANSION
Approximately 24% of the Company's 1997 pro forma revenues, excluding the
Adjustments, were generated from sales outside North America (including an
initial stocking order by a new international distributor approximating 8% of
1997 pro forma revenues). The Company may increase its presence internationally
through internal growth and, possibly, through acquisitions. There are certain
risks inherent in doing business in international markets, such as the
uncertainty of product acceptance by different cultures, the risks of divergent
business expectations or difficulties in establishing joint ventures with
foreign partners, difficulties in staffing and managing multinational
operations, currency and interest rate fluctuations, reduced protection of
intellectual property rights, political instability, restrictions or limitations
on the repatriation of funds and potentially adverse tax consequences. There can
be no assurance that one or more of such factors will not have a material
adverse effect on the Company's future international operations and,
consequently, on the Company's financial condition and results of operations.
12
<PAGE>
RISKS RELATED TO THE YEAR 2000
The year 2000 issue is the result of computer programs using two digits
rather than four to define the applicable year. As a result, those computer
programs have time-sensitive software that recognizes a date using "00" as the
year 1900 rather than the year 2000. This error could cause a system failure or
miscalculations causing disruptions of operations, including, among other
things, a temporary inability to process transactions, send invoices or engage
in similar normal business activities. Although the Company expects that its
information technology will be ready for the year 2000, the Company cannot
effectively ensure against all potential year 2000 problems that might originate
with third parties. If the Company or any third party with whom the Company does
business were to have a year 2000 problem, the Company's business, especially
that of MicroPatent, could be seriously disrupted and the Company's financial
condition and results of operations could be materially adversely affected.
FLUCTUATIONS IN PAPER COSTS
While the Company does not make significant direct paper purchases, paper
costs constitute a significant component of its printing expenses, which
expenses accounted for 8% of the Company's total operating expenses in 1997.
Paper prices have been volatile over the past several years, and management
anticipates such volatility to continue in the future. Significant increases in
paper prices could adversely affect the Company's financial condition and
results of operations.
RISKS RELATED TO USE OF PROCEEDS
Substantially all of the net proceeds from the Offering will remain
uncommitted pending the intended application of such funds for general corporate
purposes, including acquisitions. Accordingly, management will have substantial
discretion in using the proceeds received by the Company until such time as
acquisitions are completed. In the interim, management intends to invest these
proceeds in short-term, investment grade securities, which will yield only that
rate of return earned by such securities and will be subject to the risks
inherent in investment in such securities. A delay in using such proceeds for
acquisitions may adversely affect the market price of the Common Stock.
The principal purposes of the Offering are to (i) fund the Company's growth
through acquisition, (ii) create a public market for the Common Stock, which
will enable the Company to issue equity securities as consideration for
acquisitions and incentive compensation to employees, and (iii) facilitate
future access by the Company of public capital markets.
CONTROL BY PRINCIPAL STOCKHOLDERS; ANTI-TAKEOVER PROVISIONS
Upon consummation of the Offering, the Initial Stockholders will own an
aggregate of 73.9% of the outstanding Common Stock. As a result, the Initial
Stockholders will have the ability to control the Company, including the
election of directors, and direct its affairs and business. Such concentration
of ownership, as well as certain provisions of the Company's Certificate of
Incorporation and the Delaware General Corporation Law (the "DGCL"), could have
the effect of delaying or preventing a change in control of the Company under
circumstances that could give holders of the Common Stock the opportunity to
realize a premium over the then prevailing market price of such stock. Such
provisions may also adversely affect the market price of the Common Stock. Such
provisions include the ability of the Board of Directors to issue preferred
stock without further action by stockholders (known as "blank check preferred
stock") and Section 203 of the DGCL, which, in general, imposes restrictions
upon certain acquirers of 15% or more of the Company's Common Stock. These
provisions could delay or frustrate the assumption of control by stockholders,
even if such assumption of control would be beneficial to stockholders, and also
could discourage or make more difficult a merger, tender offer or proxy contest,
even if such events could be beneficial to the interests of stockholders. See
"Description of Capital Stock."
13
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon consummation of the Offering, the Company will have outstanding
16,466,129 shares of Common Stock. All of the 4,250,000 shares of Common Stock
to be sold in the Offering will be eligible for immediate sale in the public
market without restriction unless purchased by affiliates of the Company. All of
the remaining 12,216,129 outstanding shares of Common Stock (the "Restricted
Shares") are held by affiliates of the Company and are available for public
resale pursuant to Rule 144 under the Securities Act. All the Restricted Shares
are subject to the lock-up agreements described under "Underwriting." Further,
408,878 shares of Common Stock (assuming an initial public offering price of
$15.50 per share) are issuable at the initial public offering price per share
upon the exercise of stock options to be granted upon consummation of the
Offering. See "Management--1998 Stock Option Plan" and "Shares Eligible for
Future Sale." Sales of substantial amounts of Common Stock, or the perception
that such sales could occur, could adversely affect the market price of the
Common Stock. The Company may also determine to issue Common Stock to fund
acquisitions, which may have such an effect, as well as be financially dilutive
to stockholders.
NO PRIOR MARKET FOR THE COMMON STOCK
Prior to the Offering, there has been no public market for the Common Stock.
There can be no assurance that an active public market for the Common Stock will
develop or be sustained after the Offering. The initial public offering price of
the Common Stock will be determined by negotiation between the Company and the
representatives of the Underwriters based on the factors described under
"Underwriting." There can be no assurance that the price at which the Common
Stock will trade in the public market after the Offering will not fall below the
initial public offering price. See "Underwriting."
DILUTION TO NEW INVESTORS
Purchasers of Common Stock in the Offering will experience immediate and
substantial dilution in the amount of $11.35 per share in net tangible book
value per share. See "Dilution."
DIVIDENDS
The Company has never declared or paid dividends on its Common Stock and
does not currently anticipate paying dividends in the future. There can be no
assurance that the Company will ever pay a dividend. See "Dividend Policy."
14
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the Offering are estimated to be
approximately $59.9 million (approximately $69.1 million if the Underwriters'
over-allotment option is exercised in full) after deducting underwriting
discounts and estimated offering expenses (and assuming an initial offering
price of $15.50 per share). Such net proceeds will be used for general corporate
purposes, including acquisitions. The Company does not have any agreements,
arrangements or understandings with respect to any prospective material
acquisitions. Pending such uses, the net proceeds will be invested in
short-term, investment grade securities.
The principal purposes of the Offering are to (i) fund the Company's growth
through acquisition, (ii) create a public market for the Common Stock, which
will enable the Company to issue equity securities as consideration for
acquisitions and incentive compensation to employees, and (iii) facilitate
future access by the Company of public capital markets.
DIVIDEND POLICY
The Company has never declared or paid dividends on the Common Stock. The
Company intends to retain future earnings, if any, to finance the development
and expansion of its business and, therefore, does not anticipate paying any
cash dividends on its Common Stock in the foreseeable future. The decision
whether to pay dividends will be made by the Board of Directors of the Company
in light of conditions then existing, including the Company's results of
operations, financial condition and requirements, business conditions and other
factors.
15
<PAGE>
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company as of March 31, 1998 and as adjusted to give effect to the Exchange and
the Offering (assuming an initial public offering price of $15.50 per share).
This table should be read in conjunction with "Management's Discussion and
Analysis of Financial Conditions and Results of Operations" and the financial
statements of the Company and notes thereto appearing elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
AS OF MARCH 31, 1998
-----------------------
<S> <C> <C>
ACTUAL AS ADJUSTED
---------- -----------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C>
Cash and cash equivalents................................................................ $ 9,803 $ 69,707
---------- -----------
---------- -----------
DEBT:
Short-term............................................................................. $ 1,000 $ 1,000
Current portion of capitalized lease obligations....................................... 243 243
---------- -----------
Total short-term debt................................................................ 1,243 1,243
Long-term portion of capitalized lease obligations..................................... 2,889 2,889
---------- -----------
Total debt........................................................................... 4,132 4,132
---------- -----------
STOCKHOLDERS' EQUITY:
Membership interests in the LLC........................................................ 33,467 --
Common stock, $.01 par value; 50,000 shares authorized; no shares issued and
outstanding, actual; 16,466 shares issued and outstanding, as adjusted(1)............ -- 165
Additional paid-in capital............................................................. -- 93,535
Retained deficit....................................................................... (4,310) (4,639)
---------- -----------
Total stockholders' equity........................................................... 29,157 89,061
---------- -----------
Total capitalization................................................................. $ 33,289 $ 93,193
---------- -----------
---------- -----------
</TABLE>
- ------------------------
(1) Does not include an aggregate of 408,878 shares of Common Stock (assuming an
initial public offering price of $15.50 per share) issuable at a price per
share equal to the initial public offering price upon the exercise of stock
options to be granted upon consummation of the Offering. See "Management--
1998 Stock Option Plan" and "Shares Eligible for Future Sale."
16
<PAGE>
DILUTION
As of March 31, 1998, the pro forma net tangible book value of the Common
Stock, after giving effect to the Exchange, was approximately $8.5 million, or
approximately $0.69 per share. Net tangible book value per share represents the
amount of total tangible assets less total liabilities, divided by the number of
shares of Common Stock outstanding. After giving effect to the Offering
(assuming an initial public offering price of $15.50 per share and after
deducting estimated offering expenses), the pro forma net tangible book value of
the Company at March 31, 1998 would have been approximately $68.4 million, or
approximately $4.15 per share. This represents an immediate dilution of
approximately $11.35 per share to investors purchasing shares at the initial
public offering price. The following table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share......................... $ 15.50
Pro forma net tangible book value per share at March 31, 1998, after
giving effect to the Exchange....................................... $ 0.69
Increase in pro forma net tangible book value per share attributable
to new investors in the Offering.................................... 3.46
---------
Pro forma net tangible book value per share as further adjusted for the
Offering 4.15
---------
Dilution per share to new investors in the Offering..................... $ 11.35
---------
---------
</TABLE>
The following table sets forth, on a pro forma basis as of March 31, 1998,
the difference between the existing holders of Common Stock (including the
shares of Common Stock issued pursuant to the Exchange) and the new investors in
the Offering with respect to the number of shares of Common Stock purchased
(assuming an initial public offering price of $15.50 per share), the total
consideration paid and the average price per share paid:
<TABLE>
<CAPTION>
SHARES TOTAL
PURCHASED CONSIDERATION
-------------------------- --------------------------
NUMBER AMOUNT AVERAGE
(IN (IN PRICE
THOUSANDS) PERCENT THOUSANDS) PERCENT PER SHARE
------------- ----------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Existing stockholders............................... 12,216 74.2% $ 33,717 33.9% $ 2.76
New investors in the Offering....................... 4,250 25.8 65,875 66.1 15.50
------ ----- ------------- -----
Total............................................. 16,466 100.0% $ 99,592 100.0%
------ ----- ------------- -----
------ ----- ------------- -----
</TABLE>
17
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA
The selected historical financial data of (i) CRC Press, Inc. (the
"Predecessor") as of and for the years ended December 31, 1995 and 1996 and (ii)
the Company as of and for the year ended December 31, 1997 and as of and for the
three months ended March 31, 1998 have been derived from their respective
audited financial statements. The selected historical financial data of the
Predecessor as of and for the years ended December 31, 1993 and 1994 is derived
from its accounting records and has not been audited. The selected historical
financial data as of and for the three months ended March 31, 1997 has been
derived from unaudited financial statements, which in the opinion of management
includes all adjustments, consisting only of normal recurring adjustments,
necessary for a fair presentation of the results for the interim period. The
acquisition of the Predecessor and all other acquisitions by the Company were
accounted for using the purchase method of accounting. The Company acquired St.
Lucie Press on January 13, 1997, Auerbach on June 5, 1997 and MicroPatent on
July 2, 1997. The results of operations of these businesses are included in the
Company's results from their respective dates of acquisition and are not
included at all in the Predecessor's results. Accordingly, certain of the
historical financial data of the Predecessor are not comparable to those of the
Company. The selected historical financial data should be read in conjunction
with, and are qualified by reference to, "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and the financial statements
and notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
THE COMPANY(1)
THE PREDECESSOR ----------------------------------
---------------------------------------------
YEAR ENDED THREE MONTHS
YEAR ENDED DECEMBER 31, DECEMBER 31, ENDED MARCH 31,
--------------------------------------------- ------------ --------------------
1993 1994 1995 1996 1997 1997 1998
--------- --------- ---------- ----------- ------------ --------- ---------
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenues (2)........................... $ 32,155 $ 32,328 $ 32,054 $ 28,852 $ 34,869 $ 8,698 $ 10,728
Cost of sales (3)...................... 11,145 11,591 11,371 9,262 11,492 2,668 2,858
Operating expenses (3)................. 23,541 18,289 33,452 29,667 28,040 5,864 7,250
--------- --------- ---------- ----------- ------------ --------- ---------
Operating income (loss)................ (2,531) 2,448 (12,769) (10,077) (4,663) 166 620
Interest (expense) income.............. (1,131) (1,237) (1,272) (1,036) (130) (127) 37
Other (expense) income................. (219) (95) (95) 47 (115) -- --
--------- --------- ---------- ----------- ------------ --------- ---------
Income (loss) before taxes............. (3,881) 1,116 (14,136) (11,066) (4,908) 39 657
Net income (loss) (4).................. (2,614) 1,556 (9,234) (11,236) (4,911) 39 601
BALANCE SHEET DATA (AT PERIOD END):
Cash and cash equivalents.............. $ 103 $ 846 $ 664 $ 1,025 $ 10,280 $ 4,888 $ 9,803
Total assets........................... 51,655 49,897 45,753 35,533 50,219 34,701 47,592
Total debt............................. 17,066 12,026 13,756 15,705 5,188 5,720 4,132
Total equity........................... 27,250 26,251 17,017 5,818 28,556 16,756 29,157
</TABLE>
<TABLE>
<S> <C> <C> <C>
OTHER DATA:
Depreciation and amortization (5)............................... $ 6,222 $ 859 $ 1,841
Capital expenditures (5)........................................ 2,817 398 342
Net cash provided by operating
activities (6)................................................ 8,570 1,292 1,080
Net cash used by investing
activities (6)................................................ (33,584) (15,578) (502)
Net cash provided (used) by
financing activities (6)...................................... 35,294 19,174 (1,055)
EBITDA (7)...................................................... 1,444 1,025 2,461
</TABLE>
(FOOTNOTES ON FOLLOWING PAGE)
18
<PAGE>
(FOOTNOTES FOR PRECEDING PAGE)
- ------------------------
(1) In conjunction with the acquisition and reorganization of CRC Press and
other businesses and certain compensation issues, the Company recorded
significant adjustments in 1997 and early 1998, which are not expected to
continue in the future. These adjustments (the "Adjustments") reduced
revenues by $4,017 and increased expenses by $4,013, and therefore reduced
net income by $8,030, for the year ended December 31, 1997. The Adjustments
reduced revenue by $693 and $54 and increased expenses by $1,968 and $146,
and therefore reduced net income by $2,661 and $200, for the three month
periods ended March 31, 1997 and March 31, 1998, respectively. The
Adjustments affecting revenues were required by purchase accounting in
connection with the acquisitions of CRC Press and MicroPatent and reflect
the revaluation of acquired deferred subscription revenues based on the cost
to fulfill subscriptions. This revaluation is a non-cash adjustment which
reduces revenues in the twelve months following acquisition. The Adjustments
affecting expenses relate to: severance and reorganization costs from the
consolidation of certain functions and reductions in workforce; special
bonuses granted to an officer; contingent compensation paid to an officer of
a subsidiary; and certain additional purchase accounting-related
adjustments. Historical operating loss and EBITDA for the year ended
December 31, 1997 of $4,663 and $1,444, respectively, include the effect of
the Adjustments of $8,030.
(2) Revenues for the three months ended March 31, 1997 and the year ended
December 31, 1997 includes an initial stocking order by a new international
distributor aggregating $3,307, which is not expected to continue in the
future.
(3) Operating expenses for the year ended December 31, 1995 include $10,727 of
restructuring and one-time charges. Operating expenses for the year ended
December 31, 1996 include an impairment in the value of goodwill and other
intangible assets of $10,666. This charge represents the amount by which the
recorded value of the assets exceeded the proceeds from the sale of the
business.
(4) Income taxes of the Company are not significant. Prior to the Exchange, the
Company was a limited liability company and, accordingly, was not subject to
U.S. federal or certain state income taxes. Income tax (benefits) expenses
of the Predecessor were ($4,902) and $170, respectively, for the years ended
December 31, 1995 and 1996. No historical earnings per share or share data
are presented as the Company does not consider such historical data
meaningful.
(5) Depreciation and amortization include balances related to property and
equipment, intangible assets and pre-publication costs incurred in book
publishing operations. Capital expenditures include property and equipment
and pre-publication costs.
(6) For details of operating, investing and financing activities, see the
Company's Consolidated Statements of Cash Flow for the year ended December
31, 1997 and for the three months ended March 31, 1998, included elsewhere
in this Prospectus.
(7) "EBITDA" is defined as income before interest expense/income, income taxes,
depreciation and amortization. EBITDA is not a measure of performance under
GAAP and should not be considered in isolation or as a substitute for net
income, cash flow from operations or other income or cash flow data prepared
in accordance with GAAP. Items excluded from the calculation of EBITDA are
significant components in understanding and evaluating the Company's
financial performance. While EBITDA should not be considered as a measure of
profitability or liquidity, the Company understands that EBITDA is
customarily used in evaluating the equity value of publishing companies. The
EBITDA measure presented herein may not be comparable to similarly titled
measures of other companies.
19
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION AND ANALYSIS SHOULD BE READ IN CONJUNCTION WITH THE
FINANCIAL STATEMENTS AND NOTES THERETO AND THE OTHER FINANCIAL INFORMATION
APPEARING ELSEWHERE IN THIS PROSPECTUS.
OVERVIEW
The Company is an information publisher that provides print and electronic
information to end-users in the STM and professional markets and electronic
access to intellectual property databases for end-users in the patent and
trademark markets. The Company currently sells over 3,000 individual book titles
and publishes approximately 300 new books each year. The Company also offers
multiple subscription products and services, including 20 journals, eight
newsletters, 16 annual handbooks and several comprehensive information guides
that are available in print and electronic formats. The Company offers its
intellectual property databases on CD-ROM and through the Internet.
The Company operates in attractive niche publishing markets where it
provides essential information to professional and academic end-users. These
markets have supported consistent price increases over the past decade due to
the critical nature of the content. The markets for STM and professional
publishing and intellectual property information are growing and provide a
foundation for organic revenue growth and attractive fold-in acquisition
opportunities. The Company may enter additional niche markets that have these
attractive characteristics, such as healthcare information, regulatory
information and technology-related information.
The Company's principal sources of revenues are book publishing sales,
subscription service sales and sales of patent and trademark information.
Through CRC Press (which includes St. Lucie Press and Auerbach), the Company
generates revenues from the sale of books and subscription products (72% and
28%, respectively, of total CRC Press revenues in the first quarter of 1998).
Revenues from books and related costs of sales are recognized when the product
is shipped to the customer. For products sold with a right of return, revenues
are recognized net of a provision for estimated returns. CRC Press's
subscription products target end-users with essential information and represent
a stable source of revenues. For example, aggregate renewal rates of the
Company's journals approximated 85% in 1997. The Company realizes significant
liquidity benefits from subscription revenues as cash is generally received in
advance of shipment. Revenues from subscription products are deferred and
recognized as revenues once the product is shipped. Further, the Company
believes that its book and subscription titles generate significant recurring
demand. For example, while the Company published approximately 285 frontlist
titles in 1997, it had a backlist of nearly 3,000 titles which accounted for
approximately 68% of the Company's total book publishing revenues in 1997.
Through MicroPatent, the Company generates revenues from CD-ROM subscriptions,
Internet-based services, and other products including database sales of
historical and customized patent information (35%, 34% and 31%, respectively, of
total MicroPatent revenues in the first quarter of 1998). The Company expects
that new publishing media, such as the Internet, will grow in significance in
the future. Of the Company's total revenues of $10.7 million for the first
quarter of 1998, 83% and 17% were derived from CRC Press and MicroPatent,
respectively.
The Company's cost of sales are comprised principally of printing and
binding costs, amortization of plant costs and royalties paid to authors.
Printing and binding costs, which represented 26% of revenues for the first
quarter of 1998, are paid to third parties that print or produce the Company's
book products on a contract basis and include the costs of paper purchased by
those third parties. Plant costs include design and other pre-publication costs.
These costs are capitalized and charged to expense over a four-year period
following the release of the applicable book using an accelerated amortization
method. The Company's payments to its authors and editors do not involve
substantial up-front expense. Royalty payments are variable costs directly
associated with book sales.
Operating expenses, which represented approximately 69% of the Company's
revenues for the first quarter of 1998, include selling, general and
administrative expense and related costs (39%), direct mail marketing costs
(19%) and amortization of intangible assets (13.4%). Selling, general and
administrative
20
<PAGE>
expense includes wages and related costs, rent, fulfillment and commissions.
Direct mail expense is driven by the cost to produce each page, the number of
pages produced and mailing expense. In 1997, the Company mailed in excess of
800,000 pieces of direct mail per month. The aggregate cash consideration paid
by the Company to acquire its businesses in 1997 of $30.8 million was allocated
primarily to intangible assets having a gross book value of $24.6 million. The
amortization of these assets, as well as amortization from future acquisitions,
will impact operating results.
IMPACT OF ACQUISITIONS AND OUTLOOK
The Company was organized in December 1996 and, since its inception, has
grown principally through acquisitions. The Company has sought acquisitions in
attractive niche markets where opportunities exist to organically grow the
acquired companies' revenues and profitability and to achieve operating
efficiencies. The Company continues to actively seek acquisitions that
management believes will further its growth and operating strategies. As the
Company acquires additional companies, its sales mix, market focus, cost
structure and operating leverage may change significantly. Consequently, the
Company's historical and future results of operations reflect and will reflect
the impact of acquisitions, and period-to-period comparisons may not be
meaningful in certain respects. For example, historical information for the
Predecessor and other acquired companies prior to their acquisitions reflect the
acquired companies' prior management and cost structure. In addition, as
described below, historical information for companies subsequent to their
acquisition may include integration and other costs that are not expected to
continue in the future.
In 1997 and early 1998, the Company recorded the Adjustments in conjunction
with the acquisition and reorganization of the Predecessor and other businesses,
as well as certain compensation matters. The Adjustments reduced revenues and
operating loss of $34.9 million and $4.7 million for 1997 by approximately $4.0
and $8.0 million, respectively. Management does not expect these items to
continue in the future, although other issues may arise from future
acquisitions. See "Selected Historical Financial Data."
The Company's results of operations for the fiscal quarter in which the
Offering is consummated will be adversely affected by the payment of
approximately $1.0 million in cash and shares of Common Stock as incentive
payments to Dennis Buda. See "Management--Employment Agreements."
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1998 COMPARED TO THREE MONTHS ENDED MARCH 31, 1997
REVENUES. Revenues increased by $2.0 million, or 23.3%, from $8.7 million
to $10.7 million. Auerbach, acquired in June 1997, and MicroPatent, acquired in
July 1997, contributed $2.9 million to revenues in the first quarter of 1998.
Domestic book sales increased by $2.2 million and the Adjustments resulted in an
increase of $0.6 million. These increases were partially offset by lower
international book sales of $3.8 million, due primarily to the initial stocking
order received in the first quarter of 1997.
COST OF SALES. Cost of sales increased by $0.2 million, or 7.1%, from $2.7
million to $2.9 million. As a percentage of revenues, cost of sales declined
from 30.7% to 26.6%. Auerbach and MicroPatent contributed $0.7 million to cost
of sales in the first quarter of 1998. Excluding the impact of such
acquisitions, cost of sales declined by $0.5 million due to the reduction in
international revenues, while other costs remained relatively consistent.
OPERATING EXPENSES. Operating expenses increased by $1.4 million, or 23.6%,
from $5.9 million to $7.3 million due primarily to operating expenses at
Auerbach and MicroPatent of $1.5 million. Excluding the impact of the
acquisitions, operating expenses decreased by $0.1 million. Expenses associated
with the Adjustments decreased by $1.8 million, offset by increases in
amortization of intangible assets of $0.9 million and increases in other
expenses of $0.8 million, including higher direct mail marketing costs.
NET INCOME. Net income increased by $0.6 million from less than $0.1
million to $0.6 million due to the factors described above.
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EBITDA. EBITDA increased by $1.5 million, or 140.1%, from $1.0 million to
$2.5 million due to increased operating income of $0.5 million and the fact that
depreciation and amortization charged against operating income increased by $1.0
million for the three months ended March 31, 1998. The ratio of EBITDA as a
percentage of revenues increased from 11.8% to 22.9%.
COMPANY YEAR ENDED DECEMBER 31, 1997 COMPARED TO PREDECESSOR YEAR ENDED DECEMBER
31, 1996
REVENUES. Revenues increased by $6.0 million, or 20.9%, from $28.9 million
to $34.9 million. St. Lucie Press, acquired in January 1997, Auerbach and
MicroPatent (the "1997 Acquisitions") contributed $8.3 million of revenues in
1997. Additionally, international book sales increased by $3.6 million,
primarily due to the initial stocking order received in the first quarter of
1997. These increases were partially offset by reduced revenues of $4.0 million
related to the Adjustments and other decreases of $1.9 million related primarily
to lower domestic book sales.
COST OF SALES. Cost of sales increased by $2.2 million, or 24.1%, from $9.3
million to $11.5 million. The 1997 Acquisitions contributed $2.4 million to cost
of sales in 1997. The Adjustments caused an increase of $0.4 million and, as a
result, increased cost of sales as a percentage of revenues. These increases
were partially offset by reduced costs of $0.6 million, primarily due to a
decrease in book production costs. Excluding the Adjustments, cost of sales as a
percentage of revenues decreased from 32.1% to 28.5% due primarily to lower
amortization of plant costs, as well as reductions in printing and binding costs
as a percentage of revenues.
OPERATING EXPENSES. Operating expenses decreased by $1.6 million, or 5.5%,
from $29.6 million to $28.0 million due to the impairment of intangible assets
of $10.7 million recorded in 1996 and a reduction in selling, general and
administrative expenses of $2.1 million, primarily related to lower wages, rent
and fulfillment costs. These decreases were partially offset by expenses of $5.7
million from the 1997 Acquisitions, expenses of $3.6 million related to the
Adjustments and $1.9 million of charges, due to the amortization of intangible
assets.
OPERATING INCOME/LOSS. The operating loss decreased by $5.4 million, or
53.7%, from ($10.1) million to ($4.7) million due to operating income (excluding
the amortization of intangible assets) from the 1997 Acquisitions of $0.6
million, an improvement in operating income of $4.0 million and an increase of
$10.7 million due to the impairment of intangibles recorded in 1996. These
increases were offset in part by an $8.0 million decrease resulting from the
Adjustments and a decrease of $1.9 million from higher amortization of
intangible assets.
INTEREST EXPENSE. Interest expense decreased by $0.9 million, or 87.5%,
from $1.0 million to $0.1 million due to reduced long-term obligations of CRC
Press, which had previous borrowings from its parent, The Times Mirror Company.
NET LOSS. The net loss decreased by $6.3 million, or 56.3%, from ($11.2)
million to ($4.9) million due to the operating income changes described above,
decreased interest expense and a decrease in income tax expense of $0.2 million.
EBITDA. EBITDA increased by $6.7 million, or 127.5%, from ($5.3) million to
$1.4 million. Excluding the Adjustments, EBITDA would have been $9.5 million, or
24.4% of revenues. For the year ended December 31, 1996, excluding the
impairment in intangible assets, EBITDA would have been $5.4 million, or 18.7%
of revenue.
PREDECESSOR YEAR ENDED DECEMBER 31, 1996 COMPARED TO PREDECESSOR YEAR ENDED
DECEMBER 31, 1995
REVENUES. Revenues decreased by $3.2 million, or 10.0%, from $32.1 million
to $28.9 million due primarily to a $2.6 million decrease in international book
sales, largely in Asia. Domestic book sales declined by $0.4 million due to a
decreased publishing schedule.
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COST OF SALES. Cost of sales declined by $2.1 million, or 18.5%, from $11.4
million to $9.3 million. As a percentage of revenues, cost of sales declined
from 35.5% to 32.1% primarily due to lower book publishing revenues, which
resulted in lower printing and binding costs, and decreased amortization of
plant costs.
OPERATING EXPENSES. Operating expenses decreased by $3.8 million, or 11.3%,
from $33.5 million to $29.7 million due to restructuring costs of $10.7 million
recorded in 1996, reduced provisions for book returns and bad debts and
decreased employee related costs in editorial and administrative areas. These
decreases were partially offset by a $10.7 million impairment of intangible
assets recorded in 1997.
OPERATING LOSS. The operating loss decreased by $2.7 million, or 21.1%,
from ($12.8) to ($10.1) million due to lower operating expenses, partially
offset by lower gross profits resulting from the decline in revenues. The 1996
restructuring charges of $10.7 million were offset by the 1997 impairment of
intangible assets of $10.7 million.
INTEREST EXPENSE. Interest expense declined by $0.3 million, or 18.6%, from
$1.3 million to $1.0 million due to lower average intercompany borrowings.
NET LOSS. The net loss increased by $2.0 million, or 21.7%, from ($9.2)
million to ($11.2) million due primarily to increased income tax expenses of
$5.1 million. This increase was partially offset by the operating income
improvements discussed above.
EBITDA. EBITDA increased by $1.8 million, or 25.4%, from ($7.1) million to
($5.3) million due to higher operating income, partially offset by decreased
depreciation and amortization.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the financing requirements of the Company have been funded
through cash generated by operating activities and capital contributions from
the Initial Stockholders. The financing requirements of CRC Press prior to its
acquisition by the Company were funded primarily through intercompany loans and
advances from its parent, The Times Mirror Company.
Cash and cash equivalents totaled $9.8 million at March 31, 1998 and $10.3
million at December 31, 1997. Excluding cash, the Company had a working capital
deficit of $5.7 million at March 31, 1998 due primarily to the inclusion of $8.2
million of deferred subscription revenues, a non-cash obligation. Since the
Company receives subscription payments in advance, the Company's existing
operations are expected to maintain very low or negative working capital
balances, excluding cash.
Cash generated by operating activities was $1.1 million for the three months
ended March 31, 1998 derived from net income of $0.6 million plus non-cash
charges of $1.8 million less an increase in operating assets, net of liabilities
of $1.3 million. This increase in operating assets and liabilities was primarily
due to payments associated with the Adjustments. Cash generated by operating
activities for the year ended December 31, 1997 was $8.6 million derived from
the net loss of ($4.9) million plus non-cash charges of $7.2 million plus a
decrease in operating assets, net of liabilities of $6.3 million.
Cash used by investing activities was $0.5 million for the three months
ended March 31, 1998 due to capital expenditures, including pre-publication
costs, of $0.3 million and acquisition costs of $0.2 million. Cash used for
investing activities for the year ended December 31, 1997 was $33.6 million,
including acquisitions of businesses totaling $30.8 million and capital
expenditures, including plant costs, of $2.8 million. The Company's existing
operations are not capital intensive.
Cash used for financing activities was $1.1 million for the three months
ended March 31, 1998 representing payment on debt. Cash provided by financing
activities was $35.3 million for the year ended December 31, 1997, including
$33.5 million of capital contributions from the Initial Stockholders and a net
increase in debt of $1.8 million.
The Company has financed all acquisitions to date through capital
contributions from the Initial Stockholders. The Company had $1.0 million of
debt at March 31, 1998 under a revolving credit facility,
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which was subsequently repaid. The Company currently does not maintain a working
capital facility but believes that, if needed, one would be available at market
rates.
The Company believes that net cash provided by operations, together with
cash on hand and other available sources of funds, will be sufficient to fund
the cash requirements of its existing operations. Excluding acquisition
activity, the Company does not expect to use the proceeds of the Offering to
fund operations. The Company currently has no commitments for material capital
expenditures. However, future operating requirements and capital needs will be
subject to economic conditions and other factors, many of which are beyond the
Company's control. See "Risk Factors."
The Company will use net proceeds from the Offering for general corporate
purposes, including acquisitions. The Company does not have any agreements,
arrangements or understandings with respect to any prospective material
acquisitions. Pending such uses, the net proceeds will be invested in
short-term, investment grade securities.
SEASONALITY
The Company's business is mildly seasonal, with revenues typically reaching
slightly higher levels during the third and fourth quarters of each calendar
year, based on historical publication schedules. In 1997, on a pro forma basis,
24% of the Company's revenues were generated during the fourth quarter, with the
first, second and third quarters accounting for 29%, 23% and 24% of revenues,
respectively. The first quarter of 1997 was uncharacteristically high due to an
initial stocking order from a new international distributor. Excluding this
order, first through fourth quarter revenues were 22%, 25%, 27% and 26%,
respectively. In addition, the Company may experience fluctuations in revenues
from period to period based on the timing of acquisitions and new product
launches.
EFFECTS OF INFLATION
The Company believes that inflation has not had a material impact on the
results of operations presented herein.
ACCOUNTING PRONOUNCEMENTS
In 1997, the Financial Accounting Standards Board (FASB) issued SFAS No.
129, DISCLOSURE OF INFORMATION ABOUT CAPITAL STRUCTURE, and SFAS No. 130,
REPORTING COMPREHENSIVE INCOME. SFAS No. 129 contains no change in the Company's
disclosure requirements, and SFAS No. 130 has no impact on the Company's
financial position or results of operations.
In June 1997, the FASB issued SFAS No. 131, DISCLOSURES ABOUT SEGMENTS OF AN
ENTERPRISE AND RELATED INFORMATION. The Company adopted this statement and
determined that the new standard does not have any impact on the Company's
financial statements.
YEAR 2000 ISSUE
The year 2000 issue is the result of computer programs using two digits
rather than four to define the applicable year. As a result, those computer
programs have time-sensitive software that recognizes a date using "00" as the
1900 rather than the year 2000. This error could cause a system failure or
miscalculations causing disruptions of operations, including, among other
things, a temporary inability to process transactions, send invoices or engage
in similar normal business activities.
The Company has developed a plan to modify its information technology to be
ready for the year 2000 and has begun converting critical data processing
systems. The Company expects the projects to be completed by early 1999 at a
cost of less than $100,000. The estimate includes internal costs, but excludes
the costs to upgrade and replace systems in the normal course of business. The
Company does not expect these projects to have a significant effect on
operations. As of March 31, 1998, there have been no significant expenses
incurred. See "Risk Factors--Risks Related to the Year 2000."
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BUSINESS
OVERVIEW
The Company is an information publishing business focused on providing
essential information to professional and academic end-users in attractive niche
markets. The Company was formed to capitalize on management's experience in
acquiring information publishing businesses and then increasing profitability
through a combination of organic revenue growth and improved operating
efficiencies. To date, the Company has acquired information publishing
businesses in the following niche markets: STM and professional through CRC
Press; and intellectual property through MicroPatent. For the year ended
December 31, 1997, the Company had revenues, net loss and EBITDA of $34.9
million, $4.9 million and $1.4 million, respectively. These figures reflect the
Adjustments, which reduced revenues by $4.0 million and net income and EBITDA by
$8.0 million.
CRC Press, acquired in January 1997 from The Times Mirror Company, is a
mid-sized STM and professional publisher with leading positions in several
attractive niche markets. CRC Press, with a 95-year history, has highly regarded
brand names and publishes some of the most recognizable STM titles in their
respective fields, including THE HANDBOOK OF CHEMISTRY AND PHYSICS (currently in
its 79th edition) and STANDARD MATHEMATICAL TABLES AND FORMULAE. In the first
half of 1997, two fold-in acquisitions were completed and combined with CRC
Press: St. Lucie Press, a publisher of professional titles; and Auerbach, a
provider of technology-oriented print and electronic subscription-based
products, which was acquired from Thomson. For the three months ended March 31,
1998, CRC Press contributed approximately 83% of the Company's revenues.
MicroPatent, acquired in July 1997, is a leading source of intellectual
property information products and services. Its high-quality patent and
trademark databases are used extensively by legal and research professionals and
corporations. The Internet, MicroPatent's fastest-growing distribution channel,
accounted for 34% of its total revenue in the first quarter of 1998, as compared
to 14% in the first quarter of 1997. The Company believes that its profitable
PATENTWEB service is among the most comprehensive intellectual property
information services on the Internet. For the three months ended March 31, 1998,
MicroPatent contributed approximately 17% of the Company's revenues.
MANAGEMENT
The Company was formed in December 1996 by Mason P. Slaine and Warburg
Pincus. Mr. Slaine, the Company's President and Chief Executive Officer, has
more than 15 years of experience in the information publishing industry in both
corporate and entrepreneurial environments. From 1994 to 1996, he served as
President of Thomson Financial, a unit of Thomson which is a leading provider of
financial information, research, analysis and software products worldwide. Under
his leadership, Thomson Financial completed numerous acquisitions and increased
its sales and operating profit from $407 million and $74 million in 1993 to $790
million and $166 million in 1996, respectively.
Prior to joining Thomson Financial, Mr. Slaine led a number of highly
successful acquisitions in the information publishing industry. In 1982, he,
along with partners, acquired Dealers' Digest, Inc., a financial publishing
company, for $800,000, reengineered its operations and sold it four years later
for $40 million. In 1987, he founded Rand Data Services, Inc., a financial
information company, with an equity investment of $1.5 million and merged it in
1988 into Thomson's Securities Data Company, Inc., for which he and his
associates received aggregate consideration (including earn-outs through 1991)
of approximately $25 million. In 1988, he and a partner acquired CHEMICAL WEEK
MAGAZINE, a trade magazine serving the chemical industry, for $9.5 million, of
which $1 million was contributed equity. Mr. Slaine reengineered CHEMICAL WEEK's
operations and sold it in three stages between 1991 and 1996 for aggregate
consideration of approximately $23 million. The financial results of Mr.
Slaine's past acquisitions are not intended to be indicative of the future
financial results of the Company.
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Vincent A. Chippari, the Company's Executive Vice President and Chief
Financial Officer, has extensive experience in information publishing, business
management, consulting and finance, including seven years in various senior
level operating and financial capacities with Thomson. Messrs. Slaine and
Chippari are complemented by strong operating management. Dennis Buda, President
of CRC Press, and Steven Wolfson, President of MicroPatent, each have more than
20 years of experience in the information publishing industry. See "Executive
Officers and Directors." Upon consummation of the Offering, the executive
officers of the Company will own an aggregate of approximately 15.4%, of the
outstanding Common Stock, assuming an initial public offering price of $15.50
per share. See "Security Ownership of Certain Beneficial Owners and Management."
GROWTH AND OPERATING STRATEGY
The principal elements of the Company's growth strategy are to (i) acquire
businesses in attractive niche markets, (ii) organically grow revenues and
profit, (iii) improve operating efficiencies and (iv) attract and retain
superior management.
ACQUIRE BUSINESSES IN ATTRACTIVE NICHE MARKETS. The Company actively seeks
to identify and acquire information publishing businesses with attractive
market, product and customer characteristics. The Company targets professional
and academic end-users who have a critical need to keep abreast of current
developments in their particular fields. While the Company continually develops
and introduces new products, the majority of the Company's revenues are
generated from recurring sources, such as subscriptions and backlist sales. The
Company believes that markets in which information is critical to success, such
as the STM market served by the Company, have supported consistent price
increases over the past decade. The Company's products and services are
generally not sensitive to pricing pressures or adverse economic conditions.
Examples of additional niche markets that the Company may target include
business information, healthcare information, regulatory information and
technology-related information. Upon the expiration of Mr. Slaine's non-compete
agreement with Thomson at the end of 1999, the Company may also pursue
opportunities in financial information publishing. See "Management--Slaine
Non-competition Agreement."
ORGANICALLY GROW REVENUES AND PROFIT. The Company seeks to acquire
information publishing businesses with significant short- and long-term growth
prospects. The Company's strategy is to acquire valuable content and leverage
such content across new distribution platforms and through expansion of product
lines. For example, the Company has launched new electronic versions of
successful print products, increased sales of core products based on new
distribution agreements, began Internet delivery of products and launched new
products targeting segments of its existing customer base.
IMPROVE OPERATING EFFICIENCIES. The Company seeks to improve operating
efficiencies by combining administrative functions, eliminating redundant
facilities, negotiating more favorable contract terms with suppliers,
implementing systems improvements, and upgrading management. In addition, the
Company seeks to leverage its infrastructure by acquiring companies or product
lines which can be supported by its existing operations. To date, CRC Press has
acquired two such companies, St. Lucie Press and Auerbach, as well as a line of
engineering titles from Krause Communications and the McGee line of business
titles.
ATTRACT AND RETAIN SUPERIOR MANAGEMENT. The Company seeks to employ
professional management with substantial information publishing expertise, both
in entrepreneurial and corporate settings. The Company's philosophy is to
provide operating units with significant decision-making authority, so that key
operating policies are made close to the Company's customers and operations.
This enables the Company to attract superior entrepreneurial talent who can grow
the business by capitalizing on market opportunities.
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STRATEGY IMPLEMENTATION
Since the acquisitions of CRC Press and MicroPatent, the Company has
successfully executed its growth and operating strategy and significantly
improved the financial performance of these businesses. In 1996, prior to its
acquisition by the Company, CRC Press had an operating profit margin of
approximately 6%, excluding the impairment and amortization of intangibles. In
the first quarter of 1998, CRC Press increased its operating profit margin to
approximately 15%, excluding the amortization of intangibles. Similarly,
MicroPatent's operating profit margin was approximately 2%, excluding the
amortization of intangibles, in the year prior to acquisition. In the first
quarter of 1998, operating profit was increased to 32%, excluding the
amortization of intangibles.
ORGANIC GROWTH. At CRC Press, the list of new publications or new editions
of prior publications ("frontlist") of 285 titles in 1997 is expected to grow to
approximately 300 new titles in 1998 and approximately 350 titles in 1999. The
Company has also taken steps to increase its international sales by entering
into a global distribution agreement (excluding North America) with
Springer-Verlag GmbH & Co. KG ("Springer-Verlag"), a significant Europe-based
scientific and technical publisher. In addition, the Company has leveraged
well-established titles such as THE HANDBOOK OF CHEMISTRY AND PHYSICS and
STANDARD MATHEMATICAL TABLES AND FORMULAE by publishing them in electronic
format, which is expected to expand their reach and application.
MicroPatent's revenue growth has also accelerated significantly since its
acquisition by the Company, with revenues increasing 23% in the nine months
following acquisition over the comparable period of the prior fiscal year. Such
growth has been driven largely by Internet product offerings. Revenues from
Internet-based patent information grew more than 150% from the second quarter of
1997 to the first quarter of 1998. In addition, in the first quarter of 1998,
revenues generated by all Internet products rose to 34% of MicroPatent's total
revenues, as compared to 14% in the first quarter of 1997.
OPERATING IMPROVEMENTS. The overall cost base of CRC Press has been reduced
through an improvement in operating procedures. For example, plant costs per
page, which include design and other pre-production costs for books published,
decreased by approximately 45% between 1996 and 1997 and have been further
reduced in 1998. Additionally, direct marketing costs per piece were reduced by
more than 30% from 1996 to 1997 without any revenue impairment.
At MicroPatent, significant investments were made in its website to expand
web-based content and to enhance existing technology. This investment has led to
increased Internet reliability and speed which has helped spur customer demand.
In addition, since the Company acquired MicroPatent, overall cost levels have
decreased. In particular, in the year prior to acquisition, operating expenses,
excluding the amortization of intangibles, approximated 62% of revenues. In the
first six months under the Company's ownership, these expenses were reduced to
52% of revenues.
FOLD-IN ACQUISITIONS. Since the acquisition of CRC Press, the Company has
successfully completed two fold-in acquisitions: (i) St. Lucie Press, a
publisher of professional titles; and (ii) Auerbach, a provider of
technology-oriented print and electronic subscription-based products. The
Company also acquired a line of engineering titles from Krause Communications
and the McGee line of business titles. These acquisitions expanded the Company's
product offerings and increased profitability by leveraging its existing
infrastructure.
MANAGEMENT. The Company installed a new senior management team at CRC Press
within three months after its acquisition, which substantially altered the
editorial, production and marketing processes at the Company. These executives
have an average of 16 years of publishing industry experience.
At MicroPatent, through internal promotion and recruitment, the Company
installed a new CEO, hired management to build a trademark database and hired
senior sales and marketing executives.
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STM AND PROFESSIONAL PUBLISHING
MARKET
The Company provides information in selected niches of the broad STM and
professional market. The STM and professional market is global in nature and has
experienced consistently solid growth with total market revenues expanding from
$2.1 billion in 1986 to $4.0 billion in 1996. Management believes this market
will continue to expand as the need for information continues to increase based
on factors such as: constantly increasing complexity within STM and professional
research; globalization of the STM and professional market; and technological
advances which enable greater distribution of content.
The Company targets end-users, such as professionals and academics, with
high-end specialized reference information. The Company products are targeted
towards areas with a significant number of end-users including chemists,
engineers, mathematicians, technology practitioners and environmental
scientists. These end-users are generally not price sensitive due to the
critical nature of the content.
PRODUCTS
CRC Press is a medium-sized publisher with strong market positions in
chemistry, mathematics, engineering, food science, environmental sciences and
key areas of technology. CRC Press's products are divided into two broad
categories: book publishing (which includes electronic versions and
distribution) and subscription services. In the first quarter of 1998, book
publishing and subscription services generated 72% and 28%, respectively, of CRC
Press's revenues.
BOOK PUBLISHING. CRC Press publishes some of the most recognizable science
titles in their respective fields, including THE HANDBOOK OF CHEMISTRY AND
PHYSICS (currently in its 79th edition) and STANDARD MATHEMATICAL TABLES AND
FORMULAE. CRC Press has an extensive backlist of nearly 3,000 titles, which
generates substantial recurring demand. In 1996 and 1997, the backlist
contributed 66% and 68% of total book publishing revenues, respectively. In
addition, CRC Press has a strong and active frontlist publishing program. In
1997, CRC Press published approximately 285 frontlist titles. Publishing levels
have increased since the Company acquired CRC Press with 300 titles scheduled
for publication in 1998 and approximately 350 scheduled for publication in 1999.
CRC Press's book publishing focuses on the following areas:
Life Sciences. CRC Press-Registered Trademark- is a well-recognized
brand in life sciences and publishes with a technical focus in areas
including neurology, biology, pathology, ecology, food technology, marine
science and forensics. CRC Press published 103 titles in life sciences in
1997 and has an active life sciences backlist of over 1,400 titles. In 1997,
total life sciences sales represented 34% of Company's book publishing
revenues. Some of CRC Press's leading titles in life sciences include CRC
HANDBOOK OF HUMAN TOXICOLOGY, PRACTICAL HOMICIDE INVESTIGATION and PAIN
MANAGEMENT.
Engineering, Mathematics and Physical Sciences. CRC Press has a strong
franchise in engineering, mathematics and physical sciences based on leading
titles, strong co-publishing relationships and a practitioner oriented
approach. CRC Press published 83 titles in engineering, mathematics and
physical sciences in 1997 and has a backlist of over 600 titles. In 1997,
total engineering, mathematics and physical sciences revenues represented
32% of Company's book publishing sales. CRC Press's strong titles include
THE HANDBOOK OF CHEMISTRY AND PHYSICS (79th edition) and STANDARD
MATHEMATICAL TABLES AND FORMULAE. In addition, the Company has a
co-publishing arrangement with the Institute of Electrical and Electronic
Engineers, a leading engineering society with over 120,000 members. This
relationship gives the Company wide distribution for engineering titles and
a competitive advantage in attracting engineering authors.
Environmental Sciences. The Company's Lewis Publishers-TM- imprint is
one of the top publishers of environmental science books with titles in all
areas including environmental chemistry, environment engineering, wetlands
development, ecology and remediation. The Company published 54
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environmental sciences titles in 1997 and has a backlist that includes over
600 titles. In 1997, total environmental sciences sales represented 22% of
the Company's book publishing revenues. Well-known environmental sciences
titles include Manahan's ENVIRONMENTAL CHEMISTRY, REMEDIATION ENGINEERING: A
DESIGN HANDBOOK, ENVIRONMENTAL ENGINEERING HANDBOOK and the United States
Golf Association's ("USGA") LANDSCAPE RESTORATION HANDBOOK (a joint
publication among CRC Press, the Audubon Society of New York State and the
USGA).
Business Publications. The Company's St. Lucie Press-TM- imprint
publishes books focusing on all areas of business, including management,
human resources, manufacturing processes, finance and investment. St. Lucie
Press's publications are targeted at high-level management, technical and
analytic end-users through titles such as PRINCIPLES OF TOTAL QUALITY and
CHIEF EXECUTIVE OFFICER PAY AND SHAREHOLDER VALUE. Additionally, the Company
completed the complementary acquisition of the McGee line of titles,
including TECHNICAL ANALYSIS OF STOCK TRENDS, which was integrated into CRC
Press. CRC Press published 34 business publications in 1997 and has a
backlist which includes approximately 100 titles. In 1997, total business
publications sales represented 7% of the Company's book publishing revenues.
SUBSCRIPTION PRODUCTS. The Company's subscription products focus on the
following areas:
Technology Services. The Company provides high-level information
systems and information technology management products under its Auerbach
imprint. Auerbach offers three journals, two newsletters, sixteen annual
handbooks and eight information management guides available in print and
CD-ROM. Auerbach is a technology publisher with over 20,000 subscriptions
for its various products. Significant Auerbach titles include the JOURNAL OF
INFORMATION SYSTEMS MANAGEMENT, EDP AUDIT CONTROLS, BUSINESS RESUMPTION
PLANNING, HANDBOOK OF LOCAL AREA NETWORKS, HANDBOOK OF MIS MANAGEMENT and
the AUERBACH INFORMATION MANAGEMENT SERIES (AIMS). Auerbach recently
launched a successful newsletter, YEAR 2000 PRACTITIONER, and it has several
newsletters and handbooks in development. Auerbach contributed approximately
41% of CRC Press's pro forma 1997 subscription revenues, excluding the
Adjustments.
Newsletters. The Company's Food Chemical News ("FCN") division serves
the food and chemical industries with six newsletters and two comprehensive
food chemical science guides, available in print and CD-ROM. FCN products
command premium pricing and have aggregate renewal rates above 80%. Content
is also available in electronic format, and the Company is actively pursuing
site licensing and Internet opportunities. FCN's flagship product, FOOD
CHEMICAL NEWS-REGISTERED TRADEMARK-, is a weekly newsletter tracking food
policy and regulatory changes. It has been a leading source of information
to the food industry for over 36 years. Additional products offered by FCN
include PESTICIDE AND TOXIC CHEMICAL NEWS, WORLD FOOD NEWS and FOOD LABELING
AND NUTRITION NEWS. FCN contributed approximately 37% of CRC Press's pro
forma 1997 subscription revenues, excluding the Adjustments.
Journals. The Company currently publishes 17 subscription-based
journals. Journals include both primary journals, such as the JOURNAL OF
SOIL CONTAMINATION and OZONE SCIENCE AND ENGINEERING, which are vehicles for
the publication of original research; and secondary journals in the Critical
Review series. The journal program is concentrated in areas where the
Company has strong book publishing programs and provides synergy with
respect to marketing and editorial functions. In CRITICAL REVIEW journals,
including titles such as CRITICAL REVIEWS IN ANALYTICAL CHEMISTRY and
CRITICAL REVIEWS IN TOXICOLOGY, acknowledged experts summarize recent
professional literature in important areas of science and technology. The
Company recently launched a new primary journal, STRATEGIES IN ENVIRONMENTAL
MANAGEMENT, and is actively developing journal content for Internet
delivery. Aggregate renewal rates for the Company's journals approximated
85%. Journals contributed approximately 21% of CRC Press's pro forma 1997
subscription revenues, excluding the Adjustments.
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SALES, MARKETING AND DISTRIBUTION
Direct response marketing is the primary method for selling the Company's
products. The Company has an in-house creative services and direct marketing
group which designs, manages, and produces cost-effective direct mail campaigns
and other promotional support programs. The Company utilizes its extensive
in-house lists of book buyers, supplemented by lists from professional societies
and list management companies. In 1997, the Company produced in excess of 1,000
promotional campaigns and mailed in excess of 800,000 direct mail pieces per
month on average. The cost per piece for direct mail has been reduced by over
30% since the Company acquired CRC Press. Direct mail, including textbook
adoptions, generated 31% of CRC Press's 1997 book revenues and the majority of
its subscription-based revenues.
The Company uses a small, well-experienced sales force for professional book
sales to the Company's academic and specialty bookstores, wholesalers,
catalogers and associations, as well as sales of site licenses to corporations
and academic institutions. In the aggregate, these channels provided 37% of the
Company's 1997 book revenues. There is also an outbound telesales group used
primarily for new sales of Auerbach technology products.
The Company uses several well-respected distributors for sales outside of
North America. The primary distributor for books is Springer-Verlag, a
significant Europe-based scientific and technical publisher with extensive
international marketing capabilities. International sales contributed 30% of the
Company's 1997 book revenues, 12% attributable to a non-recurring initial
stocking order from Springer-Verlag in the first quarter of 1997. In 1997,
Springer-Verlag accounted for approximately 18.7% of the Company's revenues.
OPERATIONS
The Company operates its business in an entrepreneurial manner that serves
to increase employee responsibility and accountability. The Company has
leveraged its long-standing relationships with acknowledged experts in its
existing markets and developed close relationships with acclaimed industry
leaders in new markets. These relationships provide the Company with experienced
authors and editors who are given increased responsibility for product
development and profitability. Currently, CRC Press employs approximately 40
editors who are responsible for proposing new publications, contacting and
signing new authors, managing each publication on a return-on-investment basis,
and managing product line growth and quality enhancement. The compensation of
editors is partially linked to the success of their respective product lines.
Similarly, authors are typically signed to royalty-based contracts that
compensate them based on the revenues of the applicable publications.
The Company's strategy of increasing individual responsibility and
accountability has been applied to the in-house production process, as well.
Currently, CRC Press employs approximately 35 professionals to manage pre-press
production which includes copy-editing, type-setting, illustration, interior and
cover design, and the preparation of final output for the printer. Driven by
systems upgrades and several incentive-based bonus plans, CRC Press expects to
perform over 50% of pre-press production in-house in 1998, with external
production having negotiated rates comparable to its internal rate. In addition,
the production personnel oversee the printing and binding activities performed
by third-party printers. The Company conducts business with several different
printers and is not dependent on the services of any one printer in particular.
INTELLECTUAL PROPERTY INFORMATION SERVICES
MARKETS
The Company is a leading provider of intellectual property information
products and services. The Company estimates that the core components of the
intellectual property information markets, patents and trademarks, currently
exceed $500 million on a worldwide basis. These markets continue to grow as
usage
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<PAGE>
of intellectual property information has expanded significantly in the past
decade fueled by factors such as: increased awareness of the value of
intellectual property as a corporate asset; greater enforcement of intellectual
property rights on a worldwide basis; more intellectual property filings, such
as European Community trademarks; and technological advances which enable
greater storage, searching and access to large databases. Management believes
these positive trends will continue.
PRODUCTS
The Company is a leader in selected niches of intellectual property markets,
specifically in the provision of patent information through the Internet,
corporate intranets and other electronic media, such as CD-ROM. The Company
collects primary source data from the world's major patent and trademark offices
and adds significant value through the development of vast integrated databases,
innovative product delivery and sophisticated software for data searching and
access. In addition, the Company has recently launched its trademark information
business and is currently a growing provider in this market.
The Internet is an important distribution mechanism for intellectual
property information and is MicroPatent's fastest growing channel. The Company
believes that its profitable PATENTWEB service is the most comprehensive
commercial intellectual property information service on the Internet. Internet
services range from individual payment for access to a single patent to
unlimited annual use plans for searching and downloading throughout a corporate
customer's site. Revenues from Internet-based patent information grew more than
150% from the second quarter of 1997 to the first quarter of 1998. In addition,
in the first quarter of 1998, revenues generated by all Internet products rose
to 34% of MicroPatent's total revenues.
MicroPatent was also among the first providers of patent information on
CD-ROM. It offers both text and image products covering U.S., European and
Japanese information. The Company believes that its
PATENTIMAGES-REGISTERED TRADEMARK- products remain leading CD-ROM products in
the North American market. Patent CD-ROM subscriptions generated 35% of
MicroPatent's revenues in the first quarter of 1998. In addition to
subscriptions to databases of worldwide patent information, MicroPatent offers
databases of historical ("backfile") and current patent information, in standard
and custom formats, in multiple media. Backfile and custom product sales
generated 23% of MicroPatent's revenues in the first quarter of 1998.
While the Company continues to expand both the content and functionality of
its patent products, it is also expanding rapidly into trademark information.
The Company launched a U.S. federal trademark database, MARKSEARCH PRO-TM-, and
now has trademark products available in CD-ROM and on the Internet through
TRADEMARKWEB-TM-. In the first quarter of 1998, trademark products, which are
included above in CD-ROM subscription and Internet revenues, generated 7% of
MicroPatent's revenues.
The Company continues to develop its content and recently launched its
worldwide patent search service and MARKSEARCH PRO. Later this year, the Company
plans to introduce full-text searching on U.S. patents and several new
international databases, including content from the World Intellectual Property
Organization and the European Community. The Company is also expanding into new
markets through development of value-added trademark information products,
including a state trademark database which will be available on the Internet.
SALES, MARKETING AND DISTRIBUTION
The majority of MicroPatent's sales are made through an in-house sales force
with offices in the United States and the United Kingdom. Prospects are
identified through referrals from existing customers, referrals from patent and
trademark offices, leads from trade shows and information requests from sources
such as the Internet. Additional international sales are made through a network
of distributors. Renewals are generally made by mail with telephone follow-up.
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OPERATIONS
The Company employs 12 people to produce and fulfill its patent and
trademark CD-ROM and customized information products. Source data is received
weekly from the U.S. Patent and Trademark Office and certain foreign patent and
trademark offices. The Company receives the data in various formats and media
and, through internal procedures using both proprietary and third-party
software, produces a master CD-ROM for each subscription product. An outside
vendor is used for CD-ROM replication and shipments to customers.
Source data is continually added to the Company's numerous in-house
databases, which support its Internet-based products and services. These
databases, together with various support systems and product interfaces, are
maintained by a programming and research and development staff of four. These
software development professionals, together with several technical support
staff, create and maintain the Company's various Internet products.
Since its acquisition of MicroPatent, the Company has taken several
initiatives to improve operations. Significant investments made in MicroPatent's
website to expand web-based content and enhance existing technology have led to
increased reliability and speed. In addition, since the Company acquired
MicroPatent, overall cost levels have decreased. In particular, in the year
prior to acquisition, operating expenses (excluding amortization of intangibles)
approximated 62% of revenues. In the first six months under the Company's
ownership, these expenses were reduced to 52% of revenues.
COMPETITION
The Company competes with a broad range of companies for the products and
services it offers. Although it provides information in competitive markets and
such competition is unlikely to diminish, the Company believes it can compete
successfully based on its well-established positions in niche markets, the
quality of its products, the breadth and depth of its content, continued product
innovation and efficient operations.
STM information publishing is a large market with numerous competitors.
While there is competition for sales in a given area, products are generally
unique titles sold on an individual basis. The Company must also compete for the
signing of noted authors. The Company's primary STM competitors include John
Wiley, McGraw-Hill and Academic Press, a unit of Harcourt General. These
competitors are larger and have greater financial resources than the Company. In
addition there are numerous small publishers that compete with the Company.
The Company also competes with other sellers of intellectual property
information. Thomson owns Derwent and Thomson & Thomson, large competitors in
patents and trademarks, respectively. In addition to direct sales, these
companies offer content through on-line services such as Dialog, which combines
this information with other business information. Lastly, there are several
low-cost or free intellectual property services offered by large
technology-oriented companies, such as IBM and EDS, and certain national and
international patent and trademark offices. These services have not had a
significant negative impact on the Company to date, due to the Company's ability
to differentiate itself through adding value by making data easily accessible
and customizing products for specific client needs.
INTELLECTUAL PROPERTY
The Company regards its trademarks, copyrights, trade secrets and similar
intellectual property as valuable assets and relies upon trademark and copyright
laws, as well as confidentiality agreements with its employees and others, to
protect its rights. The Company pursues the registration of its material
trademarks and copyrights in the United States and, depending upon use, in
certain other countries. The Company believes it owns or licenses all
intellectual property rights necessary to conduct its business. To the best of
the Company's knowledge, there are no threatened or pending legal proceedings or
claims
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related to the Company's intellectual property that are likely to have,
individually or in the aggregate, a material adverse effect on the Company's
business, financial condition or results of operations.
FACILITIES
The Company leases office space in East Haven, Connecticut; Washington,
D.C.; Boca Raton, Florida; New York, New York; and London, England under leases
expiring in 2001; 2002; 1998 and 2006; 2002 and 2005; and quarterly,
respectively. The Company contracts with a third party for warehousing and
distribution services at a Lynn, Missouri facility. The Company does not own any
real property. The Company believes that its properties, taken as a whole, are
in good operating condition and are suitable and adequate for the Company's
current business operations, and that suitable additional or alternative space
will be available at commercially reasonable terms for future expansion.
EMPLOYEES AND LABOR RELATIONS
As of March 31, 1998, the Company had approximately 240 employees. No
employees are covered by collective bargaining agreements with labor unions. The
Company believes that relations with its employees are good. The Company's
policy is to motivate its key employees through grants of stock options and
other incentive-based compensation. See "Management--1998 Stock Option Plan."
LITIGATION
Mason P. Slaine, the Company's President and Chief Executive Officer, and
Michael E. Danziger, a director of the Company, are shareholders, officers and
directors of Rand Publishing Company Inc. ("Rand"), a private holding company
that has made investments in the publishing industry. Certain of the other
investors in Rand have alleged that Mr. Slaine breached his fiduciary duty to
them and usurped corporate opportunities available to Rand by investing in the
Company and by participating in the acquisition by the Company of various
businesses. These investors have threatened to sue Mr. Slaine, have asserted
claims for damages and have requested that a constructive trust be established
for their benefit consisting of Mr. Slaine's interest in the Company and other
relief. Mr. Slaine denies such allegations and has indicated to the Company
that, if commenced, he intends to vigorously contest any such action brought by
these investors.
In addition, the Company is involved in litigation that has arisen in the
ordinary course of business. None of these matters, either individually or in
the aggregate, is expected to have a material adverse effect on the Company's
financial condition or results of operations.
INSURANCE
The Company maintains general liability and property insurance and an
umbrella and excess liability policy in amounts it considers adequate and
customary for a business of its kind. However, there can be no assurance that
future claims will not exceed insurance coverage.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
Set forth below are the names, ages and positions of the executive officers
and directors of the Company as of July 15, 1998.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------------- --- ---------------------------------------------------------
<S> <C> <C>
Mason P. Slaine.............. 45 President, Chief Executive Officer and Director
Vincent A. Chippari.......... 38 Executive Vice President and Chief Financial Officer
Dennis Buda.................. 50 President, CRC Press LLC
Steven Wolfson............... 53 President, MicroPatent LLC
Michael E. Danziger.......... 39 Director
David R. Haas................ 57 Director
Sidney Lapidus............... 60 Director
David E. Libowitz............ 35 Director
</TABLE>
Set forth below are the present principal occupation and employment
background of each of the executive officers and directors of the Company.
MASON P. SLAINE has been President, Chief Executive Officer and a director
of the Company since December 1996. Since 1993, Mr. Slaine has been President of
Rand Publishing Company Inc. ("Rand"), a small holding company that has made
investments in the publishing industry. One such investment is Progressive
Grocer Associates LLC, a publisher of three magazines serving the retail
industry, of which Mr. Slaine has been Chairman since 1995. From 1994 to 1996,
Mr. Slaine served as President of Thomson Financial, a division of Thomson which
provides financial information, research, analysis and software products
worldwide. From 1993 to 1994, he served as President of Thomson Financial
Publishing, a division of Thomson Financial. See "Business--Litigation."
VINCENT A. CHIPPARI has been Executive Vice President and Chief Financial
Officer of the Company since January 1998. From 1990 to 1996, Mr. Chippari was
Chief Financial Officer of Thomson Business Information, which serves the global
scientific, medical, intellectual property, technical and general reference
markets. From 1996 to 1997, he was Executive Vice President, Operations, of
Thomson Intellectual Property/Automotive Group, as well as General Manager of
its Derwent Information North America unit, a patent and scientific information
business.
DENNIS BUDA has been President of CRC Press since January 1997. From 1992
until then, Mr. Buda was the owner and President of St. Lucie Press, Inc., a
publisher of managerial, technical and analytical business books.
STEVEN WOLFSON has been President of MicroPatent since July 1997. From 1996
to 1997, Mr. Wolfson was Vice President and Chief Financial Officer of
MicroPatent's predecessor. From 1994 to 1996, he was Vice President and Chief
Financial Officer of American Banker, a financial information publishing
company. From 1993 to 1994, Mr. Wolfson was an independent consultant in the
financial and administrative fields.
MICHAEL E. DANZIGER has been a director of the Company since July 1998.
Since 1991, Mr. Danziger has been Chairman of Thomson Financial's Database
Group, a division of Thomson which provides financial information. Since 1993,
he has also been an executive officer of Rand.
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<PAGE>
DAVID R. HAAS has been a director of the Company since July 1998. Mr. Haas
has been a financial consultant in the entertainment and communications
industries since 1995. From 1990 until 1994, he was Senior Vice President and
Controller of Time Warner, a leading media and entertainment company. He is
currently a director of TODD-AO Corporation and GRB Entertainment, Inc.
SIDNEY LAPIDUS has been a director of the Company since December 1996. Mr.
Lapidus has been a General Partner of Warburg, Pincus & Co. ("WP") and a Member
and Managing Director of E.M. Warburg, Pincus & Co., LLC or its predecessors
("EMW LLC") since January 1982, where he has been employed since 1967. He is
currently a director of Caribiner International, Inc., Grubb and Ellis Company,
Journal Register Company, Knoll Inc., Lennar Corporation and several privately
held companies.
DAVID E. LIBOWITZ has been a director of the Company since December 1996.
Mr. Libowitz is a General Partner of WP and a Member and Managing Director of
EMW LLC, where he has been employed since July 1991. He is currently a director
of Caribiner International, Inc. and several privately held companies.
The Company has agreed to nominate and use its best efforts to elect and
cause to remain as directors (i) Mr. Slaine, for so long as he beneficially owns
(within the meaning of Rule 13d-3 under the Securities Exchange Act of 1934, as
amended) at least 5% of the outstanding shares of Common Stock, unless his
employment is terminated by the Company for "Just Cause" (as defined in his
employment agreement), and (ii) at least one or two nominees of Warburg Pincus
for so long as Warburg Pincus beneficially owns at least 10% or 20%,
respectively, of the outstanding shares of Common Stock.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors of the Company has established Compensation and Audit
Committees, each of which reports to the Board. The Compensation Committee
consists of Messrs. Lapidus and Libowitz and has the authority to determine all
matters relating to compensation of the Company's employees. The Audit Committee
consists of Messrs. Danziger and Haas and is responsible for meeting with the
Company's independent accountants regarding, among other issues, audits and
adequacy of the Company's accounting and control systems.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Securities and Exchange Commission (the "Commission") requires issuers
to disclose the existence of any other company in which both (i) an executive
officer of the Company serves on the board of directors and/or compensation
committee and (ii) a director of the Company serves as an executive officer.
There are no relationships that are required to be disclosed hereunder.
DIRECTOR COMPENSATION
Each director who is not an employee of the Company or its affiliates,
including Warburg Pincus (each, an "Independent Director"), will receive a fee
of $1,000 for each meeting of the Board of Directors attended in person and $500
for each telephonic meeting of the Board of Directors attended. The Chairman of
each committee of the Board will also receive an annual fee of $1,000. Effective
upon consummation of the Offering, each Independent Director will receive a
grant of options to purchase 1,500 shares of Common Stock at the initial public
offering price per share. Thereafter, each Independent Director will receive an
annual grant of a number of options equal to $15,000 divided by the fair market
value of one share of Common Stock on the date of grant, which options will be
exercisable at a price per share equal to the fair market value of the Common
Stock on such date. All options granted to Independent Directors will vest
immediately. Directors who are not Independent Directors will not receive fees
for serving on the Board of Directors or any committee thereof. In addition, all
directors will be reimbursed for reasonable out-of-pocket expenses incurred in
attending meetings of the Board of Directors and any committee thereof.
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<PAGE>
SUMMARY COMPENSATION TABLE
The following Summary Compensation Table sets forth information concerning
the compensation for services paid to the officers named below (the "Named
Executive Officers") during fiscal year 1997.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
--------------------------------------------------
<S> <C> <C> <C> <C>
NAME AND PRINCIPAL ALL OTHER
POSITION YEAR SALARY BONUS COMPENSATION
- ---------------------------------------------------------------- --------- ---------- ------------ -------------
Mason P. Slaine................................................. 1997 $ 300,000 -- $ 1,000,000(1)
President and Chief Executive Officer
Vincent A. Chippari(2).......................................... 1997 -- -- --
Executive Vice President
and Chief Financial Officer
Dennis Buda..................................................... 1997 $ 150,000 -- $ 660,000(3)
President, CRC Press LLC
Steven Wolfson(4)............................................... 1997 $ 62,500 $ 25,000 --
President, MicroPatent LLC
</TABLE>
- ------------------------
(1) Represents a one-time payment related to the formation of the Company and
its initial acquisitions.
(2) Mr. Chippari's employment commenced on January 19, 1998. His employment
agreement is described below under "Employment Agreements."
(3) Represents incentive payments made under Mr. Buda's initial employment
agreement entered into in connection with the Company's acquisition of St.
Lucie Press.
(4) Mr. Wolfson's compensation includes compensation from July 2, 1997, the date
of the Company's acquisition of MicroPatent.
EMPLOYMENT AGREEMENTS
MASON P. SLAINE
The Company has an employment agreement, dated as of December 31, 1996, with
Mason P. Slaine which provides that Mr. Slaine will serve as President and Chief
Executive Officer of the Company until June 30, 2000, subject to automatic
two-year renewals unless either party provides notice of non-renewal. Mr.
Slaine's employment agreement provides for a base salary of $300,000 per year,
subject to increases in the discretion of the Board of Directors. In addition,
Mr. Slaine is eligible to receive an annual cash bonus, as determined by the
Board of Directors. He is also entitled to participate in health, insurance,
pension, automobile and other benefits provided to other senior executives of
the Company.
In the event that Mr. Slaine resigns without "Good Reason" or his employment
terminates for "Just Cause" (as such terms are defined in the his employment
agreement), Mr. Slaine will be entitled to receive any accrued but unpaid base
salary, unused vacation or unreimbursed expenses. In the event that Mr. Slaine
terminates his employment for Good Reason, for a period of 12 months following
the date of such termination, in addition to the amounts specified in the
foregoing sentence, Mr. Slaine will continue to receive his base salary and
health and insurance benefits, offset by amounts paid to him in respect of other
employment or business activities during such period. Mr. Slaine's employment
agreement also contains a non-compete clause, which applies until the first
anniversary of the termination of Mr. Slaine's employment, and confidentiality
and non-solicitation provisions.
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<PAGE>
VINCENT A. CHIPPARI
The Company has an employment agreement, dated as of January 19, 1998, with
Vincent A. Chippari, which provides that Mr. Chippari will serve as Executive
Vice President and Chief Financial Officer of the Company until January 19,
2001, subject to automatic one-year renewals unless either party provides notice
of non-renewal. Mr. Chippari's employment agreement provides for a base salary
of $200,000 per year, increased annually to the extent of any net increase in
the Consumer Price Index. In addition, Mr. Chippari is entitled to receive an
annual cash bonus in an amount up to 50% of his base salary based upon the
meeting of certain objectives approved by the Board of Directors, provided that
the bonus for his first year of employment must equal at least $50,000. Mr.
Chippari is also eligible to participate in health, insurance, pension and other
benefits provided to other senior executives of the Company.
In the event that Mr. Chippari resigns or his employment terminates for
"Cause" (as defined in his employment agreement), Mr. Chippari will be entitled
to receive any accrued but unpaid base salary, unused vacation or unreimbursed
expenses. In the event the Company terminates his employment without Cause, in
addition to the amounts specified in the foregoing sentence, Mr. Chippari will
continue to receive his base salary and health and insurance benefits for a
period of 12 months following the date of such termination. Mr. Chippari's
employment agreement also contains a non-compete clause, which applies until the
first anniversary of the termination of Mr. Chippari's employment, and
confidentiality and non-solicitation provisions.
In addition, Mr. Chippari holds an equity interest in the LLC. Assuming an
initial public offering price of $15.50 per share, Mr. Chippari will exchange
such interest for 32,123 shares of Common Stock in the Exchange.
DENNIS BUDA
The Company has an employment agreement, dated as of June 10, 1998, with
Dennis Buda, which provides that Mr. Buda will serve as President of CRC Press
until January 13, 2000. Mr. Buda's Employment Agreement provides for a base
salary of $175,000 per year through December 31, 1998 and $200,000 per year
beginning January 1, 1999, subject to increases in the discretion of the Board
of Directors. Upon consummation of the Offering, Mr. Buda is also entitled to
receive incentive payments of approximately $1.0 million, of which $250,000 will
be paid in shares of Common Stock based on the initial public offering price
(the "Incentive Payments"). In addition, Mr. Buda is entitled to receive a bonus
equal to 50% of his base salary if CRC Press meets its financial performance
objectives for the year ended December 31, 1999. Mr. Buda is also eligible to
participate in health, insurance and other benefits provided to other senior
executives of CRC Press.
Mr. Buda's employment agreement provides for a grant, upon consummation of
the Offering, of options to purchase the number of shares of Common Stock
obtained by dividing $3 million by the initial public offering price. Pursuant
to the employment agreement, Mr. Buda's options will be exercisable for a period
of five years from the date of grant at a price per share equal to the initial
public offering price. Approximately one-third of such options will be
immediately exercisable, one-third will vest and become exercisable on December
31, 1999 and the balance thereof will vest and become exercisable in equal
monthly installments through January 13, 2000.
In the event that Mr. Buda's employment terminates for any reason, Mr. Buda
will be entitled to receive any accrued but unpaid base salary, Incentive
Payments or unreimbursed expenses, provided that he will not be entitled to
receive the Incentive Payments if he is terminated for "Just Cause" (as defined
in his employment agreement) or if he resigns. In the event Mr. Buda's
employment is terminated without Just Cause prior to January 13, 1999, then
until such date, in addition to the amounts specified in the foregoing sentence,
Mr. Buda will continue to receive his base salary and health and insurance
benefits, offset by amounts paid to him in respect of other employment or
business activities during such period.
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<PAGE>
Mr. Buda's employment agreement also contains a non-compete clause, which
applies until January 13, 2002, and confidentiality and non-solicitation
provisions.
SLAINE NON-COMPETITION AGREEMENT
Pursuant to an employment and restrictive covenants agreement, dated April
1, 1994, between Mr. Slaine and an affiliate of Thomson, Mr. Slaine is generally
restricted from owning, engaging in or providing services to any business that
competes with the businesses of Thomson Financial. Thomson Financial is a
provider of financial information, research, analysis and software products.
These restrictions expire on December 31, 1999.
1998 STOCK OPTION PLAN
The Company's 1998 Stock Option Plan (the "1998 Stock Option Plan") has been
adopted by the Board of Directors and the stockholders of the Company. The 1998
Stock Option Plan provides for the grant of non-qualified options ("NQOs") and
incentive stock options ("ISOs") as defined in Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"). The 1998 Stock Option Plan will
be administered by the Board of Directors of the Company, or, if designated by
the Board, the Compensation Committee of the Board. The Board believes that the
1998 Stock Option Plan is important to provide an inducement to obtain and
retain the services of employees of the Company and its subsidiaries and to
increase their proprietary interest in the Company's success.
At present, all directors and full-time employees of the Company and its
subsidiaries, are eligible to participate in the 1998 Stock Option Plan. The
aggregate number of shares of Common Stock as to which stock options ("Options")
may be granted under the 1998 Stock Option Plan may not exceed 866,638 (assuming
an initial public offering price of $15.50 per share), subject to adjustment as
provided in the 1998 Stock Option Plan.
Recipients of Options under the 1998 Stock Option Plan ("Optionees") are
currently selected by the Board, which has sole authority (i) to determine the
number of Options to be granted to such recipient, (ii) to prescribe the form or
forms of the Option Agreements, (iii) to adopt, amend or rescind rules and
regulations for the administration of the 1998 Stock Option Plan, (iv) to
construe and interpret the 1998 Stock Option Plan, (v) to determine the exercise
price of shares subject to Options, (vi) to determine the dates on which Options
become exercisable, (vii) to determine the expiration date of each Option and
(viii) to cancel any Option held with the express written consent of the
affected Optionee. Options granted under the 1998 Stock Option Plan will be
evidenced by a written Option agreement between each Optionee and the Company.
The exercise price of the shares of Common Stock subject to Options are
currently fixed by the Board, in its discretion, at the time Options are
granted, provided that the per share exercise price of an ISO may not be less
than the fair market value of a share of Common Stock on the date of grant.
Options to purchase an aggregate of 408,878 shares under the 1998 Stock Option
Plan will be granted upon consummation of the Offering, assuming an initial
public offering price of $15.50 per share. Such Options are exercisable at a
price per share equal to the initial public offering price and vest in four
equal annual installments beginning on the first anniversary of the date of
grant, except that the Options to be granted to Messrs. Chippari and Buda have
accelerated vesting schedules.
Optionees will have no voting, dividend, or other rights as stockholders
with respect to shares of Common Stock covered by Options prior to becoming the
holders of record of such shares. All Option grants will permit the exercise
price to be paid in cash or by certified check, bank draft or money order or by
"cashless" exercise. If the Company is sold, reorganized, consolidated, or
merged with another corporation, or if all or substantially all of the assets of
the Company are sold or exchanged (a "Corporate Event"), (i) the Optionee will,
at the time of such Corporate Event, be entitled to receive upon the exercise of
his Option the same number and kind of shares of Common Stock or the same amount
of property, cash
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<PAGE>
or other securities as he would have been entitled to receive upon the
occurrence of such Corporate Event as if he had been, immediately prior to, or
on the record date relating to, such event, the holder of the number of shares
covered by his Option, and (ii) if the Company is not the surviving corporation
in such Corporate Event, the Company will require the successor corporation or
parent thereof to assume such outstanding Options; provided, however, that the
Board may provide that all outstanding Options will terminate as of the
consummation of such Corporate Event and accelerate the exercisability of all
outstanding Options to any date prior to the date of such Corporate Event. In
the event of a "Change of Control" (as defined in the 1998 Stock Option Plan),
each outstanding Option will vest and become immediately exercisable in full as
of the date immediately preceding the date of such Change of Control.
The Board of Directors of the Company may at any time terminate the 1998
Stock Option Plan or from time to time make such modifications or amendments to
the 1998 Stock Option Plan as it may deem advisable, provided that the Board may
not, without the consent of the Optionee, take action which would have a
material adverse effect on outstanding Options or any unexercised rights under
outstanding Options.
The following is a brief discussion of the Federal income tax consequences
of transactions under the 1998 Stock Option Plan based on the Code. The 1998
Stock Option Plan is not qualified under Section 401(a) of the Code.
No taxable income is realized by an Optionee upon the grant or exercise of
an ISO. If Common Stock is issued to an Optionee pursuant to the exercise of an
ISO, and if no disqualifying disposition of such shares is made by such Optionee
within two years after the date of grant or within one year after the transfer
of such shares to such Optionee, then (i) upon sale of such shares, any amount
realized in excess of the Option price will be taxed to such Optionee as a
long-term capital gain and any loss sustained will be a long-term capital loss
and (ii) no deduction will be allowed to the Optionee's employer for Federal
income tax purposes.
If the Common Stock acquired upon the exercise of an ISO is disposed of
prior to the expiration of either holding period described above, generally (i)
the Optionee will realize ordinary income in the year of disposition in an
amount equal to the excess (if any) of the fair market value of such shares at
exercise (or, if less, the amount realized on the disposition of such shares)
over the Option price paid for such shares and (ii) the Company will be entitled
to deduct such amount for Federal income tax purposes if the amount represents
an ordinary and necessary business expense. Any further gain (or loss) realized
by the Optionee will be taxed as short-term or long-term capital gain (or loss),
as the case may be, and will not result in any deduction by the Company.
With respect to NQOs, (i) no income is realized by an Optionee at the time
the Option is granted, (ii) generally, at exercise, ordinary income is realized
by the Optionee in an amount equal to the difference between the Option price
paid for the shares and the fair market value of the shares, if unrestricted, on
the date of exercise, and the Company is generally entitled to a tax deduction
in the same amount subject to applicable tax withholding requirements and (iii)
at sale, appreciation (or depreciation) after the date of exercise is treated as
either short-term or long-term capital gain (or loss) depending on how long the
shares have been held. Deductions for compensation attributable to NQOs (or
disqualified ISOs) granted to the Company's named executive officers may be
subject to the deduction limits of Section 162(m) of the Code, unless such
compensation qualifies as "performance-based" (as defined therein).
39
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Pursuant to an Exchange Agreement, dated as of June 10, 1998, immediately
prior to the consummation of the Offering, Warburg Pincus, Mr. Slaine and Mr.
Chippari will contribute to the Company all of their direct or indirect equity
interests in the LLC in exchange for an aggregate of 12,200,000 shares of Common
Stock. See "The Exchange." The exact number of shares to be issued to each of
them will be based on the initial public offering price of the Common Stock.
Assuming an initial public offering price of $15.50 per share, Warburg Pincus,
Mr. Slaine and Mr. Chippari will receive 9,682,380, 2,485,497 and 32,123 shares
of Common Stock, respectively.
In connection with the acquisition of CRC Press in January 1997, the Initial
Stockholders loaned an aggregate of $2.5 million to the Company. Such loans were
repaid without interest in April 1997.
The Company transacts business in the amount of approximately $250,000 per
year with a mail house owned by a brother-in-law of Dennis Buda, the President
of CRC Press. The rates charged by such mail house are at or below the rates
charged by other mail houses serving the Company.
The Initial Stockholders are entitled to certain registration rights with
respect to their respective shares of Common Stock. See "Shares Eligible for
Future Sale."
Until such time as the Company uses the net proceeds of the Offering for
acquisitions, the Company intends to invest them in short-term, investment grade
securities. In connection therewith, the Company may utilize the services of an
affiliate of Warburg Pincus, for which the Company will pay reasonable and
customary fees to such affiliate.
40
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The table below sets forth the beneficial ownership of Common Stock as of
July 1, 1998, after giving effect to the Exchange and the Offering (assuming an
initial public offering price of $15.50 per share), by (i) all persons who
beneficially own 5% or more of the Common Stock, (ii) each Named Executive
Officer, (iii) each director of the Company and (iv) all executive officers and
directors as a group.
<TABLE>
<CAPTION>
COMMON STOCK BENEFICIALLY OWNED
----------------------------------
<S> <C> <C>
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER OF SHARES PERCENTAGE(1)
- --------------------------------------------------------------------------------- ----------------- ---------------
Warburg, Pincus Ventures, L.P.(2)................................................ 9,682,380 58.8%
466 Lexington Avenue
New York, New York 10017
Mason P. Slaine(3)............................................................... 2,485,497 15.1
Vincent A. Chippari.............................................................. 32,123 *
Dennis Buda(4)................................................................... 84,229 *
Steven Wolfson................................................................... 0 *
Michael E. Danziger.............................................................. 69,372 *
David R. Haas.................................................................... 3,469 *
Sidney Lapidus(5)................................................................ 9,682,380 58.8
David E. Libowitz(5)............................................................. 9,682,380 58.8
All directors and executive officers as a group (eight persons).................. 12,357,070 74.7
</TABLE>
- ------------------------
* Less than 1%.
(1) Pursuant to the regulations of the Commission, shares are deemed to be
"beneficially owned" by a person if such person directly or indirectly has
or shares the power to vote or dispose of such shares, whether or not such
person has any pecuniary interest in such shares, or the right to acquire
the power to vote or dispose of such shares within 60 days, including any
right to acquire through the exercise of any option, warrant or right.
(2) The sole general partner of Warburg Pincus is Warburg, Pincus & Co., a New
York general partnership ("WP"). E.M. Warburg, Pincus & Co., LLC, a New York
limited liability company ("EMW LLC"), manages Warburg Pincus. The members
of EMW LLC are substantially the same as the partners of WP. Lionel I.
Pincus is the Managing Partner of WP and the Managing Member of EMW LLC. WP
has a 15% interest in the profits of Warburg Pincus as the general partner
and also owns approximately 1.2% of the limited partnership interests in
Warburg Pincus.
(3) Mr. Slaine has been threatened with a lawsuit relating to his interest in
the Company. See "Business-- Litigation."
(4) Includes 68,100 shares issuable upon exercise of options to be granted upon
consummation of the Offering that will be immediately vested and
exercisable.
(5) All shares indicated as owned by Mr. Lapidus or Mr. Libowitz are owned by
Warburg Pincus and are included because of their affiliation with Warburg
Pincus. Both of them are Members and Managing Directors of EMW LLC and
General Partners of WP. Messrs. Lapidus and Libowitz disclaim beneficial
ownership of the shares owned by Warburg Pincus.
41
<PAGE>
DESCRIPTION OF CAPITAL STOCK
GENERAL
The authorized capital stock of the Company consists of 50,000,000 shares of
Common Stock, par value $.01 per share, and 1,000,000 shares of Preferred Stock,
par value $.01 per share.
COMMON STOCK
Prior to the consummation of the Offering, after giving effect to the
Exchange, there will be 12,200,000 shares of Common Stock outstanding, owned of
record by three stockholders. Holders of Common Stock have no pre-emptive,
redemption, conversion or sinking fund rights. Holders of Common Stock are
entitled to one vote per share on all matters submitted to a vote of
stockholders and do not have any cumulative voting rights. In the event of a
liquidation, dissolution, or winding-up of the Company, the holders of Common
Stock are entitled to share equally and ratably in the assets of the Company, if
any, remaining after provision for the payment of creditors and after payment of
any liquidation preference to holders of Preferred Stock. Upon consummation of
the Offering, all outstanding shares of Common Stock will be validly issued,
fully paid and nonassessable. Holders of Common Stock will receive such
dividends, if any, as may be declared by the Board out of funds legally
available for such purposes. See "Dividend Policy."
PREFERRED STOCK
The Company is authorized to issue up to 1,000,000 shares of Preferred
Stock. The Board of Directors will have the authority to issue this Preferred
Stock in one or more series and to fix the rights, preferences, privileges and
restrictions thereof, including dividend rights, dividend rates, conversion
rights, voting rights, terms of redemption, redemption prices, liquidation
preferences and the number of shares constituting any series or the designation
of such series, without further vote or action by the stockholders. The issuance
of Preferred Stock may have the effect of delaying, deferring or preventing a
change in control of the Company without further action by the stockholders and
may adversely affect the voting and other rights of the holders of Common Stock,
including the loss of voting control to others.
CERTAIN EFFECTS OF AUTHORIZED BUT UNISSUED STOCK
After consummation of the Offering, there will be 33,533,871 shares of
Common Stock and 1,000,000 shares of Preferred Stock available for future
issuance without stockholder approval. These additional shares may be utilized
for a variety of corporate purposes, including future public offerings to raise
additional capital or to facilitate corporate acquisitions. The company
currently does not have any plans to issue additional shares of Common Stock or
Preferred Stock.
One of the effects of the existence of unissued and unreserved Common Stock
and Preferred Stock of the Company may be to enable the Board of Directors to
issue shares to persons supportive of current management which could render more
difficult or discourage an attempt to obtain control of the Company by means of
a merger, tender offer, proxy contest or otherwise, and thereby protect the
continuity of the Company's management and possibly deprive the stockholders of
opportunities to sell their shares of Common Stock at prices higher than
prevailing market prices. Such additional shares also could be used to dilute
the stock ownership of persons seeking to obtain control of the Company pursuant
to the operation of a stockholders' rights plan or otherwise.
DELAWARE GENERAL CORPORATION LAW
Pursuant to Section 203 of the DGCL, with certain exceptions, a Delaware
corporation may not engage in any of a broad range of business combinations,
such as mergers, consolidations and sales of assets, with an "interested
stockholder" for a period of three years from the date that such person became
an interested stockholder unless (i) the transaction that results in the
person's becoming an interest stockholder, or the business combination, is
approved by the board of directors of the corporation before
42
<PAGE>
the person becomes an interested stockholder, (ii) the interested stockholder
acquires 85% or more of the outstanding voting stock of the corporation in the
same transaction that makes it an interested stockholder or (iii) on or after
the date the person becomes an interested stockholder, the business combination
is approved by the corporation's board of directors and by holders of at least
two-thirds of the corporation's outstanding voting stock, excluding shares owned
by the interested stockholder, at a meeting of the stockholders. Under Section
203, an "interested stockholder" is defined as any person that is (i) the owner
of 15% or more of the outstanding voting stock of the corporation or (ii) an
affiliate or associate of the corporation and the owner of 15% or more of the
outstanding voting stock of the corporation at any time within the three-year
period immediately prior to the date on which it is sought to be determined
whether such person is an interested stockholder or (iii) an affiliate or
associate of such person. Pursuant to an exception within Section 203, no
stockholders of the Company existing prior to the Offering are subject to the
restrictions of Section 203.
Under certain circumstances, Section 203 makes it more difficult for a
person who would be an "interested stockholder" to effect various business
combinations with a corporation for a three-year period, although the
stockholders may elect to exclude a corporation from the restrictions imposed
thereunder. The Company's Certificate of Incorporation does not exclude the
Company from the restrictions imposed under Section 203. The provisions of
Section 203 may encourage companies interested in acquiring the Company to
negotiate in advance with the Board of Directors, since the stockholder approval
requirement would be avoided if a majority of the directors then in office
approve either the business combination or the transaction which results in the
stockholder becoming an interested stockholder. Such provisions also could delay
or frustrate the assumption of control by stockholders, even if such assumption
of control would be beneficial to stockholders, and also could discourage or
make more difficult a merger, tender offer or proxy contest, even if such events
could be beneficial to the interests of stockholders.
LIMITATION OF LIABILITY OF DIRECTORS
The Certificate of Incorporation provides that a director of the Company
will not be personally liable to the Company or its stockholders for monetary
damages for breach of fiduciary duty as a director, except for liability (i) for
any breach of the director's duty of loyalty to the Company or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174 of the
Delaware General Corporation Law, which concerns unlawful payments of dividends,
stock purchases or redemptions, or (iv) for any transaction from which the
director derived an improper personal benefit.
While the Certificate of Incorporation provides directors with protection
from awards for monetary damages for breaches of their duty of care, it does not
eliminate such duty. Accordingly, the Certificate of Incorporation will have no
effect on the availability of equitable remedies such as an injunction or
rescission based on a director's breach of his duty of care. The provisions of
the Certificate of Incorporation described above apply to an officer of the
Company only if he is a director of the Company and is acting in his capacity as
director, and do not apply to officers of the Company who are not directors.
REGISTRATION RIGHTS
The Initial Stockholders are entitled to certain registration rights with
respect to their respective shares of Common Stock. See "Shares Eligible for
Future Sale."
TRANSFER AGENT
The transfer agent and registrar of the Common Stock is State Street Bank
and Trust Company.
43
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Of the 16,466,129 shares of Common Stock outstanding upon consummation of
the Offering, the 4,250,000 shares of Common Stock sold in the Offering will be
freely transferable without restriction under the Securities Act unless
purchased by "affiliates" of the Company (as that term is used under the
Securities Act and the regulations promulgated thereunder). The remaining
12,216,129 shares of Common Stock outstanding were sold by the Company in
reliance on exemptions from the registration requirements of the Securities Act
and are deemed "restricted" securities within the meaning of Rule 144 under the
Securities Act and may not be resold without registration under the Securities
Act or pursuant to an exemption from registration, including exemptions provided
by Rule 144 under the Securities Act. All such restricted shares are presently
held by affiliates of the Company, are subject to lock-up agreements (as
described under "Underwriting") and will become eligible for sale beginning 180
days after the date of this Prospectus upon expiration of such agreements and
subject to compliance with the Securities Act.
In general, under Rule 144 as currently in effect, any person (or persons
whose shares are aggregated), including an affiliate of the Company, who has
beneficially owned shares for at least a one-year period (as computed under Rule
144) is entitled to sell within any three-month period commencing 90 days after
this Offering such number of shares that does not exceed the greater of (i) 1%
of the then outstanding shares of Common Stock (approximately 164,661 shares
upon consummation of the Offering) and (ii) the average weekly trading volume in
the Common Stock during the four calendar weeks immediately preceding such sale.
Sales under Rule 144 are also subject to certain manner-of-sale provisions,
notice requirements and the availability of current public information about the
Company. A person who is not deemed to have been an affiliate of the company at
any time during the three months preceding a sale, and who has beneficially
owned the shares proposed to be sold for at least two years, is entitled to sell
such shares under Rule 144(k) without regard to the volume limitations or other
requirements described above. The foregoing summary of Rule 144 is not intended
to be a complete description of that rule.
Upon consummation of the Offering, 866,638 shares of Common Stock will be
authorized for issuance under the 1998 Stock Option Plan, of which options to
purchase 408,878 shares will be outstanding, assuming an initial public offering
price of $15.50 per share. When issued, such shares may only be resold by
complying with the one-year holding period under Rule 144 or pursuant to
registration under the Securities Act.
Prior to the Offering, there has been no public market for securities of the
Company. No predictions can be made of the effect, if any, that the sale or
availability for sale of shares of additional Common Stock will have on the
market price of the Common Stock. Nevertheless, sales of substantial amounts of
Common Stock, or the perception that such sales could occur, could adversely
affect the market price of the Common Stock.
The Company, the Company's directors and executive officers and Warburg
Pincus have agreed, subject to certain exceptions, not to offer, sell or
otherwise dispose of or transfer any shares of Common Stock or any securities
convertible into or exercisable or exchangeable for Common Stock for a period of
180 days after the date of this Prospectus. See "Underwriting."
Pursuant to a registration rights agreement, the Initial Stockholders have
the right to request two registrations of their shares of Common Stock, provided
that the anticipated aggregate public offering price equals $15 million or more,
and unlimited registrations on Form S-3, provided that the anticipated aggregate
offering price exceeds $5 million. In addition, the Initial Stockholders are
entitled to have their shares included in an unlimited number of registrations
initiated by the Company, subject to certain customary conditions. The rights of
the Initial Stockholders pursuant to the registration rights agreement are
subject to the lock-up agreements described under "Underwriting." In general,
all fees, costs and expenses of such registration (other than underwriting
discounts and selling commissions) will be borne by the Company. The Company has
agreed to indemnify the Initial Stockholders from any liability arising out of
or relating to any untrue statement of a material fact or any omission of a
material fact in any registration statement or prospectus filed by the Company
pursuant to the Registration Rights Agreement, subject to certain exceptions.
44
<PAGE>
UNDERWRITING
Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch") and BT
Alex. Brown Incorporated are acting as representatives (the "Representatives")
of each of the Underwriters named below (the "Underwriters"). Subject to the
terms and conditions set forth in a purchase agreement (the "Purchase
Agreement") among the Company and the Underwriters, the Company has agreed to
sell to the Underwriters, and each of the Underwriters severally and not jointly
has agreed to purchase from the Company, the number of shares of Common Stock
set forth opposite its name below.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
- ------------------------------------------------------------------------------------ -----------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated..............................................................
BT Alex. Brown Incorporated.........................................................
-----------
Total.....................................................................
-----------
-----------
</TABLE>
In the Purchase Agreement, the several Underwriters have agreed, subject to the
terms and conditions set forth therein, to purchase all of the shares of Common
Stock being sold pursuant to such agreement if any of the shares of Common Stock
being sold pursuant to such agreement are purchased. Under certain
circumstances, under the Purchase Agreement, the commitments of non-defaulting
Underwriters may be increased.
The Representatives have advised the Company that the Underwriters propose
initially to offer the shares of Common Stock to the public at the initial
public offering price set forth on the cover page of this Prospectus, and to
certain dealers at such price less a concession not in excess of $ per share
of Common Stock. The Underwriters may allow, and such dealers may re-allow, a
discount not in excess of $ per share of Common Stock on sales to certain
other dealers. After the Offering, the public offering price, concession and
discount may be changed.
The Company has granted an option to the Underwriters, exercisable for 30
days after the date of this Prospectus, to purchase up to an aggregate of
637,500 additional shares of Common Stock at the initial public offering price
set forth on the cover page of this Prospectus, less the underwriting discount.
The Underwriters may exercise this option solely to cover over-allotments, if
any, made on the sale of the Common Stock offered hereby. To the extent that the
Underwriters exercise this option, each Underwriter will be obligated, subject
to certain conditions, to purchase a number of additional shares of Common Stock
proportionate to such Underwriter's initial amount reflected in the foregoing
table.
At the request of the Company, the Underwriters have reserved for sale, at
the initial public offering price, up to 212,500 of the shares offered hereby to
be sold to certain employees of the Company and certain other persons. The
number of shares of Common Stock available for sale to the general public will
be reduced to the extent such persons purchase such reserved shares. Any
reserved shares which are not orally confirmed for purchase within one day of
the pricing of the Offering will be offered by the Underwriters to the general
public on the same terms as the other shares offered hereby.
The Company, the Company's executive officers and directors and Warburg
Pincus have agreed not to directly or indirectly (i) offer, pledge, sell,
contract to sell, sell any option or contract to purchase, purchase any option
or contract to sell, grant any option, right or warrant for the sale of, or
otherwise dispose of or transfer any shares of Common Stock or any securities
convertible into or exchangeable or exercisable for Common Stock, or file any
registration statement under the Securities Act with respect to any of the
foregoing or (ii) enter into any swap or other agreement or any transaction that
transfers, in whole or in part, directly or indirectly, the economic consequence
of ownership of the Common Stock whether any such swap or transaction is to be
settled by delivery of Common Stock or other securities, in cash or otherwise,
without the prior written consent of Merrill Lynch on behalf of the Underwriters
for a period of 180 days after the date of this Prospectus other than (i) the
sale to the Underwriters of the shares of
45
<PAGE>
Common Stock in connection with the Offering, (ii) the issuance of options
pursuant to the 1998 Stock Option Plan, (iii) upon the exercise of such options,
(iv) in the Exchange, (v) pursuant to Dennis Buda's employment agreement or (vi)
the issuance of securities as consideration for a merger or acquisition,
provided that the recipients of securities referred to in clauses (v) and (vi)
immediately above agree to be bound by the foregoing restriction. See
"Management--1998 Stock Option Plan" and "Management-- Employment Agreements."
Prior to the Offering, there has been no public market for the Common Stock
of the Company. The initial public offering price has been determined through
negotiations between the Company and the Representatives. The factors considered
in determining the initial public offering price, in addition to prevailing
market conditions, are price-earnings ratios of publicly traded companies that
the Representatives believe to be comparable to the Company, certain financial
information of the Company, the history of, and the prospects for, the Company
and the industry in which it competes, and an assessment of the Company's
management, its past and present operations, the prospects for, and timing of,
future revenues of the Company, the present state of the Company's development,
and the above factors in relation to market values and various valuation
measures of other companies engaged in activities similar to the Company. There
can be no assurance that an active trading market will develop for the Common
Stock or that the Common Stock will trade in the public market subsequent to the
Offering at or above the initial public offering price.
The Common Stock has been approved for listing on the NYSE under the symbol
"IHI," subject to official notice of issuance. In order to meet the requirements
for listing of the Common Stock on the NYSE, the Underwriters have undertaken to
sell lots of 100 or more shares to a minimum of 2,000 beneficial owners.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including certain liabilities under the Securities Act, or to
contribute to payments the Underwriters may be required to make in respect
thereof.
Until the distribution of the Common Stock is completed, rules of the
Commission may limit the ability of the Underwriters and certain selling group
members to bid for and purchase the Common Stock. As an exception to these
rules, the Representatives are permitted to engage in certain transactions that
stabilize the price of the Common Stock. Such transactions consist of bids or
purchases for the purpose of pegging, fixing or maintaining the price of the
Common Stock.
If the Underwriters create a short position in the Common Stock in
connection with the Offering, i.e., if they sell more shares of Common Stock
than are set forth on the cover page of this Prospectus, the Representatives may
reduce that short position by purchasing Common Stock in the open market. The
Representatives may also elect to reduce any short position by exercising all or
part of the over-allotment option described above.
The Representatives may also impose a penalty bid on certain Underwriters
and selling group members. This means that if the Representatives purchase
shares of Common Stock in the open market to reduce the Underwriters' short
position or to stabilize the price of the Common Stock, they may reclaim the
amount of the selling concession from the Underwriters and selling group members
who sold those shares as part of the Offering.
In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchases. The imposition of a penalty bid
might also have an effect on the price of the Common Stock to the extent that it
discourages resales of the Common Stock.
Neither the Company nor any of the Underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the Common Stock. In addition, neither
the Company nor any of the Underwriters makes any representation
46
<PAGE>
that the Representatives will engage in such transactions or that such
transactions, once commenced, will not be discontinued without notice.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for the
Company by Willkie Farr & Gallagher, New York, New York. Certain legal matters
in connection with this Offering will be passed upon for the Underwriters by
Cahill Gordon & Reindel (a partnership including a professional corporation),
New York, New York.
EXPERTS
The consolidated balance sheets of Information Ventures LLC as of December
31, 1997 and March 31, 1998 and the related consolidated statements of
operations, members' equity and cash flows for the year ended December 31, 1997
and for the three months ended March 31, 1998 appearing in this Prospectus and
the Registration Statement have been audited by Ernst & Young LLP, independent
auditors, as set forth in their reports thereon appearing elsewhere herein, and
are included in reliance upon such reports given upon the authority of such firm
as experts in accounting and auditing.
The consolidated balance sheets of CRC Press, Inc. as of December 31, 1995
and 1996 and the related consolidated statements of operations, shareholder's
equity and cash flows for the years ended December 31, 1995 and 1996 appearing
in this Prospectus and the Registration Statement have been audited by Ernst &
Young LLP, independent auditors, as set forth in their report thereon appearing
elsewhere herein, and are included in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
The balance sheets of MicroPatent as of June 30, 1996 and 1997 and the
related statements of operations, partners' capital and cash flows for the years
ended June 30, 1996 and 1997 appearing in this Prospectus and the Registration
Statement have been audited by Ernst & Young LLP, independent auditors, as set
forth in their report thereon appearing elsewhere herein, and are included in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
The balance sheet of St. Lucie Press, Inc. as of December 31, 1996 and the
related statement of income and retained earnings and cash flows for the year
ended December 31, 1996 appearing in this Prospectus and the Registration
Statement have been audited by Robert A. Young, CPA, independent auditor, as set
forth in his report thereon appearing elsewhere herein, and are included in
reliance upon such report given upon the authority of such firm as an expert in
accounting and auditing.
47
<PAGE>
ADDITIONAL INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-1 (herein, together with all amendments thereto, called the "Registration
Statement") under the Securities Act with respect to the Common Stock offered by
the Company hereby. This Prospectus, which is part of the Registration
Statement, does not contain all of the information set forth in the Registration
Statement and the exhibits and financial schedules thereto, to which reference
is hereby made. Statements contained in this Prospectus as to the contents of
any contract or other document are summaries which are not necessarily complete
and in each instance reference is made to the copy of such contract or other
document filed as an exhibit to the Registration Statement, each such statement
herein being qualified in all respects by such reference. The Registration
Statement, including the exhibits thereto, may be inspected without charge at
the public reference facilities maintained by the Commission at Room 1024, 450
Fifth Avenue, N.W., Washington, D.C. 20549, and at the Commission's regional
offices at Seven World Trade Center, 13th Floor, New York, New York 10048.
Copies of such materials can be obtained at prescribed rates from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549. The Commission also maintains a Website (http://www.sec.gov.) that
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission.
The Company intends to furnish stockholders with annual reports containing
audited financial statements and an opinion thereon expressed by independent
certified public accountants.
48
<PAGE>
INDEX TO FINANCIAL STATEMENTS
INFORMATION VENTURES LLC
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Report of Independent Auditors............................................................................. F-2
Consolidated Balance Sheet as of March 31, 1998............................................................ F-3
Consolidated Statements of Operations for the three months ended March 31, 1997 (unaudited) and the three
months ended March 31, 1998.............................................................................. F-4
Consolidated Statement of Members' Equity for the three months ended March 31, 1998........................ F-5
Consolidated Statements of Cash Flows for the three months ended March 31, 1997 (unaudited) and the three
months ended March 31, 1998.............................................................................. F-6
Notes to Consolidated Financial Statements................................................................. F-7
Report of Independent Auditors............................................................................. F-14
Consolidated Balance Sheet as of December 31, 1997......................................................... F-15
Consolidated Statement of Operations for the year ended December 31, 1997.................................. F-16
Consolidated Statement of Members' Equity for the year ended December 31, 1997............................. F-17
Consolidated Statement of Cash Flows for the year ended December 31, 1997.................................. F-18
Notes to Consolidated Financial Statements................................................................. F-19
Unaudited Pro Forma Condensed Consolidated Statement of Operations for the year ended December 31, 1997.... F-27
Notes to Unaudited Pro Forma Condensed Consolidated Financial Statement of Operations...................... F-29
CRC PRESS, INC.
Report of Independent Certified Public Accountants......................................................... F-30
Consolidated Balance Sheets as of December 31, 1995 and 1996............................................... F-31
Consolidated Statements of Operations for the years ended December 31, 1995 and 1996....................... F-32
Consolidated Statements of Shareholder's Equity for the years ended December 31, 1995 and 1996............. F-33
Consolidated Statements of Cash Flows for the years ended December 31, 1995 and 1996....................... F-34
Notes to Consolidated Financial Statements................................................................. F-35
MICROPATENT
Report of Independent Auditors............................................................................. F-44
Balance Sheets as of June 30, 1996 and 1997................................................................ F-45
Statements of Income for the years ended June 30, 1996 and 1997............................................ F-46
Statements of Partners' Capital for the years ended June 30, 1996 and 1997................................. F-46
Statements of Cash Flows for the years ended June 30, 1996 and 1997........................................ F-47
Notes to Financial Statements.............................................................................. F-48
ST. LUCIE PRESS, INC.
Report of Independent Public Accountant.................................................................... F-52
Balance Sheet as of December 31, 1996...................................................................... F-53
Statement of Income and Retained Earnings for the year ended December 31, 1996............................. F-54
Statement of Cash Flow for the year ended December 31, 1996................................................ F-55
Notes to Financial Statements.............................................................................. F-56
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Members of
Information Ventures LLC
We have audited the accompanying consolidated balance sheet of Information
Ventures LLC (the "Company") as of March 31, 1998, and the related consolidated
statements of operations, members' equity and cash flows for the three months
then ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Information
Ventures LLC at March 31, 1998 and the consolidated results of their operations
and their cash flows for the three months then ended in conformity with
generally accepted accounting principles.
/s/ Ernst & Young LLP
New York, New York
June 8, 1998
F-2
<PAGE>
INFORMATION VENTURES LLC
CONSOLIDATED BALANCE SHEET
MARCH 31, 1998
(IN THOUSANDS OF DOLLARS)
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents........................................................ $ 9,803
Accounts receivable, less allowance for doubtful accounts and returns of $776.... 3,497
Inventories...................................................................... 3,624
Prepaid expenses................................................................. 123
Other current assets............................................................. 1,911
---------
Total current assets............................................................... 18,958
Property and equipment, net........................................................ 3,906
Pre-publication costs, net......................................................... 2,935
Publishing rights and other intangible assets, net................................. 20,672
Other assets....................................................................... 1,094
Deferred tax assets................................................................ 27
---------
Total assets....................................................................... $ 47,592
---------
---------
LIABILITIES AND MEMBERS' EQUITY
Current liabilities:
Current portion of capitalized lease obligations................................. $ 243
Accounts payable................................................................. 2,834
Accrued expenses................................................................. 752
Accrued compensation............................................................. 643
Royalties payable................................................................ 1,158
Deferred subscription revenue.................................................... 8,233
Short-term debt.................................................................. 1,000
---------
Total current liabilities.......................................................... 14,863
Capital leases..................................................................... 2,889
Other long-term liabilities........................................................ 683
---------
Total liabilities.................................................................. 18,435
---------
Members' equity:
Class A preferred................................................................ 31,804
Class B preferred................................................................ 1,663
Retained deficit................................................................. (4,310)
---------
Total members' equity.............................................................. 29,157
---------
Total liabilities and members' equity.............................................. $ 47,592
---------
---------
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE>
INFORMATION VENTURES LLC
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, 1997 THREE MONTHS ENDED
(UNAUDITED) MARCH 31, 1998
------------------- -------------------
<S> <C> <C>
Revenues............................................................... $ 8,698 $ 10,728
Costs and expenses:
Cost of sales........................................................ 2,668 2,858
Selling, general and administrative expenses......................... 5,605 5,972
Depreciation and amortization........................................ 259 1,278
------ -------
Total operating expenses............................................... 8,532 10,108
------ -------
Operating income....................................................... 166 620
Interest income........................................................ 27 140
Interest expense....................................................... (154) (103)
------ -------
Income before income taxes............................................. 39 657
Provision for income taxes............................................. -- 56
------ -------
Net income............................................................. $ 39 $ 601
------ -------
------ -------
Pro forma income data (unaudited):
Income before income taxes, as reported............................ $ 657
Pro forma income taxes............................................. 56
-------
Pro forma net income............................................... $ 601
-------
-------
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
INFORMATION VENTURES LLC
CONSOLIDATED STATEMENT OF MEMBERS' EQUITY
MARCH 31, 1998
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
CLASS A
PREFERRED CLASS B PREFERRED TOTAL
---------------- ----------------- ---------
<S> <C> <C> <C>
Balance at January 1, 1998........................................ $ 27,139 $ 1,417 $ 28,556
Net income........................................................ 571 30 601
------- ------ ---------
Balance at March 31, 1998......................................... $ 27,710 $ 1,447 $ 29,157
------- ------ ---------
------- ------ ---------
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
INFORMATION VENTURES LLC
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, 1997 THREE MONTHS ENDED
(UNAUDITED) MARCH 31, 1998
------------------- -------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income............................................................. $ 39 $ 601
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization........................................ 259 1,278
Amortization of pre-publication costs................................ 600 563
Changes in assets and liabilities:
Accounts receivable.................................................. (2,687) 1,471
Inventories.......................................................... 747 179
Prepaid expenses and other current assets............................ (620) (568)
Accounts payable, accrued expenses and employee compensation......... 1,765 (2,232)
Royalties payable.................................................... (245) (591)
Deferred subscription revenue........................................ 784 651
Other................................................................ 650 (272)
-------- -------
Net cash provided by operating activities.............................. 1,292 1,080
-------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment..................................... (25) (133)
Pre-publication costs.................................................. (373) (209)
Acquisitions of businesses............................................. (15,180) --
Acquisition of titles.................................................. -- (160)
-------- -------
Net cash used in investing activity.................................... (15,578) (502)
-------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings from Members................................................ 2,500 --
Repayments under line of credit........................................ -- (1,000)
Capital contributions.................................................. 16,717 --
Payments on capitalized lease obligations.............................. (43) (55)
-------- -------
Net cash provided by (used in) financing activities.................... 19,174 (1,055)
-------- -------
Net increase (decrease) in cash and cash equivalents................... 4,888 (477)
Cash and cash equivalents at beginning of period....................... -- 10,280
-------- -------
Cash and cash equivalents at end of period............................. $ 4,888 $ 9,803
-------- -------
-------- -------
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE>
Information Ventures LLC
Notes to Consolidated Financial Statements
March 31, 1998
1. BUSINESS OPERATIONS
Information Ventures LLC ("IV") was formed on December 2, 1996 to create and
build an information and publishing business. IV functions as a holding company
and, through its subsidiaries (together, the "Company"), publishes information
in print and electronic media in the fields of science, technology, business,
environmental science, intellectual property, and certain related disciplines.
Products are distributed on a worldwide basis and the business has operating
offices in the United States and Europe. Prior to the Company's initial
acquisition, which occurred effective as of January 1, 1997, the Company had no
operations or assets.
In connection with a planned offering of securities, the members will
contribute all of their direct or indirect equity interests to Information
Holdings Inc. ("IH"), a newly formed Delaware corporation, in exchange for
Common Stock of IH, representing 100% of the outstanding equity interest.
Because IH will conduct no business operations prior to the exchange, the
balance sheet and statement of operations for Information Holdings Inc. are not
included herein.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements of the Company include the accounts of
IV and subsidiaries, all which are wholly owned. All material intercompany
accounts and transactions have been eliminated in consolidation. All
acquisitions have been accounted for using the purchase method of accounting and
operating results have been included from the respective dates of acquisition.
REVENUE RECOGNITION
Revenues from books and the related cost of sales are recognized when the
product is shipped to the customer. For products sold with the right of return,
revenue is recognized net of a provision for estimated returns. Subscription
payments received are deferred and recognized as revenue in the period in which
the product is shipped.
INTERIM FINANCIAL INFORMATION
The financial information for the three months ended March 31, 1997 is
unaudited, but includes all adjustments (consisting only of normal recurring
adjustments) that the Company considers necessary for a fair presentation of the
operating results and cash flows for such period.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of all highly liquid investments with
maturities of three months or less. The cost of these investments is equal to
fair market value.
INVENTORIES
Inventories are valued at the lower of cost or market and are determined
under the first-in, first-out method. Inventories at March 31, 1998 consist
solely of finished goods. The vast majority of inventories are books, which are
reviewed periodically on a title-by-title basis for salability. The cost of
inventory determined to be impaired is charged to income in the period of
determination.
F-7
<PAGE>
INFORMATION VENTURES LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
DIRECT MAIL COSTS
Direct mail costs are expensed upon mailing. Direct mail expense was
$1,444,000 for the period ended March 31, 1998. Direct mail related costs of
$428,000 were included in other current assets at March 31, 1998.
PROPERTY AND EQUIPMENT
Property and equipment are carried at cost. Expenditures for repairs and
maintenance are expensed as incurred.
Depreciation is calculated on a straight-line basis over the estimated
useful lives of the assets as follows:
<TABLE>
<S> <C>
Buildings............................ 10 years
Furniture and equipment.............. 5 years
Computer equipment................... 3 years
Leasehold improvements............... Shorter of useful life or lease term
</TABLE>
PRE-PUBLICATION COSTS
Certain expenses related to books, primarily comprised of design and other
pre-production costs, are deferred and charged to expense over the estimated
product life. These costs are amortized over a four year period following
release of the applicable book, using an accelerated amortization method.
Accumulated amortization of pre-publication costs was approximately $2,876,000
at March 31, 1998.
PUBLISHING RIGHTS AND OTHER INTANGIBLES
Publishing rights consist primarily of publication agreements, subscriber
lists, trademarks and related assets and are amortized using the straight-line
method over their estimated useful lives ranging from 3-20 years. Amortization
expense of publishing rights in 1998 was approximately $981,000.
Noncompete agreements arising from acquisitions are amortized using the
straight-line basis over the contractual term, currently 3 years. Amortization
expense in 1998 related to noncompete agreements was $8,333.
Goodwill represents acquisition cost in excess of the fair market value of
the net tangible and identifiable intangible assets. Goodwill and related
amortization expense was insignificant in 1998.
The recoverability of publishing rights, other intangibles and other
long-lived assets is assessed periodically and whenever adverse events or
changes in circumstances or business climate indicate that previously
anticipated cash flows warrant a reassessment. When such reassessments indicate
the potential of impairment, all business factors are considered and, if such
assets are not likely to be recovered from future cash flows, they are written
down to recoverable value. The Company, based on current circumstances, does not
believe that any long-lived asset are impaired at March 31, 1998.
F-8
<PAGE>
INFORMATION VENTURES LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INCOME TAXES
The Company is a limited liability company ("LLC") and anticipates treatment
as a partnership for federal and most state income taxes. However, the Company
is still liable for income taxes in certain states and thus a provision for
those state income taxes is reflected on the statement of operations.
Deferred income tax assets and liabilities are determined based upon
differences between financial reporting and tax bases of assets and liabilities
and are measured using the enacted tax rates and laws that will be in effect
when the differences are expected to reverse.
ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reported
period. Actual results could differ from these estimates.
CONCENTRATION OF BUSINESS RISK
The Company is not subject to significant credit risk from concentration of
accounts receivable or other assets in any particular customer group, industry
segment or geographic region. A subsidiary of IV has entered into an exclusive
distribution agreement with a third party for sale of its products in regions
outside of North America. Accounts receivable related to this distribution
agreement approximated $630,000 at March 31, 1998.
The Company performs ongoing credit evaluation of its customers and does not
require any collateral for the amounts owed.
The Company maintains its cash in demand deposit accounts which at times may
exceed the Federal Deposit Insurance Corporation ("FDIC") insurance limits. As
of March 31, 1998, the Company had approximately $552,000 of cash in excess of
FDIC insurance limits.
GEOGRAPHIC INFORMATION (IN THOUSANDS)
<TABLE>
<CAPTION>
REVENUES
------------
<S> <C>
United States....................................................................................... $ 8,914
Europe.............................................................................................. 1,045
Others.............................................................................................. 769
------------
Total............................................................................................... $ 10,728
------------
------------
</TABLE>
RECENT ACCOUNTING PRONOUNCEMENTS
In 1997, the Financial Accounting Standards Board ("FASB") issued SFAS No.
129, DISCLOSURE OF INFORMATION ABOUT CAPITAL STRUCTURE, and SFAS No. 130,
REPORTING COMPREHENSIVE INCOME. SFAS No. 129 contains no change in the Company's
disclosure requirements, and SFAS No. 130 has no impact on the Company's
financial position or results of operations.
F-9
<PAGE>
INFORMATION VENTURES LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
In June 1997, the FASB issued SFAS No. 131, DISCLOSURES ABOUT SEGMENTS OF AN
ENTERPRISE AND RELATED INFORMATION. The Company adopted this statement and
determined that the new standard does not have any impact on the Company's
financial statements.
3. PROPERTY AND EQUIPMENT
Property and equipment at March 31, 1998 consist of the following (in
thousands):
<TABLE>
<S> <C>
Building............................................................ $ 2,344
Furniture and equipment............................................. 2,298
Leasehold improvements.............................................. 370
---------
5,012
Accumulated depreciation............................................ (1,106)
---------
$ 3,906
---------
---------
</TABLE>
Depreciation expense for building under capital lease, furniture and
equipment and leasehold improvements for the period was approximately $270,000.
4. PUBLISHING RIGHTS AND OTHER INTANGIBLE ASSETS
Publishing rights and other intangible assets at March 31, 1998 consist of
the following (in thousands):
<TABLE>
<S> <C>
Publishing rights.................................................. $ 23,154
Goodwill........................................................... 148
Noncompete agreements.............................................. 100
Trademarks......................................................... 1,350
---------
24,752
Accumulated amortization........................................... (4,080)
---------
$ 20,672
---------
---------
</TABLE>
5. LEASES
As of March 31, 1998, assets recorded under capital leases aggregated
approximately $2,430,000 and had accumulated amortization of approximately
$327,000.
F-10
<PAGE>
INFORMATION VENTURES LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. LEASES (CONTINUED)
Rental expense under operating leases was $127,000 for the period ended
March 31, 1998. The future noncancelable minimum lease payments as of March 31,
1998, including estimated escalation amounts for the capital leases, are as
follows (in thousands):
<TABLE>
<CAPTION>
CAPITAL
OPERATING LEASES LEASES
---------------- -------------
<S> <C> <C>
For the nine months ending December 31, 1998................ $ 335 $ 412
For the twelve months ending December 31,
1999........................................................ 333 525
2000........................................................ 318 517
2001........................................................ 288 519
2002........................................................ 118 535
Thereafter.................................................. 236 2,070
------- -------------
Total....................................................... $ 1,628 4,578
-------
-------
Less amount representing unamortized interest (1,446)
Less current portion........................................ (243)
-------------
Present value of minimum lease payment, excluding current
portion................................................... $ 2,889
-------------
-------------
</TABLE>
6. DEBT
A subsidiary of the Company maintains a revolving line of credit (the
"Credit Line") borrowing arrangement of $5,000,000 with State Street Bank.
Interest on the Credit Line is due quarterly in arrears at the London Interbank
Offering Rate (LIBOR) plus applicable margin ranging from 1.5% to 2.5%. In 1998,
interest rates under these agreements ranged from 7.22% to 7.38%. At March 31,
1998, the principal amount outstanding is $1,000,000 and the unused bank line of
credit amounted to $4,000,000. The Credit Line expires as follows: June 20,
2000--$1,250,000, June 30, 2001--$1,250,000, and June 30, 2002-- $2,500,000.
There are no compensating balance arrangements. The line is secured by the
tangible and intangible property of the subsidiary. The property securing this
obligation comprises a material portion of the net assets of the Company.
The terms of the Credit Line restrict the subsidiary from incurring
additional debts, repaying debts and declaring dividends and distributions to
affiliates or members over specified amounts. In addition, the Company is
required to maintain certain financial ratios and comply with certain
restrictive covenants. All other future indebtedness of the subsidiary is
subordinate to this Credit Line.
The outstanding balance of $1,000,000 at March 31, 1998 was repaid in full
in April 1998. The Company plans to terminate the Credit Line in 1998.
7. MEMBERSHIP INTEREST
The Company has two classes of preferred equity interests which have voting
rights and which share in profits and losses. The Class A Preferred holder
contributed 95% of total capital, is allocated 95% of profits and losses and is
entitled to elect three directors. The Class B Preferred holder contributed 5%
of total capital, is allocated 5% of profits and losses and is entitled to elect
one director. Voting rights are apportioned between the classes on a basis
equivalent to contributed capital.
F-11
<PAGE>
INFORMATION VENTURES LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. MEMBERSHIP INTEREST (CONTINUED)
Both classes of such preferred equity interests convert to common equity
interests under certain events, including a public offering of the Company's
securities or the sale of the Company. In the event of a conversion to common
equity interests, the Class A and Class B Preferred holders receive common
equity interests under a pre-determined formula.
8. EMPLOYEE BENEFIT PLANS
The Company offers two defined contribution savings plan qualifying under
Section 401(k) of the Internal Revenue Code. The plans cover substantially all
full time U.S. employees, both requiring one year of service prior to
eligibility (see below). The Company, via the subsidiaries, matches 50% of such
contributions up to a maximum employee contribution of 6% of salary. The Company
contributed and incurred expenses of $55,000 during 1998 under these plans.
Effective January 1, 1998, one of the plans is being replaced with a new
plan. The new plan will cover all employees of a subsidiary of the Company as of
December 31, 1997 and new employees with more than one year of service (compared
to 90 days service in the prior plan). Other plan provisions are unchanged from
the prior plan.
9. INCOME TAXES
The components of the state income tax provision (benefit) for the period
ended March 31, 1998 are as follows:
<TABLE>
<S> <C>
Current.............................................................. $ 56
Deferred............................................................. --
---------
Total................................................................ $ 56
---------
---------
</TABLE>
10. PRO FORMA INCOME TAXES (UNAUDITED)
As discussed in Note 2, the Company is an LLC that anticipates treatment as
a partnership for Federal and certain state income taxes. In connection with the
initial public offering, the Company will become subject to Federal and
additional state income tax. The pro forma provision for income taxes represents
the income tax provisions that would have been reported had the Company been
subject to Federal and additional state income taxes.
The pro forma income tax provision consists of the following (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, 1998
---------------------
<S> <C>
Current income taxes:
Federal taxes.............................................................................. $ --
State and local taxes...................................................................... 56
-----
56
Deferred income taxes...................................................................... --
-----
$ 56
-----
-----
</TABLE>
F-12
<PAGE>
INFORMATION VENTURES LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. PRO FORMA INCOME TAXES (UNAUDITED) (CONTINUED)
A reconciliation setting forth the differences between the pro forma
effective tax rate of the Company and U.S. Federal Statutory tax rate is as
follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, 1998
-------------------
<S> <C>
Federal statutory rate....................................................................... 35.0%
State and local taxes net of Federal tax benefits............................................ 5.6
Valuation allowance.......................................................................... (32.9)
Other items, net, none of which individually exceeds 5% of Federal taxes at statutory
rates....................................................................................... 0.8
-------------------
Effective tax rate........................................................................... 8.5%
</TABLE>
Pro forma deferred income taxes will reflect the net tax effects of
temporary differences between the carrying amount of assets and liabilities for
pro forma financial reporting and the amounts used for income tax purposes.
Significant components of the Company's deferred tax asset as of March 31, 1998
are as follows (in thousands):
<TABLE>
<S> <C>
Current deferred tax assets:
Allowance for accounts receivable........................................ $ 338
Inventory................................................................ 377
Accruals and other....................................................... 239
-------
Total current deferred tax assets.......................................... 954
Long term deferred tax assets:
Amortization and depreciation............................................ 1,255
Net operating loss....................................................... --
-------
Total long term deferred tax asset......................................... 1,255
Valuation allowance...................................................... (1,744)
-------
Total deferred tax asset................................................... $ 465
-------
-------
</TABLE>
During the three months ended March 31, 1998, the Company reversed $216,000
of its valuation allowance, as the Company generated income during the three
months ended March 31, 1998.
F-13
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Members of
Information Ventures LLC
We have audited the accompanying consolidated balance sheet of Information
Ventures LLC (the "Company") as of December 31, 1997, and the related
consolidated statements of operations, members' equity and cash flows for the
year then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Information
Ventures LLC at December 31, 1997 and the consolidated results of their
operations and their cash flows for the year then ended in conformity with
generally accepted accounting principles.
New York, New York /s/ Ernst & Young LLP
April 20, 1998
F-14
<PAGE>
INFORMATION VENTURES LLC
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1997
(IN THOUSANDS OF DOLLARS)
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents........................................................ $ 10,280
Accounts receivable, less allowance for doubtful accounts and returns of $803.... 4,968
Inventories...................................................................... 3,803
Prepaid expenses................................................................. 1,387
Other current assets............................................................. 79
---------
Total current assets............................................................... 20,517
Property and equipment, net........................................................ 4,041
Pre-publication costs.............................................................. 3,289
Other assets....................................................................... 826
Publishing rights and other intangible assets, net................................. 21,519
Deferred tax asset................................................................. 27
---------
Total assets....................................................................... $ 50,219
---------
---------
LIABILITIES AND MEMBERS' EQUITY
Current liabilities:
Current portion of capitalized lease obligations................................. $ 233
Accounts payable................................................................. 2,950
Accrued compensation expense..................................................... 1,988
Accrued expenses................................................................. 1,523
Royalties payable................................................................ 1,749
Deferred subscription revenue.................................................... 7,582
---------
Total current liabilities.......................................................... 16,025
Capital leases..................................................................... 2,955
Long-term debt..................................................................... 2,000
Other long-term liabilities........................................................ 683
---------
Total liabilities.................................................................. 21,663
---------
Members' equity:
Class A preferred................................................................ 31,804
Class B preferred................................................................ 1,663
Retained deficit................................................................. (4,911)
---------
Total members' equity.............................................................. 28,556
---------
Total liabilities and members' equity.............................................. $ 50,219
---------
---------
</TABLE>
See notes to consolidated financial statements.
F-15
<PAGE>
INFORMATION VENTURES LLC
CONSOLIDATED STATEMENT OF OPERATIONS
DECEMBER 31, 1997
(IN THOUSANDS OF DOLLARS)
<TABLE>
<S> <C>
Revenues........................................................................... $ 34,869
Costs and expenses:
Cost of sales.................................................................... 11,492
Selling, general and administrative expenses..................................... 20,518
Severance and special bonuses.................................................... 3,213
Research and development expense................................................. 400
Depreciation and amortization.................................................... 3,909
---------
Total operating expenses........................................................... 39,532
---------
Operating loss..................................................................... (4,663)
Interest income.................................................................... 152
Interest expense................................................................... (282)
Other expense, net................................................................. 115
---------
Loss before income taxes........................................................... (4,908)
Provision for income taxes......................................................... 3
---------
Net loss........................................................................... $ (4,911)
---------
---------
</TABLE>
<TABLE>
<S> <C>
Pro forma income data (unaudited):
Loss before income taxes, as reported............................................ $ (4,908)
Pro forma income taxes........................................................... 3
---------
Pro forma net loss............................................................... $ (4,911)
---------
---------
</TABLE>
See notes to consolidated financial statements.
F-16
<PAGE>
INFORMATION VENTURES LLC
CONSOLIDATED STATEMENT OF MEMBERS' EQUITY
DECEMBER 31, 1997
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
CLASS A CLASS B
PREFERRED PREFERRED TOTAL
----------- ----------- ---------
<S> <C> <C> <C>
Balance at January 1, 1997................................... $ -- $ -- $ --
Capital contributions........................................ 31,804 1,663 33,467
Net loss..................................................... (4,665) (246) (4,911)
----------- ----------- ---------
Balance at December 31, 1997................................. $ 27,139 $ 1,417 $ 28,556
----------- ----------- ---------
----------- ----------- ---------
</TABLE>
See notes to consolidated financial statements.
F-17
<PAGE>
INFORMATION VENTURES LLC
CONSOLIDATED STATEMENT OF CASH FLOW
DECEMBER 31, 1997
(IN THOUSANDS OF DOLLARS)
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss........................................................................... $ (4,911)
Adjustments to reconcile net loss to net cash provided
by operating activities:
Depreciation and amortization.................................................. 3,909
Amortization of pre-publication costs.......................................... 2,313
Provision for bad debt......................................................... 587
Other.......................................................................... 400
Deferred income taxes.......................................................... (27)
Changes in assets and liabilities:
Accounts receivable.............................................................. (1,495)
Inventories...................................................................... 785
Prepaid expenses and other current assets........................................ (807)
Other assets, net................................................................ 387
Accounts payable, accrued expenses and compensation expense...................... 2,779
Royalties payable................................................................ 843
Deferred subscription revenue.................................................... 3,807
---------
Net cash provided by operating activities.......................................... 8,570
---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment................................................. (1,163)
Pre-publication costs.............................................................. (1,654)
Acquisitions of businesses......................................................... (30,778)
Proceeds from sale of equipment.................................................... 11
---------
Net cash used in investing activity................................................ (33,584)
---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings under line of credit...................................... 3,000
Repayments under line of credit.................................................... (1,000)
Capital contributions.............................................................. 33,467
Payments on capitalized lease obligations.......................................... (173)
---------
Net cash provided by financing activities.......................................... 35,294
---------
Net increase in cash and cash equivalents.......................................... 10,280
Cash and cash equivalents at beginning of year..................................... --
---------
Cash and cash equivalents at end of year........................................... $ 10,280
---------
---------
</TABLE>
See notes to consolidated financial statements.
F-18
<PAGE>
INFORMATION VENTURES LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
1. BUSINESS OPERATIONS
Information Ventures LLC ("IV") was formed on December 2, 1996 to create and
build an information and publishing business. IV functions as a holding company
and, through its subsidiaries (together, the "Company"), publishes information
in print and electronic media in the fields of science, technology, business,
environmental science, intellectual property, and certain related disciplines.
Products are distributed on a worldwide basis and the business has operating
offices in the United States and Europe. Prior to the Company's initial
acquisition (see Note 3), which occurred effective as of January 1, 1997, the
Company had no operations or assets.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements of the Company include the accounts of
IV and subsidiaries, all which are wholly owned. All material intercompany
accounts and transactions have been eliminated in consolidation. All
acquisitions have been accounted for using the purchase method of accounting and
operating results have been included from the respective dates of acquisition.
REVENUE RECOGNITION
Revenues from books and the related cost of sales are recognized when the
product is shipped to the customer. For products sold with the right of return,
revenue is recognized net of a provision for estimated returns. Subscription
payments received are deferred and recognized as revenue in the period in which
the product is shipped.
DEFERRED REVENUE
In connection with the acquisition of companies, it is the Company's policy
to record deferred revenue as the cost to fulfill rather than based on the
subscription payments received.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of all highly liquid investments with
maturities of three months or less. The cost of these investments is equal to
fair market value.
INVENTORIES
Inventories are valued at the lower of cost or market and are determined
under the first-in, first-out method. Inventories at December 31, 1997 consist
solely of finished goods. The vast majority of inventories are books, which are
reviewed periodically on a title-by-title basis for salability. The cost of
inventory determined to be impaired is charged to income in the period of
determination.
DIRECT MAIL COSTS
Direct mail costs are expensed upon mailing. Direct mail expense was
$6,119,000 for the period ended December 31, 1997. $418,000 of direct mail
related costs were included in other current assets at December 31, 1997.
F-19
<PAGE>
INFORMATION VENTURES LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PROPERTY AND EQUIPMENT
Property and equipment are carried at cost. Expenditures for repairs and
maintenance are expensed as incurred.
Depreciation is calculated on a straight-line basis over the estimated
useful lives of the assets as follows:
<TABLE>
<S> <C>
Buildings............................ 10 years
Furniture and equipment.............. 5 to 7 years
Computer equipment................... 3 years
Leasehold improvements............... Lesser of useful life or lease term
</TABLE>
PRE-PUBLICATION COSTS
Certain expenses related to books, primarily comprised of design and other
pre-production costs, are deferred and charged to expense over the estimated
product life. These costs are amortized over a four year period following
release of the applicable book, using an accelerated amortization method.
Accumulated amortization of pre-publication costs was approximately $2,313,000
at December 31, 1997.
PUBLISHING RIGHTS AND OTHER INTANGIBLES
Publishing rights consist primarily of publication agreements, subscriber
lists, trademarks and related assets and are amortized using the straight-line
method over their estimated useful lives ranging from 3-20 years. Amortization
of publishing rights in 1997 was approximately $3,000,000.
Noncompete agreements arising from acquisitions are amortized using the
straight-line basis over the contractual term, currently 3 years. Amortization
in 1997 related to noncompete agreements was $19,000.
Goodwill represents acquisition cost in excess of the fair market value of
the net tangible and identifiable intangible assets. Goodwill and related
amortization were insignificant in 1997.
The recoverability of publishing rights, other intangibles and other
long-lived assets is assessed periodically and whenever adverse events or
changes in circumstances or business climate indicate that previously
anticipated cash flows warrant a reassessment. When such reassessments indicate
the potential of impairment, all business factors are considered and, if such
assets are not likely to be recovered from future cash flows, they are written
down to recoverable value. The Company, based on current circumstances, does not
believe that any long-lived assets are impaired at December 31, 1997.
INCOME TAXES
The Company is a limited liability company ("LLC") and anticipates treatment
as a partnership for federal and most state income taxes. However, the Company
is still liable for income taxes in certain states and thus a provision for
those state income taxes is reflected on the statement of operations.
Deferred income tax assets and liabilities are determined based upon
differences between financial reporting and tax bases of assets and liabilities
and are measured using the enacted tax rates and laws that will be in effect
when the differences are expected to reverse.
F-20
<PAGE>
INFORMATION VENTURES LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reported
period. Actual results could differ from these estimates.
CONCENTRATION OF BUSINESS RISK
The Company is not subject to significant credit risk from concentration of
accounts receivable or other assets in any particular customer group, industry
segment or geographic region. A subsidiary of IV has entered into an exclusive
distribution agreement with a third party for sale of its products in regions
outside of North America. Accounts receivable related to this distribution
agreement approximated $1.4 million at December 31, 1997.
The Company performs ongoing credit evaluation of its customers and does not
require any collateral for the amounts owed.
The Company maintains its cash in demand deposit accounts which at times may
exceed the FDIC insurance limits. As of December 31, 1997, the company had
approximately $355,000 of cash in excess of FDIC insurance limits.
GEOGRAPHIC INFORMATION
<TABLE>
<CAPTION>
REVENUES
(IN
THOUSANDS)
-------------
<S> <C>
United States................................................................................. $ 24,570
Europe........................................................................................ 9,086
Other......................................................................................... 1,213
-------------
Total......................................................................................... $ 34,869
-------------
-------------
</TABLE>
MAJOR CUSTOMER
Revenues from one customer represent approximately 18.7% of the Company's
consolidated revenue.
RECENT ACCOUNTING PRONOUNCEMENTS
In 1997, the FASB issued SFAS No. 129, DISCLOSURE OF INFORMATION ABOUT
CAPITAL STRUCTURE, and SFAS No. 130, REPORTING COMPREHENSIVE INCOME. SFAS No.
129 contains no change in the Company's disclosure requirements, and SFAS No.
130 has no impact on the Company's financial position or results of operations.
In June 1997, the FASB issued SFAS No. 131, DISCLOSURES ABOUT SEGMENTS OF AN
ENTERPRISE AND RELATED INFORMATION. The Company anticipates that the adoption of
this statement will not have any significant impact on the Company's financial
statements.
F-21
<PAGE>
INFORMATION VENTURES LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
3. ACQUISITIONS
On January 10, 1997, effectively as of January 1, 1997, the Company acquired
the net assets of CRC Press for cash consideration of $13 million. CRC Press
publishes information in print and electronic media for the global scientific,
professional and technical communities. The purchase price was allocated to net
tangible assets of $5.8 million and publishing rights and other intangible
assets of $7.2 million. Intangible assets are being amortized on a straight-line
basis over 20 years.
On January 14, 1997, effectively as of January 1, 1997, the Company acquired
the net assets of St. Lucie Press for cash consideration of $2.6 million. St.
Lucie publishes business related books. The purchase price was allocated to net
tangible assets aggregating $.6 million and publishing rights and other
intangibles of $2.0 million. Intangible assets are being amortized on a
straight-line basis over 20 years.
On June 5, 1997, the Company acquired the net assets of Auerbach for cash
consideration of $8.0 million. Auerbach publishes information in print and
electronic media for the information technology market. The purchase price was
allocated to net liabilities assumed of $.3 million publishing rights and other
intangibles of $8.1 million, goodwill of $.1 million and noncompete agreements
of $.1 million. Intangible assets are being amortized on a straight-line basis
over 20 years.
On July 2, 1997, effectively as of July 1, 1997, the Company acquired the
net assets of MicroPatent for cash consideration of $7.4 million. MicroPatent
provides information products and services for intellectual property
professionals. The purchase price was allocated to in process research and
development costs of $.4 million which were expensed in 1997, tangible net
assets/(liabilities) aggregating ($.1 million) and publishing rights and other
intangibles of $7.1 million. Intangible assets are being amortized over a three
year life using an accelerated method.
In connection with the purchase of the above mentioned subsidiaries, the
Company has revalued the deferred subscription revenues based on cost to
fulfill. As a result, the deferred subscription revenues were reduced by $4
million. Had the Company not made such revaluation, revenues and gross profit
for the year ended December 31, 1997 would have been higher by $4 million.
The acquisitions were accounted for using the purchase method of accounting
and results of operations are included from the dates of acquisition.
The Pro forma unaudited condensed consolidated result of operations for the
year ended December 31, 1997, assuming the transactions were consummated as of
January 1, 1997, are as follows (in thousands):
<TABLE>
<S> <C>
Revenues........................................................... $ 39,483
---------
---------
Net loss........................................................... $ 7,872
---------
---------
</TABLE>
4. SEVERANCE AND SPECIAL BONUSES
During the year the Company incurred severance expenses related primarily to
the consolidation of certain functions and reductions in workforce aggregating
$1.6 million. The amount included in accrued expenses at December 31, 1997
relating to the termination expense was $160,000.
A subsidiary has an employment agreement with an officer which provides for
the contingent compensation arrangements based on the subsidiary's operating
performance. The agreement expires in
F-22
<PAGE>
INFORMATION VENTURES LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
4. SEVERANCE AND SPECIAL BONUSES (CONTINUED)
January 2000. In addition, the Company granted an officer of the Company a
special bonus (payable in cash) related to the formation of the Company and its
initial acquisitions. As a result, the amount recognized by the Company for
compensation under the two arrangements was approximately $1.6 million for the
year ended December 31, 1997.
5. PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1997 consist of the following (in
thousands):
<TABLE>
<S> <C>
Building............................................................ $ 2,344
Furniture and equipment............................................. 2,223
Leasehold improvements.............................................. 310
---------
4,877
Accumulated depreciation............................................ (836)
---------
$ 4,041
---------
---------
</TABLE>
Depreciation expense for building under capital lease, furniture and
equipment and leasehold improvements for the year was approximately $836,000.
6. PUBLISHING RIGHTS AND OTHER INTANGIBLE ASSETS
Publishing rights and other intangible assets at December 31, 1997 consist
of the following (in thousands):
<TABLE>
<S> <C>
Publishing rights.................................................. $ 22,994
Goodwill........................................................... 148
Noncompete agreements.............................................. 100
Trademarks......................................................... 1,350
---------
24,592
Accumulated amortization........................................... (3,073)
---------
$ 21,519
---------
---------
</TABLE>
7. LEASES
As of December 31, 1997, assets recorded under capital leases aggregated
approximately $2,430,000 and had accumulated amortization of approximately
$81,000.
F-23
<PAGE>
INFORMATION VENTURES LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
7. LEASES (CONTINUED)
Rental expense under operating leases was $359,000 for the year ended
December 31, 1997. The future noncancelable minimum lease payments as of
December 31, 1997, including estimated escalation amounts for the capital
leases, are as follows (in thousands):
<TABLE>
<CAPTION>
CAPITAL
OPERATING LEASES LEASES
----------------- -------------
<S> <C> <C>
1998........................................................ $ 441 $ 522
1999........................................................ 333 525
2000........................................................ 320 517
2001........................................................ 289 519
2002........................................................ 118 535
Thereafter.................................................. 236 2,070
------ -------------
Total....................................................... $ 1,737 4,688
------
------
Less amount representing unamortized interest............... (1,500)
Less current portion........................................ (233)
-------------
Present value of minimum lease payment, excluding current
portion................................................... $ 2,955
-------------
-------------
</TABLE>
8. DEBT
A subsidiary of the Company maintains a revolving line of credit (the
"Credit Line") borrowing arrangement of $5,000,000 with State Street Bank.
Interest on the Credit Line is due quarterly in arrears at the London Interbank
Offering Rate (LIBOR) plus applicable margin ranging from 1.5% to 2.5%. In 1997,
interest rates under these agreements ranged from 7.22% to 7.38%. At December
31, 1997, the principal amount outstanding is $2,000,000 and the unused bank
line of credit amounted to $3,000,000. No amount is currently due. The Credit
Line expires as follows: June 20, 2000--$1,250,000, June 30, 2001--$1,250,000,
and June 30, 2002--$2,500,000. There are no compensating balance arrangements.
The line is secured by the tangible and intangible property of the subsidiary.
The property securing this obligation comprises a material portion of the net
assets of the Company.
The terms of the Credit Line restrict the subsidiary from incurring
additional debts, repaying of debts, declaring of dividends and distributions to
affiliates or members over specified amounts. In addition, the Company is
required to maintain certain financial ratios and comply with certain
restrictive covenants. All other future indebtedness of the subsidiary is
subordinate to this Credit Line. At December 31, 1997, the subsidiary was in
compliance with all positive and negative covenants contained in the line of
credit agreement.
9. MEMBERSHIP INTEREST
The Company has two classes of preferred equity interests which have voting
rights and which share in profits and losses. The Class A Preferred holder
contributed 95% of total capital, is allocated 95% of profits and losses and is
entitled to elect three directors. The Class B Preferred holder contributed 5%
of total capital, is allocated 5% of profits and losses and is entitled to elect
one director. Voting rights are apportioned between the classes on a basis
equivalent to contributed capital.
F-24
<PAGE>
INFORMATION VENTURES LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
9. MEMBERSHIP INTEREST (CONTINUED)
Both classes of such preferred equity interests convert to common equity
interests under certain events, including a public offering of the Company's
securities or the sale of the Company. In the event of a conversion to common
equity interests, the Class A and Class B Preferred holders receive common
equity interests under a predetermined formula.
10. EMPLOYEE BENEFIT PLANS
The Company offers two defined contribution savings plans qualifying under
Section 401(k) of the Internal Revenue Code. The plans cover substantially all
full time U.S. employees; one plan requiring 90 days of service prior to
eligibility and the other requiring one year of service prior to eligibility.
The Company, via the subsidiaries, matches 50% of such contributions up to a
maximum employee contribution of 6% of salary. The Company contributed and
incurred expenses of $86,000 during 1997 under these plans.
Effective January 1, 1998, one of the plans is being replaced with a new
plan. The new plan will cover all employees of a subsidiary of the Company as of
December 31, 1997 and new employees with more than one year of service (compared
to 90 days service in the prior plan). Other plan provisions are unchanged from
the prior plan.
11. INCOME TAXES
The components of the state income tax provision (benefit) for the year
ended December 31, 1997 are as follows:
<TABLE>
<S> <C>
Current........................................................... $ 30,000
Deferred.......................................................... (27,000)
---------
Total............................................................. $ 3,000
---------
---------
</TABLE>
12 SUBSEQUENT EVENT
In January 1998, a subsidiary of the Company acquired certain assets of the
Chicago Publishing and Media Company, Inc. for cash of approximately $175,000.
13. PRO FORMA INCOME TAXES (UNAUDITED)
As discussed in Note 2, the Company is a limited liability company that
anticipates treatment as a partnership for federal and certain state income
taxes. In connection with the offering made hereby, the Company will become
subject to Federal and additional state income tax. The pro forma provision for
income taxes represents the income tax provisions that would have been reported
had the Company been subject to Federal and additional state income taxes.
F-25
<PAGE>
INFORMATION VENTURES LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
13. PRO FORMA INCOME TAXES (UNAUDITED) (CONTINUED)
The Pro forma income tax provision consists of the following (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1997
-----------------
<S> <C>
Current income taxes:
Federal taxes............................................................ $ --
State and local taxes.................................................... 3,000
------
Deferred income taxes.................................................... --
------
$ 3,000
------
------
</TABLE>
A reconciliation setting forth the differences between the pro forma
effective tax rate of the Company and U.S. Federal statutory tax rate is as
follows:
<TABLE>
<S> <C>
Federal Statutory Rate...................................... (35.0)%
State and local taxes, net of Federal tax benefits.......... (5.6)
Valuation allowance......................................... 41.7
Other items, net, none of which individually exceeds 5% of
Federal taxes at Statutory Rates.......................... (1.0)
------
Effective tax rate.......................................... 0.1%
------
------
</TABLE>
Pro forma deferred income taxes will reflect the net tax effects of
temporary differences between the carrying amount of assets and liabilities for
pro forma financial reporting and the amounts used for income tax purposes.
Significant components of the Company's deferred tax asset as of December 31,
1997 are as follows (in thousands):
<TABLE>
<S> <C>
Current deferred tax assets:
Allowance for accounts receivable $ 326
Inventory................................................. 82
Accruals and other........................................ 188
------
Total current deferred tax assets........................... 596
------
Long-term deferred tax assets:
Amortization and depreciation............................. 1,011
Net operating loss........................................ 353
------
Total long-term deferred tax asset.......................... 1,364
------
Valuation allowance....................................... (1,960)
------
Total deferred tax asset.................................... $ --
------
------
</TABLE>
F-26
<PAGE>
INFORMATION VENTURES LLC
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
The following unaudited pro forma condensed consolidated statement of
operations of Information Ventures LLC for the year ended December 31, 1997
gives effect to the following transactions as if they occurred as of January 1,
1997: (i) the acquisition of Auerbach on June 5, 1997; and (ii) the acquisition
of MicroPatent on July 2, 1997. The unaudited pro forma condensed financial
statement gives effect to the aforementioned acquisitions under the purchase
method of accounting and the assumptions in the accompanying notes to the pro
forma condensed financial statement.
The unaudited pro forma condensed consolidated financial statement has been
prepared by the Company's management. The unaudited pro forma statement of
operations is not designed to represent and does not represent what the
Company's results of operations actually would have been had the aforementioned
transactions been completed as of the date or the beginning of the period
indicated, or to project the Company's results of operations at any future date
or for any future period. The pro forma condensed financial statement of
operations should be read in conjunction with the consolidated financial
statements and notes of Information Ventures LLC and MicroPatent contained
elsewhere herein.
F-27
<PAGE>
INFORMATION VENTURES LLC
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
DECEMBER 31, 1997
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
INFORMATION PRO FORMA
VENTURES LLC MICROPATENT AUERBACH ADJUSTMENTS PRO FORMA
------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Revenues........................................ $ 34,869 $ 2,841 $ 1,773 $ $ 39,483
Costs and expenses:
Cost of sales................................. 11,492 919 904 13,315
Selling, general and administrative........... 20,518 1,571 1,161 183(c) 23,433
Severance and special bonuses................. 3,213 -- -- 3,213
Research and development...................... 400 141 -- 541
Depreciation and amortization................. 3,909 356 -- 2,363(a) 6,584
186(b)
(230)(c)
------------- ----------- ----------- ----------- -----------
Total operating expenses........................ 39,532 2,987 2,065 2,502 47,086
------------- ----------- ----------- ----------- -----------
Operating loss.................................. (4,663) (146) (292) (2,502) (7,603)
------------- ----------- ----------- ----------- -----------
Other expenses:
Interest expense, net......................... 130 10 -- 140
Other expense, net............................ 115 -- -- 115
Loss on disposal of asset..................... -- 11 -- 11
------------- ----------- ----------- ----------- -----------
Total other expenses............................ 245 21 -- 266
------------- ----------- ----------- ----------- -----------
Net loss before provision for income taxes...... (4,908) (167) (292) (2,502) (7,869)
Provision for income taxes...................... 3 -- -- 3
------------- ----------- ----------- ----------- -----------
Net loss........................................ $ (4,911) $ (167) $ (292) $ (2,502) $ (7,872)
------------- ----------- ----------- ----------- -----------
------------- ----------- ----------- ----------- -----------
</TABLE>
F-28
<PAGE>
INFORMATION VENTURES LLC
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS OF DOLLARS)
For purposes of determining the pro forma effect of the transactions described
above on Information Ventures LLC Condensed Consolidated Statement of Operations
for the year ended December 31, 1997, the following adjustments have been made:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1997
-----------------
<S> <C> <C>
(a) Represents incremental amortization of acquired intangible assets of MicroPatent,
amortized over three years using an accelerated method. $ 2,363
(b) Represents incremental amortization on intangible assets of Auerbach. The non-compete
agreement is amortized over a term of three years. Goodwill, publishing rights and
trademarks are amortized over a term of 20 years. 186
(c) Represents the adjustment for amortization recorded relating to the capitalized
database costs of MicroPatent no longer being capitalized; represents the database
costs acquired that are currently expensed.
- Depreciation and amortization (230)
- Selling, general and administrative 183
</TABLE>
F-29
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors and Shareholder
CRC Press, Inc.
We have audited the accompanying consolidated balance sheets of CRC Press,
Inc. (a wholly-owned subsidiary of The Times Mirror Company) as of December 31,
1995 and 1996, and the related consolidated statements of operations,
shareholder's equity, and cash flows for the years then ended. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of the CRC
Press, Inc. at December 31, 1995 and 1996 and the results of its operations and
its cash flows for the years then ended, in conformity with generally accepted
accounting principles.
/s/ Ernst & Young LLP
West Palm Beach, Florida
May 29, 1998
F-30
<PAGE>
CRC PRESS, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
<S> <C> <C>
1995 1996
--------- ---------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................................................. $ 664 $ 1,025
Accounts receivable, less allowances for doubtful accounts and
returns of $4,281 and $2,979, in 1995 and 1996, respectively............................ 1,368 3,247
Inventories............................................................................... 2,328 3,660
Deferred income taxes..................................................................... 8,841 7,314
Other current assets...................................................................... 924 519
--------- ---------
Total current assets........................................................................ 14,125 15,765
Building, equipment and leasehold improvements, net......................................... 2,698 2,543
Goodwill and other intangible assets, net................................................... 20,394 7,236
Pre-publication costs, net.................................................................. 7,235 7,812
Deferred income taxes....................................................................... 856 1,866
Other assets................................................................................ 445 311
--------- ---------
Total assets................................................................................ $ 45,753 $ 35,533
--------- ---------
--------- ---------
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Accounts payable.......................................................................... $ 4,015 $ 4,564
Unearned income........................................................................... 3,663 4,114
Employees' compensation................................................................... 2,001 1,328
Restructuring liabilities................................................................. 1,699 --
Royalties payable......................................................................... 1,187 1,114
Advances due to Times Mirror.............................................................. 11,579 13,694
Other current liabilities................................................................. 262 482
--------- ---------
Total current liabilities................................................................... 24,406 25,296
Capital lease liability..................................................................... 2,177 2,011
Pension liability........................................................................... 1,421 1,665
Postretirement benefits liability........................................................... 732 743
--------- ---------
Total liabilities........................................................................... 28,736 29,715
Commitments
Shareholder's equity:
Common stock; $1.00 par value; 5,000 shares authorized;
3,950 shares issued and outstanding..................................................... 4 4
Additional paid-in capital................................................................ 29,069 29,106
Accumulated deficit....................................................................... (12,056) (23,292)
--------- ---------
Total shareholder's equity.................................................................. 17,017 5,818
--------- ---------
Total liabilities and shareholder's equity.................................................. $ 45,753 $ 35,533
--------- ---------
--------- ---------
</TABLE>
See accompanying notes.
F-31
<PAGE>
CRC PRESS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
<S> <C> <C>
1995 1996
--------- ----------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C>
Revenues................................................................................... $ 32,054 $ 28,852
Costs and expenses:
Cost of sales............................................................................ 11,371 9,262
Selling, general and administrative expenses............................................. 22,725 19,001
Restructuring and one-time charges....................................................... 10,727 --
Impairment of goodwill and other intangible assets....................................... -- 10,666
--------- ----------
Total Operating Expenses................................................................... 44,823 38,929
--------- ----------
Operating loss............................................................................. (12,769) (10,077)
Intercompany interest expense.............................................................. (1,063) (824)
Interest expense........................................................................... (209) (212)
Other, net................................................................................. (95) 47
--------- ----------
Loss before income taxes................................................................... (14,136) (11,066)
Income tax provision (benefit)............................................................. (4,902) 170
--------- ----------
Net loss................................................................................... $ (9,234) $ (11,236)
--------- ----------
--------- ----------
</TABLE>
See accompanying notes.
F-32
<PAGE>
CRC PRESS, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY
DECEMBER 31, 1996
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
ADDITIONAL TOTAL
PAID-IN ACCUMULATED STOCKHOLDER'S
COMMON STOCK CAPITAL DEFICIT EQUITY
------------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
Balance at January 1, 1995.................................... $ 4 $ 29,069 $ (2,822) $ 26,251
Net loss...................................................... -- -- (9,234) (9,234)
--
----------- ------------ ------------
Balance at December 31, 1995.................................. 4 29,069 (12,056) 17,017
Capital contribution.......................................... -- 37 -- 37
Net loss...................................................... -- -- (11,236) (11,236)
--
----------- ------------ ------------
Balance at December 31, 1996.................................. $ 4 $ 29,106 $ (23,292) $ 5,818
--
--
----------- ------------ ------------
----------- ------------ ------------
</TABLE>
See accompanying notes.
F-33
<PAGE>
CRC PRESS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
<S> <C> <C>
1995 1996
---------- ----------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $ (9,234) $ (11,236)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization........................................................... 2,212 1,706
Restructuring:
Net change in liability............................................................... 1,541 (371)
Noncash charges....................................................................... 7,691 --
Amortization of product development costs............................................... 3,597 3,064
Provision for doubtful accounts......................................................... 615 207
Loss on impairment of goodwill and other intangible assets.............................. -- 10,666
Deferred income tax (benefit) provision................................................. (4,914) 170
Changes in assets and liabilities:
Decrease (increase) in trade accounts receivable...................................... 3,929 (2,086)
Increase in inventories............................................................... (618) (1,332)
(Decrease) increase in accounts payable............................................... (21) 549
Increase (decrease) in employees' compensation........................................ 1,195 (673)
Other, net............................................................................ (3,600) 1,584
---------- ----------
Net cash provided by operating activities................................................. 2,393 2,248
INVESTING ACTIVITIES
Capital expenditures...................................................................... (434) (387)
Additions to product development.......................................................... (3,472) (3,641)
Acquisition, net of cash acquired......................................................... (524) --
Covenant-not-to-compete payments.......................................................... (500) --
Other, net................................................................................ 37 --
---------- ----------
Net cash used in investing activities..................................................... (4,893) (4,028)
FINANCING ACTIVITIES
Change in advance from Times Mirror....................................................... 2,462 2,270
Capital contribution from Times Mirror.................................................... -- 37
Capital lease payments.................................................................... (144) (166)
---------- ----------
Net cash provided by financing activities................................................. 2,318 2,141
---------- ----------
Decrease (increase) in cash and cash equivalents.......................................... (182) 361
Cash and cash equivalents at beginning of year............................................ 846 664
---------- ----------
Cash and cash equivalents at end of year.................................................. $ 664 $ 1,025
---------- ----------
---------- ----------
Cash paid during the year for:
Interest................................................................................ $ 1,287 $ 1,035
---------- ----------
---------- ----------
Income taxes............................................................................ $ 1,185 $ 974
---------- ----------
---------- ----------
</TABLE>
See accompanying notes.
F-34
<PAGE>
CRC PRESS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1996
1. BUSINESS OPERATIONS
CRC (as defined below) publishes reference books and other information for
scientists and engineers in industry, government and academia. Revenues
typically increase in the third and fourth quarters more as a result of its
publication schedule than from any seasonality aspects of its customers.
CRC routinely assesses the financial strength of significant customers and
this assessment, combined with the large number and geographic diversity of its
customer base, limits its concentration of risk with respect to trade
receivables.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
As of December 31, 1995, the consolidated financial statements include the
accounts of CRC Press, Inc. and its wholly-owned subsidiary, Environmental
Education Enterprises (collectively "CRC" ). On March 20, 1996, Environmental
Education Enterprises was sold to an unrelated party. CRC is a wholly-owned
subsidiary of The Times Mirror Company ("Times Mirror"). All significant
intercompany accounts and transactions have been eliminated in consolidation.
The historical consolidated financial statements do not necessarily reflect
the results of operations or financial position that would have existed had CRC
been an independent company. Times Mirror provides certain legal services, tax
compliance and planning reviews, risk management and various other corporate
services to CRC. The cost of these services is not believed to be material and
is not included in the financial statements of CRC.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of all highly liquid investments with
maturities of three months or less. The cost of these investments is equal to
fair market value.
INVENTORIES
Inventories are carried at the lower of cost or market and are determined
under the first-in, first-out method. Inventories consist of books and other
finished products. There were no raw materials or work-in-progress as of
December 31, 1995 and 1996.
BUILDING, EQUIPMENT AND LEASEHOLD IMPROVEMENTS
The building is carried at the net present value of the capital lease
obligation. Leasehold improvements and equipment are carried on the basis of
cost. Maintenance and repairs are charged to expense as incurred. Additions,
improvements and replacements are capitalized.
Depreciation is calculated on a straight-line basis over the estimated
useful lives as follows:
<TABLE>
<S> <C>
Building............................. Lease term - 20 years
Furniture and equipment.............. 5 to 7 years
Leasehold improvements............... Lesser of useful life or lease term
</TABLE>
F-35
<PAGE>
CRC PRESS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill recognized in business combinations is amortized on a straight-line
basis over 40 years. Accumulated amortization was $4,745,000 and $17,367,000 at
December 31, 1995 and 1996, respectively. Amortization expense amounted to
$686,000 for 1995 and $629,000 for 1996. The cost of covenants-not-to-compete is
amortized on a straight-line basis over 2 to 5 years. Accumulated amortization
was $821,000 and $1,357,000 at December 31, 1995 and 1996, respectively.
Amortization expense amounted to $536,000 for 1995 and 1996.
CRC assesses on an ongoing basis the recoverability of goodwill and other
intangibles based on estimates of future undiscounted cash flows compared to net
book value. If the future undiscounted cash flows estimate was less than net
book value, net book value would then be reduced to fair value based on an
estimate of discounted cash flow. CRC also evaluates the amortization periods of
assets, including goodwill and other intangibles, to determine whether events or
circumstances warrant revised estimates of useful lives.
Based on the January 10, 1997 sale of CRC's net assets (see Note 11), CRC
determined that goodwill had been impaired and recorded an impairment charge of
approximately $10,666,000, which is net of approximately $1,300,000 representing
the recovery of certain restructuring liabilities that were accrued as of
December 31, 1995.
DIRECT MAIL COSTS
Direct mail costs are expensed upon mailing. Direct mail expense was
approximately $3,646,000 and $3,596,000 for the years ended December 31, 1995
and 1996, respectively. Other current assets as of December 31, 1995 and 1996
included approximately $307,000 and $19,000, respectively.
PRE-PUBLICATION COSTS
Certain expenses for books, primarily design and order pre-production costs,
are deferred and charged to expense over the estimated product life. These costs
are amortized over a 4 year period following the release of the applicable book,
using an accelerated amortization method. Accumulated amortization of
pre-publication costs was $7,587,000 and $10,086,000 at December 31, 1995 and
1996, respectively.
REVENUE RECOGNITION
Revenues from books sold with the right of return are recognized net of a
provision for estimated returns. Revenues from newsletter subscriptions are
deferred as unearned income at the time of the sale. A pro rata share of the
subscription price is included in revenue as the newsletter is delivered,
generally over one year.
F-36
<PAGE>
CRC PRESS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
USE OF ESTIMATES AND OTHER UNCERTAINTIES
Financial statements prepared in accordance with generally accepted
accounting principles require management to make estimates and judgments that
affect amounts and disclosures reported in the financial statements. Actual
results could differ from those estimates although management does not believe
that any differences would materially affect its financial position or reported
results. CRC's future results could be adversely affected by a general economic
downturn resulting in decreased professional or corporate spending on
discretionary items such as information products.
3. RESTRUCTURING PROGRAM
During 1995, the Company recorded restructuring charges of $10,727,000,
consisting primarily of asset writeoffs, in connection with a comprehensive and
systematic review of its operations, cost structure, and balance sheet.
Additional charges of $1,032,000 were also included in 1995 results. These
charges do not meet the accounting criteria for inclusion in restructuring
charges, but were part of CRC's restructuring program.
Liabilities of $1,699,000 representing cash to be paid for restructuring
program actions, are included in the consolidated balance sheets at December 31,
1995.
4. OTHER INFORMATION
CRC participates in Time Mirror's cash management system, where the bank
sends daily notification of checks presented for payment. Times Mirror transfers
funds from other sources to cover the checks presented for payment. This program
generally results in a book overdraft as a result of checks outstanding. The
book overdraft of $514,000 and $588,000 on December 31, 1995 and 1996,
respectively, has been reclassified to accounts payable.
CRC is largely self-insured for workers compensation group health benefits
and certain other loss contingencies.
5. BUILDING, EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Building, equipment and leasehold improvements consist of the following (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
<S> <C> <C>
1995 1996
--------- ---------
Building................................................................. $ 2,816 $ 2,816
Furniture and equipment.................................................. 2,259 2,749
Leasehold improvements................................................... 517 517
--------- ---------
5,592 6,082
Less accumulated depreciation............................................ (2,894) (3,539)
--------- ---------
$ 2,698 $ 2,543
--------- ---------
--------- ---------
</TABLE>
Depreciation expense for building, equipment and leasehold improvements was
approximately $576,000 and $574,000 for 1995 and 1996, respectively.
F-37
<PAGE>
CRC PRESS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill and other intangible assets consist of the following (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
<S> <C> <C>
1995 1996
--------- ----------
Goodwill (See Note 2).................................................. $ 24,460 $ 12,494
Covenants-not-to-compete............................................... 1,500 1,500
--------- ----------
25,960 13,994
Less accumulated amortization.......................................... (5,566) (6,758)
--------- ----------
$ 20,394 $ 7,236
--------- ----------
--------- ----------
</TABLE>
Amortization expense was approximately $1,222,000 and $1,165,000 for 1995
and 1996, respectively.
7. INCOME TAXES
CRC is included in Times Mirror's consolidated Federal income tax return.
CRC files separate tax returns in Florida, Missouri and Washington, D.C. Under a
tax sharing arrangement with Times Mirror, CRC's deferred tax assets are
recoverable against the future taxable earnings of CRC or Times Mirror.
CRC accounts for income taxes under FASB Statement No. 109 "Accounting for
Income Taxes" (FASB 109). Deferred income tax assets and liabilities are
determined based upon differences between financial reporting and tax bases of
assets and liabilities and are measured using the enacted tax rates and laws
that will be in effect when the differences are expected to reverse.
Income tax (benefit) expense for 1995 and 1996, which is computed as if CRC
filed a separate income tax return, consisted of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
<S> <C> <C>
1995 1996
--------- ---------
Current
Federal................................................................ $ (30) $ (313)
State.................................................................. 42 (33)
Deferred
Federal................................................................ (4,594) 468
State.................................................................. (320) 48
--------- ---------
$ (4,902) $ 170
--------- ---------
--------- ---------
</TABLE>
F-38
<PAGE>
CRC PRESS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. INCOME TAXES (CONTINUED)
The difference between the actual income tax benefit and the U.S. Federal
statutory income tax benefit for 1995 and 1996 is reconciled as follows (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
<S> <C> <C>
1995 1996
---------- ----------
Loss before income taxes.............................................. $ (14,136) $ (11,066)
Federal statutory income tax rate..................................... 35% 35%
Federal statutory income tax benefit.................................. (4,948) (3,873)
Increase (decrease) in income taxes resulting from:
State and local income tax benefit, net of Federal effect........... (181) (393)
Goodwill amortization not deductible for tax purposes............... 159 4,198
Non-deductible permanent items...................................... -- 26
Other................................................................. 68 (212)
---------- ----------
$ (4,902) $ 170
---------- ----------
---------- ----------
</TABLE>
The tax effect of temporary differences results in deferred income tax
assets (liabilities) and balance sheet classifications at December 31, 1995 and
1996 as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
<S> <C> <C>
1995 1996
--------- ---------
TEMPORARY DIFFERENCES
Depreciation and other building and equipment differences.................. $ 516 $ 592
Postretirement benefits.................................................... 1,259 1,274
Valuation and other reserves............................................... 6,986 4,793
State and local income taxes............................................... (261) (366)
Restructuring charges...................................................... 804 1,044
Other deferred tax assets.................................................. 1,018 2,252
Other deferred tax liabilities............................................. (625) (409)
--------- ---------
$ 9,697 $ 9,180
--------- ---------
--------- ---------
BALANCE SHEET CLASSIFICATION
Current deferred tax asset................................................. $ 8,841 $ 7,314
Noncurrent deferred tax asset.............................................. 856 1,866
--------- ---------
$ 9,697 $ 9,180
--------- ---------
--------- ---------
</TABLE>
FASB 109 requires a valuation allowance to reduce the deferred tax assets
reported if, based on the weight of evidence, it is more likely than not that
some portion or all of the deferred tax assets will not be realized. Due to
CRC's tax sharing arrangements with Times Mirror, management has determined that
a valuation allowance is not required at December 31, 1995 and 1996.
8. RETIREMENT PLANS AND POSTRETIREMENT BENEFITS
CRC provides defined pension benefits to employees based on years of service
and the employee's compensation for the five highest consecutive years during
the last ten years of employment. These
F-39
<PAGE>
CRC PRESS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. RETIREMENT PLANS AND POSTRETIREMENT BENEFITS (CONTINUED)
benefits are provided under The Times Mirror Pension Plan (the "Times Mirror
Plan"). The Times Mirror Plan is generally funded on a current basis in
accordance with the Employee Retirement Income Security Act of 1974.
Substantially all employees over age 21 with one year of service are
eligible to participate in the Times Mirror's Savings Plus Plan (the "Savings
Plus Plan"). Eligible employees may contribute from 1 percent to 13 percent of
their basic compensation. CRC makes matching contributions equal to 50 percent
of employee before-tax contributions from 1 percent to 6 percent. Employees may
choose among five investment options, including a Times Mirror common stock
fund, for investing their contributions and CRC's matching contribution.
Retirement plan expense for 1995 and 1996 consisted of defined contribution
plan expense for the Saving Plus Plan of $114,000 and $119,000, respectively and
net periodic pension expense for the Time Mirror Plan as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
<S> <C> <C>
1995 1996
--------- ---------
Service cost--benefits earned during period............................... $ 266 $ 243
Interest cost on projected benefit obligation............................. 151 177
Return on plan assets..................................................... (142) (168)
Net amortization and deferral............................................. (16) (9)
--------- ---------
Periodic pension expense.................................................. $ 259 $ 243
--------- ---------
--------- ---------
</TABLE>
Assumptions used in the actuarial computations at December 31, 1995 and 1996
were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
<S> <C> <C>
1995 1996
--------- ---------
Discount rate............................................................. 7.5% 8.0%
Rate of increase in compensation levels................................... 5.0% 5.0%
Expected long-term rate of return on assets............................... 9.75% 9.75%
</TABLE>
F-40
<PAGE>
CRC PRESS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. RETIREMENT PLANS AND POSTRETIREMENT BENEFITS (CONTINUED)
The following table sets forth the amount recognized in the consolidated
balance sheets at December 31, 1995 and 1996 (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
<S> <C> <C>
1995 1996
--------- ---------
Actuarial present value of benefit obligations:
Vested................................................................. $ 1,197 $ 1,380
Nonvested.............................................................. 61 104
--------- ---------
Accumulated benefit obligations.......................................... $ 1,258 $ 1,484
--------- ---------
--------- ---------
Projected benefit obligations............................................ 2,361 2,457
Plan assets at fair value................................................ 1,783 1,813
--------- ---------
Plan assets less than projected benefit obligations...................... (578) (644)
Unrecognized net loss from past experience different from that assumed... (879) (1,021)
Prior service cost not yet recognized.................................... 36 --
--------- ---------
Pension liability........................................................ $ (1,421) $ (1,665)
--------- ---------
--------- ---------
</TABLE>
Postretirement health care benefits provided by CRC are unfunded and cover
employees hired before January 1, 1993, or approximately half of CRC's current
employees.
Net periodic postretirement benefit expense for 1995 and 1996 is as follows
(in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
<S> <C> <C>
1995 1996
--------- ---------
Service cost--benefits earned during period.................................... $ 33 $ 30
Interest cost on accumulated projected benefit obligation...................... 26 25
Net amortization............................................................... (36) (37)
--- ---
Net periodic postretirement expense............................................ $ 23 $ 18
--- ---
--- ---
</TABLE>
Assumptions used in the actuarial computations as of December 31, 1995 and
1996 were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
<S> <C> <C>
1995 1996
--------- -----
Discount rate................................................................... 7.5% 8.0%
Health care cost trend rate..................................................... 10.0% 9.0%
</TABLE>
At December 31, 1995 and 1996, the health care cost trend rates of 10 and 9
percent respectively were assumed to ratably decline to 5.5 percent by 2008 as
December 31, 1998 and 2011 as December 31, 1995.
F-41
<PAGE>
CRC PRESS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. RETIREMENT PLANS AND POSTRETIREMENT BENEFITS (CONTINUED)
The following table sets forth the plan's unfunded obligations and the
amount recognized in the consolidated balance sheets at December 31, 1995 and
1996 (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
<S> <C> <C>
1995 1996
--------- ---------
Actuarial present value of benefit obligations:
Retirees.................................................................... $ 49 $ 37
Other active participants................................................... 384 308
--------- ---------
Accumulated postretirement benefit obligations................................ 433 345
Unrecognized net decrease in prior service cost............................... 405 368
Unrecognized net gain (loss) from past experience different from that
assumed..................................................................... (106) 30
--------- ---------
Postretirement benefits liability............................................. $ 732 $ 743
--------- ---------
--------- ---------
</TABLE>
The assumed health care cost trend rate can significantly affect
postretirement expense and liabilities. An increase of 1 percent in the health
care cost trend rate would increase 1995 and 1996 net periodic postretirement
expense by $8,000 and $7,000, respectively and increase the accumulated
postretirement benefit obligations as of December 31, 1995 and 1996 by $16,000
and $33,000, respectively.
On January 10, 1997, CRC was sold by Times Mirror (see Note 11). In
accordance with the Asset Purchase Agreement, the Retirement Plans and
Postretirement Benefits Liabilities were not assumed by the purchaser and were
retained by Times Mirror.
9. LEASES
Rental expense under operating leases was $867,000 and $872,000 for the
years ended December 31, 1995 and 1996, respectively. The future noncancelable
minimum lease payments as of December 31, 1996, including estimated escalation
amounts for the capital lease, are as follows (in thousands):
<TABLE>
<CAPTION>
OPERATING CAPITAL
LEASES LEASE
----------- ---------
<S> <C> <C>
1997.................................................................... $ 339 $ 624
1998.................................................................... 234 640
1999.................................................................... 656
2000.................................................................... 672
2001.................................................................... 689
Later years............................................................. 3,386
----------- ---------
Total minimum payments.................................................. $ 573 6,667
-----------
-----------
Less: Executory costs................................................ (3,677)
Imputed portion................................................. (814)
Current portion................................................. (165)
---------
Present value of net minimum lease payments............................. $ 2,011
---------
---------
</TABLE>
The imputed interest for the capital lease was 7% in 1996.
F-42
<PAGE>
CRC PRESS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. RELATED PARTY TRANSACTIONS
AMOUNTS DUE TO TIMES MIRROR
The amounts due to Times Mirror are generally due on demand and the
aggregate amounts are as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
<S> <C> <C>
1995 1996
--------- ---------
Advances due to Times Mirror............................................ $ 11,885 $ 14,347
Receivables due from affiliated companies............................... (1,059) (259)
Income taxes payable (receivable) to (from) Times Mirror................ 753 (394)
--------- ---------
$ 11,579 $ 13,694
--------- ---------
--------- ---------
</TABLE>
Advances bear interest at Times Mirror's estimated ten-year financing rate.
These interest rates are established at the beginning of each quarter and were
9% in the first quarter of 1995, 8% through the first quarter of 1996 and 6% for
the remainder of 1996.
WAREHOUSING AND DISTRIBUTION
CRC receives warehousing and distribution services from another Times Mirror
subsidiary. The charges for these services during 1995 and 1996 were $500,000
and $454,000, respectively.
INTERNATIONAL SALES
Times Mirror International Publishers, Inc. ("TMIP"), a wholly-owned
subsidiary of Times Mirror, has an arrangement with other subsidiaries of Times
Mirror, including CRC, to manage all international sales, including sales of
U.S. copyrighted materials, foreign language adaptations of U.S. copyrighted
materials and foreign rights income. In connection with this arrangement, TMIP
markets, sells and distributes CRC's products in certain international markets.
Net sales to TMIP aggregated $6,093,000 and $3,975,000 in 1995 and 1996,
respectively. CRC incurred direct costs including paper, printing, binding,
international royalties and incremental plant, editorial and production
associated with foreign language adaptations of $2,595,000 and $1,837,000 in
1995 and 1996, respectively.
11. SUBSEQUENT EVENT
On January 10, 1997, Times Mirror, pursuant to an Asset Purchase Agreement
with Information Ventures LLC ("IV"), sold substantially all the assets of CRC
for $12,950,000. The transaction was accounted by IV as a purchase.
Subsequently, IV formed CRC Press LLC and transferred all assets purchased to
this new entity.
F-43
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Partners of
MicroPatent
We have audited the accompanying balance sheets of MicroPatent (the
"Company") as of June 30, 1996 and 1997, and the related statements of income
and partners' deficit and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of MicroPatent at June 30, 1996
and 1997 and the results of its operations and its cash flows for the years then
ended in conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
New York, New York
June 8, 1998
F-44
<PAGE>
MICROPATENT
BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30,
--------------------------
<S> <C> <C>
1996 1997
------------ ------------
ASSETS
Current assets:
Cash and cash equivalents........................................................... $ 269,607 $ 181,252
Accounts receivable, net of allowance for bad debts of $0 and $51,960,
respectively...................................................................... 457,719 458,553
Due from Neato LLC.................................................................. -- 421,410
Inventories......................................................................... 170,900 194,781
Prepaid subscriptions............................................................... 321,912 318,960
Prepaid commissions and royalties................................................... 118,872 108,768
Prepaid expenses, other............................................................. 60,787 66,722
------------ ------------
Total current assets............................................................ 1,399,797 1,750,446
Fixed assets, net..................................................................... 403,723 444,801
Capitalized database costs, net of accumulated amortization of $1,866,106 and
$2,306,111, respectively............................................................ 616,742 530,682
Intangible assets, net................................................................ 25,530 24,499
Deposits.............................................................................. 27,961 21,594
------------ ------------
Total assets.................................................................... $ 2,473,753 $ 2,772,022
------------ ------------
------------ ------------
LIABILITIES AND PARTNERS' DEFICIT
Current liabilities:
Accounts payable.................................................................... $ 314,919 $ 461,009
Accrued expenses.................................................................... 280,220 201,977
Royalties payable................................................................... 107,599 73,680
Commissions payable................................................................. 220,739 118,732
Deferred revenue.................................................................... 1,928,336 2,072,901
Other current liabilities........................................................... 27,636 64,463
Notes payable, bank................................................................. 150,000 300,000
Capital lease obligations, current portion.......................................... 27,475 38,046
------------ ------------
Total current liabilities....................................................... 3,056,924 3,330,808
Other long-term liabilities........................................................... 4,627 --
Capital lease obligations, less current portion....................................... 89,343 69,990
------------ ------------
Total liabilities............................................................... 3,150,894 3,400,798
Partners' deficit:
Partners' deficit................................................................... (677,141) (628,776)
------------ ------------
Total liabilities and partners' deficit............................................... $ 2,473,753 $ 2,772,022
------------ ------------
------------ ------------
</TABLE>
See notes to financial statements
F-45
<PAGE>
MICROPATENT
STATEMENTS OF INCOME AND PARTNERS' DEFICIT
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30,
--------------------------
<S> <C> <C>
1996 1997
------------ ------------
Revenue............................................................................... $ 5,248,766 $ 5,829,693
Cost of sales......................................................................... 2,208,084 2,156,210
------------ ------------
Gross profit.................................................................... 3,040,682 3,673,483
Operating expenses:
Selling, general and administrative................................................. 2,257,576 2,783,285
New product development............................................................. 79,930 144,261
Depreciation and amortization....................................................... 616,096 664,580
Loss on disposition................................................................. -- 10,375
------------ ------------
Total operating expenses.............................................................. 2,953,602 3,602,501
------------ ------------
Income from operations................................................................ 87,080 70,982
Interest income....................................................................... 6,628 3,324
Interest expense...................................................................... (23,818) (25,941)
------------ ------------
Net income............................................................................ 69,890 48,365
Partners' deficit, beginning of year.................................................. (629,220) (677,141)
Partner distributions................................................................. (117,811) --
------------ ------------
Partners' deficit, end of year........................................................ $ (677,141) $ (628,776)
------------ ------------
------------ ------------
</TABLE>
See notes to financial statements
F-46
<PAGE>
MICROPATENT
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30,
----------------------
CASH FLOWS FROM OPERATING ACTIVITIES 1996 1997
---------- ----------
<S> <C> <C>
Net income................................................................................ $ 69,890 $ 48,365
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization........................................................... 616,096 664,580
Loss on disposal........................................................................ -- 10,375
Provision for bad debt.................................................................. -- 51,960
Changes in assets and liabilities:
Decrease (increase) in accounts receivable.............................................. 4,146 (52,794)
Increase in due from Neato LLC.......................................................... (421,410)
Decrease (increase) in inventories...................................................... 27,532 (23,881)
Decrease in prepaid subscription costs.................................................. 17,616 2,952
(Increase) decrease in prepaidcommissions and royalties................................. (67,552) 10,104
Decrease (increase) in prepaid expenses, other.......................................... (3,040) (5,935)
Increase in intangible assets........................................................... (14,254) (6,338)
(Increase) decrease in deposits......................................................... (10,559) 6,367
(Decrease) increase in accounts payable and accrued expenses............................ (536,312) 67,847
Increase (decrease) in royalties payable................................................ 67,099 (33,919)
Increase (decrease) in commissions payable.............................................. 168,632 (102,007)
Increase in deferred revenue............................................................ 333,843 144,565
Increase in other current liabilities................................................... 9,454 36,827
Decrease in other liabilities........................................................... (5,828) (4,627)
---------- ----------
Net cash provided by operating activities................................................. 676,763 393,031
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, equipment and database costs........................................ (479,070) (612,051)
Proceeds from sale of assets.............................................................. -- 9,500
---------- ----------
Net cash used in investing activity....................................................... (479,070) (602,551)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITY
Proceeds from borrowings.................................................................. 150,000 150,000
Payments on capitalized lease obligations................................................. (21,392) (28,835)
Distributions to partners................................................................. (117,811) --
---------- ----------
Net cash provided by financing activities................................................. 10,797 121,165
---------- ----------
Net increase (decrease) in cash and cash equivalents...................................... 208,490 (88,355)
Cash and cash equivalents at beginning of year............................................ 61,117 269,607
---------- ----------
Cash and cash equivalents at end of year.................................................. $ 269,607 $ 181,252
---------- ----------
---------- ----------
SUPPLEMENTAL DATA
Interest Paid............................................................................. $ 22,599 $ 27,160
---------- ----------
---------- ----------
Capital lease obligations entered into during the year.................................... $ 138,909 $ 20,053
---------- ----------
---------- ----------
</TABLE>
See notes to financial statements
F-47
<PAGE>
MICROPATENT
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997
1. BUSINESS OPERATIONS AND BASIS OF PRESENTATION
MicroPatent (the "Company") is a general partnership founded in 1989 that
publishes intellectual property databases for the patent and trademark markets,
all in electronic format. Its databases, which are provided on the Internet,
Intranet and on CD-ROM, are used by legal and research professionals and
corporations.
On January 1, 1997, the Neato division of the Company was transferred to
certain partners of the Company for net book value.
On July 2, 1997, net assets of the Company (which excluded the Neato assets)
were purchased by MicroPatent LLC, a newly-formed subsidiary of Information
Ventures LLC for $7,400,000. Accordingly, these financial statements have been
prepared representing the operations acquired by the subsidiary of Information
Ventures LLC.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REVENUE RECOGNITION
Revenues include the sale of patent and trademark information on CD-ROM and
the Internet. Subscription sales and related cost of sales are recognized
ratably over the life of the subscription as the information is made available
or shipped to the customer. Subscription payments received are deferred and
recorded as revenue in the period in which the information is made available.
Nonsubscription sales and related cost of sales are recognized when information
is made available or shipped to the customer.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of all highly liquid investments with
maturities of three months or less, when purchased. The cost of these cash
equivalents is equal to fair market value.
INVENTORIES
Inventories are valued at lower of cost or market and are determined under
the first-in, first-out method. Inventories at June 30, 1996 and 1997 consist of
finished products and raw materials. There was no significant work-in-process as
of June 30, 1996 and 1997.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Expenditures for repairs and
maintenance are expensed as incurred.
The Company provides for depreciation and amortization primarily using the
straight-line method over the estimated useful lives of the various assets as
follows:
<TABLE>
<S> <C>
Furniture and equipment............................................ 7 years
Computers and equipment............................................ 5 years
Leasehold improvements............................................. 5 years
Trademarks......................................................... 5 years
</TABLE>
F-48
<PAGE>
MICROPATENT
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CAPITALIZED DATABASE COSTS
Capitalized database costs consist of masters, data and software purchased.
Amortization is computed by an accelerated method over a period of five years.
INCOME TAXES
The Company is organized as a partnership and accordingly all income and
expenses are passed through to the Partners. Therefore, the Company's financial
statements exclude a provision for income taxes.
ADVERTISING EXPENSE
Advertising costs are expensed as incurred and approximated $128,968 and
$201,249 as of June 30, 1996 and 1997, respectively.
ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from these estimates.
3. INVENTORIES
Inventories consist of the following as of June 30, 1996 and 1997:
<TABLE>
<CAPTION>
1996 1997
---------- ----------
<S> <C> <C>
Finished goods........................................................ $ 155,446 $ 185,418
Raw material.......................................................... 15,454 9,363
---------- ----------
$ 170,900 $ 194,781
---------- ----------
---------- ----------
</TABLE>
4. PROPERTY AND EQUIPMENT
Property, plant and equipment consist of the following as of June 30, 1996
and 1997:
<TABLE>
<CAPTION>
1996 1997
----------- ------------
<S> <C> <C>
Furniture and fixtures............................................. $ 16,422 $ 19,734
Equipment.......................................................... 805,827 1,038,424
Automobile......................................................... 25,632 --
Leasehold improvements............................................. 32,357 58,430
----------- ------------
880,238 1,116,588
Accumulated depreciation........................................... (476,515) (671,787)
----------- ------------
$ 403,723 $ 444,801
----------- ------------
----------- ------------
</TABLE>
F-49
<PAGE>
MICROPATENT
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. INTANGIBLE ASSETS
Intangible assets consist of trademarks and are amortized using the
straight-line method over five years. Accumulated amortization as of June 30,
1996 and 1997 is $21,428 and $28,797, respectively.
6. LEASES
As of June 30, 1996 and 1997, assets recorded under capital leases
aggregated approximately $138,909 and $158,962, respectively, and included
accumulated amortization of $27,782 and $76,244, respectively.
Rental expense under operating leases was $70,000 and $83,000 for the years
ended June 30, 1996 and 1997, respectively. The future noncancelable minimum
lease payments as of June 30, 1997, including estimated escalation amounts for
capital leases, are as follows:
<TABLE>
<CAPTION>
OPERATING CAPITAL
LEASES LEASES
---------- ----------
<S> <C> <C>
1998.................................................................. $ 46,587 $ 51,999
1999.................................................................. 44,787 51,999
2000.................................................................. 43,897 24,809
2001.................................................................. 42,116 3,100
2002.................................................................. 17,548 --
---------- ----------
Total................................................................. $ 194,935 $ 131,907
---------- ----------
---------- ----------
Less amount representing unamortized interest......................... 23,871
Less current portion.................................................. 38,046
----------
Present value of minimum lease payment, excluding current portion..... $ 69,990
----------
----------
</TABLE>
7. FOREIGN EXCHANGE
The Company incurred foreign exchange gains of $44,000 and $109,000 for the
years ended June 30, 1996 and 1997, respectively. Foreign exchange gains are
included in cost of sales.
8. EMPLOYEE BENEFIT PLAN
The Company offers an employee savings plan qualifying under Section 401(k)
of the Internal Revenue Code. The plan covers substantially all full time U.S.
employees with more than 90 days of service. Employees are encouraged to make
contributions to the Plan. The Company matches 50% of such contributions up to a
maximum employee contribution of 6% of salary. The Company contributed and
incurred expenses of $21,000 and $22,132 during the years ended June 30, 1996
and 1997, respectively.
9. NOTES PAYABLE
The notes payable consist of a revolving line of credit note for $150,000,
bearing interest at 1.5% above the bank prime lending rate (8.25% and 8.5% at
June 30, 1996 and 1997, respectively). The line of credit agreement, which
expires December 31, 1997, is secured by all of the Company's assets. At June
30, 1996 and 1997, the balance outstanding on the revolving line of credit is
$150,000.
F-50
<PAGE>
MICROPATENT
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
9. NOTES PAYABLE (CONTINUED)
At June 30, 1997 the Company also has a demand note payable for $150,000
bearing interest at 1.75% above the bank prime lending rate (8.5%). The note is
secured by all the Company's assets and is due on demand.
Subsequent to the purchase of the Company by MicroPatent LLC, the
outstanding balances of the line of credit and the demand note were paid in
full.
F-51
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANT
To the Board of Directors of
St. Lucie Press Corporation, Inc.,
I have audited the accompanying balance sheet of St. Lucie Press Corporation,
Inc., (the "Company") as of December 31, 1996, and the related statements of
income, retained earnings and cash flows for the year ended December 31, 1996.
These financial statements are the responsibility of the Company's management.
My responsibility is to express an opinion on these financial statements based
on my audit.
I conducted my audit in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
I believe that my audit provides a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of St. Lucie Press Corporation, Inc.,
as of December 31, 1996, and the results of its operations ands its cash flows
for the year then ended in conformity with generally accepted accounting
principles.
/s/ Robert A. Young, CPA
West Palm Beach, Florida
June 5, 1998
F-52
<PAGE>
ST. LUCIE PRESS CORPORATION, INC.
BALANCE SHEET,
DECEMBER 31, 1996
<TABLE>
<S> <C>
ASSETS
Cash and cash equivalents....................................................... $ 47,618
Investments..................................................................... 53,952
Accounts receivable............................................................. 258,132
Inventories..................................................................... 231,359
Other current assets............................................................ 62,112
---------
Total current assets........................................................ 653,173
Property and equipment, net..................................................... 62,159
Other assets.................................................................... 97,784
---------
Total assets................................................................ $ 813,116
---------
---------
LIABILITIES
Current liabilities:
Accounts payable................................................................ 95,213
Accrued liabilities............................................................. 93,395
Accrued royalties............................................................... 134,400
Deferred revenue................................................................ 49,458
---------
Total current liabilities................................................... 372,466
---------
Total liabilities........................................................... 372,466
---------
STOCKHOLDERS' EQUITY
Common stock, $1 par value; 100,000 shares authorized; 10,000 shares issued and
outstanding................................................................... 10,000
Paid-in capital................................................................. 174,161
Retained earnings............................................................... 256,489
---------
Total stockholders' equity.................................................. 440,650
---------
Total liabilities and stockholders' equity...................................... $ 813,116
---------
---------
</TABLE>
See accompanying notes
F-53
<PAGE>
ST. LUCIE PRESS CORPORATION, INC.
STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<S> <C>
Revenue:
Sales......................................................................... $2,615,383
Interest and other............................................................ 2,861
---------
Total revenue............................................................. 2,618,244
Costs and expenses:
Cost of sales................................................................. 706,748
Selling, general and administrative........................................... 1,471,618
Interest...................................................................... 1,206
Depreciation and amortization................................................. 5,668
---------
Total costs and expenses.................................................. 2,185,240
---------
Net Income................................................................ 433,004
Distributions to shareholders............................................. (280,401)
Retained earnings, beginning............................................ 103,886
---------
Retained earnings, ending................................................. $ 256,489
---------
---------
Earnings per common share....................................................... $ 43.30
Average shares outstanding...................................................... 10,000
</TABLE>
See accompanying notes
F-54
<PAGE>
ST. LUCIE PRESS CORPORATION, INC.
STATEMENT OF CASH FLOWS,
FOR YEAR ENDED DECEMBER 31, 1996
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income........................................................................ $ 433,004
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization................................................... 5,668
Change in assets and liabilities:
(Increase) decrease in:
Accounts receivable........................................................... 53,846
Investments................................................................... (1,337)
Inventories................................................................... (87,895)
Other current assets.......................................................... (62,112)
Other assets.................................................................. (53,528)
Increase (decrease) in:
Accounts payable.............................................................. (5,178)
Deferred revenue.............................................................. (52,465)
Accrued royalities............................................................ 46,183
Accrued liabilities........................................................... 75,544
---------
Net cash provided by operating activities......................................... 351,730
---------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures............................................................ (2,607)
Dividends paid to shareholders.................................................. (280,401)
---------
Net cash used by investing activities............................................. (283,008)
---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term borrowings.............................................. 40,000
Repayments of long-term borrowings.............................................. (84,623)
---------
Net cash used by financing activities............................................. (44,623)
---------
NET INCREASE IN CASH.............................................................. 24,099
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF PERIOD.............................. 23,519
---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD........................................ $ 47,618
---------
---------
</TABLE>
See accompanying notes.
F-55
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
St. Lucie Press Corporation, Inc. (the "Company"), is a publisher of printed
and electronic media for the global education, scientific and professional
markets. Its products consist of books, videos and newsletters which are sold
both domestically and internationally.
The significant accounting policies followed by the Company are summarized
below:
ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
ACQUISITIONS
On August 1, 1995 the Company purchased certain operating assets and assumed
certain operating debts of Goose Run Press, Inc., d.b.a. GR Press in exchange
for ten percent of the outstanding shares of the Company. An excess purchase
price of approximately $56,000 has been determined, based upon the fair values
of assets acquired and liabilities assumed.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash on hand, demand deposits and highly
liquid investments. The Company considers all highly liquid investments
purchased with an original maturity date of three months or less to be cash
equivalents.
REVENUE RECOGNITION
Sales primarily consist of the publication of books and videos for which
sales and the related cost of sales are recognized when the book or video is
shipped to the customer. Revenues from books sold with the right of return are
recognized net of a provision for estimated return. Subscription payments
received are deferred and reported as income in the period in which the related
issue is shipped.
INVENTORIES
Inventories are stated at the lower of cost or market. Cost is principally
determined by first-in, first-out method. Inventories at December 31, 1996
consist of books and other finished products. There were no raw materials or
work-in-process as of December 31, 1996. Consideration is given to obsolescence
and other factors in evaluating the net realizable value.
LONG-LIVED ASSETS
The Company accounts for long-lived assets pursuant to Statement of
Financial Standards (SFAS) No. 121, ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED
ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF, which requires impairment
losses to be recorded in long-lived assets used in operations when events or
changes in circumstances indicates that the carrying amount of an asset may not
be recoverable. Management reviews long-lived assets and the related intangible
assets for impairment whenever events or changes in
F-56
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
circumstances indicate the assets may be impaired. The Company, based on current
circumstances, does not believe that any long-lived assets are impaired at
December 31, 1996.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Improvements and replacements are
capitalized, while expenditures for maintenance and repairs are charged to
expense as incurred.
Depreciation is computed using the straight-line method over the estimated
useful lives of the assets. Accelerated depreciation methods are used for tax
purposes. The cost and accumulated depreciation of property sold or retired are
removed from the accounts and gains or losses, if any, are reflected in the
earnings for the period.
INTANGIBLE ASSETS
Intangible assets consist primarily of publication rights and trademarks
arising from acquisitions and goodwill. These assets are recorded at cost and
amortized using the straight-line method over their estimated useful lives
ranging from 7 to 20 years. The Company continually reviews the recoverability
of the carrying value of these assets using various factors, including the
methodology prescribed in SFAS No. 121.
ADVERTISING COSTS
Pursuant to Statement of Position (SOP) 93-7, REPORTING ON ADVERTISING
COSTS, the production costs of advertising are expensed in the period in which
the costs are incurred. Advertising expense was approximately $897,404 for the
year ended December 31, 1996. At December 31, 1996, approximately $62,112 of
advertising related costs were included in other current assets.
DEFERRED PRODUCT DEVELOPMENT COSTS
Certain expenses for books, primarily design and other pre-production costs,
are capitalized and charged to expense over the estimated product life as the
products are sold, which is typically three years.
INCOME TAXES
The Company has elected to be treated as a "S" Corporation for federal and
state income tax purposes.
Deferred income taxes are determined utilizing a liability method. This
method gives consideration to the future tax consequences associated with
differences between financial accounting and tax bases of assets and
liabilities. These differences relate to items such as depreciable properties.
This method gives immediate effect to changes in income tax laws upon enactment.
The income statement effect is derived from changes in deferred income taxes on
the balance sheet.
CONCENTRATION OF BUSINESS RISK
The Company is not subject to significant credit risk from concentration of
accounts receivable or other assets in any particular customer group, industry
segment or geographical region. The Company performs ongoing credit evaluation
of its customers and does not require any collateral for the amounts owed. The
customary payment term for most customers is 30 days. Occasionally, the Company
grants
F-57
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
extended terms to foreign or larger commercial customers with payment terms
ranging from 60 to 180 days.
The Company maintains its cash in demand deposit accounts which at times may
exceed the Federal Deposit Insurance Corporation (FDIC) insurance limits. As of
December 31, 1996, the Company was not in excess of FDIC insurance limits.
2. INVENTORIES
Inventories at December 31, 1996 consists of finished goods of $100,559.
The Company regularly reviews its book inventories on a title-by-title basis
for salability. The costs of those books determined to have impaired or no sales
value are charged to income in the period of impairment.
3. PROPERTY AND EQUIPMENT
Property and equipment consists of the following at December 31, 1996:
<TABLE>
<S> <C>
Computer hardware and software............................. $ 57,289
Equipment.................................................. 5,489
Furniture and fixtures..................................... 7,831
---------
70,609
Less accumulated depreciation.............................. 8,450
---------
$ 62,159
---------
---------
</TABLE>
At December 31, 1996 depreciation expense charged to income was $3,450
4. OTHER ASSETS
At December 31, 1996 other assets consist of the following:
<TABLE>
<S> <C>
Note receivable, under capitalized lease................... $ 50,513
Note receivable............................................ 5,133
Goodwill................................................... 42,138
---------
$ 97,784
---------
---------
</TABLE>
Included as a charge to income at December 21, 1992 was amortization of
intangible assets of $2,218.
5. RELATED PARTY TRANSACTIONS
Because of related shareholders the Company and Perry Services, Inc., are
related parties. At December 31, 1996 the Company had advanced Perry Services,
Inc., $5,133 under an unsecured note receivable and $50,513 under a secured note
receivable.
The Company paid wages of $100,590 to shareholders.
6. SUBSEQUENT EVENT
On January 14, 1997, substantially all the assets of the Company as well as
publishing rights were purchased by Information Ventures LLC for cash
consideration of $2.6 million.
F-58
<PAGE>
[Graphic material, omitted in the electronic filing, depicts MicroPatent's
website.]
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER
TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE COMMON STOCK IN ANY
JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS
OF THE COMPANY SINCE THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................................................ 5
Risk Factors.............................................................. 11
Use of Proceeds........................................................... 15
Dividend Policy........................................................... 15
Capitalization............................................................ 16
Dilution.................................................................. 17
Selected Historical Financial Data........................................ 18
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 20
Business.................................................................. 25
Management................................................................ 34
Certain Relationships and Related Transactions............................ 40
Security Ownership of Certain Beneficial Owners and Management............ 41
Description of Capital Stock.............................................. 42
Shares Eligible for Future Sale........................................... 44
Underwriting.............................................................. 45
Legal Matters............................................................. 47
Experts................................................................... 47
Additional Information.................................................... 48
Index to Financial Statements............................................. F-1
</TABLE>
------------------------
UNTIL , 1998 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN
ADDITION TO THE OBLIGATIONS OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
4,250,000 SHARES
[LOGO]
INFORMATION HOLDINGS INC.
COMMON STOCK
-------------------
P R O S P E C T U S
-------------------
MERRILL LYNCH & CO.
BT ALEX. BROWN
, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the various expenses in connection with the
sale and distribution of the securities being registered which will be paid
solely by the Company. All the amounts shown are estimates, except the
Commission registration fee and the NASD filing fee:
<TABLE>
<S> <C>
SEC Registration Fee............................................................ $ 23,790
NASD Fees....................................................................... 7,000
NYSE Listing Fee................................................................ 81,800
Transfer Agent and Registrar Fees and Expenses.................................. 2,500
Printing and Engraving Expenses................................................. 386,800
Legal Fees and Expenses......................................................... 350,000
Accounting Fees and Expenses.................................................... 500,000
Blue Sky Fees and Expenses...................................................... 5,000
Miscellaneous Expenses.......................................................... 3,110
---------
Total......................................................................... $1,360,000
---------
---------
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the DGCL empowers a Delaware corporation to indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of such corporation) by reason of the fact that such person is or was a
director, officer, employee or agent of such corporation, or is or was serving
at the request of such corporation as a director, officer, employee or agent of
another corporation or enterprise. A corporation may indemnify such person
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by such person in connection with
such action, suit or proceeding if he acted in good faith and in a manner
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, has no
reasonable cause to believe his conduct was unlawful. A corporation may, in
advance of the final disposition of any civil, criminal, administrative or
investigative action, suit or proceeding, pay the expenses (including attorneys'
fees) incurred by any officer or director in defending such action, provided
that the director or officer undertake to repay such amount if it shall
ultimately be determined that he is not entitled to be indemnified by the
corporation.
A Delaware corporation may indemnify officers and directors in an action by
or in the right of the corporation to procure a judgment in its favor under the
same conditions, except that no indemnification is permitted without judicial
approval if the officer or director is adjudged to be liable to the corporation.
Where an officer or director is successful on the merits or otherwise in the
defense of any action referred to above, the corporation must indemnify him
against the expenses (including attorneys' fees) which he actually or reasonably
incurred in connection therewith. The indemnification provided is not deemed to
be exclusive of any other rights to which an officer or director may be entitled
under any corporation's bylaw, agreement, vote or otherwise.
The Company has adopted provisions in its Certificate of Incorporation and
Bylaws that provide that the Company shall indemnify its officers and directors
to the maximum extent permitted under the Act.
II-1
<PAGE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS (CONTINUED)
In addition, the Purchase Agreement filed as Exhibit 1.1 to the Registration
Statement provides for indemnification of the Company, its officers and its
directors by the Underwriters under certain circumstances.
The Company's officers and directors are also covered under the Company's
directors' and officers' insurance policy.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Pursuant to an Exchange Agreement, dated June 10, 1998, immediately prior to
the consummation of the Offering, Warburg Pincus, Mr. Slaine and Mr. Chippari
will contribute to the Company all of their direct or indirect equity interests
in the LLC in exchange for an aggregate of 12,200,000 shares of Common Stock.
See "Prospectus Summary--Background." The exact number of shares to be issued to
each of them will be based on the initial public offering price for the Common
Stock. Assuming an initial offering price of $15.50 per share, Warburg Pincus,
Mr. Slaine and Mr. Chippari will receive 9,682,380, 2,485,497 and 32,123 shares
of Common Stock, respectively.
Pursuant to Mr. Buda's employment agreement, upon consummation of the
Offering, the Company will issue to Mr. Buda the number of shares of Common
Stock obtained by dividing $250,000 by the initial public offering price per
share. See "Management--Employment Agreements."
In addition to any exemptions specified above, each of the foregoing
offerings was effected in reliance on Section 4(2) of the Securities Act as a
transaction not involving any public offering.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<CAPTION>
NO. DESCRIPTION
- --------- ----------------------------------------------------------------------------------------------------------
<C> <S>
1.1 Form of Purchase Agreement
3.1 Certificate of Incorporation
3.2 Bylaws
4.1 Specimen Common Stock certificate
5.1 Opinion of Willkie Farr & Gallagher regarding the legality of Common Stock
10.1 Employment Agreement, dated as of December 31, 1996, between Information Ventures LLC and Mason P. Slaine
10.2 Employment Agreement, dated as of January 19, 1998, between Information Ventures LLC and Vincent A.
Chippari
10.3 Employment Agreement, dated as of June 10, 1998, between CRC Press LLC and Dennis Buda
10.4 Form of 1998 Stock Option Plan of the Company
10.5 Form of Registration Rights Agreement among the Company, Warburg, Pincus Ventures, L.P., and Mason P.
Slaine
10.6 Asset Purchase Agreement, dated as of December 4, 1996, The Times Mirror Company, CRC Press, Inc. and
Information Ventures LLC
</TABLE>
II-2
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (CONTINUED)
<TABLE>
<CAPTION>
NO. DESCRIPTION
- --------- ----------------------------------------------------------------------------------------------------------
<C> <S>
10.7 Asset Purchase Agreement, dated as of January 8, 1997, among St. Lucie Press, Inc., St. Lucie Press (U.K.)
Ltd. and CRC Press LLC
10.8 Asset Purchase Agreement, dated as of June 5, 1997, among Thomson Information Services Inc., Thomson
Licensing Corporation and CRC Press LLC
10.9 Asset Purchase Agreement, dated as of July 2, 1997, among MicroPatent, Opus Publications, Inc., Dorinda
Developments, Inc., Susan Severtson, Robert Asleson and MicroPatent LLC
10.10 Lease Agreement, dated December 1, 1980, between CRC Press, Inc. and Starkoff Associates
10.11 Modification and Extension of Leases, dated January 1, 1994, between CRC Press, Inc. and Starkoff
Associates
10.12 Lease Agreement, dated March 1, 1998, between R.P. Realty Company and MicroPatent LLC
21.1 List of subsidiaries of the Company
23.1 Consent of Ernst & Young LLP
23.2 Consent of Ernst & Young LLP
23.3 Consent of Ernst & Young LLP
23.4 Consent of Robert A. Young, CPA
23.5 Consent of Willkie Farr & Gallagher (included in Exhibit 5.1)
24.1 Powers of Attorney (included in the signature pages of this registration statement)
27.1 Financial Data Schedule
</TABLE>
(b) Financial Statement Schedules
Schedule II--Valuation and Qualifying Accounts, Information Ventures LLC
Schedule II--Valuation and Qualifying Accounts, CRC Press, Inc.
ITEM 17. UNDERTAKINGS
(1) The undersigned Registrant hereby undertakes to provide to the
Underwriters at the closing specified in the Purchase Agreement certificates for
the Common Stock in such denominations and registered in such names as required
by the Underwriters to permit prompt delivery to each purchaser.
(2) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to its Bylaws, the Purchase Agreement or otherwise, the
Registrant has been advised that, in the opinion of the Commission, such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-3
<PAGE>
ITEM 17. UNDERTAKINGS (CONTINUED)
(3) The Registrant hereby undertakes that:
(a) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4)
or 497(h) under the Securities Act shall be deemed to be part of the
Registration Statement as of the time it was declared effective.
(b) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 1 to be signed on its behalf by the
undersigned, thereunto duly authorized, in New York, New York on July 16, 1998.
<TABLE>
<S> <C> <C>
INFORMATION HOLDINGS INC.
By: /s/ MASON P. SLAINE
------------------------------------------
Mason P. Slaine
PRESIDENT AND CHIEF EXECUTIVE OFFICER
</TABLE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature appears
below constitutes and appoints each of Mason P. Slaine and Vincent A. Chippari,
as his true and lawful attorneys-in-fact and agents for the undersigned, with
full power of substitution, for and in the name, place and stead of the
undersigned to sign and file with the Securities and Exchange Commission under
the Securities Act of 1933, as amended, (i) any and all pre-effective and
post-effective amendments to this registration statement, (ii) any registration
statement relating to this offering that is to be effective upon filing pursuant
to Rule 462(b) under the Securities Act of 1933, as amended, (iii) any exhibits
to any such registration statement or pre-effective or post-effective
amendments, (iv) any and all applications and other documents in connection with
any such registration statement or pre-effective or post-effective amendments,
and generally to do all things and perform any and all acts and things
whatsoever requisite and necessary or desirable to enable Information Holdings
Inc. to comply with the provisions of the Securities Act of 1933, as amended,
and all requirements of the Securities and Exchange Commission.
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 has been signed by the following persons in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------------------ --------------------------------- ----------------------
<S> <C> <C>
/s/ MASON P. SLAINE President, Chief Executive
- ------------------------------------------- Officer and Director (Principal July 16, 1998
Mason P. Slaine Executive Officer)
Executive Vice President and
/s/ VINCENT A. CHIPPARI Chief Financial Officer
- ------------------------------------------- (Principal Accounting Officer July 16, 1998
Vincent A. Chippari and Principal Financial
Officer)
/s/ MICHAEL E. DANZIGER
- ------------------------------------------- Director July 16, 1998
Michael E. Danziger
/s/ DAVID R. HAAS
- ------------------------------------------- Director July 16, 1998
David R. Haas
/s/ SIDNEY LAPIDUS
- ------------------------------------------- Director July 16, 1998
Sidney Lapidus
/s/ DAVID E. LIBOWITZ
- ------------------------------------------- Director July 16, 1998
David E. Libowitz
</TABLE>
II-5
<PAGE>
INDEX TO FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Report of Independent Auditors............................................................................. S-2
Schedule II Valuation and Qualifying Accounts, Information Ventures LLC.................................... S-3
Report of Certified Public Accountants..................................................................... S-4
Schedule II Valuation and Qualifying Accounts, CRC Press, Inc.............................................. S-5
</TABLE>
S-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Members of
Information Ventures LLC
We have audited the consolidated financial statements of Information
Ventures LLC as of December 31, 1997 and March 31, 1998 and have issued our
reports thereon dated April 20, 1998 and June 8, 1998, respectively, included
elsewhere in this Registration Statement. Our audits also included the financial
statement schedule listed in Item 16(b) of this Registration Statement. This
schedule is the responsibility of the Company's management. Our responsibility
is to express an opinion based on our audits.
In our opinion the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
present fairly in all material respects the information set forth therein.
/s/ Ernst & Young LLP
New York, New York
June 8, 1998
S-2
<PAGE>
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
INFORMATION VENTURES LLC
<TABLE>
<CAPTION>
ADDITIONS ADDITIONS
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING COST AND OTHER END OF
DESCRIPTION (IN THOUSANDS) OF YEAR EXPENSES ACCOUNTS DEDUCTIONS YEAR
- ---------------------------------------------------- ------------- ----------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1997
Allowance for doubtful accounts and returns......... $ 0 1,049 -- 246 $ 803
----- ----------- ----- ----- -----
----- ----------- ----- ----- -----
THREE MONTHS ENDED MARCH 31, 1998
Allowance for doubtful accounts and returns......... $ 803 69 -- 96 $ 776
----- ----------- ----- ----- -----
----- ----------- ----- ----- -----
</TABLE>
S-3
<PAGE>
REPORT OF CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholder
of CRC Press, Inc.
We have audited the financial statements of CRC Press, Inc. as of December
31, 1995 and 1996 and have issued our report dated May 29, 1998, included
elsewhere in this Registration Statement. Our audits also included the financial
statement schedule listed in Item 16(b) of this Registration Statement. This
schedule is the responsibility of the Company's management. Our responsibility
is to express an opinion based on our audits.
In our opinion the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
present fairly in all material respects the information set forth therein.
/s/ Ernst & Young LLP
West Palm Beach, Florida
May 29, 1998
S-4
<PAGE>
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
CRC PRESS, INC.
<TABLE>
<CAPTION>
ADDITIONS ADDITIONS
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING COST AND OTHER END OF
DESCRIPTION (IN THOUSANDS) OF YEAR EXPENSES ACCOUNTS DEDUCTIONS YEAR
- ---------------------------------------------------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1995
Allowance for doubtful accounts and returns......... $ 1,444 3,203 -- 366 $ 4,281
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
YEAR ENDED DECEMBER 31, 1996
Allowance for doubtful accounts and returns......... $ 4,281 207 -- 1,509 $ 2,979
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
</TABLE>
S-5
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
INFORMATION HOLDINGS INC.
(a Delaware corporation)
[ ] Shares of Common Stock
PURCHASE AGREEMENT
Dated: [ ], 1998
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
Table of Contents
<S> <C>
PURCHASE AGREEMENT...................................................................1
SECTION 1. Representations and Warranties............................................3
(a) Representations and Warranties by the Company...................................3
(i) Compliance with Registration Requirements...............................3
(ii) Independent Accountants................................................5
(iii) Financial Statements..................................................5
(iv) No Material Adverse Change in Business.................................5
(v) Good Standing of the Company............................................6
(vi) Good Standing of Subsidiaries..........................................6
(vii) Capitalization........................................................7
(viii) Authorization of Agreement...........................................7
(ix) Authorization and Description of Securities............................7
(x) Absence of Defaults and Conflicts.......................................7
(xi) Absence of Labor Dispute...............................................8
(xii) Absence of Proceedings................................................8
(xiii) Accuracy of Exhibits.................................................9
(xiv) Possession of Intellectual Property...................................9
(xv) Absence of Further Requirements........................................9
(xvi) Possession of Licenses and Permits...................................10
(xvii) Title to Property...................................................10
(xviii) Compliance with Cuba Act...........................................11
(xix) Investment Company Act...............................................11
(xx) Environmental Laws....................................................11
(b) Officer's Certificates.........................................................12
SECTION 2. Sale and Delivery to the Underwriters; Closing...........................12
(a) Initial Securities.............................................................12
(b) Option Securities..............................................................12
(c) Payment........................................................................13
(d) Denominations; Registration....................................................14
SECTION 3. Covenants of the Company.................................................14
(a) Compliance with Securities Regulations and Commission Requests.................14
(b) Filing of Amendments...........................................................14
(c) Delivery of Registration Statements............................................15
(d) Delivery of Prospectus.........................................................15
(e) Continued Compliance with Securities Laws......................................15
(f) Blue Sky Qualifications........................................................16
(g) Rule 158.......................................................................16
(h) Use of Proceeds................................................................17
(i) Listing........................................................................17
(j) Restriction on Sale of Securities..............................................17
(k) Reporting Requirements.........................................................17
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
(l) Compliance with NASD Rules....................................................17
(m) Compliance with Rule 463......................................................18
SECTION 4. Payment of Expenses.....................................................18
(a) Expenses......................................................................18
(b) Termination of Agreement......................................................19
SECTION 5. Conditions of the Underwriters' Obligations.............................19
(a) Effectiveness of Registration Statement.......................................19
(b) Opinion of Counsel for the Company............................................19
(c) Opinion of Counsel for the Underwriters.......................................20
(d) Officers' Certificate.........................................................20
(e) Accountant's Comfort Letter...................................................21
(f) Bring-down Comfort Letter.....................................................21
(g) Approval of Listing...........................................................21
(h) No Objection..................................................................21
(i) Lock-up Agreements............................................................21
(k) Exchange of Equity Interests of Information Ventures LLC......................21
(k) Conditions to Purchase of Option Securities...................................21
(l) Additional Documents..........................................................22
(m) Termination of Agreement......................................................23
SECTION 6. Indemnification.........................................................23
(a) Indemnification of the Underwriters...........................................23
(b) Indemnification of the Company, its Directors and Officers....................24
(c) Actions against Parties; Notification.........................................25
(d) Settlement without Consent if Failure to Reimburse............................26
(e) Indemnification for Reserved Securities.......................................26
SECTION 7. Contribution............................................................26
SECTION 8. Representations, Warranties and Agreements to Survive Delivery..........28
SECTION 9. Termination of Agreement................................................28
(a) Termination; General..........................................................28
(b) Liabilities...................................................................29
SECTION 10. Default by One or More of the Underwriters.............................29
SECTION 11. Notices................................................................30
SECTION 12. Parties................................................................30
SECTION 13. GOVERNING LAW AND TIME.................................................31
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
SECTION 14. Effect of Headings....................................................31
SCHEDULES
Schedule A - List of Underwriters...................................Sch A-1
Schedule B - Pricing Information....................................Sch B-1
Schedule C - List of Persons subject to Lock-up.....................Sch C-1
EXHIBITS
Exhibit A - Form of Opinion of Company's Counsel........................A-1
Exhibit B - Form of Lock-up Letter......................................B-1
</TABLE>
iii
<PAGE>
INFORMATION HOLDINGS INC.
(a Delaware corporation)
[ ] Shares of Common Stock
(Par Value $.01 Per Share)
PURCHASE AGREEMENT
[ ], 1998
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
BT Alex. Brown Incorporated
as Representatives of the several Underwriters
c/o Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
North Tower
World Financial Center
New York, New York 10281-1209
Ladies and Gentlemen:
Information Holdings Inc., a Delaware corporation (the
"Company"), confirms its agreement with Merrill Lynch & Co., Merrill Lynch,
Pierce, Fenner & Smith Incorporated ("Merrill Lynch"), BT Alex. Brown
Incorporated and each of the other Underwriters named in Schedule A hereto
(collectively, the "Underwriters," which term shall also include any
underwriter substituted as hereinafter provided in Section 10 hereof), for
whom Merrill Lynch and BT Alex. Brown Incorporated are acting as
Representatives (in such capacity, the "Representatives"), with respect to
the issue and sale by the Company and the purchase by the Underwriters,
acting severally and not jointly, of the respective numbers of shares of
Common Stock, par value $.01 per share, of the Company ("Common Stock") set
forth in said Schedule A, and with respect to the grant by the Company to the
Underwriters, acting severally and not jointly, of the option described in
Section 2(b) hereof to purchase all or any part of [ ] additional shares
of Common Stock solely to cover over-allotments, if any. The aforesaid [ ]
shares of Common Stock (the "Initial Securities") to be purchased by the
Underwriters and all or any part of the [ ] shares of Common Stock
subject to the option described in Section 2(b) hereof (the "Option
Securities") are hereinafter called, collectively, the "Securities."
<PAGE>
The Underwriters will concurrently enter into an
Intersyndicate Agreement of even date herewith (the "Intersyndicate Agreement")
providing for the coordination of certain transactions among the Underwriters
under the direction of Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner &
Smith Incorporated (in such capacity, the "Coordinator").
The Company understands that the Underwriters propose to make
a public offering of the Securities as soon as the Representatives deem
advisable after this Agreement has been executed and delivered.
The Company and the Underwriters agree that up to [ ] shares
of the Initial Securities to be purchased by the Underwriters (the "Reserved
Securities") shall be reserved for sale by the Underwriters to certain eligible
employees and persons having business relationships with the Company, as part of
the distribution of the Securities by the Underwriters, subject to the terms of
this Agreement, the applicable rules, regulations and interpretations of the
National Association of Securities Dealers, Inc. and all other applicable laws,
rules and regulations. To the extent that such Reserved Securities are not
orally confirmed for purchase by such eligible employees and such other
designated persons by the end of the first business day after the date of this
Agreement, such Reserved Securities may be offered to the public as part of the
public offering contemplated hereby.
The Company has filed with the Securities and Exchange
Commission (the "Commission") a registration statement on Form S-1 (No.
333-56665) covering the registration of the Securities under the Securities Act
of 1933, as amended (the "1933 Act"), including the related preliminary
prospectus. Promptly after execution and delivery of this Agreement, the Company
will either (i) prepare and file a prospectus in accordance with the provisions
of Rule 430A ("Rule 430A") of the rules and regulations of the Commission under
the 1933 Act (the "1933 Act Regulations") and paragraph (b) of Rule 424 ("Rule
424(b)") of the 1933 Act Regulations or (ii) if the Company has elected to rely
upon Rule 434 ("Rule 434") of the 1933 Act Regulations, prepare and file a term
sheet (a "Term Sheet") in accordance with the provisions of Rule 434 and Rule
424(b). The information included in any prospectus or Term Sheet, as the case
may be, that was omitted from such registration statement at the time it became
effective but that is deemed to be part of such registration statement at the
time it became effective (a) pursuant to paragraph (b) of Rule 430A is referred
to as "Rule 430A Information" or (b) pursuant to paragraph (d)
2
<PAGE>
of Rule 434 is referred to as "Rule 434 Information." Each prospectus used
before such registration statement became effective, and any prospectus that
omitted, as applicable, the Rule 430A Information or the Rule 434 Information,
that was used after such effectiveness and prior to the execution and delivery
of this Agreement, is herein called a "preliminary prospectus." Such
registration statement, including the exhibits thereto and schedules thereto, at
the time it became effective and including the Rule 430A Information or the Rule
434 Information, as applicable, is herein called the "Registration Statement."
Any registration statement filed pursuant to Rule 462(b) of the 1933 Act
Regulations is herein referred to as the "Rule 462(b) Registration Statement,"
and after such filing the term "Registration Statement" shall include the Rule
462(b) Registration Statement. The final prospectus in the form first furnished
to the Underwriters for use in connection with the offering of the Securities is
herein called the "Prospectus." If Rule 434 is relied on, the term "Prospectus"
shall refer to the preliminary prospectus dated [ ], 1998, together with the
applicable Term Sheet and all references in this Agreement to the date of such
Prospectus shall mean the date of the applicable Term Sheet. For purposes of
this Agreement, all references to the Registration Statement, any preliminary
prospectus, the Prospectus or any Term Sheet or any amendment or supplement to
any of the foregoing shall be deemed to include the copy filed with the
Commission pursuant to its Electronic Data Gathering, Analysis and Retrieval
system ("EDGAR").
SECTION 1. Representations and Warranties
(a) Representations and Warranties by the Company. The Company
represents and warrants to each Underwriter as of the date hereof, as of the
Closing Time referred to in Section 2(c) hereof, and as of each Date of Delivery
(if any) referred to in Section 2(b), hereof and agrees with each Underwriter,
as follows:
(i) Compliance with Registration Requirements. Each of the
Registration Statement and any Rule 462(b) Registration
Statement has become effective under the 1933 Act and no
stop order suspending the effectiveness of the Registration
Statement or any Rule 462(b) Registration Statement has been
issued under the 1933 Act and no proceedings for that
purpose have been instituted or are pending or, to the
knowledge of the Company, are contemplated by the
Commission, and any request on the part of the Commission
for additional information has been complied with.
3
<PAGE>
At the respective times the Registration Statement,
any Rule 462(b) Registration Statement and any post-effective
amendments thereto became effective and at the Closing Time (as defined
below) (and, if any Option Securities are purchased, at the Date of
Delivery), the Registration Statement, the Rule 462(b) Registration
Statement and any amendments or supplements thereto complied and will
comply in all material respects with the requirements of the 1933 Act
and the 1933 Act Regulations and did not and will not contain an untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading. Neither the Prospectus nor any amendments or supplements
thereto including any prospectus wrapper, at the time the Prospectus or
any amendment or supplement thereto was issued and at the Closing Time
(as defined below) (and, if any Option Securities are purchased, at the
Date of Delivery), included or will include an untrue statement of a
material fact or omitted or will omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. If Rule 434
is used, the Company will comply with the requirements of Rule 434 and
the Prospectus shall not be "materially different," as such term is
used in Rule 434, from the prospectus included in the Registration
Statement at the time it became effective. The representations and
warranties in this subsection shall not apply to statements in or
omissions from the Registration Statement or the Prospectus made in
reliance upon and in conformity with information furnished to the
Company in writing by any Underwriter through the Representatives
expressly for use in the Registration Statement or the Prospectus.
Each preliminary prospectus filed as part of the
Registration Statement as originally filed or as part of any amendment
thereto, or filed pursuant to Rule 424 under the 1933 Act, complied
when so filed in all material respects with the 1933 Act Regulations
and each preliminary prospectus and the Prospectus delivered to the
Underwriters for use in connection with this offering was identical to
the electronically transmitted copy thereof filed with the Commission
pursuant to EDGAR, except to the extent permitted by Regulation S-T.
(ii) Independent Accountants. The accountants who certified the
financial statements and supporting schedules included in the
Registration Statement are independ-
4
<PAGE>
ent public accountants as required by the 1933 Act and the 1933 Act
Regulations.
(iii) Financial Statements. The financial statements included
in the Registration Statement and the Prospectus, together with the
related schedules and notes, present fairly the financial position
of the Company and its consolidated subsidiaries at the dates
indicated and the statement of operations, stockholders' equity and
cash flows of the Company and its consolidated subsidiaries for the
periods specified; said financial statements have been prepared in
conformity with generally accepted accounting principles ("GAAP")
applied on a consistent basis throughout the periods involved. The
supporting schedules included in the Registration Statement present
fairly in accordance with GAAP the information required to be stated
therein. The selected financial data and the summary financial
information included in the Prospectus present fairly the
information shown therein and have been compiled on a basis
consistent with that of the audited financial statements included in
the Registration Statement. The pro forma financial statements and
the related notes thereto included in the Registration Statement and
the Prospectus present fairly the information shown therein, have
been prepared in accordance with the Commission's rules and
guidelines with respect to pro forma financial statements and have
been properly compiled on the bases described therein, and the
assumptions used in the preparation thereof are reasonable and the
adjustments used therein are appropriate to give effect to the
transactions and circumstances referred to therein.
(iv) No Material Adverse Change in Business. Since the respective
dates as of which information is given in the Registration Statement
and the Prospectus, except as otherwise stated therein, (A) there
has been no material adverse change in the condition, financial or
otherwise, or in the earnings, business affairs or business
prospects of the Company and its subsidiaries considered as one
enterprise, whether or not arising in the ordinary course of
business (a "Material Adverse Effect"), (B) there have been no
transactions entered into by the Company or any of its subsidiaries,
other than those in the ordinary course of business, which are
material with respect to the Company and its subsidiaries considered
as one enterprise, and (C) there has been no dividend or
distribution of any kind declared, paid or made by the Company on
any class of its capital stock.
5
<PAGE>
(v) Good Standing of the Company. The Company has been duly
organized and is validly existing as a corporation in good standing
under the laws of the State of Delaware and has corporate power and
authority to own, lease and operate its properties and to conduct
its business as described in the Prospectus and to enter into and
perform its obligations under this Agreement; and the Company is
duly qualified as a foreign corporation to transact business and is
in good standing in each other jurisdiction in which such
qualification is required, whether by reason of the ownership or
leasing of property or the conduct of business, except where the
failure so to qualify or to be in good standing would not result in
a Material Adverse Effect.
(vi) Good Standing of Subsidiaries. Each "significant subsidiary"
of the Company (as such term is defined in Rule 1-02 of Regulation
S-X) (each a "Subsidiary" and, collectively, the "Subsidiaries") has
been duly organized and is validly existing as a limited liability
company in good standing under the laws of the jurisdiction of its
organization, has the power and authority to own, lease and operate
its properties and to conduct its business as described in the
Prospectus and is duly qualified as a foreign limited liability
company to transact business and is in good standing in each
jurisdiction in which such qualification is required, whether by
reason of the ownership or leasing of property or the conduct of
business, except where the failure so to qualify or to be in good
standing would not result in a Material Adverse Effect; except as
otherwise disclosed in the Registration Statement, all of the issued
and outstanding equity interests of each such Subsidiary have been
duly authorized and validly issued, are fully paid and
non-assessable and are owned by the Company, directly or through
subsidiaries, free and clear of any security interest, mortgage,
pledge, lien, encumbrance, claim or equity; none of the outstanding
shares of equity interests of any Subsidiary was issued in violation
of the preemptive or similar rights of any securityholder of such
Subsidiary. The only Subsidiaries of the Company are the
subsidiaries listed on Exhibit 21.1 to the Registration Statement.
(vii) Capitalization. The authorized, issued and outstanding
capital stock of the Company is as set forth in the Prospectus in
the column entitled "Actual" under the caption "Capitalization"
(except for subsequent issuances, if any, pursuant to this
Agreement, pursuant to reserva-
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<PAGE>
tions, agreements or employee benefit plans referred to in the
Prospectus or pursuant to the exercise of convertible securities or
options referred to in the Prospectus). The shares of issued and
outstanding capital stock of the Company have been duly authorized
and validly issued and are fully paid and non-assessable; none of
the outstanding shares of capital stock of the Company was issued in
violation of the preemptive or other similar rights of any
securityholder of the Company.
(viii) Authorization of Agreement. This Agreement has been duly
authorized, executed and delivered by the Company.
(ix) Authorization and Description of Securities. The Securities
to be purchased by the Underwriters from the Company have been duly
authorized for issuance and sale to the Underwriters pursuant to
this Agreement and, when issued and delivered by the Company
pursuant to this Agreement against payment of the consideration set
forth herein, will be validly issued, fully paid and non-assessable;
the Common Stock conforms to all statements relating thereto
contained in the Prospectus and such description conforms to the
rights set forth in the instruments defining the same; no holder of
the Securities will be subject to personal liability by reason of
being such a holder; and the issuance of the Securities is not
subject to the preemptive or other similar rights of any
securityholder of the Company.
(x) Absence of defaults and Conflicts. Neither the Company nor
any of its subsidiaries is in violation of its charter, by-laws or
limited liability company agreement, as the case may be, or in
default in the performance or observance of any obligation,
agreement, covenant or condition contained in any contract,
indenture, mortgage, deed of trust, loan or credit agreement, note,
lease or other agreement or instrument to which the Company or any
of its subsidiaries is a party or by which it or any of them may be
bound, or to which any of the property or assets of the Company or
any subsidiary is subject (collectively, "Agreements and
Instruments") except for such defaults that would not result in a
Material Adverse Effect; and the execution, delivery and performance
of this Agreement and the consummation of the transactions
contemplated in this Agreement and in the Registration Statement
(including the issuance and sale of the Securities and the use of
the proceeds from the sale of the Securities as de-
7
<PAGE>
scribed in the Prospectus under the caption "Use of Proceeds") and
compliance by the Company with its obligations under this Agreement
has been duly authorized by all necessary corporate action and do
not and will not, whether with or without the giving of notice or
passage of time or both, conflict with or constitute a breach of, or
default or Repayment Event (as defined below) under, or result in
the creation or imposition of any lien, charge or encumbrance upon
any property or assets of the Company or any subsidiary pursuant to,
the Agreements and Instruments (except for such conflicts, breaches
or defaults or liens, charges or encumbrances that would not result
in a Material Adverse Effect), nor will such action result in any
violation of the provisions of the charter, by-laws or limited
liability company agreement, as the case may be, of the Company or
any subsidiary or any applicable law, statute, rule, regulation,
judgment, order, writ or decree of any government, government
instrumentality or court having jurisdiction over the Company or any
subsidiary or any of their assets, properties or operations. As used
herein, a "Repayment Event" means any event or condition which gives
the holder of any note, debenture or other evidence of indebtedness
(or any person acting on such holder's behalf) the right to require
the repurchase, redemption or repayment of all or a portion of such
indebtedness by the Company or any subsidiary.
(xi) Absence of Labor Dispute. No labor dispute with the
employees of the Company or any subsidiary exists or, to the
knowledge of the Company, is imminent, and the Company is not aware
of any existing or imminent labor disturbance by the employees of
any of its or any subsidiary's principal suppliers, manufacturers,
customers or contractors, which, in either case, may reasonably be
expected to result in a Material Adverse Effect.
(xii) Absence of Proceedings. Except as disclosed in the
Registration Statement, there is no action, suit, proceeding,
inquiry or investigation before or brought by any court or
governmental agency or body now pending, or, to the knowledge of the
Company, threatened, against or affecting the Company or any
subsidiary, which is required to be disclosed in the Registration
Statement (other than as disclosed therein), or which might
reasonably be expected to result in a Material Adverse Effect, or
which might reasonably be expected to materially and adversely
affect the properties or assets thereof or the consummation of the
transactions contemplated in this Agreement or
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<PAGE>
the performance by the Company of its obligations hereunder or
thereunder; the aggregate of all pending legal or governmental
proceedings to which the Company or any subsidiary is a party or of
which any of their respective property or assets is the subject
which are not described in the Registration Statement, including
ordinary routine litigation incidental to the business, could not
reasonably be expected to result in a Material Adverse Effect.
(xiii) Accuracy of Exhibits. There are no contracts or documents
which are required to be described in the Registration Statement or
the Prospectus or to be filed as exhibits thereto which have not
been so described and filed as required.
(xiv) Possession of Intellectual Property. The Company and its
subsidiaries own or possess, or can acquire on reasonable terms,
adequate patents, patent rights, licenses, inventions, copyrights,
know-how (including trade secrets and other unpatented and/or
unpatentable proprietary or confidential information, systems or
procedures), trademarks, service marks, trade names or other
intellectual property (collectively, "Intellectual Property")
necessary to carry on the business now operated by them, and neither
the Company nor any of its subsidiaries has received any notice or
is otherwise aware of any infringement of or conflict with asserted
rights of others with respect to any Intellectual Property or of any
facts or circumstances which would render any Intellectual Property
invalid or inadequate to protect the interest of the Company or any
of its subsidiaries therein, and which infringement or conflict (if
the subject of any unfavorable decision, ruling or finding) or
invalidity or inadequacy, singly or in the aggregate, would result
in a Material Adverse Effect.
(xv) Absence of Further Requirements. No filing with, or
authorization, approval, consent, license, order, registration,
qualification or decree of, any court or governmental authority or
agency is necessary or required for the performance by the Company
of its obligations hereunder, in connection with the offering,
issuance or sale of the Securities under this Agreement or the
consummation of the transactions contemplated by this Agreement,
except such as have been already obtained or as may be required
under the 1933 Act or the 1933 Act Regulations and state securities
or blue sky laws.
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<PAGE>
(xvi) Possession of Licenses and Permits. The Company and its
subsidiaries possess such permits, licenses, approvals, consents and
other authorizations (collectively, "Governmental Licenses") issued
by the appropriate federal, state or local regulatory agencies or
bodies necessary to conduct the business now operated by them; the
Company and its subsidiaries are in compliance with the terms and
conditions of all such Governmental Licenses, except where the
failure so to comply would not, singly or in the aggregate, have a
Material Adverse Effect; all of the Governmental Licenses are valid
and in full force and effect, except when the invalidity of such
Governmental Licenses or the failure of such Governmental Licenses
to be in full force and effect would not have a Material Adverse
Effect; and neither the Company nor any of its subsidiaries has
received any notice of proceedings relating to the revocation or
modification of any such Governmental Licenses which, singly or in
the aggregate, if the subject of an unfavorable decision, ruling or
finding, would result in a Material Adverse Effect.
(xvii) Title to Property. The Company and its subsidiaries have
good and marketable title to all real property owned by the Company
and its subsidiaries and good title to all other properties owned by
them, in each case, free and clear of all mortgages, pledges, liens,
security interests, claims, restrictions or encumbrances of any kind
except such as (a) are described in the Prospectus or (b) do not,
singly or in the aggregate, materially affect the value of such
property and do not interfere with the use made and proposed to be
made of such property by the Company or any of its subsidiaries; and
all of the leases and subleases material to the business of the
Company and its subsidiaries, considered as one enterprise, and
under which the Company or any of its subsidiaries holds properties
described in the Prospectus, are in full force and effect, and
neither the Company nor any subsidiary has any notice of any
material claim of any sort that has been asserted by anyone adverse
to the rights of the Company or any subsidiary under any of the
leases or subleases mentioned above, or affecting or questioning the
rights of the Company or such subsidiary to the continued possession
of the leased or subleased premises under any such lease or sublease.
(xviii) Compliance with Cuba Act. The Company has complied with,
and is and will be in compliance with, the provisions of that
certain Florida act relating to disclo-
10
<PAGE>
sure of doing business with Cuba, codified as Section 517.075 of
the Florida statutes, and the rules and regulations thereunder
(collectively, the "Cuba Act") or is exempt therefrom.
(xix) Investment Company Act. The Company is not, and upon the
issuance and sale of the Securities as herein contemplated and the
application of the net proceeds therefrom as described in the
Prospectus will not be, an "investment company" or an entity
"controlled" by an "investment company" as such terms are defined in
the Investment Company Act of 1940, as amended (the "1940 Act").
(xx) Environmental Laws. Except as described in the Registration
Statement and except as would not, singly or in the aggregate,
result in a Material Adverse Effect, (A) neither the Company nor any
of its subsidiaries is in violation of any federal, state or local
statute, law, rule, regulation, ordinance, code, published policy or
rule of common law or any judicial or administrative interpretation
thereof, including any judicial or administrative order, consent,
decree or judgment, relating to pollution or protection of human
health, the environment (including, without limitation, ambient air,
surface water, groundwater, land surface or subsurface strata) or
wildlife, including, without limitation, laws and regulations
relating to the release or threatened release of chemicals,
pollutants, contaminants, wastes, toxic substances, hazardous
substances, petroleum or petroleum products (collectively,
"Hazardous Materials") or to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or
handling of Hazardous Materials (collectively, "Environmental
Laws"), (B) the Company and its subsidiaries have all permits,
authorizations and approvals required under any applicable
Environmental Laws and are each in compliance with their
requirements, (C) there are no pending or, to the Company's
knowledge, threatened administrative, regulatory or judicial
actions, suits, demands, demand letters, claims, liens, notices of
noncompliance or violation, investigation or proceedings relating to
any Environmental Law against the Company or any of its subsidiaries
and (D) to the Company's knowledge, there are no events or
circumstances that might reasonably be expected to form the basis of
an order for clean-up or remediation, or an action, suit or
proceeding by any private party or governmental body or agency,
against or affecting the Company or any of its subsidiaries relating
to Hazardous Materials or any Environmental Laws.
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<PAGE>
(xxi) Registration. There are no persons with registration
rights or other similar rights to have any securities
registered pursuant to the Registration Statement or otherwise
registered by the Company under the 1933 Act, except as
disclosed in the Registration Statement.
(b) Officer's Certificates. Any certificate signed
by any officer of the Company or any of its subsidiaries delivered to the
Coordinator, the Representatives or to counsel for the Underwriters shall be
deemed a representation and warranty by the Company to each Underwriter as to
the matters covered thereby.
SECTION 2. Sale and Delivery to the Underwriters;
Closing
(a) Initial Securities. On the basis of the
representations and warranties herein contained and subject to the terms and
conditions herein set forth, the Company agrees to sell to each Underwriter,
severally and not jointly, and each Underwriter, severally and not jointly,
agrees to purchase from the Company, at the price per share set forth in
Schedule B, the number of Initial Securities set forth in Schedule A opposite
the name of such Underwriter, plus any additional number of Initial Securities
which such Underwriter may become obligated to purchase pursuant to the
provisions of Section 10 hereof.
(b) Option Securities. In addition, on the basis of
the representations and warranties herein contained and subject to the terms and
conditions herein set forth, the Company hereby grants an option to the
Underwriters, severally and not jointly, to purchase up to an additional [ ]
shares of Common Stock at the price per share set forth in Schedule B hereto,
less an amount per share equal to any dividends or distributions, if any,
declared by the Company and payable on the Initial Securities but not payable on
the Option Securities. The option hereby granted will expire 30 days after the
date of the Prospectus and may be exercised in whole or in part from time to
time only for the purpose of covering over-allotments which may be made in
connection with the offering and distribution of the Initial Securities upon
notice by the Coordinator to the Company setting forth the number of Option
Securities as to which the several Underwriters are then exercising the option
and the time and date of payment and delivery for such Option Securities. Any
such time and date of delivery for the Option Securities (a "Date of Delivery")
shall be determined by the Coordinator, but shall not be later than seven full
busi-
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<PAGE>
ness days after the exercise of said option, nor in any event prior to the
Closing Time (as defined below). If the option is exercised as to all or any
portion of the Option Securities, each of the Underwriters, acting severally and
not jointly, will purchase that proportion of the total number of Option
Securities then being purchased which the number of Initial Securities set forth
in Schedule A opposite the name of such Underwriter bears to the total number of
Initial Securities, subject in each case to such adjustments as the Coordinator
in its discretion shall make to eliminate any sales or purchases of fractional
shares.
(c) Payment. Payment of the purchase price for, and
delivery of certificates for, the Initial Securities shall be made at the
offices of Cahill Gordon & Reindel, 80 Pine Street, New York, New York 10005 or
at such other place as shall be agreed upon by the Coordinator and the Company,
at 9:00 A.M. (Eastern time) on the third (fourth, if the pricing occurs after
4:30 P.M. (Eastern time) on any given day) business day after the date hereof
(unless postponed in accordance with the provisions of Section 10), or such
other time not later than ten business days after such date as shall be agreed
upon by the Coordinator and the Company (such time and date of payment and
delivery being herein called the "Closing Time").
In addition, in the event that any or all of the Option
Securities are purchased by the Underwriters, payment of the purchase price for,
and delivery of certificates for, such Option Securities shall be made at the
above-mentioned offices, or at such other place as shall be agreed upon by the
Coordinator and the Company, on each Date of Delivery as specified in the notice
from the Coordinator to the Company.
Payment shall be made to the Company by wire transfer
of immediately available funds to a bank account designated by the Company,
against delivery to the Representatives for the respective accounts of the
Underwriters of certificates for the Securities to be purchased by them. It is
understood that each Underwriter has authorized the Representatives, for its
account, to accept delivery of, receipt for, and make payment of the purchase
price for, the Initial Securities and the Option Securities, if any, which it
has agreed to purchase. Merrill Lynch, individually and not as representative of
the Underwriters, may (but shall not be obligated to) make payment of the
purchase price for the Initial Securities or the Option Securities, if any, to
be purchased by any Underwriter whose funds have not been received by the
Closing Time or the relevant Date
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<PAGE>
of Delivery, as the case may be, but such payment shall not relieve such
Underwriter from its obligations hereunder.
(d) Denominations; Registration. Certificates for the
Initial Securities and the Option Securities, if any, shall be in such
denominations and registered in such names as the Representatives may request in
writing at least one full business day before the Closing Time or the relevant
Date of Delivery, as the case may be. The certificates for the Initial
Securities and the Option Securities, if any, will be made available for
examination and packaging by the Representatives in The City of New York not
later than 10:00 A.M. (Eastern time) on the business day prior to the Closing
Time or the relevant Date of Delivery, as the case may be.
SECTION 3. Covenants of the Company. The Company
covenants with each Underwriter as follows:
(a) Compliance with Securities Regulations and
Commission Requests. The Company, subject to Section 3(b), will comply with the
requirements of Rule 430A or Rule 434, as applicable, and will notify the
Coordinator immediately, and confirm the notice in writing, (i) when any
post-effective amendment to the Registration Statement shall become effective,
or any supplement to the Prospectus or any amended Prospectus shall have been
filed, (ii) of the receipt of any comments from the Commission, (iii) of any
request by the Commission for any amendment to the Registration Statement or any
amendment or supplement to the Prospectus or for additional information, and
(iv) of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or of any order preventing or
suspending the use of any preliminary prospectus, or of the suspension of the
qualification of the Securities for offering or sale in any jurisdiction, or of
the initiation or threatening of any proceedings for any of such purposes. The
Company will promptly effect the filings necessary pursuant to Rule 424(b) and
will take such steps as it deems necessary to ascertain promptly whether the
form of prospectus transmitted for filing under Rule 424(b) was received for
filing by the Commission and, in the event that it was not, it will promptly
file such prospectus. The Company will make every reasonable effort to prevent
the issuance of any stop order and, if any stop order is issued, to obtain the
lifting thereof at the earliest possible moment.
(b) Filing of Amendments. The Company will give the
Coordinator notice of its intention to file or prepare any amendment to the
Registration Statement (including any filing
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<PAGE>
under Rule 462(b)), any Term Sheet or any amendment, supplement or revision to
either the prospectus included in the Registration Statement at the time it
became effective or to the Prospectus, will furnish the Coordinator with copies
of any such documents a reasonable amount of time prior to such proposed filing
or use, as the case may be, and will not file or use any such document to which
the Coordinator or counsel for the Underwriters shall reasonably object.
(c) Delivery of Registration Statements. The Company
has furnished or will deliver to the Representatives and counsel for the
Underwriters, without charge, signed copies of the Registration Statement as
originally filed and of each amendment thereto (including exhibits filed
therewith or incorporated by reference therein) and signed copies of all
consents and certificates of experts, and will also deliver to the
Representatives, without charge, conformed copies of the Registration Statement
as originally filed and of each amendment thereto (without exhibits) for each of
the Underwriters. The copies of the Registration Statement and each amendment
thereto furnished to the Underwriters will be identical to the electronically
transmitted copies thereof filed with the Commission pursuant to EDGAR, except
to the extent permitted by Regulation S-T.
(d) Delivery of Prospectus. The Company has delivered
to each Underwriter, without charge, as many copies of each preliminary
prospectus as such Underwriter reasonably requested, and the Company hereby
consents to the use of such copies for purposes permitted by the 1933 Act. The
Company will furnish to each Underwriter, without charge, during the period when
the Prospectus is required to be delivered under the 1933 Act or the Securities
Exchange of 1934 (the "1934 Act"), such number of copies of the Prospectus (as
amended or supplemented) as such Underwriter may reasonably request. The
Prospectus and any amendments or supplements thereto furnished to the
Underwriters will be identical to the electronically transmitted copies thereof
filed with the Commission pursuant to EDGAR, except to the extent permitted by
Regulation S-T.
(e) Continued Compliance with Securities Laws. The
Company will comply with the 1933 Act and the 1933 Act Regulations so as to
permit the completion of the distribution of the Securities as contemplated in
this Agreement and in the Prospectus. If at any time when a prospectus is
required by the 1933 Act to be delivered in connection with sales of the
Securities, any event shall occur or condition shall exist as a result of which
it is necessary, in the opinion of counsel for
15
<PAGE>
the Underwriters or for the Company, to amend the Registration Statement or
amend or supplement the Prospectus in order that the Prospectus will not include
any untrue statements of a material fact or omit to state a material fact
necessary in order to make the statements therein not misleading in the light of
the circumstances existing at the time it is delivered to a purchaser, or if it
shall be necessary, in the opinion of such counsel, at any such time to amend
the Registration Statement or amend or supplement the Prospectus in order to
comply with the requirements of the 1933 Act or the 1933 Act Regulations, the
Company will promptly prepare and file with the Commission, subject to Section
3(b), such amendment or supplement as may be necessary to correct such statement
or omission or to make the Registration Statement or the Prospectus comply with
such requirements, and the Company will furnish to the Underwriters such number
of copies of such amendment or supplement as the Underwriters may reasonably
request.
(f) Blue Sky Qualifications. The Company will use its
reasonable best efforts, in cooperation with the Underwriters, to qualify the
Securities for offering and sale under the applicable securities laws of such
states and other jurisdictions as the Coordinator may designate and to maintain
such qualifications in effect for a period of not less than one year from the
later of the effective date of the Registration Statement and any Rule 462(b)
Registration Statement; provided, however, that the Company shall not be
obligated to file any general consent to service of process or to qualify as a
foreign corporation or as a dealer in securities in any jurisdiction in which it
is not so qualified or to subject itself to taxation in respect of doing
business in any jurisdiction in which it is not otherwise so subject. In each
jurisdiction in which the Securities have been so qualified, the Company will
file such statements and reports as may be required by the laws of such
jurisdiction to continue such qualification in effect for a period of not less
than one year from the effective date of the Registration Statement and any Rule
462(b) Registration Statement.
(g) Rule 158. The Company will timely file such
reports pursuant to the 1934 Act as are necessary in order to make generally
available to its securityholders as soon as practicable an earnings statement
for the purposes of, and to provide the benefits contemplated by, the last
paragraph of Section 11(a) of the 1933 Act.
16
<PAGE>
(h) Use of Proceeds. The Company will use the net
proceeds received by it from the sale of the Securities in the manner specified
in the Prospectus under "Use of Proceeds."
(i) Listing. The Company will use its reasonable best
efforts to effect the listing of the Securities on the New York Stock Exchange.
(j) Restriction on Sale of Securities. During a
period of 180 days from the date of the Prospectus, the Company will not,
without the prior written consent of the Coordinator, (i) directly or
indirectly, offer, pledge, sell, contract to sell, sell any option or contract
to purchase, purchase any option or contract to sell, grant any option, right or
warrant to purchase or otherwise transfer or dispose of any share of Common
Stock or any securities convertible into or exercisable or exchangeable for
Common Stock or file any registration statement under the 1933 Act with respect
to any of the foregoing or (ii) enter into any swap or any other agreement or
any transaction that transfers, in whole or in part, directly or indirectly, the
economic consequence of ownership of the Common Stock, whether any such swap or
transaction described in clause (i) or (ii) above is to be settled by delivery
of Common Stock or such other securities, in cash or otherwise. The foregoing
sentence shall not apply to (A) the Securities registered pursuant to the
Registration Statement, (B) any options to purchase Common Stock granted
pursuant to the 1998 Stock Option Plan, as such term is defined in the
Prospectus, (C) the exercise of the options referred to in clause (B)
immediately above, (D) the exchange of equity interests referred to in Section
5(k) below, (E) securities issued pursuant to Dennis Buda's employment agreement
or (F) any securities issued as consideration for a merger or acquisition;
provided, however, that any recipient of securities under clauses (E) and (F)
immediately above shall be bound by the restrictions of this Section 3(j) and
shall enter into an agreement substantially in the form of Exhibit B hereto.
(k) Reporting Requirements. The Company, during the
period when the Prospectus is required to be delivered under the 1933 Act or the
1934 Act, will file all documents required to be filed with the Commission
pursuant to the 1934 Act within the time periods and rules and regulations of
the Commission thereunder.
(l) Compliance with NASD Rules. The Company hereby
agrees that it will ensure that the Reserved Securities will be restricted as
required by the National Association of Securi-
17
<PAGE>
ties Dealers, Inc. (the "NASD") or the NASD rules from sale, transfer,
assignment, pledge or hypothecation for a period of three months following the
date of this Agreement. The Underwriters will notify the Company as to which
persons will need to be so restricted. At the request of the Underwriters, the
Company will direct the transfer agent to place a stop transfer restriction upon
such securities for such period of time. Should the Company release, or seek to
release, from such restrictions any of the Reserved Securities, the Company
agrees to reimburse the Underwriters for any reasonable expenses (including,
without limitation, legal expenses) they incur in connection with such release.
(m) Compliance with Rule 463. The Company will report
such information as may be required pursuant to Rule 463 of the 1933 Act
Regulations.
SECTION 4. Payment of Expenses
(a) Expenses. The Company will pay all expenses
incident to the performance of its obligations under this Agreement, including
(i) the preparation, printing and filing of the Registration Statement
(including financial statements and exhibits) as originally filed and of each
amendment thereto, (ii) the preparation, printing and delivery to the
Underwriters of this Agreement, any Agreement among Underwriters and such other
documents as may be required in connection with the offering, purchase, sale,
issuance or delivery of the Securities, (iii) the preparation, issuance and
delivery of the certificates for the Securities to the Underwriters, including
any stock or other transfer taxes and any stamp or other duties payable upon the
sale and the issuance or delivery of the Securities to the Underwriters, (iv)
the fees and disbursements of the Company's counsel, accountants and other
advisors, (v) the qualification of the Securities under securities laws in
accordance with the provisions of Section 3(f) hereof, including filing fees and
the reasonable fees and disbursements of counsel for the Underwriters in
connection therewith and in connection with the preparation of the Blue Sky
Survey and any supplement thereto, (vi) the printing and delivery to the
Underwriters of copies of each preliminary prospectus, any Term Sheet and of the
Prospectus and any amendment or supplement thereto, (vii) the preparation,
printing and delivery to the Underwriters of copies of the Blue Sky Survey and
any supplement thereto, (viii) the fees and expenses of any transfer agent or
registrar for the Securities, (ix) the filing fees incident to, and the
reasonable fees and disbursements of counsel for the Underwriters in connection
with, the review by the NASD
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<PAGE>
of the terms of the sale of the Securities, (x) the fees and expenses incurred
in connection with the listing of the Securities on the New York Stock Exchange
and (xi) all costs and expenses of the Underwriters, including the fees and
disbursements of counsel for the Underwriters, in connection with matters
related to the Reserved Securities which are designated by the Company for sale
to certain eligible employees and certain persons having business relationships
with the Company.
(b) Termination of Agreement. If this Agreement is
terminated by the Representatives in accordance with the provisions of Section 5
or Section 9(a)(i) hereof, the Company shall reimburse the Underwriters for all
of their out-of-pocket expenses, including the reasonable fees and disbursements
of counsel for the Underwriters.
SECTION 5. Conditions of the Underwriters' Obliga-
tions. The obligations of the several Underwriters hereunder are subject to the
accuracy of the representations and warranties of the Company contained in
Section 1 hereof or in certificates of any officer of the Company or any
subsidiary of the Company delivered pursuant to the provisions hereof, to the
performance by the Company of its covenants and other obligations hereunder, and
to the following further conditions:
(a) Effectiveness of Registration Statement. The
Registration Statement, including any Rule 462(b) Registration Statement, has
become effective and at the Closing Time no stop order suspending the
effectiveness of the Registration Statement shall have been issued under
the 1933 Act or proceedings therefor initiated or threatened by the Commission,
and any request on the part of the Commission for additional information shall
have been complied with to the reasonable satisfaction of counsel for the
Underwriters. A prospectus containing the Rule 430A Information shall have been
filed with the Commission in accordance with Rule 424(b) (or a post-effective
amendment providing such information shall have been filed and declared
effective in accordance with the requirements of Rule 430A) or, if the Company
has elected to rely upon Rule 434, a Term Sheet shall have been filed with the
Commission in accordance with Rule 424(b).
(b) Opinion of Counsel for the Company. At the Closing
Time, the Representatives shall have received the favorable opinion, dated as
of the Closing Time, of Willkie Farr & Gallagher, counsel for the Company, in
form and substance satisfactory to counsel for the Underwriters, together with
signed or reproduced copies of such letter for each of the other Underwrit-
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<PAGE>
ers to the effect set forth in Exhibit A hereto and to such further effect as
counsel for the Underwriters may reasonably request.
(c) Opinion of Counsel for the Underwriters. At the
Closing Time, the Representatives shall have received the favorable opinion,
dated as of the Closing Time, of Cahill Gordon & Reindel, counsel for the
Underwriters, together with signed or reproduced copies of such letter for each
of the other Underwriters, in form and substance satisfactory to the
Representatives. In giving such opinion such counsel may rely, as to all
matters governed by the laws of jurisdictions other than the law of the State
of New York and the federal law of the United States and the General
Corporation Law of the State of Delaware, upon the opinions of counsel
satisfactory to the Representatives. Such counsel may also state that, insofar
as such opinion involves factual matters, they have relied, to the extent they
deem proper, upon certificates of officers of the Company and its subsidiaries
and certificates of public officials.
(d) Officers' Certificate. At the Closing Time, there
shall not have been, since the date hereof or since the respective dates as of
which information is given in the Prospectus, any material adverse change in
the condition, financial or otherwise, or in the earnings, business affairs or
business prospects of the Company and its subsidiaries considered as one
enterprise, whether or not arising in the ordinary course of business, and the
Representatives shall have received a certificate of the President or a Vice
President of the Company and of the chief financial or chief accounting officer
of the Company, dated as of the Closing Time, to the effect that (i) there has
been no such material adverse change, (ii) the representations and warranties
in Section 1(a) hereof are true and correct in all material respects with the
same force and effect as though expressly made at and as of the Closing Time,
(iii) the Company has complied in all material respects with all agreements and
satisfied all conditions on its part to be performed or satisfied at or prior
to the Closing Time, and (iv) no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that purpose have
been instituted or are pending or, to their knowledge, are contemplated by the
Commission.
20
<PAGE>
(e) Accountant's Comfort Letter. At the time of the
execution of this Agreement, the Representatives shall have received from
Ernst & Young, LLP a letter dated such date, in form and substance satisfactory
to the Representatives, together with signed or reproduced copies of such
letter for each of the other Underwriters containing statements and information
of the type ordinarily included in accountants' "comfort letters" to
underwriters with respect to the financial statements and certain financial
information contained in the Registration Statement and the Prospectus.
(f) Bring-down Comfort Letter. At the Closing Time, the
Representatives shall have received from Ernst & Young, LLP a letter, dated as
of the Closing Time, to the effect that they reaffirm the statements made in
the letter furnished pursuant to subsection (e) of this Section, except that
the specified date referred to shall be a date not more than five business days
prior to the Closing Time.
(g) Approval of Listing. At the Closing Time, the
Securities shall have been approved for listing on the New York Stock Exchange,
subject only to official notice of issuance.
(h) No Objection. The NASD has confirmed that it has
not raised any objection with respect to the fairness and reasonableness of the
underwriting terms and arrangements.
(i) Lock-up Agreements. At the date of this Agreement,
the Representatives shall have received an agreement substantially in the form
of Exhibit B hereto signed by the persons listed on Schedule C hereto.
(j) Exchange of Equity Interests of Information
Ventures LLC. Immediately prior to the Closing Time, the members of Information
Ventures LLC shall have contributed all of their direct or indirect equity
interests therein to the Company in exchange for an aggregate of [ ] shares of
the Common Stock.
(k) Conditions to Purchase of Option Securities. In the
event that the Underwriters exercise their option provided in Section 2(b)
hereof to purchase all or any portion of the Option Securities, the
representations and warranties of the Company contained herein and the state-
21
<PAGE>
ments in any certificates furnished by the Company or any subsidiary of the
Company hereunder shall be true and correct as of each Date of Delivery and,
at the relevant Date of Delivery, the Representatives shall have received:
(i) Officers' Certificate. A certificate, dated such
Date of Delivery, of the President or a Vice President of the
Company and of the chief financial or chief accounting officer of
the Company confirming that the certificate delivered at the
Closing Time pursuant to Section 5(d) hereof remains true and
correct as of such Date of Delivery.
(ii) Opinion of Counsel for the Company. The
favorable opinion of Willkie Farr & Gallagher, counsel for the
Company, in form and substance satisfactory to counsel for the
Underwriters, dated such Date of Delivery, relating to the Option
Securities to be purchased on such Date of Delivery and otherwise
to the same effect as the opinion required by Section 5(b) hereof.
(iii) Opinion of Counsel for the Underwriters. The
favorable opinion of Cahill Gordon & Reindel, counsel for the
Underwriters, dated such Date of Delivery, relating to the Option
Securities to be purchased on such Date of Delivery and otherwise
to the same effect as the opinion required by Section 5(c) hereof.
(iv) Bring-down Comfort Letter. A letter from Ernst
& Young, LLP in form and substance satisfactory to the
Representatives and dated such Date of Delivery, substantially
in the same form and substance as the letter furnished to the
Representatives pursuant to Section 5(f) hereof, except that
the "specified date" in the letter furnished pursuant to this
paragraph shall be a date not more than five days prior to such
Date of Delivery.
(l) Additional Documents. At the Closing Time and at
each Date of Delivery, counsel for the Underwriters shall have been furnished
with such documents and opinions as they may reasonably require for the
purpose of enabling them to pass upon the issuance and sale of the Securities
as herein contemplated, or in order to evidence the accuracy of any of the
representations or warranties, or the fulfillment of any of the conditions,
herein contained;
22
<PAGE>
and all proceedings taken by the Company in connection with the issuance and
sale of the Securities as herein contemplated shall be reasonably satisfactory
in form and substance to the Representatives and counsel for the Underwriters.
(m) Termination of Agreement. If any condition
specified in this Section shall not have been fulfilled when and as required
to be fulfilled, this Agreement, or, in the case of any condition to the
purchase of Option Securities on a Date of Delivery which is after the
Closing Time, the obligations of the several Underwriters to purchase the
Option Securities, may be terminated by the Representatives by notice to the
Company at any time at or prior to the Closing Time or such Date of Delivery,
as the case may be, and such termination shall be without liability of any
party to any other party except as provided in Section 4 and except that
Sections 1, 6, 7 and 8 shall survive any such termination and remain in full
force and effect.
SECTION 6. Indemnification
(a) Indemnification of the Underwriters. The Company
agrees to indemnify and hold harmless each Underwriter and each person, if any,
who controls any Underwriter within the meaning of Section 15 of the 1933 Act or
Section 20 of the 1934 Act as follows:
(i) against any and all loss, liability, claim, damage
and expense whatsoever, as incurred, arising out of any untrue
statement or alleged untrue statement of a material fact contained
in the Registration Statement (or any amendment thereto),
including the Rule 430A Information and the Rule 434 Information,
if applicable, or the omission or alleged omission therefrom of a
material fact required to be stated therein or necessary to make
the statements therein not misleading or arising out of any untrue
statement or alleged untrue statement of a material fact included
in any preliminary prospectus or the Prospectus (or any amendment
or supplement thereto), or the omission or alleged omission
therefrom of a material fact necessary in order to make the
statements therein, in the light of the circumstances under which
they were made, not misleading;
(ii) against any and all loss, liability, claim, damage
and expense whatsoever, as incurred, to the extent of
23
<PAGE>
the aggregate amount paid in settlement of any litigation, or any
investigation or proceeding by any governmental agency or body,
commenced or threatened, or of any claim whatsoever based upon any
such untrue statement or omission, or any such alleged untrue
statement or omission; provided that (subject to Section 6(d)
below) any such settlement is effected with the written consent of
the Company; and
(iii) against any and all expense whatsoever, as
incurred (including the fees and disbursements of counsel chosen
by Merrill Lynch), reasonably incurred in investigating, preparing
or defending against any litigation, or any investigation or
proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue
statement or omission, or any such alleged untrue statement or
omission, to the extent that any such expense is not paid under
(i), (ii) or (iii) above;
provided, however, that this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Company by any
Underwriter through the Representatives expressly for use in the Registration
Statement (or any amendment thereto), including the Rule 430A Information and
the Rule 434 Information, if applicable, or any preliminary prospectus or the
Prospectus (or any amendment or supplement thereto); and provided, further,
however, that the Company shall not be liable to any indemnified party with
respect to any preliminary prospectus (or supplement thereto) if the Prospectus
corrected any such untrue statement or omission, was delivered to such
indemnified party and such indemnified party failed to furnish a copy of the
Prospectus at or prior to the written confirmation of the sale of Securities to
the applicable purchaser.
(b) Indemnification of the Company, its Directors and
Officers. Each Underwriter severally agrees to indemnify and hold harmless the
Company, its directors, each of its officers who signed the Registration
Statement, and each person, if any, who controls the Company within the meaning
of Section 15 of the 1933 Act or Section 20 of the 1934 Act against any and all
loss, liability, claim, damage and expense described in the indemnity contained
in subsection (a) of this Section, as incurred, but only with respect to untrue
statements or omissions, or alleged untrue statements or omissions, made in the
24
<PAGE>
Registration Statement (or any amendment thereto), including the Rule 430A
Information and the Rule 434 Information, if applicable, or any preliminary
prospectus or the Prospectus (or any amendment or supplement thereto) in
reliance upon and in conformity with written information furnished to the
Company by such Underwriter through the Representatives expressly for use in the
Registration Statement (or any amendment thereto) or such preliminary prospectus
or the Prospectus (or any amendment or supplement thereto).
(c) Actions against Parties; Notification. Each
indemnified party shall give notice as promptly as reasonably practicable to
each indemnifying party of any action commenced against it in respect of which
indemnity may be sought hereunder, but failure to so notify an indemnifying
party shall not relieve such indemnifying party from any liability hereunder to
the extent it is not materially prejudiced as a result thereof and in any event
shall not relieve it from any liability which it may have otherwise than on
account of this indemnity agreement. In the case of parties indemnified pursuant
to Section 6(a) above, counsel for the indemnified parties shall be selected by
Merrill Lynch, and, in the case of parties indemnified pursuant to Section 6(b)
above, counsel for the indemnified parties shall be selected by the Company. An
indemnifying party may participate at its own expense in the defense of any such
action; provided, however, that counsel for the indemnifying party shall not
(except with the consent of the indemnified party) also be counsel for the
indemnified party. In no event shall the indemnifying parties be liable for fees
and expenses of more than one counsel (in addition to any local counsel)
separate from their own counsel for all indemnified parties in connection with
any one action or separate but similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances. No
indemnifying party shall, without the prior written consent of the indemnified
parties, settle or compromise or consent to the entry of any judgment with
respect to any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or any claim whatsoever in
respect of which indemnification or contribution could be sought under this
Section 6 or Section 7 hereof (whether or not the indemnified parties are actual
or potential parties thereto), unless such settlement, compromise or consent (i)
includes an unconditional release of each indemnified party from all liability
arising out of such litigation, investigation, proceeding or claim and (ii) does
not include a statement as to or an admission of fault, culpability or a failure
to act by or on behalf of any indemnified party.
25
<PAGE>
(d) Settlement without Consent if Failure to
Reimburse. If at any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified party for fees and expenses of
counsel, such indemnifying party agrees that it shall be liable for any
settlement of the nature contemplated by Section 6(a)(ii) effected without its
written consent if (i) such settlement is entered into more than 45 days after
receipt by such indemnifying party of the aforesaid request, (ii) such
indemnifying party shall have received notice of the terms of such settlement at
least 30 days prior to such settlement being entered into and (iii) such
indemnifying party shall not have reimbursed such indemnified party in
accordance with such request prior to the date of such settlement.
Notwithstanding the immediately preceding sentence, if at any time an
indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel, an indemnifying party shall
not be liable for any settlement of the nature contemplated by Section 6(a)(ii)
effected without its consent if such indemnifying party (i) reimburses the
indemnified party in accordance with such request to the extent it consider such
request to be reasonable and (ii) provides written notice to the indemnified
party which fully explains the indemnifying party's belief that any unpaid
balance of such request is unreasonable, in each case prior to the date of such
settlement.
(e) Indemnification for Reserved Securities. In
connection with the offer and sale of the Reserved Securities, the Company
agrees, promptly upon a request, in writing to indemnify and hold harmless the
Underwriters from and against any and all losses, liabilities, claims, damages
and expenses incurred by them as a result of the failure of eligible employees
of the Company and certain persons having business relationships with the
Company to pay for and accept delivery of Reserved Securities which, by the end
of the first business day following the date of this Agreement, were subject to
a properly confirmed agreement to purchase.
SECTION 7 Contribution. If the indemnification
provided for in Section 6 hereof is for any reason unavailable to or
insufficient to hold harmless an indemnified party in respect of any losses,
liabilities, claims, damages or expenses referred to therein, then each
indemnifying party shall contribute to the aggregate amount of such losses,
liabilities, claims, damages and expenses incurred by such indemnified party, as
incurred, (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company on the one hand and the Underwriters on the
other hand from the offer-
26
<PAGE>
ing of the Securities pursuant to this Agreement or (ii) if the allocation
provided by clause (i) is not permitted by applicable law, in such proportion as
is appropriate to reflect not only the relative benefits referred to in clause
(i) above but also the relative fault of the Company on the one hand and of the
Underwriters on the other hand in connection with the statements or omissions,
which resulted in such losses, liabilities, claims, damages or expenses, as well
as any other relevant equitable considerations.
The relative benefits received by the Company on the
one hand and the Underwriters on the other hand in connection with the offering
of the Securities pursuant to this Agreement shall be deemed to be in the same
respective proportions as the total net proceeds from the offering of the
Securities pursuant to this Agreement (before deducting expenses) received by
the Company and the total underwriting discount received by the Underwriters, in
each case as set forth on the cover of the Prospectus, or, if Rule 434 is used,
the corresponding location on the Term Sheet, bear to the aggregate initial
public offering price of the Securities as set forth on such cover.
The relative fault of the Company on the one hand and
the Underwriters on the other hand shall be determined by reference to, among
other things, whether any such untrue or alleged untrue statement of a material
fact or omission or alleged omission to state a material fact relates to
information supplied by the Company or by the Underwriters and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.
The Company and the Underwriters agree that it would
not be just and equitable if contribution pursuant to this Section 7 were
determined by pro rata allocation (even if the Underwriters were treated as one
entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to above in this Section
7. The aggregate amount of losses, liabilities, claims, damages and expenses
incurred by an indemnified party and referred to above in this Section 7 shall
be deemed to include any legal or other expenses reasonably incurred by such
indemnified party in investigating, preparing or defending against any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever based upon any such
untrue or alleged untrue statement or omission or alleged omission.
27
<PAGE>
Notwithstanding the provisions of this Section 7, no
Underwriter shall be required to contribute any amount in excess of the amount
by which the total price at which the Securities underwritten by it and
distributed to the public were offered to the public exceeds the amount of any
damages which such Underwriter has otherwise been required to pay by reason of
any such untrue or alleged untrue statement or omission or alleged omission.
No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the 1933 Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
For purposes of this Section 7, each person, if any,
who controls an Underwriter within the meaning of Section 15 of the 1933 Act or
Section 20 of the 1934 Act shall have the same rights to contribution as such
Underwriter, and each director of the Company, each officer of the Company who
signed the Registration Statement, and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act or Section 20 of the
1934 Act shall have the same rights to contribution as the Company. The
Underwriters' respective obligations to contribute pursuant to this Section 7
are several in proportion to the number of Initial Securities set forth opposite
their respective names in Schedule A hereto and not joint.
SECTION 8 Termination of Agreement. All
representations, warranties and agreements contained in this Agreement or in
certificates of officers of the Company or any of its subsidiaries submitted
pursuant hereto, shall remain operative and in full force and effect, regardless
of any investigation made by or on behalf of any Underwriter or controlling
person, or by or on behalf of the Company, and shall survive delivery of the
Securities to the Underwriters.
SECTION 9. Termination of Agreement
(a) Termination; General. The Representatives may
terminate this Agreement, by notice to the Company, at any time at or prior to
the Closing Time (i) if there has been, since the time of execution of this
Agreement or since the respective dates as of which information is given in the
Prospectus, any material adverse change in the condition, financial or
otherwise, or in the earnings, business affairs or business prospects of the
Company and its subsidiaries considered as one enterprise, whether or not
arising in the ordinary course of
28
<PAGE>
business, or (ii) if there has occurred any material adverse change in the
financial markets in the United States, any outbreak of hostilities or
escalation thereof or other calamity or crisis or any change or development
involving a prospective change in national or international political, financial
or economic conditions, in each case the effect of which is such as to make it,
in the judgment of the Representatives, impracticable to market the Securities
or to enforce contracts for the sale of the Securities, or (iii) if trading in
any securities of the Company has been suspended or materially limited by the
Commission or the New York Stock Exchange, or if trading generally on the
American Stock Exchange or the New York Stock Exchange or in the Nasdaq National
Market has been suspended or materially limited, or minimum or maximum prices
for trading have been fixed, or maximum ranges for prices have been required, by
any of said exchanges or by such system or by order of the Commission, the
National Association of Securities Dealers, Inc. or any other governmental
authority, or (iv) if a banking moratorium has been declared by either Federal
or New York authorities.
(b) Liabilities. If this Agreement is terminated
pursuant to this Section, such termination shall be without liability of any
party to any other party except as provided in Section 4 hereof, and provided
further that Sections 1, 6, 7 and 8 shall survive such termination and remain in
full force and effect.
SECTION 10. Default by One or More of the Underwrit-
ers. If one or more of the Underwriters shall fail at the Closing Time or a Date
of Delivery to purchase the Securities which it or they are obligated to
purchase under this Agreement (the "Defaulted Securities"), the Representatives
shall have the right, within 24 hours thereafter, to make arrangements for one
or more of the non-defaulting Underwriters, or any other underwriters, to
purchase all, but not less than all, of the Defaulted Securities in such amounts
as may be agreed upon and upon the terms herein set forth; if, however, the
Representatives shall not have completed such arrangements within such 24-hour
period, then:
(a) if the number of Defaulted Securities does not
exceed 10% of the number of Securities to be purchased on such date, each of
the non-defaulting Underwriters shall be obligated, severally and not
jointly, to purchase the full amount thereof in the proportions that their
respective underwriting obligations hereunder bear to the underwriting
obligations of all non-defaulting Underwriters, or
29
<PAGE>
(b) if the number of Defaulted Securities exceeds
10% of the number of Securities to be purchased on such date, this Agreement
or, with respect to any Date of Delivery which occurs after the Closing Time,
the obligation of the Underwriters to purchase and of the Company to sell the
Option Securities to be purchased and sold on such Date of Delivery shall
terminate without liability on the part of any non-defaulting Underwriter.
No action taken pursuant to this Section shall relieve
any defaulting Underwriter from liability in respect of its default.
In the event of any such default which does not
result in a termination of this Agreement or, in the case of a Date of
Delivery which is after the Closing Time, which does not result in a
termination of the obligation of the Underwriters to purchase and the Company
to sell the relevant Option Securities, as the case may be, either the
Representatives or the Company shall have the right to postpone the Closing
Time or the relevant Date of Delivery, as the case may be, for a period not
exceeding seven days in order to effect any required changes in the
Registration Statement or Prospectus or in any other documents or
arrangements. As used herein, the term "Underwriter" includes any person
substituted for an Underwriter under this Section 10.
SECTION 11. Notices. All notices and other
communications hereunder shall be in writing and shall be deemed to have been
duly given if mailed or transmitted by any standard form of telecommunication.
Notices to the Underwriters shall be directed to the Representatives at North
Tower, World Financial Center, New York, New York 10281-1201, attention of [ ];
and notices to the Company shall be directed to it at 23 Old Kings Highway
South, Darien, Connecticut 06820, Facsimile No. (203) 656-0860, attention of
Mason P. Slaine, with a copy to Willkie Farr & Gallagher, 787 Seventh Avenue,
New York 10022, facsimile no. (212) 728-8111, attention Steven J. Gartner.
SECTION 12. Parties. This Agreement shall each
inure to the benefit of and be binding upon the Underwriters and the Company and
their respective successors. Nothing expressed or mentioned in this Agreement is
intended or shall be construed to give any person, firm or corporation, other
than the Underwriters and the Company and their respective successors and the
controlling persons and officers and directors referred to in Sections 6 and 7
and their heirs and legal representa-
30
<PAGE>
tives, any legal or equitable right, remedy or claim under or in respect of this
Agreement or any provision herein contained. This Agreement and all conditions
and provisions hereof are intended to be for the sole and exclusive benefit of
the Underwriters and the Company and their respective successors, and said
controlling persons and officers and directors and their heirs and legal
representatives, and for the benefit of no other person, firm or corporation. No
purchaser of Securities from any Underwriter shall be deemed to be a successor
by reason merely of such purchase.
SECTION 13. GOVERNING LAW AND TIME. THIS AGREEMENT
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK. SPECIFIED TIMES OF DAY REFER TO NEW YORK CITY TIME.
SECTION 14. Effect of Headings. The Article and
Section headings herein and the Table of Contents are for convenience only and
shall not affect the construction hereof.
31
<PAGE>
<TABLE>
<S> <C>
If the foregoing is in accordance with your
understanding of our agreement, please sign and return to the Company a
counterpart hereof, whereupon this instrument, along with all counterparts,
will become a binding agreement between the Underwriters and the Company in
accordance with its terms.
</TABLE>
Very truly yours,
INFORMATION HOLDINGS INC.
By:
----------------
Title:
CONFIRMED AND ACCEPTED,
as of the date first above written:
MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
BT ALEX. BROWN INCORPORATED
By: MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By:
------------------------------------------
Authorized Signatory
For themselves and as Representatives of the other Underwriters named in
Schedule A hereto.
32
<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
Number of
Initial
Name of Underwriter Securities
- ------------------- ----------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.........................
BT Alex. Brown Incorporated...........................
Total.................................................
</TABLE>
Schedule A-1
<PAGE>
SCHEDULE B
INFORMATION HOLDINGS INC.
[ ] Shares of Common Stock
(Par Value $.01 Per Share)
1. The initial public offering price per share for the
Securities, determined as provided in said Section 2, shall be $[ ].
2. The purchase price per share for the Securities to be paid
by the several Underwriters shall be $[ ], being an amount equal to the
initial public offering price set forth above less $[ ] per share;
provided, however, that the purchase price per share for any Option
Securities purchased upon the exercise of the over-allotment option
described in Section 2(b) shall be reduced by an amount per share equal
to any dividends or distributions declared by the Company and payable
on the Initial Securities but not payable on the Option Securities.
Schedule B-1
<PAGE>
SCHEDULE C
Warburg, Pincus Ventures, L.P.
Mason P. Slaine
Vincent A. Chippari
Dennis Buda
David R. Haas
Michael E. Danziger
Schedule C-1
<PAGE>
Exhibit A
FORM OF OPINION OF COUNSEL FOR THE COMPANY
TO BE DELIVERED PURSUANT TO
SECTION 5(b)
(i) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State of
Delaware.
(ii) The Company has corporate power and authority to own,
lease and operate its properties and to conduct its business as described in the
Prospectus and to enter into and perform its obligations under the Purchase
Agreement.
(iii) The Company is duly qualified as a foreign corporation
to transact business and is in good standing in each jurisdiction in which such
qualification is required, whether by reason of the ownership or leasing of
property or the conduct of business, except where the failure so to qualify or
to be in good standing would not result in a Material Adverse Effect.
(iv) The authorized, issued and outstanding capital stock of
the Company is as set forth in the Prospectus in the column entitled "Actual"
under the caption "Capitalization" (except for subsequent issuances, if any,
pursuant to the Purchase Agreement or pursuant to reservations, agreements or
employee benefit plans referred to in the Prospectus or pursuant to the exercise
of convertible securities or options referred to in the Prospectus); the shares
of issued and outstanding capital stock have been duly authorized and validly
issued and are fully paid and non-assessable; and none of the outstanding shares
of capital stock of the Company was issued in violation of the preemptive or, to
our knowledge, other similar rights of any securityholder of the Company.
(v) The Securities to be purchased by the Underwriters from
the Company have been duly authorized for issuance and sale to the Underwriters
pursuant to the Purchase Agreement and, when issued and delivered by the Company
pursuant to the Purchase Agreement against payment of the consideration set
forth in the Purchase Agreement, will be validly issued and fully paid and
non-assessable and no holder of the Securities is or will be subject to personal
liability by reason of being such a holder.
EXHIBIT A-1
<PAGE>
(vi) The issuance of the Securities is not subject to the
preemptive or, to our knowledge, other similar rights of any securityholder of
the Company.
(vii) Each Subsidiary has been duly organized and is validly
existing as a limited liability company in good standing under the laws of the
jurisdiction of its organization, has the power and authority to own, lease and
operate its properties and to conduct its business as described in the
Prospectus and is duly qualified as a foreign limited liability company to
transact business and is in good standing in each jurisdiction in which such
qualification is required, whether by reason of the ownership or leasing of
property or the conduct of business, except where the failure so to qualify or
to be in good standing would not result in a Material Adverse Effect; except as
otherwise disclosed in the Registration Statement, all of the issued and
outstanding equity interests of each Subsidiary have been duly authorized and
validly issued, are fully paid and non-assessable and, to the best of our
knowledge, are owned by the Company, directly or through subsidiaries, free and
clear of any security interest, mortgage, pledge, lien, encumbrance, claim or
equity; none of the outstanding equity interests of any Subsidiary was issued in
violation of the preemptive or, to our knowledge, similar rights of any
securityholder of such Subsidiary.
(viii) The Purchase Agreement has been duly authorized,
executed and delivered by the Company.
(ix) To our knowledge, based solely on a telephone
conversation with a member of the staff of the Commission, the Registration
Statement, including any Rule 462(b) Registration Statement, has been declared
effective under the 1933 Act; any required filing of the Prospectus pursuant to
Rule 424(b) has been made in the manner and within the time period required by
Rule 424(b); and, to the best of our knowledge, no stop order suspending the
effectiveness of the Registration Statement or any Rule 462(b) Registration
Statement has been issued under the 1933 Act and no proceedings for that purpose
have been instituted or are pending or threatened by the Commission.
(x) The Registration Statement, including any Rule 462(b)
Registration Statement, the Rule 430A Information and the Rule 434 Information,
as applicable, the Prospectus and each amendment or supplement to the
Registration Statement and the Prospectus as of its respective effective or
issue dates (other than the financial statements and supporting schedules
included therein or omitted therefrom, as to which we need ex-
EXHIBIT A-2
<PAGE>
press no opinion) complied as to form in all material respects with the
requirements of the 1933 Act and the 1933 Act Regulations.
(xi) If Rule 434 has been relied upon, the Prospectus was not
"materially different," as such term is used in Rule 434, from the prospectus
included in the Registration Statement at the time it became effective.
(xii) The form of certificate used to evidence the Common
Stock complies in all material respects with the Delaware General Corporation
Law, with any applicable requirements of the charter and by-laws of the Company
and the requirements of the New York Stock Exchange.
(xiii) To the best of our knowledge and except as disclosed in
the Registration Statement, there is not pending or threatened any action, suit,
proceeding, inquiry or investigation, to which the Company or any subsidiary is
a party, or to which the property of the Company or any subsidiary is subject,
before or brought by any court or governmental agency or body which might
reasonably be expected to result in a Material Adverse Effect, or which might
reasonably be expected to materially and adversely affect the consummation of
the transactions contemplated in the Purchase Agreement or the performance by
the Company of its obligations thereunder.
(xiv) The information in the Prospectus under "Description of
Capital Stock--Common Stock," "Business--Facilities," "Business--Litigation,"
"Description of Capital Stock--Preferred Stock" and in the Registration
Statement under Item 14, to the extent that it constitutes matters of law,
summaries of legal matters, the Company's charter and bylaws or legal
proceedings, or legal conclusions, fairly summarize the matters described
therein.
(xv) To the best of our knowledge, there are no franchises,
contracts, indentures, mortgages, loan agreements, notes, leases or other
instruments required to be described or referred to in the Registration
Statement or to be filed as exhibits thereto other than those described or
referred to therein or filed or incorporated by reference as exhibits thereto.
(xvi) To the best of our knowledge, the Company is not in
violation of its charter or by-laws.
EXHIBIT A-3
<PAGE>
(xvii) No filing with, or authorization, approval, consent,
license, order, registration, qualification or decree of, any court or
governmental authority or agency (other than under the 1933 Act and the 1933 Act
Regulations, which have been obtained, or as may be required under the
securities or blue sky laws of the various states, as to which we need express
no opinion) is necessary or required in connection with the due authorization,
execution and delivery of the Purchase Agreement or for the offering, issuance,
sale or delivery of the Securities.
(xviii) The execution, delivery and performance of the Purchase
Agreement and the consummation of the transactions contemplated in the Purchase
Agreement (including the issuance and sale of the Securities) and compliance by
the Company with its obligations under the Purchase Agreement do not and will
not, whether with or without the giving of notice or lapse of time or both,
conflict with or constitute a breach of, or default or Repayment Event (as
defined in Section 1(a)(x) of the Purchase Agreement) under or result in the
creation or imposition of any lien, charge or encumbrance upon any property or
assets of the Company or any subsidiary pursuant to any contract, indenture,
mortgage, deed of trust, loan or credit agreement, note, lease or any other
agreement or instrument, known to us, to which the Company or any subsidiary is
a party or by which it or any of them may be bound, or to which any of the
property or assets of the Company or any subsidiary is subject (except for such
conflicts, breaches or defaults or liens, charges or encumbrances that would not
have a Material Adverse Effect), nor will such action result in any violation of
the provisions of the charter or by-laws of the Company or limited liability
agreement of any Subsidiary, or any applicable New York, Delaware or federal
law, statute, rule, regulation, judgment, order, writ or decree, known to us, of
any government, government instrumentality or court having jurisdiction over the
Company or any subsidiary or any of their respective properties, assets or
operations.
(xix) To the best of our knowledge, there are no persons with
registration rights or other similar rights to have any securities registered
pursuant to the Registration Statement or otherwise registered by the Company
under the 1933 Act, except as disclosed in the Registration Statement.
(xx) The Company is not an "investment company" or an entity
"controlled" by an "investment company," as such terms are defined in the 1940
Act.
EXHIBIT A-4
<PAGE>
No facts have come to our attention that would lead us to
believe that the Registration Statement or any amendment thereto, including the
Rule 430A Information and Rule 434 Information (if applicable), (except for
financial statements and schedules and other financial data included therein or
omitted therefrom, as to which we need make no statement), at the time such
Registration Statement or any such amendment became effective, contained an
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein not misleading
or that the Prospectus or any amendment or supplement thereto (except for
financial statements and schedules and other financial data included therein or
omitted therefrom, as to which we need make no statement), at the time the
Prospectus was issued, at the time any such amended or supplemented prospectus
was issued or at the Closing Time, included or includes an untrue statement of a
material fact or omitted or omits to state a material fact necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading.
In rendering such opinion, such counsel may rely as to matters
of fact (but not as to legal conclusions), to the extent they deem proper, on
certificates of responsible officers of the Company and public officials. Such
opinion shall not state that it is to be governed or qualified by, or that it is
otherwise subject to, any treatise, written policy or other document relating to
legal opinions, including, without limitation, the Legal Opinion Accord of the
ABA Section of Business Law (1991).
EXHIBIT A-5
<PAGE>
Exhibit B
FORM OF LOCK-UP FROM DIRECTORS, OFFICERS
OR OTHER STOCKHOLDERS
PURSUANT TO SECTION 5(I)
[ ], 1998
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated,
BT Alex. Brown Incorporated
as Representatives of the several
Underwriters to be named in the
within-mentioned Purchase Agreement
c/o Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
North Tower
World Financial Center
New York, New York 10281-1209
Re: Proposed Public Offering by Information Holdings Inc.
Dear Sirs:
The undersigned, a stockholder [and an officer and/or
director] of Information Holdings Inc., a Delaware corporation (the "Company"),
understands that Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("Merrill Lynch") and BT Alex Brown Incorporated proposes to enter
into a Purchase Agreement (the "Purchase Agreement") with the Company providing
for the public offering of shares (the "Securities") of the Company's common
stock, par value $.01 per share (the "Common Stock"). In recognition of the
benefit that such an offering will confer upon the undersigned as a stockholder
[and an officer and/or director] of the Company, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
undersigned agrees with each underwriter to be named in the Purchase Agreement
that, during a period commencing from the date of the execution of this
agreement and ending 180 days after the date of the final Prospectus relating to
the offering of the Common Stock, the undersigned will not, without the prior
written consent of Merrill Lynch, directly or indirectly, (i) offer, pledge,
sell, contract to sell, sell any option or contract to purchase, purchase any
option or contract to sell, grant any option, right
Exhibit B-1
<PAGE>
or warrant for the sale of, or otherwise dispose of or transfer any shares of
the Common Stock or any securities convertible into or exchangeable or
exercisable for Common Stock, whether now owned or hereafter acquired by the
undersigned or with respect to which the undersigned has or hereafter acquires
the power of disposition, or file any registration statement under the
Securities Act of 1933, as amended, with respect to any of the foregoing or (ii)
enter into any swap or any other agreement or any transaction that transfers, in
whole or in part, directly or indirectly, the economic consequence of ownership
of the Common Stock, whether any such swap or transaction is to be settled by
delivery of Common Stock or other securities, in cash or otherwise, in each
case, except as expressly contemplated by the Prospectus (as defined in the
Purchase Agreement).
Very truly yours,
---------------------------
Signature:
---------------------------
Print Name:
Exhibit B-2
<PAGE>
Exhibit 3.1
CERTIFICATE OF INCORPORATION
OF
INFORMATION HOLDINGS INC.
* * * * * *
ARTICLE I
NAME
The name of the corporation is: Information Holdings Inc. (the
"Corporation").
ARTICLE II
REGISTERED OFFICE AND AGENT
The address of the Corporation's registered office in the State of
Delaware is 1013 Centre Road, in the City of Wilmington, County of New Castle,
in the State of Delaware. The name of the Corporation's registered agent at such
address is Corporation Service Company.
ARTICLE III
PURPOSE
The nature of the business or purposes to be conducted or promoted
by the Corporation is to engage in any lawful act or activity for which
corporations may be organized under the General Corporation Law of the State of
Delaware (the "DGCL").
ARTICLE IV
CAPITAL
The total number of shares of capital stock which the Corporation
shall have the authority to issue is 51,000,000 consisting of: (i) 50,000,000
shares of Common Stock, par value $0.01 per share (the "Common Stock"); and (ii)
1,000,000 shares of Preferred Stock, par value $0.01 per share (the "Preferred
Stock").
All shares of Common Stock issued and outstanding shall be identical
and shall entitle the holders thereof to one vote per share on all matters
presented to the stockholders.
The Preferred Stock may be issued from time to time in one or more
series. The Board of Directors of the Corporation (the "Board") is expressly
authorized at any time, and from time
<PAGE>
to time, to provide for the issuance of shares of Preferred Stock in one or more
series, for such consideration (not less than its par value) and with such
designations, powers, preferences and relative, participating, optional or other
special rights, and such qualifications, limitations or restrictions, as shall
be determined by the Board and fixed by resolution or resolutions adopted by the
Board providing for the number of shares in each such series.
ARTICLE V
NAME AND ADDRESS OF INCORPORATOR
The name and address of the incorporator is as follows:
Michael C. Carroll
Willkie Farr & Gallagher
787 Seventh Avenue
New York, New York 10019-6099
ARTICLE VI
BOARD OF DIRECTORS
Except as otherwise provided by law, the number of directors which shall
constitute the Board shall be as set forth in the Bylaws of the Corporation.
Elections of directors need not be by written ballot.
ARTICLE VII
BYLAWS
In furtherance and not in limitation of the powers conferred by
statute, the Board is expressly authorized to make, alter or repeal Bylaws of
the Corporation (except insofar as Bylaws adopted by the stockholders shall
otherwise provide).
ARTICLE VIII
AGREEMENT WITH CREDITORS
Whenever a compromise or arrangement is proposed between the
Corporation and its creditors or any class of them and/or between the
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of the Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for the Corporation under the
provisions of Section 291 of Title 8 of the DGCL or on the application of
trustees in dissolution or of any receiver or receivers appointed for the
Corporation under the provisions of Section 279 of Title 8 of the DGCL, order a
meeting
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<PAGE>
of the creditors or class of creditors, and/or of the stockholders or class of
stockholders of the Corporation, as the case may be, to be summoned in such
manner as the said court directs. If a majority in number representing
three-fourths in value of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of the Corporation, as the case may be,
agree to any compromise or arrangement and to any reorganization of the
Corporation as a consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all stockholders or class of
stockholders of the Corporation, as the case may be, and also on the
Corporation.
ARTICLE IX
INDEMNIFICATION
The Corporation shall indemnify to the fullest extent permitted
under and in accordance with the laws of the State of Delaware any person who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal, administrative
or investigative by reason of the fact that he is or was a director, officer,
trustee, employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, trustee, employee or agent of
or in any other capacity with another corporation, partnership, joint venture,
trust or other enterprise, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him in connection with such action, suit or proceeding if he acted in good
faith and in a manner he reasonably believed to be in, or not opposed to, the
best interests of the Corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful.
Expenses incurred in defending a civil or criminal action, suit or
proceeding shall (in the case of any action, suit or proceeding against a
director of the Corporation) or may (in the case of any action, suit or
proceeding against an officer, trustee, employee or agent) be paid by the
Corporation in advance of the final disposition of such action, suit or
proceeding as authorized by the Board upon receipt of an undertaking by or on
behalf of the indemnified person to repay such amount if it shall ultimately be
determined that he is not entitled to be indemnified by the Corporation as
authorized in this Article IX.
The indemnification and other rights set forth in this Article IX
shall not be exclusive of any provisions with respect thereto in the Bylaws or
any other contract or agreement between the Corporation and any director,
officer, trustee, employee or agent of the Corporation.
-3-
<PAGE>
Neither the amendment nor repeal of this Article IX, nor the
adoption of any provision of this Certificate of Incorporation inconsistent with
this Article IX, shall eliminate or reduce the effect of this Article IX in
respect of any matter occurring before such amendment, repeal or adoption of an
inconsistent provision or in respect of any cause of action, suit or claim
relating to any such matter which would have given rise to a right of
indemnification or right to receive expenses pursuant to this Article IX, if
such provision had not been so amended or repealed or if a provision
inconsistent therewith had not been so adopted.
ARTICLE X
ELIMINATION OF CERTAIN LIABILITY OF DIRECTORS
To the fullest extent permitted by the DGCL, as the same presently
exists or may hereafter be amended, no director shall be personally liable to
the Corporation or to any stockholder for monetary damages for breach of
fiduciary duty as a director, provided that such provision shall not eliminate
or limit the liability of a director: (i) for any breach of the director's duty
of loyalty to the Corporation or its stockholders; (ii) for acts or omissions
not in good faith or which involve intentional misconduct or a knowing violation
of the law; (iii) under Section 174 of the DGCL or any amendment thereto or
successor provision thereto; or (iv) for any transaction from which the director
derived an improper personal benefit.
Any repeal or modification of this Article X shall not adversely
affect any right or protection of a director with respect to any act or omission
occurring prior to such repeal or modification. If the DGCL is amended after the
date of incorporation to authorize corporate action further eliminating or
limiting the personal liability of directors, then the liability of a director
of the Corporation shall be eliminated or limited to the fullest extent
permitted by the DGCL, as so amended.
THE UNDERSIGNED, being the incorporator hereinbefore named, for the
purposes of forming a corporation pursuant to the General Corporation Law of the
State of Delaware makes this Certificate, hereby declaring and certifying that
this is his act and deed and the facts herein stated are true and, accordingly,
has hereunto set his hand this 9th day of June, 1998.
/s/ Michael C. Carroll
----------------------
Michael C. Carroll
Incorporator
-4-
<PAGE>
Exhibit 3.2
INFORMATION HOLDINGS INC.
Incorporated Under the General Corporation Law
of the State of Delaware
BYLAWS
* * * * *
ARTICLE I.
OFFICES
The registered office of INFORMATION HOLDINGS INC. (the "Corporation") in
Delaware shall be at 1013 Centre Road, in the in the City of Wilmington, County
of New Castle, in the State of Delaware, and Corporation Service Company shall
be the resident agent of the Corporation in charge thereof. The Corporation may
also have such other offices at such other places, within or without the State
of Delaware, as the board of directors of the Corporation (the "Board of
Directors") may from time to time designate or the business of the Corporation
may require.
ARTICLE II.
STOCKHOLDERS
SECTION 1. Annual Meeting. The annual meeting of stockholders for the
election of directors and the transaction of any other business shall be held on
such date, in such city and state and at such time and place as may be
designated by the Board of Directors, which shall be set forth in the notice of
such meeting. At the annual meeting any business may be transacted and any
corporate action may be taken, whether stated in the notice of meeting or not,
except as otherwise expressly provided by statute, the Certificate of
Incorporation or these Bylaws.
SECTION 2. Special Meetings. Special meetings of the stockholders for any
purpose may be called at any time by the Board of Directors, the Chairman of the
Board or the Chief Executive Officer and shall be called by the Chief Executive
Officer at the request of the holders of a majority of the outstanding shares of
capital stock entitled to vote. Special meetings shall be held at such place or
places within or without the State of Delaware as shall from time to time be
designated by the Board of Directors and stated in the notice of such meeting.
At a special meeting no business shall be transacted and no corporate action
shall be taken other than that stated in the notice of the meeting.
<PAGE>
SECTION 3. Notice of Meetings. Written notice of the time and place of any
stockholders' meeting, whether annual or special, shall be given to each
stockholder entitled to vote thereat, by personal delivery or by mailing the
same to him at his address as the same appears upon the records of the
Corporation at least ten (10) days but not more than sixty (60) days before the
day of the meeting. Notice of any adjourned meeting need not be given except by
announcement at the meeting so adjourned, unless otherwise ordered in connection
with such adjournment. Such further notice, if any, shall be given as may be
required by law.
SECTION 4. Quorum. Any number of stockholders, together holding at least a
majority of the capital stock of the Corporation issued and outstanding and
entitled to vote, who shall be present in person or represented by proxy at any
meeting duly called, shall constitute a quorum for the transaction of all
business, except as otherwise provided by law, by the Certificate of
Incorporation or by these Bylaws.
SECTION 5. Adjournment of Meetings. If less than a quorum shall attend at
the time for which a meeting shall have been called, the meeting may be
adjourned from time to time by a majority vote of the stockholders present or
represented by proxy and entitled to vote, without notice other than by
announcement at the meeting until a quorum shall attend. Any meeting at which a
quorum is present may also be adjourned in like manner and for such time or upon
such call as may be determined by a majority vote of the stockholders present or
represented by proxy and entitled to vote. At any adjourned meeting at which a
quorum shall be present, any business may be transacted and any corporate action
may be taken which might have been transacted at the meeting as originally
called.
SECTION 6. Voting List. The officer or agent having charge of the stock
ledger of the Corporation shall prepare and make, at least ten (10) days before
every meeting of stockholders, a complete list of the stockholders entitled to
vote at such meeting, arranged in alphabetical order and showing the address of
each stockholder and the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any stockholder, for
any purposes germane to the meeting, during ordinary business hours, either at a
place within the city where the meeting is to be held, which place shall be
specified in the notice of the meeting, or, if not so specified, at the place
where the meeting is to be held, for said ten (10) days. The list shall also be
produced and kept at the time and place of meeting during the whole time thereof
and subject to the inspection of any stockholder who may be present.
SECTION 7. Voting. Each stockholder entitled to vote at any meeting may
vote either in person or by proxy, but no proxy shall be voted on or after three
(3) years from its date, unless said proxy provides for a longer period. Each
stockholder
-2-
<PAGE>
entitled to vote shall at every meeting of the stockholders be entitled to one
vote for each share of stock registered in his name on the record of
stockholders. At all meetings of stockholders all matters, except as otherwise
provided by statute, the Certificate of Incorporation or these Bylaws, shall be
determined by the affirmative vote of the majority of shares present in person
or by proxy and entitled to vote on the subject matter. Voting at meetings of
stockholders need not be by written ballot.
SECTION 8. Record Date of Stockholders. The Board of Directors is
authorized to fix in advance a date not more than sixty (60) days nor less than
ten (10) days preceding the date of any meeting of stockholders, or the date for
the payment of any dividend, or the date for the allotment of rights, or the
date when any change or conversion or exchange of capital stock shall go into
effect, or as a record date for the determination of the stockholders entitled
to notice of, and to vote at, any such meeting, and any adjournment thereof, or
entitled to receive payment of any such dividend, or to any such allotment of
rights, or to exercise the rights in respect of any such change, conversion or
exchange of capital stock, and, in such case, such stockholders and only such
stockholders as shall be stockholders of record on the date so fixed shall be
entitled to such notice of, and to vote at, such meeting, and any adjournment
thereof, or to receive payment of such dividend, or to receive such allotment of
rights, or to exercise such rights, as the case may be, notwithstanding any
transfer of any stock on the books of the Corporation, after such record date
fixed as aforesaid.
SECTION 9. Conduct of Meetings. The Chief Executive Officer or any Vice
President designated by the Chief Executive Officer, shall preside at all
regular or special meetings of stockholders. To the maximum extent permitted by
law, such presiding person shall have the power to set procedural rules,
including but not limited to rules respecting the time allotted to stockholders
to speak, governing all aspects of the conduct of such meetings.
ARTICLE III.
DIRECTORS
SECTION 1. Number and Qualifications. On the effective date of these
Bylaws, the Board of Directors shall consist of three (3) directors and
thereafter shall consist of such number as may be fixed from time to time by
resolution of the Board of Directors. The directors need not be stockholders.
SECTION 2. Election of Directors. The directors of the Corporation shall
be elected by the stockholders at the annual meeting of stockholders.
-3-
<PAGE>
SECTION 3. Removal and Resignation of Directors. Any director may be
removed from the Board of Directors only for cause by the holders of a majority
of the shares of capital stock entitled to vote, at any special meeting of the
stockholders called for that purpose, and the office of such director shall
forthwith become vacant.
Any director may resign at any time. Such resignation shall take effect at
the time specified therein, and if no time be specified, at the time of its
receipt by the Chief Executive Officer or Secretary. The acceptance of a
resignation shall not be necessary to make it effective, unless so specified
therein.
SECTION 4. Filling of Vacancies. Any vacancy among the directors,
occurring from any cause whatsoever, may be filled by a majority of the
remaining directors, though less than a quorum, or by a sole remaining director;
provided, however, that the stockholders removing any director may at the same
meeting fill the vacancy caused by such removal; and provided, further, that if
the directors fail to fill any such vacancy, the stockholders may at any special
meeting called for that purpose fill such vacancy. In case of any increase in
the number of directors, the additional directors may be elected by the
directors in office before such increase.
Any person elected to fill a vacancy shall hold office, subject to the
right of removal as hereinbefore provided, until the next annual election and
until his successor is elected and qualifies.
SECTION 5. Regular Meetings. Regular meetings of the Board of Directors
shall be held at such times as may be determined from time to time by resolution
of the Board of Directors.
SECTION 6. Special Meetings. Special meetings of the Board of Directors
may be called by the Chairman of the Board of Directors or by the Chief
Executive Officer.
SECTION 7. Notice and Place of Meetings. Meetings of the Board of
Directors may be held at the principal office of the Corporation or at such
other place as shall be stated in the notice of such meeting. Notice of any such
meeting shall be given in compliance with applicable law.
SECTION 8. Business Transacted at Meetings, etc. Any business may be
transacted and any corporate action may be taken at any regular or special
meeting of the Board of Directors at which a quorum shall be present, whether
such business or proposed action be stated in the notice of such meeting or not,
unless special notice of such business or proposed action shall be required by
statute.
SECTION 9. Quorum. A majority of the Board of Directors at any time in
office shall constitute a quorum. At any meeting at
-4-
<PAGE>
which a quorum is present, the vote of a majority of the members present shall
be the act of the Board of Directors unless the act of a greater number is
specifically required by law or by the Certificate of Incorporation or these
Bylaws. The members of the Board of Directors shall act only as the Board of
Directors and the individual members thereof shall not have any powers as such.
SECTION 10. Compensation. The directors shall not receive any salary for
their services as directors, but by resolution of the Board of Directors a fee
(payable in cash or securities, as determined by the Board of Directors) and
expenses of attendance may be allowed for attendance at each meeting. Nothing
herein contained shall preclude any director from serving the Corporation in any
other capacity, as an officer, agent or otherwise, and receiving compensation
therefor.
SECTION 11. Action Without a Meeting. Any action required or permitted to
be taken at any meeting of the Board of Directors, or of any committee of the
Board of Directors (each a "Committee"), may be taken without a meeting if all
members of the Board of Directors or Committee, as the case may be, consent
thereto in writing, and the writing or writings are filed with the minutes of
the proceedings of the Board of Directors.
SECTION 12. Meetings Through Use of Communications Equipment. Members of
the Board of Directors, or any Committee, shall, except as otherwise provided by
law, the Certificate of Incorporation or these Bylaws, may participate in a
meeting of the Board of Directors, or any Committee, by means of a conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and such participation shall
constitute presence in person at the meeting.
ARTICLE IV.
COMMITTEES
SECTION 1. Executive Committee. The Board of Directors may, by resolution
passed by a majority of the whole Board of Directors, designate one (1) or more
of their number to constitute an Executive Committee to hold office at the
pleasure of the Board of Directors, which Committee shall, during the intervals
between meetings of the Board of Directors, have and exercise all of the powers
of the Board of Directors in the management of the business and affairs of the
Corporation, subject only to such restrictions or limitations as the Board of
Directors may from time to time specify, or as limited by law, and shall have
power to authorize the seal of the Corporation to be affixed to all papers which
may require it.
Any member of the Executive Committee may be removed at any time, with or
without cause, by a resolution passed by a majority of the whole Board of
Directors.
-5-
<PAGE>
Any person ceasing to be a director shall ipso facto cease to be a member
of the Executive Committee.
Any vacancy in the Executive Committee occurring from any cause whatsoever
may be filled from among the directors by a resolution passed by a majority the
whole Board of Directors.
SECTION 2. Other Committees. Other Committees may be appointed by
resolution of the whole Board of Directors, which Committees shall hold office
for such time and have such powers and perform such duties as may from time to
time be assigned to them by the Board of Directors.
SECTION 3. Resignation. Any member of a Committee may resign at any time.
Such resignation shall be made in writing and shall take effect at the time
specified therein, or, if no time be specified, at the time of its receipt by
the Chief Executive Officer or Secretary. The acceptance of a resignation shall
not be necessary to make it effective unless so specified therein.
SECTION 4. Quorum. A majority of the members of a Committee shall
constitute a quorum. The act of a majority of the members of a Committee present
at any meeting at which a quorum is present shall be the act of such Committee.
The members of a Committee shall act only as a Committee, and the individual
members thereof shall not have any powers as such.
SECTION 5. Record of Proceedings, etc. Each Committee shall keep a record
of its proceedings, which record shall be filed with the minutes of the
proceedings of the Board of Directors.
SECTION 6. Organization, Meetings, Notices, etc. A Committee may hold its
meetings at the principal office of the Corporation, or at any other place which
a majority of the Committee may at any time agree upon. Each Committee may make
such rules as it may deem expedient for the regulation and carrying on of its
meetings and proceedings. Unless otherwise ordered by the Executive Committee,
any notice of a meeting of such Committee may be given by the Secretary of the
Corporation or by the chairman of the Committee and shall be sufficiently given
if mailed to each member at his residence or usual place of business at least
five (5) days before the day on which the meeting is to be held, or if sent to
him at such place by facsimile, telegraph or cable, or delivered personally or
by telephone not later than twenty-four (24) hours before the time at which the
meeting is to be held.
SECTION 7. Compensation. The members of any Committee shall be entitled to
such compensation as may be allowed them by resolution of the Board of
Directors.
-6-
<PAGE>
ARTICLE V.
OFFICERS
SECTION 1. Number. The officers of the Corporation shall be a Chief
Executive Officer, a President, one or more Vice Presidents, a Secretary, a
Treasurer, and such other officers as may be appointed in accordance with the
provisions of Section 3 of this Article V. The Board of Directors in its
discretion may also elect a Chairman of the Board of Directors.
SECTION 2. Election, Term of Office and Qualifications. The officers,
except as provided in Section 3 of this Article V, shall be appointed by the
Board of Directors. Each such officer shall, except as herein otherwise
provided, hold office until his successor shall have been chosen and shall
qualify. Except as otherwise provided by law, any number of offices may be held
by the same person.
SECTION 3. Other Officers. Other officers, including one or more
additional executive or senior vice presidents, vice presidents, assistant
secretaries or assistant treasurers, may from time to time be appointed by the
Board of Directors or Executive Committee, which other officers shall have such
powers and perform such duties as may be assigned to them by authority
appointing them.
SECTION 4. Removal of Officers. Any officer of the Corporation may be
removed from office, with or without cause, by a vote of a majority of the Board
of Directors.
SECTION 5. Resignation. Any officer of the Corporation may resign at any
time. Such resignation shall be in writing and shall take effect at the time
specified therein, and if no time be specified, at the time of its receipt by
the Chief Executive Officer or Secretary. The acceptance of a resignation shall
not be necessary in order to make it effective, unless so specified therein.
SECTION 6. Filling of Vacancies. A vacancy in any office shall be filled
by the Board of Directors or by the authority appointing the predecessor in such
office.
SECTION 7. Compensation. The compensation of the officers shall be fixed
by the Board of Directors, or by any Committee upon whom power in that regard
may be conferred by the Board of Directors.
SECTION 8. Chairman of the Board of Directors. The Chairman of the Board
of Directors shall be a director and shall preside at all meetings of the Board
of Directors at which he shall be present, and shall have such power and perform
such duties as may from time to time be assigned to him by the Board of
Directors.
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<PAGE>
SECTION 9. Chief Executive Officer and/or President. The Chief Executive
Officer and/or President shall, when present, preside at all meetings of the
stockholders. He shall have power to call special meetings of the stockholders
or of the Board of Directors at any time. He shall be the chief executive
officer of the Corporation, and shall have the general direction of the
business, affairs and property of the Corporation, and of its several officers,
and shall have and exercise all such powers and discharge such duties as usually
pertain to the office of Chief Executive Officer and/or President.
SECTION 10. Vice Presidents. The Vice Presidents, or any of them, shall,
subject to the direction of the Board of Directors, at the request of the Chief
Executive Officer and/or President or in his absence, or in case of his
inability to perform his duties for any cause, perform the duties of the Chief
Executive Officer and/or President, and, when so acting, shall have all the
powers of, and be subject to all restrictions upon, the Chief Executive Officer.
The Vice Presidents shall also perform such other duties as may be assigned to
them by the Board of Directors, and the Board of Directors may determine the
order of priority among the Vice Presidents.
SECTION 11. Secretary. The Secretary shall perform such duties as are
usually incident to the office of Secretary, or as may from time to time be
assigned to him by the Board of Directors, or as are prescribed by these Bylaws.
SECTION 12. Treasurer. The Treasurer shall perform such duties and have
powers as are usually incident to the office of Treasurer or may from time to
time be assigned to him by the Board of Directors.
ARTICLE VI.
CAPITAL STOCK
SECTION 1. Issuance of Certificates of Stock. Certificates of capital
stock shall be in such form as shall be approved by the Board of Directors. They
shall be numbered in the order of their issuance and shall be signed by (i) the
Chairman of the Board of Directors, the Chief Executive Officer, the President,
if any, or one of the Vice Presidents, and (ii) the Secretary or an Assistant
Secretary or the Treasurer or an Assistant Treasurer, and the seal of the
Corporation or a facsimile thereof shall be impressed or affixed or reproduced
thereon; provided, however, that where such certificates are signed by a
transfer agent or an assistant transfer agent or by a transfer clerk acting on
behalf of the Corporation and a registrar, the signature of any such officers of
the Corporation may be facsimile. In case any officer or officers who shall have
signed, or whose facsimile signature or signatures shall have been used on, any
such certificate or certificates shall cease to be such officer or officers of
the Corporation, whether because
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<PAGE>
of death, resignation or otherwise, before such certificate or certificates
shall have been delivered by the Corporation, such certificate or certificates
may nevertheless be issued and delivered as though the person or persons who
signed such certificate or certificates, or whose facsimile signature or
signatures shall have been used thereon, have not ceased to be such officer or
officers of the Corporation.
SECTION 2. Registration and Transfer of Shares. The name of each person
owning one or more shares of the capital stock of the Corporation shall be
entered on the books of the Corporation together with the number of shares held
by him, the numbers of the certificates covering such shares and the dates of
issuance of such certificates. The shares of stock of the Corporation shall be
transferable on the books of the Corporation by the holders thereof in person,
or by their duly authorized attorneys or legal representatives, on surrender and
cancellation of certificates for a like number of shares, accompanied by an
assignment or power of transfer endorsed thereon or attached thereto, duly
executed, and with such proof of the authenticity of the signature as the
Corporation or its agents may reasonably require. A record shall be made of each
transfer.
The Board of Directors may make other and further rules and regulations
concerning the transfer and registration of certificates for stock and may
appoint a transfer agent or registrar or both and may require all certificates
of stock to bear the signature of either or both.
SECTION 3. Lost, Stolen, Destroyed and Mutilated Certificates. The holder
of any stock of the Corporation shall immediately notify the Corporation of any
loss, theft, destruction or mutilation of the certificates therefor. The
Corporation may issue a new certificate of stock in the place of any certificate
theretofore issued by it alleged to have been lost, stolen, destroyed or
mutilated, and the Board of Directors may, in its discretion, require the owner
of the lost, stolen, destroyed or mutilated certificate, or his legal
representatives, to give the Corporation a bond, in such sum not exceeding
double the value of the stock and with such surety or sureties as they may
require, to indemnify it against any claim that may be made against it by reason
of the issuance of such new certificate and against all other liability in the
premises, or may remit such owner to such remedy or remedies as he may have
under the laws of the State of Delaware.
ARTICLE VII.
DIVIDENDS, SURPLUS, ETC.
SECTION 1. General Discretion of Directors. The Board of Directors shall
have power to fix and vary the amount to be set aside or reserved as working
capital of the Corporation, or as reserves, or for other proper purposes of the
Corporation, and,
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<PAGE>
subject to the requirements of the Certificate of Incorporation, to determine
whether any part of the surplus or net profits of the Corporation shall be
declared as dividends and paid to the stockholders, and to fix the date or dates
for the payment of any dividends.
ARTICLE VIII.
MISCELLANEOUS PROVISIONS
SECTION 1. Fiscal Year. The fiscal year of the Corporation shall commence
on the first day of January and end on the last day of December, or such other
dates as may be determined by the Board of the Directors.
SECTION 2. Corporate Seal. The corporate seal shall be in such form as
approved by the Board of Directors and may be altered at their pleasure. The
corporate seal may be used by causing it or a facsimile thereof to be impressed
or affixed or reproduced or otherwise.
SECTION 3. Notices. Except as otherwise expressly provided, any notice
required by these Bylaws to be given shall be sufficient if given by depositing
the same in a post office or letter box in a sealed postpaid wrapper addressed
to the person entitled thereto at his address, as the same appears upon the
books of the Corporation, or transmitted by facsimile, telegraph or cable the
same to such person at such address; and such notice shall be deemed to be given
at the time it is mailed, transmitted by facsimile, telegraphed or cabled.
SECTION 4. Waiver of Notice. Any stockholder or director may at any time,
by writing or by facsimile, telegraph or cable, waive any notice required to be
given under these Bylaws, and if any stockholder or director shall be present at
any meeting his presence shall constitute a waiver of such notice.
SECTION 5. Checks, Drafts, etc. All checks, drafts or other orders for the
payment of money, notes or other evidences of indebtedness issued in the name of
the Corporation, shall be signed by such officer or officers, agent or agents of
the Corporation, and in such manner, as shall from time to time be designated by
resolution of the Board of Directors.
SECTION 6. Deposits. All funds of the Corporation shall be deposited from
time to time to the credit of the Corporation in such bank or banks, trust
companies or other depositories as the Board of Directors may select, and, for
the purpose of such deposit, checks, drafts, warrants and other orders for the
payment of money which are payable to the order of the Corporation, may be
endorsed for deposit, assigned and delivered by any officer of the Corporation,
or by such agents of the Corporation as the Board of Directors or the Chief
Executive Officer may authorize for that purpose.
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<PAGE>
SECTION 7. Voting Stock of Other Corporations. Except as otherwise ordered
by the Board of Directors or the Executive Committee, any executive officer of
the Corporation shall have full power and authority on behalf of the Corporation
to attend and to act and to vote at any meeting of the stockholders of any
corporation of which the Corporation is a stockholder and to execute a proxy to
any other person to represent the Corporation at any such meeting, and at any
such meeting, such executive officer or the holder of any such proxy, as the
case may be, shall possess and may exercise any and all rights and powers
incident to ownership of such stock and which rights and powers the Corporation
might have possessed and exercised if present. The Board of Directors or the
Executive Committee may from time to time confer like powers upon any other
person or persons.
SECTION 8. Indemnification of Officers and Directors. The Corporation
shall indemnify any and all of its directors, officers, trustees, employees or
agents in accordance with the Corporation's Certificate of Incorporation.
SECTION 9. Interested Directors; Quorum. No contract or transaction
between the Corporation and one or more of its directors or officers of a
corporation, partnership, association, or other organization or entity in which
one or more of its directors or officers are directors or officers, or have a
financial interest, shall be void or voidable solely for this reason, or solely
because the director or officer is present at or participates in the meeting of
the Board of Directors or Committee thereof which authorizes the contract or
transaction, or solely because his or their votes are counted for such purpose,
if: (1) the material facts as to his relationship or interest and as to the
contract or transaction are disclosed or are known to the Board of Directors or
the Committee, and the Board of Directors or Committee in good faith authorizes
the contract or transaction by the affirmative votes of a majority of the
disinterest directors, even though the disinterested directors be less than a
quorum; or (2) the material facts as to his relationship or interest and as to
the contract or transaction are disclosed or are known to the stockholders
entitled to vote thereon, and the contract or transaction is specifically
approved in good faith by vote of the stockholders; or (3) the contract or
transaction is fair as to the Corporation as of the time it is authorized,
approved or ratified by the Board of Directors, a committee thereof, or the
stockholders. Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the Board of Directors or of a Committee
which authorizes the contract or transaction.
ARTICLE IX.
AMENDMENTS
SECTION 1. Amendments. The Board of Directors shall have the power to
make, rescind, alter, amend and repeal these Bylaws,
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<PAGE>
provided, however, that the stockholders shall have power to rescind, alter,
amend or repeal any bylaws made by the Board of Directors, and to enact bylaws
which if so expressed shall not be rescinded, altered, amended or repealed by
the Board of Directors.
* * * * *
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<PAGE>
Exhibit 4.1
THIS CERTIFICATE IS TRANSFERABLE COMMON STOCK
IN NEW YORK, NEW YORK
PAR VALUE $.01
PER SHARE
CUSIP 456727-10-6
SEE REVERSE FOR CERTAIN DEFINITIONS
[VIGNETTE WITH HUMAN FIGURE]
INFORMATION HOLDINGS INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
This certifies that
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK OF THE PAR VALUE OF
$.01 PER SHARE OF
INFORMATION HOLDINGS INC. transferable on the books of the Corporation by the
holder hereof in person or by duly authorized attorney upon surrender of this
certificate properly endorsed. This certificate is not valid until countersigned
by the Transfer Agent and registered by the Registrar.
Witness the facsimile seal of the Corporation and the facsimile
signatures of its duly authorized officers.
Dated:
COUNTERSIGNED AND REGISTERED: Mason P. Slaine
State Street Bank & Trust Company
PRESIDENT AND CHIEF
TRANSFER AGENT EXECUTIVE OFFICER
AND REGISTRAR
BY Vincent A. Chippari
AUTHORIZED SIGNATURE
SECRETARY
<PAGE>
INFORMATION HOLDINGS INC.
The Corporation will furnish without charge to each stockholder who so
requests the powers, designations, preferences and relative, participating,
optional or other special rights of each class of stock or series thereof and
the qualifications, limitations or restrictions of such preferences and/or
rights. Such request may be made to the office of the Secretary of the
Corporation or to the Transfer Agent.
The following abbreviations, when used in the inscription of the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM -- as tenants in common UNIF GIFT MIN ACT -- Custodian
-----------------------
TEN ENT -- as tenants by the (Cust) (Minor)
entireties
JT TEN -- as joint tenants with under the Uniform Gifts to Minors Act
rights of survivorship -------------------------------------
and not as tenants in (State)
common
Additional abbreviations may also be used though not in the above list.
For Value Received, _____________________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
INDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
- --------------------------------------------------------------------------------
shares
- -------------------------------------------------------------------------
of the capital stock represented by the within certificate, and do hereby
irrevocably constitute and appoint
Attorney
- -----------------------------------------------------------------------
to transfer the said stock on the books of the within-named Corporation with
full power of substitution in the premises.
Dated:
----------------------------
--------------------------------------
NOTICE: THE SIGNATURE OF THIS
AGREEMENT MUST CORRESPOND WITH THE
NAME AS WRITTEN UPON THE FACE OF
THE CERTIFICATE IN EVERY PARTICULAR
WITHOUT ALTERATION OR ENLARGEMENT OR
ANY CHANGE WHATEVER.
<PAGE>
Exhibit 5.1
WILLKIE FARR & GALLAGHER
787 Seventh Avenue
New York, New York 10019-2099
July 16, 1998
Information Holdings Inc.
250 Dodge Avenue
East Haven, Connecticut 06512
Ladies and Gentlemen:
You have requested our opinion, as counsel for Information Holdings Inc., a
Delaware corporation (the "Corporation"), in connection with the Registration
Statement on Form S-1, as amended (the "Registration Statement"), under the
Securities Act of 1933, as amended (the "1993 Act"), filed by the Corporation
with the Securities and Exchange Commission.
The Registration Statement relates to an offering of up to 4,250,000
shares (the "Shares") of Common Stock, par value $.01 per share, of the
Corporation (the "Offering"), of which up to 637,500 Shares are subject to a
30-day over-allotment option granted by the Corporation to the underwriters.
In that connection, we have examined drafts of the Corporation's
Certificate of Incorporation and Bylaws and of the underwriting agreement
providing for the issuance and sale of Shares, the applicable resolutions of the
Corporation's Board of Directors and the Registration Statement. We have also
examined such other documents, corporate records, certificates and instruments
relating to the Corporation as we have deemed relevant and necessary to the
formation of the opinion hereinafter set forth. In such examination, we have
assumed the genuineness and authenticity of all documents examined by us and all
signatures thereon, the legal capacity of all persons executing such documents,
the conformity to originals of all copies of documents submitted to us and the
conformity in all material respects of final documents with drafts thereof.
<PAGE>
Information Holdings, Inc.
July 16, 1998
Page 2
Based upon and subject to the foregoing, we are of the opinion that the
Shares, when duly sold, issued and paid for in accordance with the terms of the
Prospectus included as part of the Registration Statement, will be duly
authorized, validly issued, fully paid and non-assessable.
We hereby consent to (i) the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our firm under the caption "Legal
Matters" in the Registration Statement and (ii) the incorporation by reference
of this opinion in an abbreviated registration statement filed pursuant to Rule
462(b) under the 1993 Act, in connection with the Offering, to register
additional Shares in an amount and at a price that together represent no more
than 20% of the maximum aggregate offering price set forth in the Registration
Statement.
Very truly yours,
/s/ Willkie Farr & Gallagher
----------------------------
<PAGE>
Exhibit 10.1
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of this 31st day of December, 1996,
between INFORMATION VENTURES LLC, a limited liability company (the "Company") ,
and Mason Slaine (the "Executive").
R E C I T A L S:
WHEREAS, the Company recognizes that the future growth,
profitability and success of the Company's business will be substantially and
materially enhanced by the employment of the Executive by the Company;
WHEREAS, the Company desires to employ the Executive and the
Executive has indicated his willingness to provide his services, on the terms
and conditions set forth herein;
NOW, THEREFORE, on the basis of the foregoing premises and in
consideration of the mutual covenants and agreements contained herein, the
parties hereto agree as follows:
Section 1. Employment. The Company hereby agrees to employ the
Executive and the Executive hereby accepts employment with the Company, on the
terms and subject to the conditions hereinafter set forth. Subject to the terms
and conditions contained herein, the Executive shall serve as a President and
Chief Executive officer of the. Company and, in such capacity, shall report
directly to the Board of Directors and shall have such duties as are typically
performed by a president and chief executive officer of a corporation, together
with such additional duties, commensurate with the Executive's position as a
President of the Company, as may be assigned to the Executive from time to time
by the Board of Directors of the Company (the "Board of Directors") . The
principal location of the Executive's employment shall be at the Company's
principal executive office located in the Greater New York Area, or such other
place that the Company and Slaine shall jointly deem appropriate to locate the
office, although the Executive understands and agrees that he may be required to
travel from time to time for business reasons.
Section 2. (a). Term. Unless terminated pursuant to ion 6 hereof,
the Executive's employment hereunder shall commence on the date hereof and shall
continue during the initial period ending forty-two (42) months after the date
hereof (the "Initial Term"). Thereafter, the Employment Term shall extend
automatically for consecutive periods of two (2) years unless either party shall
provide notice of termination not less than one hundred and twenty (120) days
prior to the end of the Employment Term. The Initial Term, together with any
extension pursuant to this Section 2, is referred to herein as the "Employment
Term."
<PAGE>
Section 3. Compensation.
(a) Salary. As compensation for the performance of the Executive's
services hereunder, the Company shall pay to the Executive a salary (the
"Salary") of $300,000 per annum with increases, as may be approved in writing by
the Board of Directors. The Salary shall be payable in accordance with the
payroll practices of the Company as the same shall exist from time to time. In
no event shall the Salary be decreased during the Employment Term.
(b) Bonus Plan. The Executive shall be eligible to receive an annual
cash bonus ("Bonus") which shall be determined by the Board of Directors.
(c) Benefits. In addition to the Salary and Bonus, if any, the
Executive shall be entitled to participate in health, insurance, pension,
automobile and other benefits provided to other senior executives of the Company
on terms no less favorable than those available to such senior executives of the
Company. The Executive shall also be entitled to the same number of vacation
days, holidays, sick days and other benefits as are generally allowed to other
senior executives of businesses of comparable size and geography as the Company,
including a leased car.
Section 4. Exclusivity. During the Employment Term, the Executive
shall devote his full time to the business of the Company, shall faithfully
serve the Company, shall in all respects conform to and comply with the lawful
and reasonable directions and instructions given to him by the Board of
Directors in accordance with the terms of this Agreement shall use his best
efforts to promote and serve the interests of the Company and shall not engage
in any other business activity, whether or not such activity shall be engaged in
for pecuniary profit, except that the Executive may (i) participate in the
activities of professional trade organizations related to the business of the
Company, (ii) engage in personal investing activities, provided that activities
set forth in these clauses W and (ii), either singly or in the aggregate, do not
interfere in any material respect with the services to be provided by the
Executive hereunder and (iii) engage in activities necessary to manage. his
interests in Progressive Grocer, provided such activities do not interfere in
any. material respect with the services to be provided by Executive hereunder.
Section 5. Reimbursement for Expenses. The Executive is authorized
to incur reasonable expenses in the discharge of the services to be performed
hereunder, including expenses for travel, entertainment, lodging and similar
items in accordance with the Company's expense reimbursement policy, as the same
may be modified by the Board of Directors from time to time. The Company shall
reimburse the Executive for all such proper expenses upon presentation by the
Executive of itemized accounts
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<PAGE>
of such expenditures in accordance with the financial policy of the Company, as
in effect from time to time.
Section 6. Termination and Default.
(a) Death. this Agreement shall automatically terminate upon the
death of the Executive and upon such event, the Executive's estate shall be
entitled to receive the amounts specified in Section 6(f) below as if
termination had occurred for Good Reason.
(b) Disability. If the Executive is unable to perform the duties
required of him under this Agreement because of illness, incapacity, or physical
or mental disability, this Agreement shall remain in full force and effect and
the Company shall pay all compensation required to be paid to the Executive
hereunder, unless the Executive is unable to perform the duties required of him
under this Agreement for an aggregate of 180 days (whether or not consecutive)
during any 12-month period during the term of this Agreement, in which event
this Agreement (other than Sections 6 (f), 7, 8, and 10 hereof), including, but
not limited to, the Company's obligations to pay any Salary or to provide any
privileges under this Agreement, shall terminate at the end of the 180 days of
complete disability.
(c) Just Cause. The Company may terminate the Executive's employment
during any term hereunder only for "Just Cause" as that term is defined below.
In the event of termination pursuant to this Section 6(c) for Just Cause, the
Company shall deliver to the Executive written notice setting forth the basis
for such termination, which notice shall specifically set forth the nature of
the Just Cause which is the reason for such termination. Termination of the
Executive's employment hereunder shall be effective upon delivery of such notice
of termination. For purposes of this Agreement, "Just Cause" shall mean: W the
Executive's failure (except where due to a disability contemplated by subsection
(b) hereof), neglect or refusal to perform the material duties of his position
hereunder which failure, neglect or refusal shall not have been corrected by the
Executive within 30 days of receipt by the Executive of written notice from the
Company of such failure, neglect or refusal, which notice shall specifically set
forth the nature of said failure, neglect or refusal, (ii) any willful or
intentional act of the Executive that has the effect of materially injuring the
business of the Company or its affiliates in any material respect; (iii)
conviction of the Executive for the commission of a felony; or (iv) the
commission by the Executive of an act of fraud or embezzlement against the
Company.
(d) Good Reason. The Executive may resign for "Good Reason" if he
resigns from his employment hereunder following a Substantial Breach (as
hereinafter defined) and such Substantial Breach shall (30) days of Executive of
notice shall Breach which "Substantial not have been corrected by the Company
within thirty
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<PAGE>
receipt by the Company of written notice from the occurrence of such Substantial
Breach, which specifically set forth the nature of the Substantial is the reason
for such resignation. The term Breach" means (i) such actions taken by the
Company or its Members which prevent the Executive from performing his
responsibilities hereunder; provided, however, that the Members' exercise of its
right to approve or not approve any transaction shall not be deemed to be an
action which would prevent the Executive from performing his responsibilities
hereunder; (ii) the failure by the Company to pay to the Executive the Salary
and Bonus, if any, in accordance with Sections 3 (a) and 3 (b) hereof; (iii) the
failure by the Company to allow the Executive to participate in the Company's
employee benefit plans generally available from time to time to senior
executives of the Company; or (iv) the failure of any successor to all or
substantially all of the business and/or assets of the Company to assume this
Agreement; provided, however, that the term "Substantial Breach" shall not
include a termination of the Executive's employment hereunder pursuant to
Sections 6(b) or (c) hereof. The date of termination of the Executive, s
employment under this Section 6(d) shall be the effective date of any
resignation specified in writing by the Executive, which shall not be less than
thirty (30) days after receipt by the Company of written notice of such
resignation, provided that such resignation shall not be effective pursuant to
this Section 6(d) and the Substantial Breach shall be deemed to have been cured
if such Substantial Breach is corrected by the Company during such 30-day
period.
(e) Change in Control. The Executive shall have the right to
immediately resign his employment in the event a "Change of Control". Change of
Control shall be deemed to have occurred if any party or affiliated parties,
other than the Executive, owns more units of the Company than Warburg Pincus
Ventures, L.P. and its affiliates.
(f) Payments. In the event that the Executive resigns without Good
Reason or the Executive's employment hereunder terminates for Just Cause, the
Company shall pay to the Executive all amounts accrued but unpaid hereunder
through the date of termination in respect of Salary, unused vacation or
unreimbursed expenses. In the event the Executive's employment hereunder is
terminated by the Executive with Good Reason, in addition to the amounts
specified in the foregoing sentence, (i) the Executive shall continue to receive
the Salary (less any applicable withholding or similar taxes) at the rate in
effect hereunder on the date of such termination periodically, in accordance
with the Company's prevailing payroll practices, for a period of twelve months
following the date of such termination (the "Severance Term") and (ii) the
Executive (and/or his covered dependents) shall continue to receive any health
or insurance benefits provided to him as of the date of such termination in
accordance with Section 3(c) hereof during the severance Term. In the event the
Executive accepts other employment or engages in his own business prior to the
last date of the Employment Term, the
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<PAGE>
Executive shall forthwith notify the Company and the Company shall be entitled
to set off from amounts due the Executive under this Section 6(f) the amounts
paid to the Executive in respect of such other employment or business activity.
Amounts owed by the Company in respect of the Salary or reimbursement for
expenses under the provisions of Section 5 hereof shall, except as otherwise set
forth in this Section 6(f), be paid promptly upon any termination. Upon any
termination of this Agreement, all of the rights, privileges and duties of the
Executive hereunder shall cease, except for his rights under this Section 6(f)
and his obligations under Sections 7, 8, 9, 10, and 11 hereunder.
Section 7. Non-Disclosure Non-Interference and Inventions.
(a) No Competing Employment. The Executive acknowledges that the
agreements and covenants contained in this Section 7 are essential to protect
the value of the Company's business and assets and by his current employment
with the Company and its subsidiaries, the Executive has obtained and will
obtain such knowledge, contacts, know-how, training and experience and there is
a substantial probability that such knowledge, know-how contacts, training and
experience could be used to the substantial advantage of a competitor of the
Company and to the Company's substantial detriment. Therefore, the Executive
agrees that for the period commencing on the date of this Agreement and ending
an the first anniversary of the termination of the Executive's employment
hereunder (such period is hereinafter referred to as the "Restricted Period"),
the Executive shall not participate or engage, directly or indirectly, for
himself or on behalf of or in conjunction with any person, partnership,
corporation or other entity, whether as an employee, agent, officer, director,
shareholder, partner, joint venturer, investor or otherwise, in any business
activities in the United States if such activity consists of any activity
undertaken or expressly contemplated to be undertaken by the Company or any of
its subsidiaries or by the Executive at any time during the Employment Term;
provided, however, that the foregoing shall not preclude the Executive from
owning less than 2% of the shares of a public company. Notwithstanding the
foregoing, this Section 7(a) shall not apply if the Executive resigns for Good
Reason pursuant to Section 6(d) .
(b) Nondisclosure of Confidential Information. The Executive, except
in connection with his employment hereunder, shall not disclose to any person or
entity or use, either during the Employment Term or at any time thereafter, any
information not in the public domain or generally known in the industry, in any
form, acquired by the Executive while employed by the Company or any predecessor
to the Company's business or, if acquired following the Employment Term, such
information which, to the Executive's knowledge, has been acquired, directly or
indirectly, from any person or entity owing a duty of confidentiality to the
Company or any of its subsidiaries or affiliates, relating to the
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<PAGE>
Company, its subsidiaries or affiliates. The Executive agrees and acknowledges
that all of such information, in any form, and copies and extracts thereof, are
and shall remain the sole and exclusive property of the Company, and upon
termination of his employment with the Company, the Executive shall return to
the Company the originals and all copies of any such information provided to or
acquired by the Executive in connection with the performance of his duties for
the Company, and shall return to the Company all files, correspondence and/or
other communications received, maintained and/or originated by the Executive
during the course of his employment.
(c) No Interference. During the Restricted Period, the Executive
shall not, whether for his own account or for the account of any other
individual, partnership, firm, corporation or other business organization (other
than the Company), directly or indirectly solicit, endeavor to entice away from
the Company or its subsidiaries, or otherwise directly interfere with the
relationship of the Company or its subsidiaries with any person who, to the
knowledge of the Executive, is employed by or otherwise engaged to perform
services for the Company or its subsidiaries (including, but not limited to, any
independent sales representatives or organizations) or who is, or was within the
then most recent twelve-month period, a customer or client, of the Company, its
predecessors or any of its subsidiaries. The placement of any general classified
or "help wanted" advertisements and/or general solicitations to the public at
large shall not constitute a violation of this Section 7(c) unless the
Executive's name is contained in such advertisements or solicitations.
(d) Inventions, etc. The Executive hereby sells, transfers and
assigns to the Company or to any person or entity designated by the Company all
of the entire right, title and interest of the Executive in and to all
inventions, ideas, disclosures and improvements, whether patented or unpatented,
and copyrightable material, made or conceived by the Executive, solely or
jointly, during his employment by the Company which relate to methods,
apparatus, designs, products, processes or devices, sold, leased, used or under
consideration or development by the Company, or which otherwise relate to or
pertain to the business, functions or operations of the Company or which arise
from the efforts of the Executive during the course of his employment for the
Company. The Executive shall communicate promptly and disclose to the Company,
in such form as the Company requests, all information, details and data
pertaining to the aforementioned inventions, ideas, disclosures and
improvements; and the Executive shall execute and deliver to the Company such
formal transfers and assignments and such other papers and documents as may be
necessary or required of the Executive to permit the Company or any person or
entity designated by the Company to file and prosecute the patent applications
and, as to copyrightable material, to obtain copyright thereof. Any invention
relating to the business of the Company and disclosed
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by the Executive within one year following the termination of his employment
with the Company shall be deemed to fall within the provisions of this paragraph
unless proved to have been first conceived and made following such termination.
Section 8. Injunctive Relief. Without intending to limit the
remedies available to the Company, the Executive acknowledges that a breach of
any of the covenants contained in Section 7 hereof may result in material
irreparable injury to the Company or its subsidiaries or affiliates for which
there is no adequate remedy at law, that it will not be possible to measure
damages for such injuries precisely and that, in the event of such a breach or
threat thereof, the Company shall be entitled to obtain a temporary restraining
order and/or a preliminary or permanent injunction, without the necessity of
proving irreparable harm or injury as a result of such breach or threatened
breach of Section 7 hereof, restraining the Executive from engaging in
activities prohibited by Section 7 hereof or such other relief as may be
required specifically to enforce any of the covenants in Section 7 hereof.
Section 9. Successors and Assigns; No Third-Party Beneficiaries.
This Agreement shall inure to the benefit of, and be binding upon, the
successors and assigns of each of the parties, including, but not limited to,
the Executive's heirs and the personal representatives of the Executive's
estate; provided, however, that neither party shall assign or delegate any of
the obligations created under this Agreement without the prior written consent
of the other party. Notwithstanding the foregoing, the Company shall have the
unrestricted right to assign this Agreement and to delegate all or any part of
its obligations hereunder to any of its subsidiaries or affiliates, but in such
event such assignee shall expressly assume all obligations of the Company
hereunder and the Company shall remain fully liable for the performance of all
of such obligations in the manner prescribed in this Agreement. Nothing in this
Agreement shall confer upon any person or entity not a party to this Agreement,
or the legal representatives of such person or entity, any rights or remedies of
any nature or kind whatsoever under or by reason of this Agreement.
Section 10. Waiver and Amendments. Any waiver, alteration, amendment
or modification of any of the terms of this Agreement shall be valid only if
made in writing and signed by the parties hereto; provided, however, that any
such waiver, alteration, amendment or modification is consented to on the
Company's behalf by the Board of Directors. No waiver by either of the parties
hereto of their rights hereunder shall be deemed to constitute a waiver with
respect to any subsequent occurrences or transactions hereunder unless such
waiver specifically states that it is to be construed as a continuing waiver.
Section 11. Severability and Governing Law. The Executive
acknowledges and agrees that the covenants set forth in
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Section 7 hereof are reasonable and valid in geographical and temporal scope and
in all other respects. If any of such covenants or such other provisions of this
Agreement are found to be invalid or unenforceable by a final determination of a
court of competent jurisdiction (a) the remaining terms and provisions hereof
shall be unimpaired and (b) the invalid or unenforceable term or provision shall
be deemed replaced by a term or provision that is valid and enforceable and that
comes closest to expressing the intention of the invalid or unenforceable term
or provision. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE
PERFORMED ENTIRELY WITHIN SUCH STATE.
Section 12. Notices.
(i) All communications under this Agreement shall be in writing and
shall be delivered by hand or mailed by overnight courier or by registered or
certified mail, postage prepaid:
(1) if to the Executive such address as the Executive may have furnished
the Company in writing,
(2) if to the Company, at c/o Warburg, Pincus Ventures, L.P., 466
Lexington Avenue, New York, New York 10017, marked for the attention of the
Board of Directors, or at such other address as it may have furnished in writing
to the Executive, or
(ii) Any notice so addressed shall be deemed to be given: if delivered by
hand, on the date of such delivery; if mailed by courier, on the first business
day following the date of such mailing; and if mailed by registered or certified
mail, on the third business day after the date of such mailing.
Section 13. Section Headings. The headings of the sections and
subsections of this Agreement are inserted for convenience only-and shall not be
deemed to constitute a part thereof, affect the meaning or interpretation of
this Agreement or of any term or provision hereof.
Section 14. Entire Agreement. This Agreement constitutes the entire
understanding and agreement of the parties hereto regarding the employment of
the Executive. This Agreement supersedes all prior negotiations, discussions,
correspondence, communications, understandings and agreements between the
parties relating to the subject matter of this Agreement.
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Section 15. Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original and all of which
together shall be considered one and the same agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first above written.
INFORMATION VENTURES LLC
BY WARBURG, PINCUS INFORMATION
VENTURES, INC.
MEMBER
By: /s/ David A. Tanner
-------------------------------
Name: David A. Tanner
Title: President
By: /s/ Mason Slaine
-------------------------------
MASON SLAINE
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Exhibit 10.2
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of January 19, 1998, between
INFORMATION VENTURES LLC, a limited liability company (the "Company"), and
Vincent A. Chippari (the "Executive").
R E C I T A L S:
WHEREAS, the Company recognizes that the future growth,
profitability and success of the Company's business will be substantially and
materially enhanced by the employment of the Executive by the Company;
WHEREAS, the Company desires to employ the Executive and the
Executive has indicated his willingness to provide his services, on the terms
and conditions set forth herein;
NOW, THEREFORE, on the basis of the foregoing premises and in
consideration of the mutual covenants and agreements contained herein, the
parties hereto agree as follows:
Section 1. Employment.
(a) Duties. The Company hereby agrees to employ the Executive and
the Executive hereby accepts employment with the Company, on the terms and
subject to the conditions hereinafter set forth. Subject to the terms and
conditions contained herein, the Executive shall serve as Executive Vice
President and Chief Financial Officer of the Company and, in such capacity,
shall report to the President of the Company and shall have such duties as are
typically performed by a Chief Financial Officer of a corporation, together with
such additional duties, commensurate with the Executive's position as Executive
Vice President and Chief Financial Officer of the Company, as may be assigned to
the Executive from time to time by the President or Board of Directors of the
Company (the "Board of Directors"). Notwithstanding anything herein to the
contrary, the Executive shall have no involvement in the business of the
Company's MicroPatent subsidiaries during the six-month period commencing on the
date hereof.
(b) Location. The principal location of the Executive's employment
initially shall be in Boston, Massachusetts. At the request of the Company, the
principal location of the Executive's employment shall be in Fairfield County,
Connecticut, or such other place that the Company and the Executive shall
mutually deem appropriate, provided that in the event the Executive relocates at
the Company's request, the Company shall reimburse the Executive for his
reasonable moving expenses incurred in connection with such relocation
(including, without limitation, customary fees or commissions payable to
Executive's real estate sales agent and up to one point for mortgage financing),
as well as up to $10,000 for miscellaneous
<PAGE>
expenses (including, without limitation, decorating expenses). The Executive
understands and agrees that he may be required to travel for business reasons.
Section 2. Term. Unless terminated pursuant to Section 6 hereof, the
Executive's employment hereunder shall commence on the date hereof and shall
continue during the initial period ending on the third anniversary of the date
hereof (the "Initial Term"). Thereafter, the Executive's term of employment
shall extend automatically for consecutive periods of one (1) year unless either
party shall provide notice of termination not less than one hundred and twenty
(120) days prior to the end of the Employment Term. The Initial Term, together
with any extension pursuant to this Section 2, is referred to herein as the
"Employment Term."
Section 3. Compensation.
(a) Salary. As compensation for the performance of the Executive's
services hereunder, the Company shall pay to the Executive a salary (the
"Salary") of $200,000 per annum, increased annually to the extent of any net
increase over the applicable one-year period in the Consumer Price Index for all
Urban Consumers (CPI-U), as published by the Bureau of Labor Statistics of the
U.S. Department of Labor. The Salary shall be payable in accordance with the
payroll practices of the Company as the same shall exist from time to time. In
no event shall the Salary be decreased during the Employment Term.
(b) Bonus Plan. The Executive shall be eligible to receive an annual
cash bonus ("Bonus") in an amount up to 50% of the Salary, based upon meeting
objectives mutually determined by the Executive and the Board of Directors,
pursuant to a written objective plan which would be prepared annually, provided,
however, that the Bonus for the first year of the Employment Term shall equal at
least $50,000.
(c) Benefits. In addition to the Salary and Bonus, if any, the
Executive shall be entitled to participate in health, insurance, pension and
other benefits provided to other senior executives of the Company on terms no
less favorable than those available to such senior executives of the Company.
The Executive shall also be entitled to the same number of vacation days,
holidays, sick days and other benefits as are generally allowed to other senior
executives of businesses of comparable size and geography as the Company.
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Section 4. Exclusivity. During the Employment Term, the Executive
shall devote his full time to the business of the Company, shall faithfully
serve the Company, shall in all respects conform to and comply with the lawful
and reasonable directions and instructions given to him by the President and
Board of Directors in accordance with the terms of this Agreement, shall use his
best efforts to promote and serve the interests of the Company and shall not
engage in any other business activity, whether or not such activity shall be
engaged in for pecuniary profit, except that the Executive may (i) participate
in the activities of professional trade organizations related to the business of
the Company and (ii) engage in personal investing activities, provided that
activities set forth in these clauses (i) and (ii), either singly or in the
aggregate, do not interfere in any material respect with the services to be
provided by the Executive hereunder.
Section 5. Reimbursement for Expenses. The Executive is authorized
to incur reasonable expenses in the discharge of the services to be performed
hereunder, including expenses for travel, entertainment, lodging and similar
items in accordance with the Company's expense reimbursement policy, as the same
may be modified by the Board of Directors from time to time. The Company shall
reimburse the Executive for all such proper expenses upon presentation by the
Executive of itemized accounts of such expenditures in accordance with the
financial policy of the Company, as in effect from time to time.
Section 6. Termination.
(a) Death. This Agreement shall automatically terminate upon the
death of the Executive, and upon such event, the Executive's estate shall be
entitled to receive the amounts specified in Section 6(e) below as if
termination had occurred without Cause (as defined below).
(b) Disability. If the Executive is fully unable to perform the
duties required of him under this Agreement because of illness, incapacity, or
physical or mental disability, this Agreement shall remain in full force and
effect and the Company shall pay all compensation required to be paid to the
Executive hereunder, unless the Executive is fully unable to perform the duties
required of him under this Agreement for an aggregate of 180 days (whether or
not consecutive) during any 12-month period during the term of this Agreement,
in which event this Agreement (other than Sections 6(e), 7, 8, 9, 10, 11 and 12
hereof), including, but not limited to, the Company's obligations to pay any
Salary or to provide any privileges under this Agreement, shall terminate at the
end of the 180 days of complete disability.
(c) Cause. The Company may terminate the Executive's employment
during the Employment Term only for "Cause" as that term is defined below. In
the event of termination pursuant to
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this Section 6(c) for Cause, the Company shall deliver to the Executive written
notice setting forth the basis for such termination, which notice shall
specifically set forth the nature of the Cause which is the reason for such
termination. Termination of the Executive's employment hereunder shall be
effective upon delivery of such notice of termination. For purposes of this
Agreement, "Cause" shall mean: (i) the Executive's failure (except where due to
a disability contemplated by Section 6(b) hereof), neglect or refusal to perform
the essential duties of his position hereunder which failure, neglect or refusal
shall not have been corrected by the Executive within 30 days of receipt by the
Executive of written notice from the Company of such failure, neglect or
refusal, which notice shall specifically and in detail set forth the nature of
said failure, neglect or refusal; (ii) any willful or intentional act of the
Executive that has the effect of injuring the reputation or business of the
Company or its affiliates in any material respect; (iii) any continued or
repeated absence from the Company, unless such absence is (A) approved or
excused by the Board of Directors or (B) is the result of the Executive's
illness, or incapacity (in which event the provisions of Section 6(b) hereof
shall control); (iv) use of illegal drugs by the Executive or repeated
drunkenness; (v) conviction of the Executive for the commission of a felony or
(vi) the commission by the Executive of an act of fraud or embezzlement against
the Company.
(d) Resignation. The Executive shall have the right to terminate his
employment at any time by giving notice of his resignation.
(e) Payments. In the event that the Executive resigns or the
Executive's employment hereunder terminates for Cause, the Company shall pay to
the Executive all amounts accrued but unpaid hereunder through the date of
termination in respect of Salary, unused vacation or unreimbursed expenses. In
the event the Executive's employment hereunder is terminated by the Company
without Cause, in addition to the amounts specified in the foregoing sentence,
(i) the Executive shall continue to receive the Salary (less any applicable
withholding or similar taxes) at the rate in effect hereunder on the date of
such termination periodically, in accordance with the Company's prevailing
payroll practices, for a period of one year following the date of such
termination (the "Severance Term") and (ii) the Executive (and/or his covered
dependents) shall continue to receive any health or insurance benefits provided
to him as of the date of such termination in accordance with Section 3(c) hereof
during the Severance Term. Amounts owed by the Company in respect of the Salary
or reimbursement for expenses under the provisions of Section 5 hereof shall,
except as otherwise set forth in this Section 6(e), be paid promptly upon any
termination. Upon any termination of this Agreement, all of the rights,
privileges and duties of the Executive hereunder shall cease, except for his
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rights under this Section 6(e) and his obligations under Sections 7, 8, 9, 10,
11 and 12 hereunder.
Section 7. Non-Disclosure, Non-Interference and Inventions.
(a) No Competing Employment. The Executive acknowledges that the
agreements and covenants contained in this Section 7 are essential to protect
the value of the Company's business and assets and by his current employment
with the Company and its subsidiaries, the Executive has obtained and will
obtain such knowledge, contacts, know-how, training and experience and there is
a substantial probability that such knowledge, know-how, contacts, training and
experience could be used to the substantial advantage of a competitor of the
Company and to the Company's substantial detriment. Therefore, the Executive
agrees that for the period commencing on the date of this Agreement and ending
on the first anniversary of the termination of the Executive's employment
hereunder (such period is hereinafter referred to as the "Restricted Period"),
the Executive shall not engage, directly or indirectly, for himself or on behalf
of any person or entity, in any business activities which directly compete with
the business of the Company; provided, however, that the foregoing shall not
preclude the Executive from owning less than 1% of the shares of a public
company.
(b) Nondisclosure of Confidential Information. The Executive, except
in connection with his employment hereunder, shall not disclose to any person or
entity or use, either during the Employment Term or at any time thereafter, any
proprietary information not in the public domain or generally known in the
industry, in any form, acquired by the Executive while employed by the Company
or any predecessor to the Company's business or, if acquired following the
Employment Term, such information which, to the Executive's knowledge, has been
acquired, directly or indirectly, from any person or entity owing a duty of
confidentiality to the Company or any of its subsidiaries or affiliates,
relating to the Company, its subsidiaries or affiliates. The Executive agrees
and acknowledges that all of such information, in any form, and copies and
extracts thereof, are and shall remain the sole and exclusive property of the
Company, and upon termination of his employment with the Company, the Executive
shall return to the Company the originals and all copies of any such information
provided to or acquired by the Executive in connection with the performance of
his duties for the Company, and shall return to the Company all files,
correspondence and/or other communications received, maintained and/or
originated by the Executive during the course of his employment.
(c) No Interference. During the Restricted Period, the Executive
shall not, whether for his own account or for the account of any other
individual, partnership, firm, corporation
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or other business organization (other than the Company), directly or indirectly
solicit, endeavor to entice away from the Company or its subsidiaries, or
otherwise directly interfere with the relationship of the Company or its
subsidiaries with, any person who, to the knowledge of the Executive, is
employed by or otherwise engaged to perform services for the Company or its
subsidiaries (including, but not limited to, any independent sales
representatives or organizations) or who is, or was within the then most recent
twelve-month period, a customer or client, of the Company, its predecessors or
any of its subsidiaries. The placement of any general classified or "help
wanted" advertisements and/or general solicitations to the public at large shall
not constitute a violation of this Section 7(c) unless the Executive's name is
contained in such advertisements or solicitations.
(d) Inventions, etc. The Executive hereby sells, transfers and
assigns to the Company or to any person or entity designated by the Company all
of the entire right, title and interest of the Executive in and to all
inventions, ideas, disclosures and improvements, whether patented or unpatented,
and copyrightable material, made or conceived by the Executive, solely or
jointly, during his employment by the Company which relate to methods,
apparatus, designs, products, processes or devices, sold, leased, used or under
consideration or development by the Company, or which otherwise relate to or
pertain to the business, functions or operations of the Company or which arise
from the efforts of the Executive during the course of his employment for the
Company. The Executive shall communicate promptly and disclose to the Company,
in such form as the Company requests, all information, details and data
pertaining to the aforementioned inventions, ideas, disclosures and
improvements; and the Executive shall execute and deliver to the Company such
formal transfers and assignments and such other papers and documents as may be
necessary or required of the Executive to permit the Company or any person or
entity designated by the Company to file and prosecute the patent applications
and, as to copyrightable material, to obtain copyright thereof. Any invention
relating to the business of the Company and disclosed by the Executive within
one year following the termination of his employment with the Company shall be
deemed to fall within the provisions of this paragraph unless proved to have
been first conceived and made following such termination.
Section 8. Injunctive Relief. Without intending to limit the
remedies available to the Company, the Executive acknowledges that a breach of
any of the covenants contained in Section 7 hereof may result in material
irreparable injury to the Company or its subsidiaries or affiliates for which
there is no adequate remedy at law, that it will not be possible to measure
damages for such injuries precisely and that, in the event of such a breach or
threat thereof, the Company shall be entitled to obtain a temporary restraining
order and/or a preliminary or permanent injunction, without the necessity of
proving
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<PAGE>
irreparable harm or injury as a result of such breach or threatened breach of
Section 7 hereof, restraining the Executive from engaging in activities
prohibited by Section 7 hereof or such other relief as may be required
specifically to enforce any of the covenants in Section 7 hereof.
Section 9. Representations and Warranties of the Executive. The
Executive represents and warrants to the Company as follows:
(a) This Agreement, upon execution and delivery by the Executive,
will be duly executed and delivered by the Executive and (assuming due execution
and delivery hereof by the Company) will be the valid and binding obligation of
the Executive enforceable against the Executive in accordance with its terms.
(b) Neither the execution and delivery of this Agreement nor the
performance of this Agreement in accordance with its terms and conditions by the
Executive (i) requires the approval or consent of any governmental body or of
any other person or (ii) conflicts with or results in any breach or violation
of, or constitutes (or with notice or lapse of time or both would constitute) a
default under, any agreement, instrument, judgment, decree, order, statute,
rule, permit or governmental regulation applicable to the Executive. Without
limiting the generality of the foregoing, except for the Separation Agreement
that the Executive has with the Thompson Corporation (a true and complete copy
of which has been furnished to the Company), the Executive is not a party to any
non-competition, non-solicitation, no hire or similar agreement that restricts
in any way the Executive's ability to engage in any business or to solicit or
hire the employees of any person.
The representations and warranties of the Executive contained in
this Section 9 shall survive the execution, delivery and performance of this
Agreement.
Section 10. Successors and Assigns; No Third-Party Beneficiaries.
This Agreement shall inure to the benefit of, and be binding upon, the
successors and assigns of each of the parties, including, but not limited to,
the Executive's heirs and the personal representatives of the Executive's
estate; provided, however, that neither party shall assign or delegate any of
the obligations created under this Agreement without the prior written consent
of the other party. Notwithstanding the foregoing, the Company shall have the
unrestricted right to assign this Agreement and to delegate all or any part of
its obligations hereunder to any of its subsidiaries or affiliates, but in such
event such assignee shall expressly assume all obligations of the Company
hereunder and the Company shall remain fully liable for the performance of all
of such obligations in the manner prescribed in this Agreement. Nothing in this
Agreement shall confer upon any person or entity not a party to this Agreement,
or the legal representatives of such person or
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<PAGE>
entity, any rights or remedies of any nature or kind whatsoever under or by
reason of this Agreement.
Section 11. Waiver and Amendments. Any waiver, alteration, amendment
or modification of any of the terms of this Agreement shall be valid only if
made in writing and signed by the parties hereto; provided, however, that any
such waiver, alteration, amendment or modification is consented to on the
Company's behalf by the Board of Directors. No waiver by either of the parties
hereto of their rights hereunder shall be deemed to constitute a waiver with
respect to any subsequent occurrences or transactions hereunder unless such
waiver specifically states that it is to be construed as a continuing waiver.
Section 12. Severability and Governing Law. The Executive
acknowledges and agrees that the covenants set forth in Section 7 hereof are
reasonable and valid in geographical and temporal scope and in all other
respects. If any of such covenants or such other provisions of this Agreement
are found to be invalid or unenforceable by a final determination of a court of
competent jurisdiction (a) the remaining terms and provisions hereof shall be
unimpaired and (b) the invalid or unenforceable term or provision shall be
deemed replaced by a term or provision that is valid and enforceable and that
comes closest to expressing the intention of the invalid or unenforceable term
or provision. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE
PERFORMED ENTIRELY WITHIN SUCH STATE.
Section 13. Notices.
(i) All communications under this Agreement shall be in writing and
shall be delivered by hand or mailed by overnight courier or by registered or
certified mail, postage prepaid:
(1) if to the Executive such address as the Executive may have furnished
the Company in writing,
(2) if to the Company, at c/o Warburg, Pincus Ventures, L.P., 466
Lexington Avenue, New York, New York 10017, marked for the attention of the
Board of Directors, or at such other address as it may have furnished in writing
to the Executive, or
(ii) Any notice so addressed shall be deemed to be given: if delivered by
hand, on the date of such delivery; if mailed by courier, on the first business
day following the date of such mailing; and if mailed by registered or certified
mail, on the third business day after the date of such mailing.
Section 14. Section Headings. The headings of the sections and
subsections of this Agreement are inserted for convenience only and shall not be
deemed to constitute a part thereof, affect the meaning or interpretation of
this Agreement or of any term or provision hereof.
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Section 15. Entire Agreement. This Agreement constitutes the entire
understanding and agreement of the parties hereto regarding the employment of
the Executive. This Agreement supersedes all prior negotiations, discussions,
correspondence, communications, understandings and agreements between the
parties relating to the subject matter of this Agreement.
Section 16. Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original and all of which
together shall be considered one and the same agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first above written.
INFORMATION VENTURES LLC
By: /s/ Mason Slaine
------------------------
Mason Slaine
President
By: /s/ Vincent A. Chippari
------------------------
Vincent A. Chippari
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Exhibit 10.3
EXECUTION VERSION
CRC PRESS LLC
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of June 10, 1998, between CRC PRESS
LLC, a Delaware limited liability company (the "Company"), and Dennis Buda (the
"Executive").
R E C I T A L S:
WHEREAS, the Company and the Executive entered into an Employment
Agreement dated as of January 13, 1997 (the "Original Agreement"); and
WHEREAS, in contemplation of an Initial Public Offering by the
Company's parent, the Company and the Executive desire to amend certain terms of
the Original Agreement and to embody in this Agreement all the term and
conditions of the Executive's employment by the Company as so amended;
NOW, THEREFORE, subject to Section 17 hereof, the parties hereby
agree that this Agreement supersedes and supplants the Original Agreement in all
respects and further agree as follows:
Section 1. Employment. The Company hereby agrees to employ the
Executive and the Executive hereby accepts employment with the Company, on the
terms and subject to the conditions hereinafter set forth. Subject to the terms
and conditions contained herein, the Executive shall serve as the President of
the Company and, in such capacity, shall report directly to the Board of
Directors (or in the event the Company has no Board of Directors, its operating
committee (collectively, the "Board of Directors")) and shall have such duties
as are typically performed by a president of a corporation, together with such
additional duties, commensurate with the Executive's position as a President of
the Company, as may be assigned to the Executive from time to time by the Board
of Directors. Subject to the reasonable requirements of the Board of Directors,
the Executive shall have the authority to hire employees for the Company. The
principal location of the Executive's employment shall be at the Company's
principal executive office located in Florida, although the Executive
understands and agrees that he may be required to travel from time to time for
business reasons.
Section 2. Term. Unless terminated pursuant to Section 6 hereof, the
Executive's employment, which commenced on January 13, 1997, shall continue
during the period ending on January 13, 2000 (the "Employment Term").
<PAGE>
Section 3. Compensation.
(a) Salary. As compensation for the performance of the Executive's
services hereunder, the Company shall pay to the Executive a salary (the
"Salary") of $175,000 per annum through December 31 ,1998 and of $200,000 per
annum beginning January 1, 1999, with increases, if any, as may be approved in
writing by the Board of Directors. In the event the Company acquires another
business, by purchase of assets or stock, merger, consolidation or otherwise,
for a purchase price in excess of $50,000,000, the Board of Directors will
consider increasing the Salary. The Salary shall be payable in accordance with
the payroll practices of the Company as the same shall exist from time to time.
In no event shall the Salary be decreased during the Employment Term.
(b) Additional Payments. (i) In the event the Company or the
Company's parent completes an underwritten public offering of its equity
securities (an "Initial Public Offering") on or prior to December 31, 1998, the
Company shall pay the Executive an incentive payment in the amount of (A)
$700,000 in cash and (B) the number of shares (the "Shares") of the class of
securities offered to the public in such Initial Public Offering obtained by
dividing $250,000 by the initial public offering price per share. Such incentive
payment, if any, shall be payable on the date of the closing of such Initial
Public Offering.
(ii) In the event the Company achieves the financial performance
objectives, established by the Board of Directors, for the year ended December
31, 1999, the Company shall pay the Executive a bonus in an amount equal to 50%
of the Executive's base salary in effect at the end of such year. Such bonus, if
any, shall be payable promptly after the Company's financial results for such
year are finally determined.
(c) Benefits. In addition to the Salary and such additional
payments, if any, the Executive shall be entitled to participate in health,
insurance and other benefits provided to other senior executives of the Company
on terms no less favorable than those available to such senior executives of the
Company. The Executive shall also be entitled to the same number of vacation
days, holidays, sick days and other benefits as are generally allowed to other
senior executives of the Company in accordance with the Company policy in effect
from time to time.
(d) Stock Options. In the event an Initial Public Offering is
completed during either (i) the Employment Term or (ii) the eighteen (18) month
period following the Company's termination of the Executive's employment without
Just Cause, provided that the registration statement relating to the Initial
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Public Offering was filed with the Securities and Exchange Commission within
twelve (12) months following the Company's termination of the Executive's
employment without Just Cause and the Executive was employed by the Company for
at least thirty six (36) months, the Company shall, effective as of the closing
of the Initial Public Offering grant to the Executive options to acquire the
number of shares or similar securities offered to the public in the Initial
Public Offering obtained by dividing Three Million ($3,000,000) by the initial
public offering price of such shares or other securities (the "IPO Options").
The IPO Options shall be exercisable for a period of five (5) years commencing
on the date of the completion of the Initial Public Offering (the "Exercise
Period") for a price per share equal to the initial public offering price, and
shall vest as follows:
(i) One-third of the IPO Options shall become exercisable on
December 31, 1999; and
(ii) With respect to the remaining two-thirds of the IPO Options:
(A) If the Initial Public Offering occurs on or prior to
January 13, 2000, the Executive shall be entitled to exercise at any time
during the Exercise Period the number of such IPO Options obtained by
multiplying the total number of such IPO Options by a fraction, the
numerator of which is the number of full months between January 1997 and
the month in which the Initial Public Offering is completed and the
denominator of which is thirty six (36). All other such IPO Options shall
thereafter vest in equal monthly installments during the period commencing
with the month following the month in which the Initial Public Offering is
completed and ending with January 13, 2000; or
(B) If the Initial Public Offering occurs after January 13,
2000, the Executive shall be entitled to exercise at any time during the
Exercise Period any or all of such IPO Options.
Section 4. Exclusivity. During the Employment Term, the Executive
shall devote his full time to the business of the Company, shall faithfully
serve the Company, shall in all respects conform to and comply with the lawful
and reasonable directions and instructions given to him by the Board of
Directors in accordance with the terms of this Agreement, shall use his best
efforts to promote and serve the interests of the Company and shall not engage
in any other business activity, whether or not such activity shall be engaged in
for pecuniary profit, except that the Executive may (i) participate in the
activities of professional trade organizations related to the business of the
Company and (ii) engage in personal investing activities, provided that
activities set forth in these clauses
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(i) and (ii), either singly or in the aggregate, do not interfere in any
material respect with the services to be provided by the Executive hereunder.
Section 5. Reimbursement for Expenses. The Executive is authorized
to incur reasonable expenses in the discharge of the services to be performed
hereunder, including expenses for travel, entertainment, lodging and similar
items in accordance with the Company's expense reimbursement policy, as the same
may be modified by the Board of Directors from time to time. The Company shall
reimburse the Executive for all such proper expenses upon presentation by the
Executive of itemized accounts of such expenditures in accordance with the
financial policy of the Company, as in effect from time to time.
Section 6. Termination and Default.
(a) Death. This Agreement shall automatically terminate upon the
death of the Executive and upon such event, the Executive's estate shall be
entitled to receive the amounts specified in Section 6(e) below.
(b) Disability. If the Executive is unable to perform the duties
required of him under this Agreement because of illness, incapacity, or physical
or mental disability, this Agreement shall remain in full force and effect and
the Company shall pay all compensation required to be paid to the Executive
hereunder, unless the Executive is unable to perform the duties required of him
under this Agreement for an aggregate of 120 days (whether or not consecutive)
during any 12-month period during the term of this Agreement, in which event
this Agreement (other than Sections 6(e), 7, 8, 9 and 13 hereof), including, but
not limited to, the Company's obligations to pay any Salary or to provide any
privileges under this Agreement, shall terminate.
(c) Just Cause. If the Executive's employment is terminated pursuant
to this Section 6(c), the Executive shall be entitled to receive the amounts
specified in Section 6(e) below. In the event of termination pursuant to this
Section 6(c) for Just Cause, the Company shall deliver to the Executive written
notice setting forth the basis for such termination, which notice shall
specifically set forth the nature of the Just Cause which is the reason for such
termination. Termination of the Executive's employment hereunder shall be
effective upon delivery of such notice of termination. For purposes of this
Agreement, "Just Cause" shall mean: (i) the Executive's failure (except where
due to a disability contemplated by subsection (b) hereof), neglect or refusal
to perform his duties hereunder which failure, neglect or refusal shall not have
been corrected by the Executive within 30 days of receipt by the Executive of
written notice from the Company of such failure, neglect or refusal, which
notice
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shall specifically set forth the nature of said failure, neglect or refusal,
(ii) any willful or intentional act of the Executive that has the effect of
injuring the reputation or business of the Company or its affiliates in any
material respect; (iii) any continued or repeated absence from the Company,
unless such absence is (A) approved or excused by the Board of Directors or (B)
is the result of the Executive's illness, disability or incapacity (in which
event the provisions of Section 6(b) hereof shall control); (iv) use of illegal
drugs by the Executive or repeated drunkenness; (v) conviction of the Executive
for the commission of a felony; or (vi) the commission by the Executive of an
act of fraud or embezzlement against the Company.
(d) Resignation. The Executive shall not have the right to resign
his employment with the Company during the Employment Term.
(e) Payments. In the event that the Executive's employment hereunder
terminates for any reason, the Company shall pay to the Executive all amounts
accrued but unpaid hereunder through the date of termination in respect of
Salary or unreimbursed expenses, and additional payments under Section 3(b), if
any. Notwithstanding the foregoing, the Executive shall not be entitled to
receive any additional payments under Section 3(b) if he is terminated for Just
Cause or if he resigns in violation of Section 6(d). In the event the
Executive's employment hereunder is terminated prior to January 13, 1999 by the
Company without Just Cause, in addition to the amounts specified in the first
sentence of this subsection (e), (i) the Executive shall continue to receive the
Salary (less any applicable withholding or similar taxes) at the rate in effect
hereunder on the date of such termination periodically, in accordance with the
Company's prevailing payroll practices, through January 13, 1999 (the "Severance
Term"), (ii) the Executive shall be entitled to receive any incentive payment
payable under Section 3(b)(i), (iii) the Executive shall continue to receive any
health or insurance benefits provided to him as of the date of such termination
in accordance with Section 3(c) hereof during the Severance Term. In the event
the Executive accepts other employment or engages in his own business prior to
the last date of the Employment Term, the Executive shall forthwith notify the
Company and the Company shall be entitled to set off from amounts due the
Executive under this Section 6(e) the amounts paid to the Executive in respect
of such other employment or business activity. In the event the Executive's
employment hereunder is terminated after January 13, 1999 for any reason, the
Company shall pay to the Executive only the amounts accrued but unpaid hereunder
through the date of termination in respect of Salary or unreimbursed expenses or
additional payments under Section 3(b), if any, provided that if such
termination by the Company occurs during 1999, any bonus accrued pursuant to
Section 3(b)(ii) shall be pro rated for that portion of the year
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during which the Executive was employed by the Company. Amounts owed by the
Company in respect of the Salary or reimbursement for expenses under the
provisions of Section 5 hereof shall, except as otherwise set forth in this
Section 6(e), be paid promptly upon any termination. Amounts owed by the Company
in respect of additional payments, if any, shall, except as otherwise set forth
in this Section 6(e), be paid promptly after the amount of such payment has been
determined in accordance with Section 3(b). Upon any termination of this
Agreement, all of the rights, privileges and duties of the Executive hereunder
shall cease, except for his rights under this Section 6(e) and his obligations
under Sections 7, 8, 9, and 13 hereunder.
Section 7. Secrecy and Non-Competition.
(a) No Competing Employment. The Executive acknowledges that the
agreements and covenants contained in this Section 7 are essential to protect
the value of the Company's business and assets and by his current employment
with the Company and its subsidiaries, the Executive has obtained and will
obtain such knowledge, contacts, know-how, training and experience and there is
a substantial probability that such knowledge, know-how, contacts, training and
experience could be used to the substantial advantage of a competitor of the
Company and to the Company's substantial detriment. Therefore, the Executive
agrees that for the period commencing on the date of this Agreement and ending
on January 13, 2002 (such period is hereinafter referred to as the "Restricted
Period"), the Executive shall not participate or engage, directly or indirectly,
for himself or on behalf of or in conjunction with any person, partnership,
corporation or other entity, whether as an employee, agent, officer, director,
shareholder, partner, joint venturer, investor or otherwise, in any publishing
business undertaken or expressly contemplated to be undertaken by the Company or
any of its subsidiaries or by the Executive at any time during the Employment
Term. Notwithstanding the foregoing, in the event the Executive's employment is
terminated by the Company prior to January 13, 1999 without Just Cause, the
Restricted Period shall mean the period ending on January 13, 1999.
(b) Nondisclosure of Confidential Information. The Executive, except
in connection with his employment hereunder, shall not disclose to any person or
entity or use, either during the Employment Term or at any time thereafter, any
information not in the public domain or generally known in the industry, in any
form, acquired by the Executive while employed by the Company or any predecessor
to the Company's business or, if acquired following the Employment Term, such
information which, to the Executive's knowledge, has been acquired, directly or
indirectly, from any person or entity owing a duty of confidentiality to the
Company or any of its subsidiaries or affiliates, relating to the
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Company, its subsidiaries or affiliates, including but not limited to
information regarding customers, vendors, authors, suppliers, trade secrets,
training programs, manuals or materials, technical information, contracts,
systems, procedures, mailing or subscription lists, know-how, trade names,
improvements, price lists, financial or other data (including the revenues,
costs or profits associated with any of the Company's products or services),
business plans, code books, invoices and other financial statements, computer
programs, software systems, databases, discs and printouts, plans (business,
technical or otherwise), customer and industry lists, correspondence, internal
reports, personnel files, sales and advertising material, telephone numbers,
names, addresses or any other compilation of information, written or unwritten,
which is or was used in the business of the Company or any subsidiaries or
affiliates thereof. The Executive agrees and acknowledges that all of such
information, in any form, and copies and extracts thereof, are and shall remain
the sole and exclusive property of the Company, and upon termination of his
employment with the Company, the Executive shall return to the Company the
originals and all copies of any such information provided to or acquired by the
Executive in connection with the performance of his duties for the Company, and
shall return to the Company all files, correspondence and/or other
communications received, maintained and/or originated by the Executive during
the course of his employment.
(c) No Interference. During the Restricted Period, the Executive
shall not, whether for his own account or for the account of any other
individual, partnership, firm, corporation or other business organization (other
than the Company), directly or indirectly solicit, endeavor to entice away from
the Company or its subsidiaries, or otherwise directly interfere with the
relationship of the Company or its subsidiaries with any person who, to the
knowledge of the Executive, is employed by or otherwise engaged to perform
services for the Company or its subsidiaries (including, but not limited to, any
independent sales representatives or organizations) or who is, or was within the
then most recent twelve-month period, a customer or client, of the Company, its
predecessors or any of its subsidiaries. The placement of any general classified
or "help wanted" advertisements and/or general solicitations to the public at
large shall not constitute a violation of this Section 7(c) unless the
Executive's name is contained in such advertisements or solicitations.
(d) Inventions, etc. The Executive hereby sells, transfers and
assigns to the Company or to any person or entity designated by the Company all
of the entire right, title and interest of the Executive in and to all
inventions, ideas, disclosures and improvements, whether patented or unpatented,
and copyrightable material, made or conceived by the Executive,
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solely or jointly, during his employment by the Company which relate to methods,
apparatus, designs, products, processes or devices, sold, leased, used or under
consideration or development by the Company, or which otherwise relate to or
pertain to the business, functions or operations of the Company or which arise
from the efforts of the Executive during the course of his employment for the
Company. The Executive shall communicate promptly and disclose to the Company,
in such form as the Company requests, all information, details and data
pertaining to the aforementioned inventions, ideas, disclosures and
improvements; and the Executive shall execute and deliver to the Company such
formal transfers and assignments and such other papers and documents as may be
necessary or required of the Executive to permit the Company or any person or
entity designated by the Company to file and prosecute the patent applications
and, as to copyrightable material, to obtain copyright thereof. Any invention
relating to the business of the Company and disclosed by the Executive within
one year following the termination of his employment with the Company shall be
deemed to fall within the provisions of this paragraph unless proved to have
been first conceived and made following such termination.
Section 8. Injunctive Relief. Without intending to limit the
remedies available to the Company, the Executive acknowledges that a breach of
any of the covenants contained in Section 7 hereof may result in material
irreparable injury to the Company or its subsidiaries or affiliates for which
there is no adequate remedy at law, that it will not be possible to measure
damages for such injuries precisely and that, in the event of such a breach or
threat thereof, the Company shall be entitled to obtain a temporary restraining
order and/or a preliminary or permanent injunction, without the necessity of
proving irreparable harm or injury as a result of such breach or threatened
breach of Section 7 hereof, restraining the Executive from engaging in
activities prohibited by Section 7 hereof or such other relief as may be
required specifically to enforce any of the covenants in Section 7 hereof.
Section 9. Extension of Restricted Period. In addition to the
remedies the Company may seek and obtain pursuant to Section 8 of this
Agreement, the Restricted Period shall be extended by any and all periods during
which the Executive shall be found by a court to have been in violation of the
covenants contained in Section 7 hereof.
Section 10. Life Insurance. Executive agrees that the Company may
apply for, secure and own insurance on Executive's life (in amounts determined
by the Company). Executive agrees to cooperate fully in the application for and
securing of such insurance, including the submission by Executive to such
physical and other examinations, and the answering of such questions and
furnishing of such information by Executive, as may be required
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by the carrier(s) of such insurance. Notwithstanding anything to the contrary
contained herein, the Company shall not be required to obtain any insurance for
or on behalf of Executive.
Section 11. Successors and Assigns; No Third-Party Beneficiaries.
This Agreement shall inure to the benefit of, and be binding upon, the
successors and assigns of each of the parties, including, but not limited to,
the Executive's heirs and the personal representatives of the Executive's
estate; provided, however, that neither party shall assign or delegate any of
the obligations created under this Agreement without the prior written consent
of the other party. Notwithstanding the foregoing, the Company shall have the
unrestricted right to assign this Agreement and to delegate all or any part of
its obligations hereunder to any of its subsidiaries or affiliates, but in such
event such assignee shall expressly assume all obligations of the Company
hereunder and the Company shall remain fully liable for the performance of all
of such obligations in the manner prescribed in this Agreement. Nothing in this
Agreement shall confer upon any person or entity not a party to this Agreement,
or the legal representatives of such person or entity, any rights or remedies of
any nature or kind whatsoever under or by reason of this Agreement.
Section 12. Waiver and Amendments. Any waiver, alteration, amendment
or modification of any of the terms of this Agreement shall be valid only if
made in writing and signed by the parties hereto; provided, however, that any
such waiver, alteration, amendment or modification is consented to on the
Company's behalf by the Board of Directors. No waiver by either of the parties
hereto of their rights hereunder shall be deemed to constitute a waiver with
respect to any subsequent occurrences or transactions hereunder unless such
waiver specifically states that it is to be construed as a continuing waiver.
Section 13. Severability and Governing Law. The Executive
acknowledges and agrees that the covenants set forth in Section 7 hereof are
reasonable and valid in geographical and temporal scope and in all other
respects. If any of such covenants or such other provisions of this Agreement
are found to be invalid or unenforceable by a final determination of a court of
competent jurisdiction (a) the remaining terms and provisions hereof shall be
unimpaired and (b) the invalid or unenforceable term or provision shall be
deemed replaced by a term or provision that is valid and enforceable and that
comes closest to expressing the intention of the invalid or unenforceable term
or provision. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE
PERFORMED ENTIRELY WITHIN SUCH STATE.
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Section 14. Notices.
(i) All communications under this Agreement shall be in writing and
shall be delivered by hand or mailed by overnight courier or by registered or
certified mail, postage prepaid:
(1) if to the Executive, at 744 Peachtree Lane, Boca Raton, Florida
33486, or at such other address as the Executive may have furnished the Company
in writing,
(2) if to the Company, at 2000 Corporate Boulevard, N.W., Boca
Raton, Florida 33431, marked for the attention of the Board of Directors, or at
such other address as it may have furnished in writing to the Executive, or
(ii) Any notice so addressed shall be deemed to be given: if
delivered by hand, on the date of such delivery; if mailed by courier, on the
first business day following the date of such mailing; and if mailed by
registered or certified mail, on the third business day after the date of such
mailing.
Section 15. Section Headings. The headings of the sections and
subsections of this Agreement are inserted for convenience only and shall not be
deemed to constitute a part thereof, affect the meaning or interpretation of
this Agreement or of any term or provision hereof.
Section 16. Entire Agreement. This Agreement constitutes the entire
understanding and agreement of the parties hereto regarding the employment of
the Executive. This Agreement supersedes all prior negotiations, discussions,
correspondence, communications, understandings and agreements between the
parties relating to the subject matter of this Agreement.
Section 16. Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original and all of which
together shall be considered one and the same agreement.
Section 17. Effective Time. This Agreement shall become effective on
the date of closing of an Initial Public Offering. If an Initial Public Offering
does not close on or prior to December 31, 1998, this Agreement shall terminate
and the Original Agreement shall continue to govern the relationship between the
Company and the Executive.
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Section 18. Representations and Warranties. The Executive represents
and warrants to the Company as follows:
(a) Authorization, Validity, etc.
(i) This Agreement, upon execution and delivery by the Executive,
will be duly executed and delivered by the Executive and (assuming due execution
and delivery hereof by the Company) will be the valid and binding obligation of
the Executive enforceable against the Executive in accordance with its terms.
(ii) Neither the execution and delivery of this Agreement nor the
performance of this Agreement in accordance with its terms and conditions by the
Executive (A) requires the approval or consent of any governmental body or of
any other person or (B) conflicts with or results in any breach or violation of,
or constitutes (or with notice or lapse of time or both would constitute) a
default under, any agreement, instrument, judgment, decree, order, statute,
rule, permit or governmental regulation applicable to the Executive. Without
limiting the generality of the foregoing, the Executive is not a party to any
non-competition, non-solicitation, no hire or similar agreement that restricts
in any way the Executive's ability to engage in any business or to solicit or
hire the employees of any person.
(b) Suitability.
(i) The Executive (A) has been furnished and has carefully read a
current draft of the Registration Statement on Form S-1 relating to the Initial
Public Offering (the "Registration Statement"), (B) has the requisite knowledge
and experience in financial and business matters to be capable of evaluating the
merits and risks of an investment in the Shares, (C) is able to bear the
economic risks of such investment in the Shares for an indefinite period, (D) at
the present time could afford a complete loss of such investment and (E) is an
"accredited investor" (as defined in Rule 501 under the Securities Act of 1933,
as amended (the "Securities Act")).
(ii) The Executive and his attorneys, accountants and other
representatives and advisors (A) have been given an opportunity to ask, and
have, to the extent that the Executive has considered necessary, asked questions
of, and have received answers from, representatives of the Company and its
affiliates concerning the issuance of the Shares and the affairs of the Company
and its affiliates, and such questions, if any, have been answered to the full
satisfaction of the Executive and such persons; and (B) have been given or
afforded access to all documents, records, books and additional information
which the Executive and such persons have requested regarding such matters.
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<PAGE>
In accepting the Shares, the Executive is not relying on any oral information
furnished by or oral representation made by the Company or its affiliates or any
one acting on their behalf.
(c) Awareness.
(i) The Executive understands that the offer and sale of the Shares
has not been registered under the Securities Act or under any state securities
laws, in reliance upon exemptions therefrom for non-public offerings, and that
the Shares must be held indefinitely unless the sale thereof is subsequently
registered under the Securities Act and under certain state securities laws or
an exemption from such registration is available. The Executive understands that
the certificate or certificates for the Shares will bear a legend to such
effect.
(ii) The Executive agrees not to sell or otherwise transfer the
Shares unless they are registered under the Securities Act and under any
applicable securities laws, or an exemption from such registration is available.
The Executive understands that neither the Company nor any affiliate thereof is
required to register any Shares under the Securities Act, or take any steps to
perfect any exemption therefrom for any resale of the Shares pursuant to Rule
144 under the Securities Act, or otherwise. The Executive understands that there
may not be any public market for the Shares.
(iii) The Shares are being acquired solely for the Executive's own
account for investment, and not with a view to, or for resale in connection
with, any distribution of the Shares.
(iv) The Executive understands that no offering memorandum or sales
literature in connection with the issuance of the Shares has been filed with or
reviewed by the Securities and Exchange Commission or the state securities
administrators. No federal or state agency has passed upon the Shares or made
any finding or determination as to the merits thereof.
The representations and warranties of the Executive contained in
this Section 18 shall survive the execution, delivery and performance of this
Agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first above written.
CRC PRESS LLC
By: /s/ Mason Slaine
--------------------
Mason Slaine
Chairman
/s/ Dennis Buda
--------------------
Dennis Buda
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Exhibit 10.4
INFORMATION HOLDINGS INC.
1998 STOCK OPTION PLAN
* * *
ARTICLE I
Purpose
This 1998 Stock Option Plan (the "Plan") is intended to encourage
stock ownership in Information Holdings Inc. (the "Company") by employees and
directors of the Company and its subsidiaries in order to increase their
proprietary interest in the Company's success and to encourage such employees
and directors to remain in the service of the Company and its subsidiaries.
ARTICLE II
Certain Definitions
"Affiliate" of an entity shall mean any person or entity
controlling, controlled by or under common control with, such entity, where
"control" means the power to exercise a controlling influence over the
management or policies of such person or entity.
"Board" shall mean the Board of Directors of the Company.
"Change of Control" shall have the meaning set forth in Article
XI.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Committee" shall mean (i) the Stock Option Committee of the
Board which, if and to the extent practicable, shall be comprised of at least
two persons who qualify as "non-employee directors" under Rule 16b-3
promulgated by the Securities and Exchange Commission under the Securities
Exchange Act of 1934, and as "outside directors" under Section 162(m) of the
Code or (ii) if a Stock Option Committee has not been designated by the
Board, the Board.
"Common Stock" shall mean the voting common stock of the Company,
par value $0.01 per share.
<PAGE>
"Eligible Employee" shall mean any person employed on a full-time
basis by the Company or any of its subsidiaries, or any director of the
Company.
"Exercise Price" shall have the meaning assigned to such term in
Article VI hereof.
"ISO" shall mean an "incentive stock option" within the meaning
of Section 422 of the Code.
"Non-Qualified Option" shall mean an Option which is not an ISO.
"Option" shall mean any option granted under the Plan.
"Optionee" shall mean any holder of an Option.
"Option Agreement" shall mean the agreement between an Optionee
and the Company governing Options granted under the Plan, the forms of which
shall be consistent with the terms of the Plan but need not be identical.
"WP Ventures" shall mean Warburg, Pincus Ventures, L.P., any
Affiliate thereof, or any successor thereto.
ARTICLE III
Stock
The stock to be issued upon the exercise of Options shall be
shares of authorized but unissued Common Stock or previously issued shares of
Common Stock reacquired by the Company. The aggregate number of shares of
Common Stock as to which Options may be granted under the Plan at any time
shall not exceed [5% of the aggregate number of shares of Common Stock
outstanding on the closing date of the Company's initial public offering plus
the total number of authorized options], subject to adjustment from time to
time in accordance with the provisions of Article X hereof.
The number of shares of Common Stock available for grant of
Options at any time under the Plan shall be decreased by the sum of (i) the
number of shares with respect to which Options have been issued and have not
lapsed or been canceled, in each case, prior to such time and (ii) the number
of shares issued prior to such time upon exercise of Options. In the event
that
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any outstanding Option under the Plan lapses in accordance with Articles VII or
VIII hereof, prior to the end of the period during which Options may be granted,
the shares of Common Stock subject to the unexercised portion of such Option
shall again be available for the granting of Options under the Plan.
ARTICLE IV
Participation
Optionees shall be limited to Eligible Employees who have
received written notice of their selection to participate in the Plan and who
have entered into an Option Agreement. Each Option Agreement shall state the
total number of shares of Common Stock which are subject to the Option
granted. No Eligible Employee shall at any time have a right to be selected
as a participant.
ARTICLE V
Administration
The Plan shall be administered by the Committee which shall have
sole authority, in its absolute discretion: (a) to select which Eligible
Employees shall be granted Options; (b) to determine the number of Options to
be granted to such Eligible Employees and whether such Options shall be ISOs
or Non-Qualified Options; (c) to prescribe the form or forms of the Option
Agreements under the Plan; (d) to adopt, amend or rescind such rules and
regulations as, in its opinion, may be advisable for the administration of
the Plan; and (e) to construe and interpret the Plan, and all such rules and
regulations, and to make all other determinations deemed necessary or
advisable for the administration of the Plan. All decisions, determinations
and interpretations of the Committee made in good faith shall be final and
binding on all participants. Neither the Committee nor any member of the
Committee shall be liable for any act, omission, interpretation, construction
or determination made in connection with the Plan in good faith, and the
members of the Committee shall be entitled to indemnification and
reimbursement by the Company in respect of any claim, loss, damage or expense
(including, without limitation, counsel fees) arising therefrom to the full
extent permitted by Delaware law and under any directors' and officers'
liability insurance coverage which may be in effect from time to time.
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ARTICLE VI
Exercise Price
The Exercise Price per share of Common Stock covered by Options
granted under the Plan shall be established on or prior to the date of grant
by the Committee and shall be set forth in the Optionee's Option Agreement.
Payment shall be made in full upon exercise of the Option by delivering to
the Company at its principal executive offices cash or a certified check,
bank draft or money order payable to the order of the Company in the
aggregate amount of the Exercise Price, or in accordance with any cashless
exercise procedures adopted by the Committee from time to time.
ARTICLE VII
Vesting of Options
All Options granted under the Plan shall vest and become
exercisable in accordance with Article XI hereof and vesting schedules
established by the Committee at the time of grant.
ARTICLE VIII
Termination of Employment
Each Option will have a ten-year term from the date of grant,
subject to earlier termination upon termination of the Optionee's employment,
as determined by the Committee.
ARTICLE IX
Transferability
Options shall not be transferable, except by will or the laws of
descent and distribution. During the lifetime of the Optionee, Options shall
be exercisable only by the Optionee.
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ARTICLE X
Adjustment for Recapitalization, Merger, Etc.
The aggregate number of shares of Common Stock which may be
purchased pursuant to Options granted hereunder, the maximum number of shares
of Stock with respect to which Options may be granted to any single Optionee
during any calendar year, the number of shares of Common Stock covered by
each outstanding Option and the price per share thereof shall be
appropriately adjusted for any increase or decrease in the number of
outstanding shares of Common Stock resulting from a stock split or other
subdivision or consolidation of shares of Common Stock, or for other capital
adjustments or payments of stock dividends or distributions or other
increases or decreases in the outstanding shares of Common Stock effected
without receipt of consideration by the Company.
If the Company shall be sold, reorganized, consolidated, or
merged with another corporation, or if all or substantially all of the assets
of the Company shall be sold or exchanged (a "Corporate Event"), (i) each
Optionee shall, at the time of such Corporate Event, be entitled to receive
upon the exercise of his Option the same number and kind of shares of common
stock or the same amount of property, cash or other securities as he would
have been entitled to receive upon the occurrence of such Corporate Event as
if he had been, immediately prior to such event or on the record date
relating to such event, the holder of the number of shares of Common Stock
covered by his Option, and (ii) if the Company is not the surviving
corporation in such Corporate Event, the Company shall require the successor
corporation or parent thereof to assume such outstanding Options; provided,
however, that the Committee may, in its discretion and in lieu of requiring
such assumption, provide that all outstanding Options shall terminate as of
the consummation of such Corporate Event and accelerate the exercisability of
all outstanding Options to any date prior to the date of such Corporate Event.
The foregoing adjustments and the manner of application of the
foregoing provisions shall be determined by the Committee in its sole
discretion. Any such adjustment may provide for the elimination of any
fractional share which might otherwise become subject to an Option.
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ARTICLE XI
Change of Control
In the event of a Change of Control, each outstanding Option
under the Plan shall vest and become immediately exercisable in full as of
the date immediately preceding the date of such Change of Control, or such
other date, not later than the date of such Change of Control, as shall be
established by the Committee in its discretion.
For purposes of the Plan, a "Change of Control" shall mean:
(a) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) of 50% or more of
either (i) the then outstanding shares of Common Stock (the "Outstanding Company
Stock") or (ii) the combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in the election of
directors (the "Outstanding Company Voting Securities"); provided, however, that
for purposes of this subsection (a), the following acquisitions shall not
constitute a Change of Control: (i) any acquisition directly from the Company,
(ii) any acquisition by the Company, (iii) any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by the Company, (iv) any
acquisition by WP Ventures, or (v) any acquisition by any corporation pursuant
to a transaction which complies with clauses (i), (ii), and (iii) of subsection
(c) of this ARTICLE XI;
(b) Individuals who, as of the date hereof, constitute the Board
(the "Incumbent Board") cease for any reason to constitute at least a majority
of the Board; provided, however, that any individual becoming a director
subsequent to the effective date of the Plan whose election, or nomination for
election by the Company's stockholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial assumption of
office occurs as a result of an actual or threatened election contest with
respect to the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than the
Board; or
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(c) Consummation of a Corporate Event, unless, following such
Corporate Event, (i) all or substantially all of the individuals and entities
who were the beneficial owners, respectively, of the Outstanding Company Stock
and Outstanding Company Voting Securities immediately prior to such Corporate
Event beneficially own, directly or indirectly, more than 50% of, respectively,
the then outstanding shares of common stock and the combined voting power of the
then outstanding voting securities entitled to vote generally in the election of
directors of the corporation resulting from such Corporate Event (including,
without limitation, a corporation which as a result of such transaction owns the
Company or all or substantially all of the Company's assets either directly or
through one or more subsidiaries) upon consummation of such Corporate Event in
substantially the same proportions as their ownership, immediately prior to such
Corporate Event, of the Outstanding Company Stock and Outstanding Company Voting
Securities, as the case may be, (ii) no Person other than (1) WP Ventures, (2)
any corporation resulting from such Corporate Event, or (3) any employee benefit
plan (or related trust) of the Company or such corporation resulting from such
Corporate Event, beneficially owns, directly or indirectly, 50% or more of,
respectively, the then outstanding shares of common stock of the corporation
resulting from such Corporate Event or the combined voting power of the then
outstanding voting securities of such corporation except to the extent that such
ownership existed prior to the Corporate Event, and (iii) at least a majority of
the members of the board of directors of the corporation resulting from such
Corporate Event were members of the Incumbent Board at the time of the execution
of the initial agreement, or of the action of the Board, providing for such
Corporate Event; or
(d) Approval by the stockholders of the Company of a complete
liquidation or dissolution of the Company.
ARTICLE XII
Rights as a Stockholder
An Optionee or a transferee of an Option shall have no rights as
a stockholder with respect to any shares covered by his Option until he shall
have become the holder of record of such shares, and he shall not be entitled
to any dividends or distributions or other rights in respect of such shares
for which the record date is prior to the date on which he shall have become
the holder of record thereof.
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<PAGE>
ARTICLE XIII
Employment Rights
Nothing in the Plan or in any Option Agreement entered into
hereunder shall confer on any Optionee who is an employee of the Company or
any of its subsidiaries any right to continue in the employ of the Company or
any of its subsidiaries or to interfere in any way with the right of the
Company or any of its subsidiaries to terminate the Optionee's employment at
any time.
ARTICLE XIV
Transfer Restrictions
Appropriate legends shall be placed on the stock certificates
evidencing shares issued upon exercise of Options to reflect any relevant
transfer restrictions.
ARTICLE XV
Amendment or Discontinuance of Plan
The Board may from time to time, to the extent permitted by
applicable law, amend, suspend, or discontinue the Plan; provided, however,
that the Board may not take any action which would have a material adverse
effect on outstanding Options or any unexercised rights under outstanding
Options without the consent of the Optionee whose options would be adversely
affected thereby.
ARTICLE XVI
Cancellation of Options
The Committee, in its discretion, may, with the express written
consent of the Optionee to be affected, cancel any Option held by such
consenting Optionee hereunder.
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ARTICLE XVII
Miscellaneous
(a) The Company may, in its discretion, require that an
Optionee pay to the Company, at the time of exercise, such amount as the
Company deems necessary under law to satisfy its obligations to withhold
Federal, state, or local income or other taxes incurred by reason of the
exercise or the transfer of shares thereupon.
(b) Anything in the Plan or any Option Agreement entered into
pursuant to the Plan to the contrary notwithstanding, if, at any time specified
herein or therein for the making of any issue of shares of Common Stock, any
law, regulation or requirement of any governmental authority having jurisdiction
in the premises shall require either the Company or the Optionee (or the
Optionee's personal legal representative or transferee) to take any action in
connection with any such shares to be issued, the issue of such shares shall be
deferred until such action shall have been taken, provided, however, that the
Company shall not be required to take such action.
(c) The Plan shall be governed by and construed in accordance with
the laws of the State of Delaware without reference to the principles of
conflicts of law thereof.
(d) No provision of the Plan shall require the Company, for the
purpose of satisfying any obligations under the Plan, to purchase assets or
place any assets in a trust or other entity to which contributions are made or
otherwise to segregate any assets, nor shall the Company maintain separate bank
accounts, books, records or other evidence of the existence of a segregated or
separately maintained or administered fund for such purposes.
(e) Except as otherwise specifically provided in the relevant plan
document, no payment under the Plan or other amount required to be reported as
income for Federal income tax purposes shall be taken into account in
determining any benefits under any pension, retirement, profit sharing, group
insurance or other benefit plan of the Company.
(f) The expenses of administering the Plan shall be borne by the
Company. The proceeds received by the Company from
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the exercise of any Options pursuant to the Plan will be used for general
corporate purposes.
(g) Masculine pronouns and other words of masculine gender shall
refer to both men and women.
(h) The titles and headings of the sections in the Plan are for
convenience of reference only, and in the event of any conflict, the text of the
Plan, rather than such titles or headings, shall control.
ARTICLE XVIII
Special Provisions for ISOs
(a) ISOs must be granted within ten years from the date the Plan is
adopted, or the date the Plan is approved by the stockholders of the Company,
whichever is earlier.
(b) ISOs may not be exercised after the expiration of ten years from
the date such ISOs are granted.
(c) The Exercise Price of ISOs may not be less than the fair market
value of a share of Common Stock at the time such ISOs are granted, as
determined by the Committee. In such case, fair market value shall be determined
in a manner consistent with the rules and regulations under Section 422 of the
Code.
(d) ISOs may not be granted to a person who owns stock possessing
more than 10% of the total combined voting power of all classes of stock of the
Company or any "subsidiary corporation" of the Company within the meaning of
Section 424(f) of the Code.
(e) To the extent the aggregate fair market value of the Common
Stock with respect to which ISOs are exercisable for the first time by any
Optionee during a calendar year (under all plans of the Company and all
"subsidiary corporations" of the Company within the meaning of Section 424(f) of
the Code) exceeds $100,000, such ISOs shall be treated as Non-Qualified Options.
For purposes of the preceding sentence, the fair market value of the Common
Stock shall be determined by the Committee at the time the ISO covering such
stock is granted.
(f) No ISOs may be granted under the Plan unless the Plan has been
approved by the stockholders of the Company within
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12 months before or after the date of the Plan's adoption by the Board.
* * * *
<PAGE>
Exhibit 10.5
INFORMATION HOLDINGS INC.
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of August __, 1998, among
the investors listed on Schedule I hereto (the "Investors") and Information
Holdings Inc., a Delaware corporation (the "Company").
W I T N E S S E T H:
WHEREAS, the Investors or their affiliates are party to a
Registration Rights Agreement, dated December 2, 1996, with respect to equity
interests in Information Ventures LLC, a Delaware limited liability company
("Interests");
WHEREAS, pursuant to the terms of the Exchange Agreement, dated
as June 10, 1998, among the Company and the Investors and other parties named
therein (the "Exchange Agreement"), the Investors agreed to exchange their
Interests for shares of common stock, par value $.01, of the Company ("Common
Stock"); and
WHEREAS, pursuant to Section 2.1 of the Exchange Agreement, the
Company and the Investors desire to define the registration rights of the
Investors on the terms and subject to the conditions herein set forth.
NOW, THEREFORE, in consideration of the foregoing premises and
for other good and valuable consideration, the parties hereby agree as
follows:
1. DEFINITIONS
As used in this Agreement, the following terms have the respective
meaning set forth below:
Commission: shall mean the Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act;
Exchange Act: shall mean the Securities Exchange Act of 1934, as
amended;
Holder: shall mean any holder of Registrable Securities;
Initiating Holder: shall mean any Holder or Holders who in the
aggregate are Holders of more than 50% of the then outstanding Registrable
Securities;
Person: shall mean an individual, partnership, joint-stock company,
corporation, trust or unincorporated organization, and a government or agency or
political subdivision thereof;
<PAGE>
register, registered and registration: shall mean to a registration
effected by preparing and filing a registration statement in compliance with the
Securities Act (and any post-effective amendments filed or required to be filed)
and the declaration or ordering of effectiveness of such registration statement;
Registrable Securities: shall mean (A) shares of Common Stock
acquired pursuant to the Exchange Agreement, (B) any additional shares of Common
Stock acquired by the Investors and (C) any capital stock of the Company (or any
successor to the Company) issued as a dividend or other distribution with
respect to, or in exchange for or in replacement of, the shares of Common Stock
referred to in clause (A), (B) or (C);
Registration Expenses: shall mean all expenses incurred by the
Company in compliance with Sections 2(a) and (b) hereof, including, without
limitation, all registration and filing fees, printing expenses, fees and
disbursements of counsel for the Company, fees and expenses of one counsel for
all the Holders in an amount not to exceed $15,000, blue sky fees and expenses
and the expense of any special audits incident to or required by any such
registration (but excluding the compensation of regular employees of the
Company, which shall be paid in any event by the Company);
Security, Securities: shall have the meaning set forth in
Section 2(1) of the Securities Act;
Securities Act: shall mean the Securities Act of 1933, as amended;
and
Selling Expenses: shall mean all underwriting discounts and selling
commissions applicable to the sale of Registrable Securities and all fees and
disbursements of counsel for each of the Holders other than fees and expenses of
one counsel for all the Holders in an amount not to exceed $15,000.
2. REGISTRATION RIGHTS
(a) Requested Registration.
(i) Request for Registration. If the Company shall receive
from an Initiating Holder, at any time, a written request that the Company
effect any registration with respect to all or a part of the Registrable
Securities, the Company will:
(A) promptly give written notice of the proposed
registration, qualification or compliance to all other Holders; and
(B) as soon as practicable, use its diligent best
efforts to effect such registration (including,
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without limitation, the execution of an undertaking to file
post-effective amendments, appropriate qualification under
applicable blue sky or other state securities laws and appropriate
compliance with applicable regulations issued under the Securities
Act) as may be so requested and as would permit or facilitate the
sale and distribution of all or such portion of such Registrable
Securities as are specified in such request, together with all or
such portion of the Registrable Securities of any Holder or Holders
joining in such request as are specified in a written request
received by the Company within 10 business days after written notice
from the Company is given under Section 2(a)(i)(A) above; provided
that the Company shall not be obligated to effect, or take any
action to effect, any such registration pursuant to this Section
2(a):
(x) In any particular jurisdiction in which the
Company would be required to execute a general consent to
service of process in effecting such registration,
qualification or compliance, unless the Company is already
subject to service in such jurisdiction and except as may be
required by the Securities Act or applicable rules or
regulations thereunder;
(y) After the Company has effected two (2) such
registrations pursuant to this Section 2(a) and such
registrations have been declared or ordered effective and the
sales of such Registrable Securities shall have closed; or
(z) If the Registrable Securities requested by all
Holders to be registered pursuant to such request do not have
an anticipated aggregate public offering price (before any
underwriting discounts and commissions) of not less than
$15,000,000.
The registration statement filed pursuant to the request of the
Initiating Holders may, subject to the provisions of Section 2(a)(ii) below,
include other securities of the Company which are held by Persons who, by
virtue of agreements with the Company, are entitled to include their
securities in any such registration ("Other Stockholders").
The registration rights set forth in this Section 2 may be
assigned, in whole or in part, to any transferee of Registrable Securities
(who shall be bound by all obligations of this Agreement).
(ii) Underwriting. If the Initiating Holders intend to
distribute the Registrable Securities covered by
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their request by means of an underwriting, they shall so advise the
Company as a part of their request made pursuant to Section 2(a).
If Other Stockholders request such inclusion, the Holders shall
offer to include the securities of such Other Stockholders in the underwriting
and may condition such offer on their acceptance of the further applicable
provisions of this Section 2. The Holders whose shares are to be included in
such registration and the Company shall (together with all Other Stockholders
proposing to distribute their securities through such underwriting) enter into
an underwriting agreement in customary form with the representative of the
underwriter or underwriters selected for such underwriting by the Initiating
Holders and reasonably acceptable to the Company. Notwithstanding any other
provision of this Section 2(a), if the representative advises the Holders in
writing that marketing factors require a limitation on the number of shares to
be underwritten, the securities of the Company held by Other Stockholders shall
be excluded from such registration to the extent so required by such limitation.
If, after the exclusion of such shares, further reductions are still required,
the number of shares included in the registration by each Holder shall be
reduced on a pro rata basis (based on the number of shares held by such Holder),
by such minimum number of shares as is necessary to comply with such request. No
Registrable Securities or any other securities excluded from the underwriting by
reason of the underwriter's marketing limitation shall be included in such
registration. If any Other Stockholder who has requested inclusion in such
registration as provided above disapproves of the terms of the underwriting,
such person may elect to withdraw therefrom by written notice to the Company,
the underwriter and the Initiating Holders. The securities so withdrawn shall
also be withdrawn from registration. If the underwriter has not limited the
number of Registrable Securities or other securities to be underwritten, the
Company and officers and directors of the Company may include its or their
securities for its or their own account in such registration if the
representative so agrees and if the number of Registrable Securities and other
securities which would otherwise have been included in such registration and
underwriting will not thereby be limited.
(b) Company Registration.
(i) If the Company shall determine to register any of its
equity securities either for its own account or for the account of Other
Stockholders, other than a registration relating solely to employee
benefit plans, or a registration relating solely to a Commission Rule 145
transaction, or a registration on any registration form which does not
permit secondary sales or does not include substantially the same
information as would be required to be included in a registration
statement covering the sale of Registrable Securities, the Company will:
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(A) promptly give to each of the Holders a written
notice thereof (which shall include a list of the jurisdictions in
which the Company intends to attempt to qualify such securities
under the applicable blue sky or other state securities laws); and
(B) include in such registration (and any related
qualification under blue sky laws or other compliance), and in any
underwriting involved therein, all the Registrable Securities
specified in a written request or requests, made by the Holders
within fifteen (15) days after receipt of the written notice from
the Company described in clause (i) above, except as set forth in
Section 2(b)(ii) below. Such written request may specify all or a
part of the Holders' Registrable Securities.
(ii) Underwriting. If the registration of which the Company
gives notice is for a registered public offering involving an
underwriting, the Company shall so advise each of the Holders as a part of
the written notice given pursuant to Section 2(b)(i)(A). In such event,
the right of each of the Holders to registration pursuant to this Section
2(b) shall be conditioned upon such Holders' participation in such
underwriting and the inclusion of such Holders' Registrable Securities in
the underwriting to the extent provided herein. The Holders whose shares
are to be included in such registration shall (together with the Company
and the Other Stockholders distributing their securities through such
underwriting) enter into an underwriting agreement in customary form with
the representative of the underwriter or underwriters selected for
underwriting by the Company. Notwithstanding any other provision of this
Section 2(b), if the representative determines that marketing factors
require a limitation on the number of shares to be underwritten, the
representative may (subject to the allocation priority set forth below)
limit the number of Registrable Securities to be included in the
registration and underwriting to not less than twenty five percent (25%)
of the shares included therein (based on the number of shares). The
Company shall so advise all holders of securities requesting registration,
and the number of shares of securities that are entitled to be included in
the registration and underwriting shall be allocated in the following
manner: The securities of the Company held by officers, directors and
Other Stockholders of the Company (other than Registrable Securities and
other than securities held by holders who by contractual right demanded
such registration ("Demanding Holders")) shall be excluded from such
registration and underwriting to the extent required by such limitation,
and, if a limitation on the number of shares is still required, the number
of shares that may be included in the registration and underwriting by
each of the Holders and Demanding Holders shall be reduced,
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on a pro rata basis (based on the number of shares held by such Holder),
by such minimum number of shares as is necessary to comply with such
limitation. If any of the Holders or any officer, director or Other
Stockholder disapproves of the terms of any such underwriting, he may
elect to withdraw therefrom by written notice to the Company and the
underwriter. Any Registrable Securities or other securities excluded or
withdrawn from such underwriting shall be withdrawn from such
registration.
(c) Form S-3. The Company shall use its best efforts to qualify for
registration on Form S-3 for secondary sales. After the Company has
qualified for the use of Form S-3, the Investors shall have the right to
request an unlimited number of registrations on Form S-3 (such requests
shall be in writing and shall state the number of shares of Registrable
Securities to be disposed of and the intended method of disposition of
shares by such holders), subject only to the following:
(i) The Company shall not be required to effect a registration
pursuant to this Section 2(c) unless the Holder or Holders requesting
registration propose to dispose of shares of Registrable Securities having
an aggregate price to the public (before deduction of underwriting
discounts and expenses of sale) of more than $5,000,000.
(ii) The Company shall not be required to effect a
registration pursuant to this Section 2(c) within 180 days of the
effective date of the most recent registration pursuant to this Section 2
in which securities held by the requesting Holder could have been included
for sale or distribution.
(iii) The Company shall not be obligated to effect any
registration pursuant to this Section 2(c) in any particular jurisdiction
in which the Company would be required to execute a general consent to
service of process in effecting such registration, qualification or
compliance, unless the Company is already subject to service in such
jurisdiction and except as may be required by the Securities Act or
applicable rules or regulations thereunder.
The Company shall give written notice to all Holders of the
receipt of a request for registration pursuant to this Section 2(c) and shall
provide a reasonable opportunity for other Holders to participate in the
registration, provided that if the registration is for an underwritten
offering, the terms of Section 2(a)(ii) shall apply to all participants in
such offering. Subject to the foregoing, the Company will use its best
efforts to effect promptly the registration of all shares of Registrable
Securities on Form S-3 to the extent requested by the Holder or Holders
thereof for purposes of disposition.
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<PAGE>
(d) Expenses of Registration. All Registration Expenses incurred in
connection with any registration, qualification or compliance pursuant to this
Section 2 shall be borne by the Company, and all Selling Expenses shall be borne
by the Holders of the securities so registered pro rata on the basis of the
number of their shares so registered.
(e) Registration Procedures. In the case of each registration
effected by the Company pursuant to this Section 2, the Company will keep the
Holders, as applicable, advised in writing as to the initiation of each
registration and as to the completion thereof. At its expense, the Company will:
(i) keep such registration effective for a period of one
hundred twenty (120) days or until the Holders, as applicable, have
completed the distribution described in the registration statement
relating thereto, whichever first occurs; provided, however, that (A) such
120-day period shall be extended for a period of time equal to the period
during which the Holders, as applicable, refrain from selling any
securities included in such registration in accordance with provisions in
Section 2(i) hereof; and (B) in the case of any registration of
Registrable Securities on Form S-3 which are intended to be offered on a
continuous or delayed basis, such 120-day period shall be extended until
all such Registrable Securities are sold, provided that Rule 415, or any
successor rule under the Securities Act, permits an offering on a
continuous or delayed basis, and provided further that applicable rules
under the Securities Act governing the obligation to file a post-effective
amendment permit, in lieu of filing a post-effective amendment which (y)
includes any prospectus required by Section 10(a) of the Securities Act or
(z) reflects facts or events representing a material or fundamental change
in the information set forth in the registration statement, the
incorporation by reference of information required to be included in (y)
and (z) above to be contained in periodic reports filed pursuant to
Section 12 or 15(d) of the Exchange Act in the registration statement;
(ii) furnish such number of prospectuses and other documents
incident thereto as each of the Holders, as applicable, from time to time
may reasonably request;
(iii) notify each Holder of Registrable Securities covered by
such registration at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any
event as a result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material
fact or omits to state a material fact required to be stated therein or
necessary to make the
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statements therein not misleading in the light of the circumstances then
existing; and
(iv) furnish, on the date that such Registrable Securities are
delivered to the underwriters for sale, if such securities are being sold
through underwriters or, if such securities are not being sold through
underwriters, on the date that the registration statement with respect to
such securities becomes effective, (1) an opinion, dated as of such date,
of the counsel representing the Company for the purposes of such
registration, in form and substance as is customarily given to
underwriters in an underwritten public offering and reasonably
satisfactory to a majority in interest of the Holders participating in
such registration, addressed to the underwriters, if any, and to the
Holders participating in such registration and (2) a letter, dated as of
such date, from the independent certified public accountants of the
Company, in form and substance as is customarily given by independent
certified public accountants to underwriters in an underwritten public
offering and reasonably satisfactory to a majority in interest of the
Holders participating in such registration, addressed to the underwriters,
if any, and if permitted by applicable accounting standards, to the
Holders participating in such registration.
(f) Indemnification.
(i) The Company will indemnify each of the Holders, as
applicable, each of its officers, directors and partners, and each person
controlling each of the Holders, with respect to each registration which
has been effected pursuant to this Section 2, and each underwriter, if
any, and each person who controls any underwriter, against all claims,
losses, damages and liabilities (or actions in respect thereof) arising
out of or based on any untrue statement (or alleged untrue statement) of a
material fact contained in any prospectus, offering circular or other
document (including any related registration statement, notification or
the like) incident to any such registration, qualification or compliance,
or based on any omission (or alleged omission) to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading, or any violation by the Company of the Securities
Act or the Exchange Act or any rule or regulation thereunder applicable to
the Company and relating to action or inaction required of the Company in
connection with any such registration, qualification or compliance, and
will reimburse each of the Holders, each of its officers, directors and
partners, and each person controlling each of the Holders, each such
underwriter and each person who controls any such underwriter, for any
legal and any other expenses reasonably incurred in connection with
investigating and defending any such claim, loss, damage,
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liability or action, provided that the Company will not be liable in any
such case to the extent that any such claim, loss, damage, liability or
expense arises out of or is based on any untrue statement or omission
based upon written information furnished to the Company by the Holders or
underwriter and stated to be specifically for use therein.
(ii) Each of the Holders will, if Registrable Securities held
by it are included in the securities as to which such registration,
qualification or compliance is being effected, indemnify the Company, each
of its directors and officers and each underwriter, if any, of the
Company's securities covered by such a registration statement, each person
who controls the Company or such underwriter, each Other Stockholder and
each of their officers, directors, and partners, and each person
controlling such Other Stockholder against all claims, losses, damages and
liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact
contained in any such registration statement, prospectus, offering
circular or other document made by such Holder, or any omission (or
alleged omission) to state therein a material fact required to be stated
therein or necessary to make the statements by such Holder therein not
misleading, and will reimburse the Company and such Other Stockholders,
directors, officers, partners, persons, underwriters or control persons
for any legal or any other expenses reasonably incurred in connection with
investigating or defending any such claim, loss, damage, liability or
action, in each case to the extent, but only to the extent, that such
untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in such registration statement, prospectus, offering
circular or other document in reliance upon and in conformity with written
information furnished to the Company by such Holder and stated to be
specifically for use therein; provided, however, that the obligations of
each of the Holders hereunder shall be limited to an amount equal to the
net proceeds to such Holder of securities sold as contemplated herein.
(iii) Each party entitled to indemnification under this
Section 2(f) (the "Indemnified Party") shall give notice to the party
required to provide indemnification (the "Indemnifying Party") promptly
after such Indemnified Party has actual knowledge of any claim as to which
indemnity may be sought, and shall permit the Indemnifying Party to assume
the defense of any such claim or any litigation resulting therefrom;
provided that counsel for the Indemnifying Party, who shall conduct the
defense of such claim or any litigation resulting therefrom, shall be
approved by the Indemnified Party (whose approval shall not unreasonably
be withheld) and the Indemnified Party may participate in such defense at
such party's expense (unless the Indemnified
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Party shall have reasonably concluded that there may be a conflict of
interest between the Indemnifying Party and the Indemnified Party in such
action, in which case the fees and expenses of counsel shall be at the
expense of the Indemnifying Party), and provided further that the failure
of any Indemnified Party to give notice as provided herein shall not
relieve the Indemnifying Party of its obligations under this Section 2
unless the Indemnifying Party is materially prejudiced thereby. No
Indemnifying Party, in the defense of any such claim or litigation shall,
except with the consent of each Indemnified Party, consent to entry of any
judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim
or litigation. Each Indemnified Party shall furnish such information
regarding itself or the claim in question as an Indemnifying Party may
reasonably request in writing and as shall be reasonably required in
connection with the defense of such claim and litigation resulting
therefrom.
(iv) If the indemnification provided for in this Section 2(f)
is held by a court of competent jurisdiction to be unavailable to an
Indemnified Party with respect to any loss, liability, claim, damage or
expense referred to herein, then the Indemnifying Party, in lieu of
indemnifying such Indemnified Party hereunder, shall contribute to the
amount paid or payable by such Indemnified Party as a result of such loss,
liability, claim, damage or expense in such proportion as is appropriate
to reflect the relative fault of the Indemnifying Party on the one hand
and of the Indemnified Party on the other in connection with the
statements or omissions which resulted in such loss, liability, claim,
damage or expense, as well as any other relevant equitable considerations.
The relative fault of the Indemnifying Party and of the Indemnified Party
shall be determined by reference to, among other things, whether the
untrue (or alleged untrue) statement of a material fact or the omission
(or alleged omission) to state a material fact relates to information
supplied by the Indemnifying Party or by the Indemnified Party and the
parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission.
(v) Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution contained in the
underwriting agreement entered into in connection with any underwritten
public offering contemplated by this Agreement are in conflict with the
foregoing provisions, the provisions in such underwriting agreement shall
be controlling.
(vi) The foregoing indemnity agreement of the Company and
Holders is subject to the condition that,
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insofar as they relate to any loss, claim, liability or damage made in a
preliminary prospectus but eliminated or remedied in the amended
prospectus on file with the Commission at the time the registration
statement in question becomes effective or the amended prospectus filed
with the Commission pursuant to Commission Rule 424(b) (the "Final
Prospectus"), such indemnity or contribution agreement shall not inure to
the benefit of any underwriter or Holder if a copy of the Final Prospectus
was furnished to the underwriter and was not furnished to the person
asserting the loss, liability, claim or damage at or prior to the time
such action is required by the Securities Act.
(g) Information by the Holders. Each of the Holders holding
securities included in any registration shall furnish to the Company such
information regarding such Holder and the distribution proposed by such Holder
as the Company may reasonably request in writing and as shall be reasonably
required in connection with any registration, qualification or compliance
referred to in this Section 2.
(h) Rule 144 Reporting.
With a view to making available the benefits of certain rules and
regulations of the Commission which may permit the sale of restricted
securities to the public without registration, the Company agrees to:
(i) make and keep public information available as those terms
are understood and defined in Rule 144 under the Securities Act ("Rule
144"), at all times from and after ninety (90) days following the
effective date of the first registration under the Securities Act filed by
the Company for an offering of its securities to the general public;
(ii) use its best efforts to file with the Commission in a
timely manner all reports and other documents required of the Company
under the Securities Act and the Exchange Act at any time after it has
become subject to such reporting requirements; and
(iii) so long as the Holder owns any Registrable Securities,
furnish to the Holder upon request, a written statement by the Company as
to its compliance with the reporting requirements of Rule 144 (at any time
from and after ninety (90) days following the effective date of the first
registration statement filed by the Company for an offering of its
securities to the general public), and of the Securities Act and the
Exchange Act (at any time after it has become subject to such reporting
requirements), a copy of the most recent annual or quarterly report of the
Company, and such other reports and documents so filed as the Holder may
reasonably request in availing itself of any
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<PAGE>
rule or regulation of the Commission allowing the Holder to sell any such
securities without registration.
(i) Termination. The registration rights set forth in this Section 2
shall not be available to any Holder if, in the opinion of counsel to the
Company, all of the Registrable Securities then owned by such Holder could be
sold in any 90-day period pursuant to Rule 144 (without giving effect to the
provisions of Rule 144(k)).
3. INTERPRETATION OF THIS AGREEMENT
(a) Directly or Indirectly. Where any provision in this Agreement
refers to action to be taken by any Person, or which such Person is prohibited
from taking, such provision shall be applicable whether such action is taken
directly or indirectly by such Person.
(b) Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York applicable to contracts
made and to be performed entirely within such State.
(c) Section Headings. The headings of the sections and subsections
of this Agreement are inserted for convenience only and shall not be deemed to
constitute a part thereof.
4. MISCELLANEOUS
(a) Notices.
(i) All communications under this Agreement shall be in
writing and shall be delivered by hand or mailed by overnight courier or
by registered or certified mail, postage prepaid:
(A) if to the Company, to Information Holdings Inc.,
23 Old Kings Highway South, Darien, Connecticut 06820,
Attention: Mason P. Slaine, or at such other address as it may
have furnished in writing to the Investors;
(B) if to the Investors, at the address listed on
Schedule I hereto, or at such other address as may have been
furnished the Company in writing.
(ii) Any notice so addressed shall be deemed to be given: if
delivered by hand, on the date of such delivery; if mailed by courier, on
the first business day following the date of such mailing; and if mailed
by registered or certified mail, on the third business day after the date
of such mailing.
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<PAGE>
(b) Reproduction of Documents. This Agreement and all documents
relating thereto, including, without limitation, any consents, waivers and
modifications which may hereafter be executed may be reproduced by the Investor
by any photographic, photostatic, microfilm, microcard, miniature photographic
or other similar process and the Investors may destroy any original document so
reproduced. The parties hereto agree and stipulate that any such reproduction
shall be admissible in evidence as the original itself in any judicial or
administrative proceeding (whether or not the original is in existence and
whether or not such reproduction was made by the Investors in the regular course
of business) and that any enlargement, facsimile or further reproduction of such
reproduction shall likewise be admissible in evidence.
(c) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the
parties.
(d) Entire Agreement; Amendment and Waiver. This Agreement
constitutes the entire understanding of the parties hereto and supersedes all
prior understanding among such parties. This Agreement may be amended, and the
observance of any term of this Agreement may be waived, with (and only with) the
written consent of the Company and the Investors holding a majority of the then
outstanding Registrable Securities.
(e) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which
together shall be considered one and the same agreement.
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IN WITNESS WHEREOF, the undersigned have executed this Agreement as
of the date first set forth above.
INFORMATION HOLDINGS INC.
By:
-----------------------------
INVESTORS:
WARBURG, PINCUS VENTURES, L.P.
By Warburg, Pincus & Co.
Its General Partner
By:
------------------------------
David E. Libowitz
General Partner
---------------------------------
Mason P. Slaine
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<PAGE>
SCHEDULE I
Name and Address
of Investor
Warburg, Pincus Ventures, L.P.
466 Lexington Avenue
New York, New York 10017
Attn: David E. Libowitz
Mason P. Slaine
c/o Information Holdings Inc.
23 Old Kings Highway South
Darien, Connecticut 06820
<PAGE>
Exhibit 10.6
ASSET PURCHASE AGREEMENT
BY AND AMONG
THE TIMES MIRROR COMPANY,
CRC PRESS, INC.
AND
INFORMATION VENTURES LLC
dated as of
December 4, 1996
<PAGE>
TABLE OF CONTENTS
RECITALS.....................................................................1
ARTICLE ONE DEFINITIONS......................................................1
Section 1.01 Definitions...............................................1
Section 1.02 Interpretation of this Agreement..........................5
ARTICLE TWO PURCHASE AND SALE................................................6
Section 2.01 Purchase and Sale of the CRC Assets; Assumption
of the CRC Assumed Liabilities........................6
Section 2.02 Consideration............................................12
ARTICLE THREE CLOSING.......................................................12
Section 3.01 Closing..................................................12
ARTICLE FOUR CONDITIONS TO CLOSING..........................................13
Section 4.01 Conditions to All Parties' Obligations...................13
Section 4.02 Conditions to Buyer's Obligations........................14
Section 4.03 Conditions to Times Mirror's and Seller's Obligations....16
ARTICLE FIVE REPRESENTATIONS AND WARRANTIES OF TIMES MIRROR AND SELLER......17
Section 5.01 Organization and Authority of Times Mirror...............17
Section 5.02 Organization and Standing of Seller......................18
Section 5.03 No Breach................................................18
Section 5.04 Consents and Approvals...................................19
Section 5.05 Accounts Receivable; Inventory...........................19
Section 5.06 Equity Interests.........................................19
Section 5.07 Financial Statements.....................................20
Section 5.08 Nonforeign Certification.................................20
Section 5.09 Taxes....................................................20
Section 5.10 Assets Other than Real Property..........................20
Section 5.11 Real Property............................................21
Section 5.12 Intellectual Property....................................21
Section 5.13 Contracts................................................22
Section 5.14 Litigation; Decrees......................................24
Section 5.15 Employee and Related Matters; ERISA......................24
Section 5.16 Absence of Changes or Events.............................25
Section 5.17 Compliance with Applicable Laws..........................25
Section 5.18 Employee and Labor Relations.............................26
Section 5.19 Intercompany Services....................................26
Section 5.20 No Broker................................................26
ARTICLE SIX REPRESENTATIONS AND WARRANTIES OF BUYER.........................26
Section 6.01 Organization and Authority...............................26
Section 6.02 No Breach................................................27
Section 6.03 Consents and Approvals...................................27
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Section 6.04 Funds....................................................27
ARTICLE SEVEN COVENANTS OF TIMES MIRROR AND SELLER..........................27
Section 7.01 Access...................................................27
Section 7.02 Ordinary Conduct.........................................28
Section 7.03 Insurance................................................30
Section 7.04 Accounts Receivable......................................31
Section 7.05 Litigation...............................................31
Section 7.06 Confidentiality..........................................31
Section 7.07 Performance of Obligations by Seller After Closing Date..31
Section 7.08 Payment of Stay Bonuses and Performance
Bonuses..............................................31
ARTICLE EIGHT COVENANTS OF BUYER............................................32
Section 8.01 Confidentiality..........................................32
Section 8.02 No Additional Representations............................32
Section 8.03 Performance of Obligations by Buyer After Closing Date...32
Section 8.04 Waiver of Bulk Sales Compliance..........................32
ARTICLE NINE MUTUAL COVENANTS...............................................32
Section 9.01 Use of Times Mirror's Name and Times Mirror's Marks......33
Section 9.02 Cooperation..............................................33
Section 9.03 Publicity................................................33
Section 9.04 Antitrust Notification...................................33
Section 9.05 Records..................................................34
Section 9.06 Allocation of Purchase Price.............................35
Section 9.07 Buyer Representative.....................................35
Section 9.08 Sublease.................................................35
Section 9.09 Further Assurances.......................................36
ARTICLE TEN EMPLOYEE AND RELATED MATTERS....................................36
Section 10.01 Offers of Employment....................................36
Section 10.02 WARN Act and Other Severance Matters....................36
Section 10.03 Buyer's Benefit Responsibilities........................37
Section 10.04 Disposition of TM 401(k) Plan Interests.................37
Section 10.05 Continuation of Certain Welfare Benefits Through
Closing Date.........................................39
Section 10.06 No Modifications........................................39
Section 10.07 Mutual Cooperation......................................39
ARTICLE ELEVEN INDEMNIFICATION..............................................39
Section 11.01 Tax Indemnification by Times Mirror and
Seller...............................................39
Section 11.02 Other Indemnification by Times Mirror and Seller........39
Section 11.03 Indemnification by Buyer................................40
Section 11.04 Losses Net of Insurance.................................40
Section 11.05 Termination of Indemnification..........................40
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Section 11.06 Procedures Relating to Indemnification (Except Under
Section 11.01).......................................41
Section 11.07 Procedures Relating to Indemnification of Tax Claims....42
Section 11.08 Exclusive Remedy........................................42
ARTICLE TWELVE TERMINATION..................................................43
Section 12.01 Events of Termination...................................43
Section 12.02 Return of Confidential Information......................43
Section 12.03 Effects of Termination..................................43
Section 12.04 Survival of Representations.............................44
ARTICLE THIRTEEN MISCELLANEOUS..............................................44
Section 13.01 Expenses................................................44
Section 13.02 Attorneys' Fees.........................................44
Section 13.03 Amendments..............................................44
Section 13.04 Assignment..............................................45
Section 13.05 No Third-Party Beneficiaries............................45
Section 13.06 Notices.................................................45
Section 13.07 Counterparts............................................46
Section 13.08 Entire Agreement........................................46
Section 13.09 Severability............................................46
Section 13.10 Dispute Resolution; Equitable Enforcement...............46
Section 13.11 No Consequential or Punitive Damages....................47
Section 13.12 Transfer Taxes..........................................48
iii
<PAGE>
TABLE OF SCHEDULES
Schedule 2.01(b)(i)(A) Certain CRC Assumed Liabilities
Schedule 5.03 Breach or Default
Schedule 5.04 Consents and Approvals
Schedule 5.05 Departures from Credit Terms and Billing Cycle
Practices
Schedule 5.06 Equity Interests
Schedule 5.07 Financial Statements
Schedule 5.10 Liens
Schedule 5.11(b) Leased Property
Schedule 5.12(a) Intellectual Property
Schedule 5.12(b) Top 50 Publications
Schedule 5.12(c) Licenses
Schedule 5.12(d) Claims
Schedule 5.13(a) Employment, Independent Contractor and Consulting
Agreements
Schedule 5.13(b) Collective Bargaining Agreements
Schedule 5.13(c) Non-Competition Agreements
Schedule 5.13(d) Agreements with Officers, Directors or Employees
Schedule 5.13(e) Leases of Leased Property
Schedule 5.13(f) Personal Property Leases
Schedule 5.13(g) Supply and Service Agreements
Schedule 5.13(h) Indebtedness
Schedule 5.13(i) Guarantees
Schedule 5.13(j) Partnerships and Joint Ventures
Schedule 5.13(k) Author Contracts
Schedule 5.13(l) Other Agreements
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Schedule 5.14 Litigation; Decrees
Schedule 5.15(b) Noncompliance with ERISA
Schedule 5.16 Changes or Events
Schedule 5.17(a) Breaches of Permits
Schedule 5.18 Employee and Labor Matters
Schedule 5.19 Intercompany Services
Schedule 7.02 Exceptions to Ordinary Conduct
Schedule 7.03 Insurance
Schedule 10.01 Listed Employees
Schedule 10.02(b) Severance Benefits
TABLE OF EXHIBITS
Exhibit A Form of Mosby Transition Services Agreement
v
<PAGE>
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Agreement") is dated as of
December 4, 1996, by and among THE TIMES MIRROR COMPANY, a Delaware corporation
("Times Mirror"), CRC PRESS, INC., a Florida corporation and a wholly owned
subsidiary of Times Mirror ("Seller") and Information Ventures LLC, a Delaware
limited liability company ("Buyer").
RECITALS
Seller is engaged, through several divisions, in the business of
publishing scientific books and other technical materials.
B. On the terms and subject to the conditions set forth herein, Seller
desires to sell to Buyer, and Buyer desires to purchase, substantially all of
the assets of Seller associated with CRC's Business (as described in Section
2.10(a)(i), "the CRC Assets") and to assume certain of the liabilities of Seller
associated with CRC's Business (as described in Section 2.01(b)(i), the "CRC
Assumed Liabilities").
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and of the
representations, warranties and agreements set forth below, the parties hereto
agree as follows:
ARTICLE ONE
DEFINITIONS
As used in this Agreement, the following terms have the meanings set forth
below:
Section 1.01 Definitions.
"Accounts Receivable" is defined in Section 2.01(a)(i)(J).
"Affected Participants" is defined in Section 10.04(b).
"Affiliates" shall mean any individual, corporation, partnership, joint
venture, association, trust or unincorporated organization that controls, is
controlled by or is under common control with a Person and "control" of a Person
(including, with correlative meaning, the terms "control by" and "under common
control with") means the power to direct or cause the direction of the
management, policies or affairs of the controlled Person, whether through
ownership of securities or partnership or other ownership interests, by contract
or otherwise.
<PAGE>
"Agreement" is defined in the Preamble.
"Allocation" is defined in Section 9.07.
"Business Day" means any day other than a Saturday, Sunday, holiday or day
on which financial institutions in the State of New York are required or
permitted by law to be closed.
"Buyer" is defined in the Preamble.
"Buyer 401(K) Plan" is defined in Section 10.04(b).
"Buyer Representative" is defined in Section 9.07.
"Closing" is defined in Section 3.01.
"Closing Date" is defined in Section 3.01.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company Balance Sheet" is defined in Section 5.07.
"Company Employees" means (i) all persons actively employed on the Closing
Date by Seller, and (ii) any person not so actively employed but who is, as of
the Closing Date, on an authorized leave of absence, either short or long-term
disability leave, worker's compensation leave, or vacation from Seller, but
excluding those persons who are disabled within the meaning of the long-term
disability plan of Times Mirror or Seller or who are former employees, retired
or otherwise not actively employed with Seller.
"Confidential Offering Memorandum" means the Confidential Offering
Memorandum prepared by Morgan Stanley & Co., Incorporated dated April 1996.
"Confidentiality Agreement" is defined in Section 8.01.
"Contracts" is defined in Section 2.01(a)(i)(F).
"CRC Assets" is defined in Section 2.01(a)(i).
"CRC Assumed Liabilities" is defined in Section 2.01(b)(i).
"CRC Excluded Assets" is defined in Section 2.01(a)(ii).
"CRC Excluded Liabilities" is defined in Section 2.01(b)(ii).
"CRC's Business" means the business of publishing scientific and technical
books, journals, newsletters and other materials (and electronic versions
thereof) through several divisions of Seller, as reflected in the financial
statements of Seller and the Confidential Offering Memorandum.
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<PAGE>
"DOJ" is defined in Section 9.04.
"Enforceability Exceptions" is defined in Section 5.01.
"Environmental Law" means any applicable statute, regulation, rule,
ordinance, code, license or order, of any governmental agency, department,
commission, board, bureau or instrumentality of the United States, states and
political subdivisions thereof and all applicable judicial and administrative
and regulatory decrees, judgments and orders relating to the protection of human
health or the environment with respect to Hazardous Materials.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"FTC" is defined in Section 9.04.
"GAAP" is defined in Section 5.08(a).
"Hazardous Material" means any chemical substance the presence of which
requires investigation or remediation under any federal, state or local statute,
regulation, ordinance, order, or common law; or which is defined as a "hazardous
waste" or "hazardous substance" under any federal, state or local statute,
regulation or ordinance, including, without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act (42 U.S.C. Section 9601
et seq.) or the Resource Conservation and Recovery Act (42 U.S.C. Section 6901
et seq.); or which is toxic, explosive, corrosive, flammable, infectious,
radioactive, carcinogenic, mutagenic, or otherwise hazardous and is regulated as
such by any governmental authority, agency, department, commission, board,
agency or instrumentality of the United States or state or any political
subdivision thereof.
"Hired Company Employees" is defined in Section 10.01.
"HSR Act" is defined in Section 4.01 (a).
"Intellectual Property" is defined in Section 5.12(a).
"IRS" means the Internal Revenue Service.
"Knowledge of Seller" means the actual knowledge of any of E. Thomas
Unterman, Senior Vice President and Chief Financial Officer of Times Mirror;
Patrick A. Clifford, Senior Vice President of Times Mirror; James Imbriaco,
Associate General Counsel and General Counsel, Professional Publishing, of Times
Mirror; William G. Barker, Assistant Director of Taxes of Times Mirror; Robert
T. Grant, President and Chief Executive Officer of Seller; Mary Hurley, Senior
Vice President, Finance and Administration of Seller; and Margie Weiner, General
Manager of Food/Chemical News.
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<PAGE>
"Leased Properties" is defined in Section 5.11(b).
"Listed Employees" is defined in Section 10.01(a).
"Losses" means all damage, loss (including any diminution in the value of
the CRC Assets), liability and expense (including, without limitation,
reasonable expenses of investigation and reasonable attorneys' fees and expenses
in connection with any action, suit or proceeding).
"Mosby" means Mosby-Year Book, Inc., a Missouri corporation.
"Mosby Transition Services Agreement" means the Transition Services
Agreement to be entered into by and between Mosby and Buyer, substantially in
the form attached hereto as Exhibit A.
"Permits" is defined in Section 5.03.
"Permitted Liens" means (i) mechanics', carriers', workmen's,
warehousemen's, repairmen's or other like liens arising or incurred in the
ordinary course of business, (ii) liens arising under original purchase price
conditional sales contracts and equipment leases with third parties entered into
in the ordinary course of business, (iii) liens for Taxes and other governmental
charges which are not due and payable or which may thereafter be paid without
penalty, and (iv) other liens, imperfections of title, restrictions or
encumbrances, if any, which liens, imperfections of title, restrictions or other
encumbrances do not materially impair the continued use and operation of the
specific CRC Assets to which they relate.
"Publications" is defined in Section 2.01(a)(i)(B).
"Purchase Price" is defined in Section 2.02.
"Records" is defined in Section 9.05(a).
"Reproduction Materials" is defined in Section 2.01(a) (i)(C).
"Required Consent Contracts" is defined in Section 3.01(c).
"Seller" is defined in the Preamble.
"Tax Claim" is defined in Section 11.08.
"Taxes" means all Federal, state, local and foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental, customs, duties, capital stock,
franchise, profits, withholding, social security (or similar), unemployment,
disability, real property, personal property, sales, use, transfer,
registration, value added, VAT, alternative or add-on minimum, estimated, or
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other tax of any kind whatsoever, including any interest, penalty, or addition
thereto.
"Third-Party Claim" is defined in Section 11.07.
"Times Mirror" is defined in the Preamble.
"Times Mirror's Marks" is defined in Section 2.01(a)(i)(G).
"TM 401(k) Plan" is defined in Section 5.15.
"Top 50 Publications" is defined in Section 5.12(b).
Section 1.02 Interpretation of this Agreement.
(a) Construction. Unless the context of this Agreement clearly
requires otherwise, references to the plural include the singular, the singular
includes the plural, the part includes the whole and "including" is not
limiting. The words "hereof," "herein," "hereby," "hereunder" and similar terms
in this Agreement refer to this Agreement as a whole (including the Preamble,
the Recitals, the Schedules and the Exhibits) and not to any particular
provision of this Agreement. Article, section, exhibit, schedule, recital and
preamble references in this Agreement are to those portions of this Agreement
unless otherwise specified.
(b) Governing Law. This Agreement shall be governed by and construed
in accordance with the internal laws of the State of New York applicable to
agreements made and to be performed entirely within such State.
(c) Headings, Exhibits and Schedules. The headings contained in this
Agreement, in any Exhibit or Schedule hereto and in the Table of Contents to
this Agreement, are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement. Any capitalized terms used in
any Exhibit or Schedule but not otherwise defined therein shall have the meaning
as defined in this Agreement. Any matter disclosed in one Schedule hereto shall
be deemed incorporated by reference into each other Schedule hereto and
disclosed in each such Schedule to the extent that the relevancy of such matter
to each such other Schedule is apparent from the disclosure included on the
Schedule.
(d) Representation By Counsel; Interpretation. Times Mirror, Seller
and Buyer each acknowledge that each party to this Agreement has been
represented by counsel in connection with this Agreement and the transactions
contemplated by this Agreement. Accordingly, any rule of law or any legal
decision that would require interpretation of any claimed ambiguities in this
Agreement against the party that drafted it has no application and is expressly
waived. The provisions of this
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Agreement shall be interpreted in a reasonable manner to effect the intent of
the parties hereto.
ARTICLE TWO
PURCHASE AND SALE
Section 2.01 Purchase and Sale of the CRC Assets; Assumption of the CRC
Assumed Liabilities.
(a) Purchase and Sale of the CRC Assets.
(i) On the terms and subject to the conditions of this
Agreement, Seller will sell, convey, transfer, assign and deliver to
Buyer, free and clear of any lien or encumbrance other than Permitted
Liens, all Seller's title and interest in and to its assets, properties,
rights and business, tangible and intangible, of every type and
description, wherever located, used or employed in connection with CRC's
Business as they exist or shall exist on the Closing Date, but excluding
the CRC Excluded Assets, (all such assets, properties, rights and business
being hereinafter sometimes collectively called the "CRC Assets"),
including, without limitation:
(A) all assets, properties and rights reflected on the
Company Balance Sheet, including all items fully depreciated, subject to
changes therein in the ordinary course of business through the Closing
Date;
(B) all right, title and interest in and to the
publications produced by CRC's Business (including those publications
related to the Contracts listed or described on Schedule 5.13(k)) whether
complete, published, unpublished, in process or under contract (the
"Publications") including, without limitation, all updates, supplements
and revisions thereto, and other accompanying materials relating to the
Publications, and the literary content of all of the above;
(C) all camera-ready copy used for making negative
films, film, plates, plate-making film, paste-ups, tapes, illustrations
and other artwork, and other reproduction materials for the Publications
(collectively, the "Reproduction Materials"), permissions (to the extent
transferable) and vendor information, including, without limitation,
specifications for all published titles, and all manuscripts, proofs,
reviews, designs, artwork, covers, photographs and production-related
materials for all unpublished titles;
(D) all mailing lists for CRC's Business and lists of
present, former and prospective subscribers to, and recipients of, any of
the Publications (both in hard copy and all available machine-readable
formats), including
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names, addresses, expiration dates and other information customarily
maintained by Seller, and all other lists, files and marketing and
promotional materials relating to CRC's Business;
(E) all existing files specifically relating to CRC's
Business including, without limitation, files relating to authors, author
prospects, editorial matters, reviewers, and unsigned projects;
(F) all right, title and interest in, and claims under,
all author, editor, subscriber, license and distribution contracts and all
other contracts, commitments, leases, purchase orders, licenses and
agreements (collectively, the "Contracts") relating to the Publications or
CRC's Business, including, without limitation, author advances and
payments due Seller under any Contracts, and including those contracts and
other agreements set forth on Schedule 5.13(a) through 5.13(l);
(G) all right, title and interest in, and claims under,
series titles, titles of Publications, and all patents, copyrights,
service marks, trademarks, and trade names relating to CRC's Business,
including, without limitation, applications therefor and all rights to
Seller's name (but excluding all of Seller's rights, if any, in and to the
name "Times Mirror" and the trademarks and service marks using such name
("Times Mirror's Marks"), provided, however, that Buyer shall have the
right to use Times Mirror's Marks or any logo used by Seller on existing
inventory, inventory returns and promotional material only as and to the
extent provided for in Section 9.01;
(H) all audio and video tapes, manuscripts, editorial
material (including, without limitation, revisions, plans, reviews,
reviews of competitive works, production records and author
correspondence), back issues and superseded editions, and inventory of
every sort and in any medium used in or prepared for CRC's Business,
including, without limitation, raw materials, work-in-process, finished
goods, packaging materials and supplies;
(I) except as provided in Section 2.01(a)(ii)(E), all
databases, software, software programs, object codes, source codes,
systems documentation and user manuals used in connection with CRC's
Business, and all proprietary information, trade secrets, research
records, test information, market surveys, marketing know-how, inventions,
processes and procedures owned or licensed to Seller and used in
connection with CRC's Business;
(J) all prepaid expenses (other than prepaid Taxes,
except Property Taxes pertaining to post-
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Closing periods), advances and deposits (including utility deposits),
security deposits and trade accounts receivable of Seller relating to
CRC's Business (excluding accounts receivable for which checks have been
received by Seller for deposit prior to the Closing Date and any accounts
receivable from Times Mirror or any of its Affiliates associated with the
international sales, prior to the Closing Date, of the Publications)
("Accounts Receivable");
(K) except as otherwise provided in Section 9.05, all
books and Records of Seller relating to CRC's Business, whether stored in
computer memory, on microfilm or by any other means, including, but not
limited to, Records with respect to financial, marketing production, and
product development matters, business development plans, personnel
records, research and development files and records and sales order files;
(L) all property, plant and equipment, leasehold
interests and improvements, furniture, fixtures and personal property of
CRC's Business, including, without limitation, all office supplies,
vehicles, tools, machinery, equipment and computer equipment;
(M) all transferable licenses, permits or other
governmental authorization affecting, or relating in any way to Seller,
CRC's Business or the CRC Assets;
(N) all insurance proceeds paid or payable by any
insurance provider, other than Times Mirror or Seller or any Affiliate of
either of them, for any CRC Asset that is destroyed or damaged after the
date of this Agreement and prior to the Closing Date and the benefit of
coverage under any insurance policy written on an "occurrence" basis that
covers any CRC Asset or CRC's Business to the extent that any claim is
made after the Closing Date with respect to an event occurring prior to
the Closing Date;
(O) all telephone, telex and telecopier numbers used
solely in connection with CRC's Business and all existing listings used
solely in connection with CRC's Business in all telephone books and
directories;
(P) all transferable warranties and guaranties received
from vendors, suppliers or manufacturers with respect to the CRC Assets or
CRC's Business;
(Q) all of Seller's rights, claims, credits, causes of
action or rights of set-off against third parties arising out of the CRC
Assets, the CRC Assumed Liabilities or CRC's Business;
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(R) all transferable rights (including transferable
experience ratings with respect to unemployment and workers' compensation
insurance reserves, in each case relating to Hired Company Employees);
(S) all capital stock of or other equity interest in
each of the entities set forth on Schedule 5.06 owned directly or
indirectly by Seller;
(T) all goodwill relating to the CRC Assets or CRC's
Business; and
(U) all other assets, properties, and rights of every
kind used primarily in CRC's Business, on the Closing Date, known or
unknown, fixed or unfixed, accrued, absolute, contingent or otherwise,
whether or not specifically referred to in this Agreement.
(ii) Notwithstanding anything herein to the contrary, the CRC
Assets shall not include the following assets (collectively, the "CRC
Excluded Assets"):
(A) any cash and cash equivalent items (except as
described in Sections 2.01(a)(i)(J) and (N)), including, without
limitation, checking accounts, bank accounts, certificates of deposit,
time deposits, and securities of Seller on or prior to the Closing Date;
(B) any minute books, Tax returns or other corporate
documents of Seller;
(C) except as otherwise provided in Section
2.01(a)(i)(N), any rights of Times Mirror or Seller under those insurance
policies set forth on Schedule 7.03 that include Times Mirror or any of
its subsidiaries (other than Seller) as named insureds,
(D) except as otherwise provided in Section 9.01, any
rights to use the name "The Times Mirror Company" or any derivation
thereof;
(E) any computer programs, software or data owned by or
licensed by Times Mirror or developed by Times Mirror for use in Times
Mirror's business generally or in the businesses of the subsidiaries of
Times Mirror other than Seller; or
(F) any accounts receivable from Times Mirror or any
affiliate of Times Mirror associated with the international sales, prior
to the Closing Date, of the Publications.
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(b) Assumption of the CRC Assumed Liabilities; CRC Excluded
Liabilities.
(i) In partial consideration for the CRC Assets, Buyer shall
assume, by an undertaking, in form reasonably acceptable to Seller, as of
the Closing Date the following liabilities of Seller (the "CRC Assumed
Liabilities"):
(A) the liabilities listed on Schedule 2.01(b)(i)(A),
subject to changes in the amounts thereof in the ordinary course of
business through the Closing Date; and
(B) except for liabilities or obligations of Times
Mirror or Seller to Company Employees (including liabilities for accrued
salary or wages through the Closing Date, or stay bonuses, performance
bonuses or similar bonus arrangements, entered into by Times Mirror or
Seller with such Company Employees prior to the Closing Date), liabilities
and obligations under the Contracts, excluding, however, (x) any liability
under or with respect to any such Contract for any obligation required by
the terms thereof to be discharged prior to the Closing Date, (y) any
liability or obligation arising out of a breach or default by Seller prior
to the Closing Date (including any event occurring prior to the Closing
Date that with the lapse of time or the giving of notice, or both, would
become a breach or default) under any such Contract.
(ii) Liabilities Not Assumed by Buyer. Anything in this
Agreement to the contrary notwithstanding, Seller shall be responsible
for, and Buyer shall not assume or in any way be liable or responsible
for, any liabilities or obligations of Seller not specifically assumed in
Section 2.01(b)(i) (the "CRC Excluded Liabilities"). Without limiting the
generality of the foregoing, unless specifically assumed by Buyer in
Section 2.01(b)(i), the CRC Excluded Liabilities shall include:
(A) any liability or obligation under Contracts and
other agreements to which Seller is a party or by or to which it or any of
the CRC Assets are bound or subject that are not reflected on Schedules
5.13(a) through 5.13(l), other than Seller's obligations and liabilities
under Contracts entered into in the ordinary course of business after the
date of this Agreement;
(B) any liability or obligation of Seller arising out of
(a) the conduct of CRC's Business prior to the Closing Date, or (b) other
than as set forth in Article 10 hereof, any liability or obligation of
Times Mirror or Seller to any Company Employee (including any liability
for accrued salary or wages through the Closing Date, or any
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stay bonus, performance bonus or similar bonus arrangement entered into by
Times Mirror or Seller with such Company Employee prior to the Closing
Date), or, except with respect to liabilities and other obligations under
the Contracts assumed by Buyer pursuant to Section 2.01(b)(i), agents or
contractors;
(C) any liability or obligation of Seller owing to any
shareholder, subsidiary or Affiliate of Seller;
(D) except as otherwise provided in Section 13.12, any
liability or obligation of Seller arising out of or in connection with the
preparation of this Agreement and the consummation and performance of the
transactions contemplated by this Agreement, including, but not limited
to, any liability to which any of the parties may become subject as a
result of the fact that the transactions contemplated by this Agreement
are being effected, at the request of Seller, without compliance with the
provisions of any bulk sales act or any similar statute as enacted in any
jurisdiction;
(E) any liability or obligation of Seller under any real
estate lease or sublease, except for liability on leases that are part of
the CRC Assets, provided, however, that Buyer's liability is limited to
obligations under such leases arising after the Closing Date;
(F) any liabilities arising under Environmental Law
attributable to or incurred as a result of any acts, omissions, or
conditions prior to the Closing Date, including, but not limited to,
liabilities for the treatment, storage, or disposal of Hazardous
Materials;
(G) except as otherwise provided in Section 13.12, any
liabilities or obligations for Taxes of Times Mirror, Seller or any
Affiliate of Times Mirror or Seller, and Taxes relating to the CRC Assets
for the Tax period (or portion thereof) ending on the Closing Date but
unpaid as of the Closing Date;
(H) any liabilities attributable to or incurred in
respect of the CRC Excluded Assets;
(I) any liability or obligation relating to any
international sales made to Times Mirror or any of its Affiliates prior to
the Closing Date;
(J) any liability or obligation under any employee
benefit plan (as defined in ERISA), including without limitation any
liability of Seller or Times Mirror under ERISA or to the Pension Benefit
Guaranty Corporation;
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(K) any liability with respect to the matter described
on Schedule 5.14 related to the potential claim of C.F. Saver Company; or
(L) any liability for California sales taxes for periods
prior to the Closing Date in excess of $75,000.
Section 2.02 Consideration. In consideration of the sale, conveyance,
transfer and assignment of the CRC Assets by Seller to Buyer, Buyer shall (i)
assume the CRC Assumed Liabilities and (ii) pay to Seller $12,950,000 (the
"Purchase Price", payable as set forth in Section 3.01(a)(i)).
ARTICLE THREE
CLOSING
Section 3.01 Closing. The closing (the "Closing") of the purchase and sale
of the CRC Assets and the assumption of the CRC Assumed Liabilities shall occur
on December 31, 1996 or on such later date after the satisfaction or waiver of
the conditions to Closing set forth in Article 4 as the parties may agree (the
"Closing Date"). The Closing shall be held at the offices of Gibson, Dunn &
Crutcher LLP, 333 South Grand Avenue, Los Angeles, California at 10:00 a.m. (Los
Angeles time) on the Closing Date and shall be effective as of 11:59 p.m.
(Florida time) on the Closing Date.
(a) Buyer Deliveries at Closing. At the Closing, Buyer shall deliver
to Seller (or to Times Mirror acting as agent for Seller) (i) by wire transfer
(to a bank account designated at least two Business Days prior to the Closing
Date in writing by Seller) immediately available funds in an amount equal to the
Purchase Price, (ii) instruments of assumption in form and substance reasonably
satisfactory to Times Mirror, Seller and their counsel evidencing and effecting
the assumption by Buyer of the CRC Assumed Liabilities, and (iii) such other
documents as are specifically required by this Agreement.
(b) Seller's Deliveries at Closing. At the Closing, Seller shall
deliver or cause to be delivered to Buyer (i) such appropriately executed
instruments of sale and assignment in form and substance reasonably satisfactory
to Buyer and its counsel evidencing and effecting the sale and transfer to Buyer
of the CRC Assets (it being understood that such instruments shall not require
or permit Seller to make any additional representations, warranties or
covenants, expressed or implied, or disclaimers not contained in this Agreement)
and (ii) such other documents as are specifically required by this Agreement.
(c) Assignment of Contracts and Rights. Anything in this Agreement
to the contrary notwithstanding, this Agreement shall not constitute an
agreement to assign any of the CRC Assets
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or any claim or right or any benefit arising thereunder or resulting therefrom
if an attempted assignment thereof, without the consent of a third party
thereto, would constitute a breach or other contravention thereof or in any way
adversely affect the rights of Buyer or Seller thereunder. Seller will use
commercially reasonable efforts to obtain the consent of the other parties to
any CRC Asset or any claim or right or any benefit arising thereunder required
to permit the assignment thereof to Buyer; provided, however, that neither Buyer
nor Seller shall be required to make any material payment or agree to any
material undertaking in connection therewith, except for payments due upon
assignment expressly provided for in such agreements. Seller shall be
responsible at its sole cost to obtain the consent of each landlord under a
Leased Property to the assignment or sublease thereof. If such consent is not
obtained, or if an attempted assignment thereof would be ineffective or would
adversely affect the rights of Seller thereunder so that Buyer would not in fact
receive all such rights, Seller and Buyer will cooperate in a mutually agreeable
arrangement, as Buyer and Seller shall agree, under which Buyer would obtain the
benefits and assume the obligations thereunder in accordance with this
Agreement, including subcontracting, sublicensing or subleasing to Buyer, or
under which Seller would enforce for the benefit of Buyer, with Buyer assuming
Seller's obligations and any and all rights of Seller against a third party
thereto. Seller will pay promptly to Buyer when received all monies received by
Seller after the Closing Date under any of the CRC Assets or any claim or right
or any benefit arising thereunder. Notwithstanding anything to the contrary
contained herein, Seller covenants that the Contracts that are indicated with an
asterisk on Schedule 5.04 (the "Required Consent Contracts") will be transferred
and assigned to Buyer on the Closing Date and that Seller will have obtained, as
of the Closing Date, all consents necessary to assign to Buyer the Required
Consent Contracts without causing any default, acceleration or termination under
any such Contracts. Provided that Seller uses commercially reasonable efforts to
obtain such consents and subject to this Section 3.01(c), Buyer agrees that
neither Times Mirror nor Seller shall have any liability whatsoever arising out
of or relating to the failure to obtain any consents (other than consents
related to Required Consent Contracts) that may have been or may be required in
connection with the transactions contemplated by this Agreement or because of
the default, acceleration or termination of any CRC Asset as a result thereof.
ARTICLE FOUR
CONDITIONS TO CLOSING
Section 4.01 Conditions to All Parties' Obligations. The respective
obligations of the parties hereto to consummate the Closing shall be subject to
the satisfaction (or waiver by each party) as of the Closing of the following
conditions:
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(a) HSR Act; Other Approvals. Any waiting period applicable to the
consummation of the transactions contemplated hereby under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, and the rules and regulations
thereunder (the "HSR Act") shall have expired or have been terminated, and any
other governmental notice or approvals or notice or approvals of other parties
to the transactions contemplated hereby necessary to consummate such
transactions shall have been either filed or received.
(b) No Order. No federal, state or foreign governmental authority or
other agency or commission or court of competent jurisdiction shall have
enacted, issued, promulgated, enforced or entered any statute, rule, regulation,
injunction or other order (whether temporary, preliminary or permanent) which
remains in effect or is threatened in writing, and which has the effect of
making the transactions contemplated hereby illegal or otherwise prohibiting
consummation of the transactions contemplated by this Agreement.
Section 4.02 Conditions to Buyer's Obligations. The obligations of Buyer
to consummate the Closing are subject to the satisfaction (or waiver by Buyer)
as of the Closing of the following conditions:
(c) Representations, Warranties and Covenants. The representations
and warranties of Times Mirror and Seller made in this Agreement shall be true
and correct in all material respects as of the date of this Agreement and,
except as specifically contemplated by this Agreement, on and as of the Closing
Date, as though made on and as of the Closing Date, and Times Mirror and Seller
shall have performed or complied, or shall have caused to be performed or
complied, in all material respects with all obligations and covenants required
by this Agreement to be performed or complied with by Times Mirror, Seller or
any affiliate of Seller by the time of the Closing; and Buyer shall have
received from Times Mirror and Seller a certificate dated the Closing Date and
signed by an authorized officer of each of Times Mirror and Seller confirming
the foregoing.
(b) Certificate of Good Standing. Buyer shall have received from
Times Mirror and Seller certificates issued by the appropriate governmental
authority of the state of incorporation or organization, as the case may be, of
each of Times Mirror, Seller and the corporations set forth on Schedule 5.06,
evidencing each corporation's good standing in its respective state of
incorporation or organization as of a date not more than ten days prior to the
Closing Date.
(c) Resolutions. Buyer shall have received (i) from Times Mirror
certified copies of resolutions duly adopted by the Board of Directors of Times
Mirror authorizing the execution, delivery and performance of this Agreement and
the consummation of the transactions contemplated hereby, and (ii) from Seller
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certified copies of resolutions duly adopted by the Board of Directors of Seller
authorizing the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby and all such resolutions
shall not have been revoked and shall remain in full force and effect.
(d) Third Party Consents. Seller shall have obtained in writing all
third-party consents required under the Required Consent Contracts and, subject
to Section 3.01(c), all such other consents as have been obtained as of the
Closing Date under the Contracts.
(e) Consent to Assignment of Leases. Buyer shall have received
consents to the assignment of all leases for the Leased Properties from the
lessors thereof on terms reasonably satisfactory to Buyer and its counsel.
(f) Bill of Sale and Assignment. Seller shall have executed and
delivered a bill of sale and assignment with respect to the CRC Assets, dated
the Closing Date, in form and substance reasonably satisfactory to Buyer and its
counsel.
(g) Copyrights Assignment. Seller shall have executed and delivered
to Buyer a copyright assignment, dated the Closing Date, in form and substance
reasonably satisfactory to Buyer and its counsel.
(h) Trademarks Assignment. Seller shall have executed and delivered
to Buyer a trademark assignment, dated the Closing Date, in form and substance
reasonably satisfactory to Buyer and its counsel.
(i) Assignment of Leases. Seller shall have executed and delivered
to Buyer assignments with respect to each of the leases for the Leased
Properties, dated the Closing Date, in form and substance reasonably
satisfactory to Buyer and its counsel.
(j) Transition Services Agreement. Times Mirror shall have caused to
be executed and shall have delivered the Mosby Transition Services Agreement.
(k) Opinions of Counsel. Buyer shall have received:
(i) an opinion of Gibson, Dunn & Crutcher LLP as to (A) the
due authorization of this Agreement by Times Mirror and Seller and of the
Mosby Transition Services Agreement by Mosby, (B) the valid execution and
delivery of this Agreement by Times Mirror and Seller and of the Mosby
Transition Services Agreement by Mosby, and (C) the enforceability of this
Agreement against Times Mirror and Seller, and
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(ii) an opinion of James Imbriaco, Associate General Counsel
and General Counsel, Professional Publishing, of Times Mirror as to (A)
the due organization, valid existence and good standing of Times Mirror
and Seller in their respective states of incorporation, (B) the authority
of each of Times Mirror and Seller with respect to this Agreement, (C) the
possession by Seller of all governmental franchises, licenses, permits,
authorizations and approvals necessary to enable it to carry on its
business as presently conducted, (D) the due qualification and good
standing of Seller in each jurisdiction in which the nature of its
business or the ownership, leasing or holding of its properties make such
qualification necessary, (E) the matters set forth in the representations
and warranties contained in Section 5.03 and 5.04, (F) the absence of any
litigation relating to this Agreement and the transactions contemplated
hereby and (G) the enforceability of the Mosby Transition Services
Agreement against Mosby,
in each case subject to customary limitations and reliance upon certificates of
public officials and officers of Times Mirror and Seller as to matters of fact.
(l) Other Documents. Times Mirror or Seller shall have delivered any
other documents reasonably requested by Buyer or reasonably necessary to the
consummation of the transactions contemplated hereby.
Section 4.03 Conditions to Times Mirror's and Seller's Obligations. The
obligations of Times Mirror and Seller to consummate the Closing are subject to
the satisfaction (or waiver by Times Mirror and Seller) as of the Closing of the
following conditions:
(a) Representations, Warranties and Covenants. The representations
and warranties of Buyer made in this Agreement shall be true and correct in all
material respects as of the date of this Agreement and on and as of the Closing,
as though made on and as of the Closing Date, and Buyer shall have performed or
complied in all material respects with all obligations and covenants required by
this Agreement to be performed or complied with by Buyer by the time of the
Closing; and Times Mirror and Seller shall have received from Buyer a
certificate dated the Closing Date and signed by an authorized officer of Buyer
confirming the foregoing.
(b) Resolutions. Times Mirror and Seller shall have received from
Buyer certified copies of resolutions duly adopted by the Board of Directors of
Buyer authorizing the execution, delivery and performance of this Agreement and
the transactions contemplated hereby and such resolutions shall not have been
revoked and shall remain in full force and effect.
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(c) Certificate of Good Standing. Times Mirror and Seller shall have
received from Buyer a certificate issued by the appropriate governmental
authority of the state of incorporation of Buyer, evidencing the good standing
of Buyer in such jurisdiction as of a date not more than ten days prior to the
Closing Date.
(d) Purchase Price. Buyer shall have remitted the Purchase Price as
provided in Section 3.01(a)(i).
(e) Instruments of Assumption. Buyer shall have executed and
delivered the instruments of assumption of the CRC Assumed Liabilities referred
to in Section 3.01(a).
(f) Assumption of Leases. Buyer shall have executed and delivered to
Seller assumption agreements with respect to each of the leases for the Leased
Properties, dated the Closing Date, in form and substance reasonably
satisfactory to Times Mirror, Seller and their counsel.
(g) Opinion of Counsel. Times Mirror and Seller shall have received
an opinion of Willkie Farr & Gallagher as to the (i) due authorization of this
Agreement and the Mosby Transition Services Agreement by Buyer, (ii) the valid
execution and delivery of this Agreement and the Mosby Transition Services
Agreement by Buyer and (iii) the enforceability of this Agreement against Buyer,
in each case subject to customary limitations and reliance upon certificates of
public officials and officers of Buyer as to matters of fact.
(h) Other Documents. Buyer shall have delivered any other documents
reasonably requested by Times Mirror or Seller or reasonably necessary to the
consummation of the transactions contemplated hereby.
ARTICLE FIVE
REPRESENTATIONS AND WARRANTIES OF
TIMES MIRROR AND SELLER
Times Mirror and Seller, jointly and severally, represent and warrant to
Buyer as follows:
Section 5.01 Organization and Authority of Times Mirror. Times Mirror is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. Times Mirror has all requisite corporate power and
authority to execute and deliver this Agreement, to consummate the transactions
contemplated hereby and to perform fully its obligations hereunder. All
necessary corporate action required to have been taken by or on behalf of Times
Mirror by applicable law or its charter documents has been taken to authorize
(a) the approval, execution and delivery on behalf of Times Mirror of this
Agreement and (b) the performance by Times Mirror of its obligations under this
Agreement and the consummation of the
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transactions contemplated hereby. This Agreement constitutes a valid and binding
agreement of Times Mirror, enforceable against it in accordance with its terms,
except (i) as the same may be limited by applicable bankruptcy, insolvency,
moratorium or similar laws of general application relating to or affecting
creditors' rights generally, including, without limitation, the effect of
statutory or other laws regarding fraudulent conveyances and preferential
transfers, and (ii) for the limitations imposed by general principles of equity
(the foregoing exceptions set forth in clauses (i) and (ii) being referred to as
the "Enforceability Exceptions").
Section 5.02 Organization and Standing of Seller. Seller is a corporation
duly organized and validly existing under the laws of the State of Florida.
Seller has all requisite corporate power and authority to execute and deliver
this Agreement, to consummate the transactions contemplated hereby and to
perform fully its obligations hereunder. All necessary corporate action required
to have been taken by or on behalf of Seller by applicable law or its charter
documents has been taken to authorize (i) the approval, execution and delivery
on behalf of Seller of this Agreement and (ii) the performance by Seller of its
obligations under this Agreement and the consummation of the transactions
contemplated hereby. This Agreement constitutes a valid and binding agreement of
Seller, enforceable against it in accordance with its terms, except as the same
may be limited by the Enforceability Exceptions. Seller possesses all
governmental franchises, licenses, permits, authorizations and approvals
necessary to enable it to carry on its business as presently conducted other
than such franchises, licenses, permits. authorizations and approvals the lack
of which would not have a material adverse effect on the CRC Assets or the
business, financial condition or results of operations of Seller. Seller is duly
qualified and in good standing to do business in each jurisdiction in which the
nature of its business or the ownership, leasing or holding of its properties
makes such qualification necessary, except such jurisdictions where the failure
be so qualified or in good standing would not have a material adverse effect on
the CRC Assets or the business, financial condition or results of operations of
Seller.
Section 5.03 No Breach. The execution and delivery of this Agreement by
Times Mirror and Seller do not, and the consummation of the transactions to
which Times Mirror or Seller is a party contemplated hereby will not, (i)
violate or conflict with the Charter or Bylaws of Times Mirror or Seller, (ii)
except as set forth on Schedule 5.03 hereto, constitute a material breach or
default or give rise to any lien, third-party right of termination,
cancellation, material modification or acceleration under any material
agreement, understanding or undertaking to which Times Mirror or Seller is a
party or by which either of them is bound, or any material law, rule or
regulation to which either of them or any material portion of the assets of
either of them is subject or (iii) violate or conflict with (x) any order,
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judgment, injunction, award or decree of any court, arbitrator or governmental
or regulatory body against or binding upon or applicable to, Seller or upon the
securities, properties or business of Seller, or (y) any license or permit of
any Federal, state, county, local or foreign governmental or regulatory body
(collectively, "Permits").
Section 5.04 Consents and Approvals. Except as set forth on Schedule 5.04,
neither the execution and delivery of this Agreement by Times Mirror and Seller
nor the consummation of the transactions to which Times Mirror or Seller is a
party contemplated hereby will require any consent, approval, authorization or
permit of, or filing with or notification to, any governmental, regulatory
authority or other third party, except (i) for notification pursuant to, and
expiration or termination of the waiting period under, the HSR Act and (ii)
where the failure to obtain such consent, approval, authorization or permit, or
to make such filing or notification, would not prevent Times Mirror or Seller
from performing its respective obligations under this Agreement without having a
material adverse effect on the CRC Assets or the business, financial condition
or results of operations of Seller.
Section 5.05 Accounts Receivable; Inventory. All trade Accounts Receivable
relating to CRC's Business have arisen in the ordinary course of business and,
to the Knowledge of Seller, represent valid and enforceable obligations to
Seller, subject to cancellations and returns in accordance with Seller's
cancellation and returns policies and to Seller's reserves for bad debts
reflected on the Company Balance Sheet or reserved in the ordinary course of
business since the date of the Company Balance Sheet. Except as set forth on
Schedule 5.05, the credit terms and billing cycles of Seller through the date
hereof have been and are consistent with the past business practices of Seller.
The inventory reflected on the Company Balance Sheet is valued at the respective
paper, printing and binding costs therefor. The net inventory of the
Publications reflected on the Company Balance Sheet, as the same exists on the
date of this Agreement, is in usable and salable condition as first quality
goods in the ordinary course of business at the amounts carried on the books and
records of the Company, subject to Seller's reserves for obsolescence reflected
on the Company Balance Sheet or reserved in the ordinary course of business
since the date of the Company Balance Sheet. The inventory is generally suitable
for its intended purpose and is not in excess of the normal purchasing patterns
of the Company as it relates to CRC's Business.
Section 5.06 Equity Interests. Except as set forth on Schedule 5.06,
Seller does not directly or indirectly own any capital stock of or other equity
interests in any corporation, partnership or other entity.
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Section 5.07 Financial Statements. The financial statements set forth on
Schedule 5.07, which consist of (i) the audited consolidated balance sheet of
Seller and the notes thereto as of December 31, 1995 and the audited
consolidated statements of operations, shareholder's equity and cash flows and
the notes thereto for the year ended December 31, 1995, audited by Ernst & Young
LLP, whose report thereon is included therewith, and (ii) the unaudited
condensed consolidated balance sheet of Seller and the notes thereto as of
September 30, 1996 (the "Company Balance Sheet") and the unaudited condensed
consolidated statements of operations, shareholder's equity and cash flows for
the nine-month period then ended, were prepared in accordance with generally
accepted accounting principles ("GAAP") and present fairly, in all material
respects, Seller's consolidated financial position and the consolidated results
of its operations and cash flows as of the date thereof and for the period
covered thereby. The Company Balance Sheet and the unaudited condensed
consolidated statements of operations, shareholder's equity and cash flows
referred to in clause (ii) above were prepared on a basis consistent with the
audited consolidated financial statements of Seller for the year ended December
31, 1995, and include all adjustments that management considers necessary for a
fair presentation of the results of operations for such period. All such
adjustments, including all valuation allowance, reserves and contingent
liabilities have been prepared in good faith in accordance with GAAP
consistently applied.
Section 5.08 Nonforeign Certification. Neither Times Mirror nor Seller is
a "foreign person" within the meaning of Section 1445 of the Code.
Section 5.09 Taxes. Seller has filed or caused to be filed in a timely
manner (within applicable extension periods) with the appropriate Tax authority
all tax returns, reports and forms it is required to have filed and has paid or
provided for all Taxes it is required to have paid, except where any failure to
file or to pay would not have any adverse effect on the CRC Assets or the
business, financial condition or results of operations of Seller. There are no
Tax Liens or assessments against the CRC Assets, other than Permitted Liens.
Section 5.10 Assets Other than Real Property. Seller has good and valid
title to all the assets included in the CRC Assets, except those sold or
otherwise disposed of since the date of the Company Balance Sheet in the
ordinary course of business consistent with past practice, in each case free and
clear of all mortgages, liens, security interests or other encumbrances of any
nature whatsoever, except (a) such as are disclosed on Schedule 5.10 and (b)
Permitted Liens.
This Section 5.10 does not relate to real property or interests in real
property, which is the subject of Section 5.11, or to Intellectual Property,
which is the subject of Section 5.12.
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Section 5.11 Real Property.
(a) Owned Property. Seller does not own in fee any real property or
interests in real property.
(b) Leased Property. Schedule 5.11(b) sets forth a complete list of
all real property and interests in real property leased by Seller ("Leased
Properties") and identifies any leases relating thereto.
(c) Title to Real Property. Seller has good and marketable title to
the leasehold estates in all Leased Property, in each case free and clear of all
mortgages, liens, security interests, easements, covenants, rights-of-way and
other similar restrictions of any nature whatsoever, except (i) Permitted Liens,
(ii) easements, covenants, rights-of-way and other similar restrictions of
record, and (iii) (A) zoning, building and other similar restrictions, (B)
mortgages, liens, security interests or encumbrances that have been placed by
any developer, landlord or other third party on any Leased Property and
subordination or similar agreements relating thereto and(C) unrecorded
easements, covenants, rights-of-way or other similar restrictions, none of which
items set forth in clauses (A), (B) and (C) above materially impairs the
continued use and operation of the Leased Property to which it relates.
Section 5.12 Intellectual Property.
(a) Intellectual Property. Schedule 5.12(a) sets forth a true and
complete list of all United States, foreign and state registered patents,
trademarks, trade names, service marks, franchises and applications therefor
(collectively, "Intellectual Property"), that are registered or filed in the
name of Seller and are used in CRC's Business. With respect to registered
trademarks, Schedule 5.12(a) contains a list of all federal, foreign and state
jurisdictions in which such trademarks are registered or applied for and all
registration and application numbers.
(b) Copyrights. Schedule 5.12(a) sets forth a true and complete list
of the United States and foreign copyrights with respect to the top 50
publications (based on revenues for 1995 and the first ten months of 1996) of
Seller (the "Top 50 Publications"). Except as set forth on Schedule 5.12(b),
Seller owns the copyrights to or otherwise has all rights sufficient to
reproduce, publish and distribute all of the publications of Seller as currently
being reproduced, published or distributed by Seller, except where any failure
to own such copyright or to otherwise have such rights would not have a material
adverse effect on the CRC Assets or the business, financial condition or results
of operations of Seller.
(c) Licenses. Except as disclosed on Schedule 5.12(c), neither
Seller nor Times Mirror has licensed to any
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third party the right to use or exploit any of the Top 50 Publications in any
jurisdiction.
(d) Claims. Except as set forth on Schedule 5.12(d), the rights of
Seller in the property set forth on Schedules 5.12(a) and 5.12(b) are free and
clear of any liens or other encumbrances. Except as set forth on Schedule
5.12(d), no claims are pending or, to the Knowledge of Seller, threatened in
writing against Seller by any person with respect to the ownership, validity,
enforceability or use of any Intellectual Property listed on Schedule 5.12(a) or
any of the copyrights with respect to the Top 50 Publications or otherwise
challenging or questioning the validity or effectiveness of any such
Intellectual Property or any of the copyrights with respect to the Top 50
Publications. Except as set forth on Schedule 5.12(d), no claims are pending or,
to the Knowledge of Seller, threatened against Seller as of the date of this
Agreement by any person in which such person alleges that any activities or
conduct of Seller infringes upon the intellectual property rights of any third
party or that any product packaging design infringes upon a proprietary
packaging design of any third party.
Section 5.13 Contracts. Except as otherwise noted, Schedules 5.13(a)
through 5.13 (l) set forth a true and complete list of all agreements
specifically relating to CRC's Business and the Publications (whether written or
oral) to which the Company is a party, or by or to which it or the CRC Assets
are bound or subject, including:
(a) Employment, Independent Contractor and Consulting Agreements.
(i) Any employment agreement, employment contract or any agreement or contract
providing for the payment of any severance compensation to any Company Employee
or for the provision, vesting and/or acceleration of any employee benefits
following a change of ownership or control of Seller (other than any enhanced
benefits described in Section 10.02(b)) and (ii) any independent contractor or
consulting agreement (other than those described in Section 5.13(k)) that has an
aggregate liability after the Closing Date in excess of $50,000 and is not
terminable by notice of less than 60 calendar days for a cost of less than
$50,000;
(b) Collective Bargaining Agreements. Any employee collective
bargaining agreement or other contract with any labor union;
(c) Non-Competition Agreements. Any covenant or agreement that
restricts the ability of Seller to compete in any line of business in any place
in the world;
(d) Agreements with Officers, Directors or Employees. Any agreement
or contract with any officer, director or employee of Seller (other than
employment agreements covered by Section 5.13(a) above);
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(e) Leases of Leased Property. Any lease or similar agreement under
which Seller is a sublessor of, or makes available for use by any third party,
any Leased Property;
(f) Personal Property Leases. Any lease or similar agreement under
which(i) Seller is lessee of, or holds or uses, any machinery, equipment,
vehicle or other tangible personal property owned by a third party or (ii)
Seller is a lessor or sublessor of, or makes available for use by any third
party, any tangible personal property owned or leased by Seller, in any such
case which has an aggregate liability after the Closing Date in excess of
$50,000 and is not terminable by notice of less than 60 calendar days for a cost
of less than $50,000;
(g) Supply and Service Agreements. (i) Any continuing agreement or
contract for the future purchase by Seller of materials, supplies or equipment
(other than purchase contracts and orders for inventory in the ordinary course
of business consistent with past practice) or (ii) any advertising agreement or
arrangement (including any advertising agreement or arrangement that is
applicable to Seller), in any such case which has an aggregate liability after
the Closing Date in excess of $50,000 and is not terminable by notice of less
than 60 calendar days for a cost of less than $50,000;
(h) Indebtedness. Any agreement or contract under which Seller has
borrowed or loaned any money or issued any note, bond, indenture or other
evidence of indebtedness or directly or indirectly guaranteed indebtedness,
liabilities or obligations of others (other than endorsements for the purpose of
collection in the ordinary course of business), or any other note, bond,
indenture or other evidence of indebtedness;
(i) Guarantees. Any agreement or contract under which any other
person has directly or indirectly guaranteed indebtedness, liabilities or
obligations of Seller (other than endorsements for the purpose of collection. in
the ordinary course of business);
(j) Partnerships and Joint Ventures. Any partnership agreement or
other joint venture agreement to which Seller is a party;
(k) Author Contracts. Any agreement or contract under which Seller
is obligated to pay royalties to any person in connection with the reproduction,
publication or distribution of any works; and
(l) Other Agreements. Any other agreement, contract, lease, license,
commitment or instrument to which Seller is a party or by or to which Seller or
any of the CRC Assets is bound or subject which in any case has an aggregate
liability after the Closing Date in excess of $50,000 and is not terminable by
notice of less than 60 calendar days for a cost of less than $50,000
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(other than purchase contracts and orders for inventory in the ordinary course
of business consistent with past practice).
Except as disclosed on Schedule 5.13 or the other schedules hereto, each
Contract is in full force and effect, Seller has performed all material
obligations required to be performed by it to date under the Contracts and it is
not in breach or default in any material respect thereunder and, to the
Knowledge of Seller, no other party to any of the Contracts is in breach or
default in any material respect thereunder; nor to the Knowledge of Seller does
there exist any condition which with notice or lapse of time or both would
constitute a default thereunder; and to the Knowledge of Seller such Contracts
are enforceable against third parties in accordance with their terms.
Section 5.14 Litigation; Decrees. Schedule 5.14 sets forth a list, as of
the date of this Agreement, of all pending, and, to the Knowledge of Seller,
threatened lawsuits or claims (other than lawsuits or claims related to Taxes
with respect to which Times Mirror and Seller are obligated to indemnify Buyer
pursuant to Section 11.01) against CRC's Business or the CRC Assets and which
(i) involve a claim by or against Seller of more than $50,000, (ii) seek any
injunctive relief or (iii) relate to the transactions contemplated by this
Agreement. Seller is not in default under any judgment, order or decree of any
court, administrative agency or commission or other governmental authority or
instrumentality, domestic or foreign, applicable to Seller or the CRC Assets.
Section 5.15 Employee and Related Matters; ERISA.
(a) Times Mirror has delivered to Buyer true, complete and correct
copies of the Times Mirror Savings Plus Plan ("TM 401(k) Plan"), its most recent
annual report on Form 5500 filed with the IRS, its most recent summary plan
description and its trust agreement and all related funding contracts.
(b) Compliance with ERISA and the Code. Except as described on
Schedule 5.15(b), the TM 401(k) Plan and all other employee benefit plans (as
defined in ERISA) maintained or administered by Times Mirror or Seller for the
benefit of Hired Company Employees have been operated and administered in all
material respects in accordance with applicable laws, including, but not limited
to, ERISA and the Code, and Times Mirror has received a favorable determination
letter to the effect that the TM 401(k) Plan is qualified under Code Section 401
(a copy of which has been delivered to Buyer) and nothing has occurred since the
issuance of such letter that would adversely affect the tax qualification of
such plan. There are no pending or, to the Knowledge of Seller, threatened
claims by or on behalf of such plan, by any employee or beneficiary covered
under such plan, or otherwise involving such plan (other than ordinary course
claims for benefits).
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Section 5.16 Absence of Changes or Events. Except as set forth on Schedule
5.16 or in the financial statements set forth on Schedule 5.07, since December
31, 1995, there has not been a material adverse change in the CRC Assets or the
business, financial condition or results of operations of Seller other than
changes relating to the economy in general or the publishing industry in general
and not specifically relating to CRC's Business, nor has there been any damage,
destruction or loss materially affecting the assets, properties, business,
operations or condition (financial or otherwise) of CRC's Business, whether or
not covered by insurance. Except as disclosed on Schedule 5.16 or in the Company
Balance Sheet or as contemplated by this Agreement, since December 31, 1995,
Seller has conducted CRC's Business in the ordinary course, and neither Times
Mirror nor Seller has taken any action that, if taken after the date of this
Agreement, would constitute a breach of any of the covenants set forth in
Article 7.
Section 5.17 Compliance with Applicable Laws. Except as previously
disclosed by Times Mirror or Seller to Buyer in writing:
(a) General. Seller is in compliance with all applicable statutes,
laws, ordinances, rules, orders and regulations of any governmental authority or
instrumentality, domestic or foreign, applicable to CRC's Business, except for
any such incidents of noncompliance that would not have a material adverse
effect on the CRC Assets or the business, financial condition or results of
operations of Seller. Except as set forth on Schedule 5.17(a), Seller has not
violated or breached any Permits that are necessary for the conduct of CRC's
Business. This Section 5.17 does not relate to matters with respect to Taxes.
This Section 5.17(a) does not relate to environmental matters, which are the
subject of Sections 5.17(b) and 5.17(c).
(b) Hazardous Materials. There has been no release of any Hazardous
Material to soil or water originating at, on, or from any of Leased Properties
during the period that Seller or any of its divisions or subsidiaries has leased
such Leased Property, except for any such releases that would not have a
material adverse effect on the CRC Assets or the business, financial condition
or results of operations of Seller.
(c) Notices of Certain Environmental Matters. Seller has not
received written notice of nor, to the Knowledge of Seller, are there any
alleged violation of Environmental Law or liability for any release of any
Hazardous Material in connection with the present or past business or properties
of Seller, and there exists no writ, injunction, decree, order or judgment
outstanding, nor any lawsuit, proceeding, citation, summons or Government agency
investigation relating thereto, except for any such matters that would not have
a material adverse effect on the CRC Assets or the business, financial condition
or results of operations of Seller.
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Section 5.18 Employee and Labor Relations. Except as set forth on Schedule
5.18, (a) there is no labor strike, dispute, or work stoppage or lockout pending
or, to the Knowledge of Seller, threatened against or affecting Seller; (b) to
the Knowledge of Seller, no union organizing campaign is in progress with
respect to the employees of Seller; (c) there is no unfair labor practice charge
or complaint against Seller pending or, to the Knowledge of Seller, threatened
before the National Labor Relations Board, (d) there is no pending or, to the
Knowledge of Seller, threatened grievance that is reasonably likely to have a
material adverse effect on the business, financial condition or results of
operations of Seller; and (e) no charges with respect to or relating to Seller
are pending before the Equal Employment Opportunity Commission or any state
agency responsible for the prevention of unlawful employment practices as to
which there is a reasonable likelihood of adverse determination.
Section 5.19 Intercompany Services. Except as described on Schedule 5.19,
there are no intercompany services currently being provided by (a) CRC's
Business to Times Mirror or its Affiliates or (b) by Times Mirror or its
Affiliates to CRC's Business, and there are no contracts between Seller, on the
one hand, and Times Mirror or any of its Affiliates, on the other.
Section 5.20 No Broker. Except for Morgan Stanley & Co., Incorporated
(whose fees and expenses shall be paid by Times Mirror or Seller) no broker,
finder, agent or similar intermediary has acted for or on behalf of Times Mirror
or Seller in connection with this Agreement or the transactions contemplated
hereby and, no broker, finder, agent or similar intermediary is entitled to any
fee or commission in connection therewith based on any agreement, arrangement or
understanding with Times Mirror or Seller or any action taken by Times Mirror or
Seller.
ARTICLE SIX
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Times Mirror and Seller as
follows:
Section 6.01 Organization and Authority. Buyer a limited liability company
duly organized, validly existing and in good standing under the laws of the
State of Delaware. Buyer has all requisite power and authority to execute and
deliver this Agreement, to consummate the transactions contemplated hereby and
to perform fully its obligations hereunder. All necessary action required to
have been taken by or on behalf of Buyer by applicable law or its charter
documents has been taken to authorize (i) the approval, execution and delivery
on behalf of Buyer of this Agreement and (ii) the performance by Buyer of its
obligations under this Agreement and the consummation of the transactions
contemplated hereby. This Agreement constitutes a valid and binding agreement of
Buyer, enforceable against Buyer
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in accordance with its terms, except as the same may be limited by the
Enforceability Exceptions.
Section 6.02 No Breach. The execution and delivery of this Agreement by
Buyer do not, and the consummation of the transactions contemplated hereby by
Buyer will not, (i) violate or conflict with the Certificate of Formation or
Limited Liability Company Agreement of Buyer or(ii) constitute a breach or
default (or an event that with notice or lapse of time or both would become a
breach or default) or give rise to any lien, third-party right of termination,
cancellation, modification or acceleration under any material agreement,
understanding or undertaking to which Buyer is a party or by which it is bound,
or any law, rule or regulation to which it is subject.
Section 6.03 Consents and Approvals. Neither the execution and delivery of
this Agreement by Buyer nor the consummation of the transactions contemplated
hereby will require any consent, approval, authorization or permit of, or filing
with or notification to, any governmental or regulatory authority, except (i)
for notification pursuant to, and expiration or termination of the waiting
period under HSR Act and (ii) where the failure to obtain such consent,
approval, authorization or permit, or to make such filing or notification, would
not prevent Buyer from performing its obligations under this Agreement without
having a material adverse effect on the business, financial condition or results
of operations of Buyer.
Section 6.04 Funds. Buyer has obtained and furnished to Times Mirror and
Seller certain financing commitments in connection with the transactions
contemplated by this Agreement, which commitments are in full force and effect.
The financing commitments referred to above will be sufficient to make payment
in full of the Purchase Price and all expenses and fees payable by Buyer
associated with this Agreement and the transactions contemplated hereby.
ARTICLE SEVEN
COVENANTS OF TIMES MIRROR AND SELLER
Times Mirror and Seller covenant and agree as follows:
Section 7.01 Access. Prior to the Closing, Times Mirror and Seller, and
their officers, directors, employees, advisors, representatives and authorized
agents will provide Buyer and its representatives, employees, counsel and
accountants (including representatives of financial institutions that Buyer may
engage to finance some or all of the Purchase Price) during scheduled
appointments approved by Times Mirror or Seller occurring during normal business
hours and in a manner not unreasonably disruptive to the conduct of CRC's
Business or any of Times Mirror's or Seller's officers, directors, employees,
advisors, representatives or authorized agents, access to the personnel,
properties, books and records of Seller to evaluate CRC's
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Business and related purposes, including, without limitation, access to Company
Employees for the purpose of pre-enrolling such Company Employees in any
employee benefit or welfare plans of Buyer; provided, however, that all
information and documentation made available to Buyer pursuant to the terms of
this Section 7.01 shall be subject to the terms of the Confidentiality
Agreement.
Section 7.02 Ordinary Conduct.
(a) Except as contemplated by this Agreement or as set forth on
Schedule 7.02(a), from the date of this Agreement to the Closing Date, Seller
will:
(i) conduct CRC's Business in the ordinary course in
substantially the same manner as presently conducted;
(ii) make all reasonable efforts substantially consistent with
past practices to preserve its relationships with customers, suppliers and
others with whom Seller deals;
(iii) cause CRC's Business to duly comply in all material
respects with the laws applicable to it and to the conduct of its
business;
(iv) honor all checks drawn by Seller prior to the Closing
Date and presented for payment on or after the Closing Date;
(v) keep its books of account, files and Records in the
ordinary course and in accordance with existing practice;
(vi) continue to maintain, in all material respects, the CRC
Assets in accordance with present practice in a condition suitable for
their current use; and
(vii) collect its Accounts Receivable in the ordinary course
of business, consistent with past practice and pay its accounts payable in
the ordinary course of business consistent with past practice and, in any
event, except to the extent of amounts that Seller has disputed in good
faith, within the terms for payment of the invoice therefor.
(b) Except as contemplated by this Agreement, Seller will not take
any of the following actions without the prior written consent of Buyer:
(i) Dividends. Declare or pay any non-cash dividend or make
any other noncash distributions to Times Mirror whether or not upon or in
respect of any shares of its capital stock;
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(ii) Capital Stock. Redeem or otherwise acquire any shares of
its capital stock;
(iii) Employee Matters. Adopt or amend in any material respect
any employee benefit plan or collective bargaining agreement, except as
required by law;
(iv) Compensation. (A) Grant to any executive officer or
employee any increase in compensation or benefits or any rights to receive
severance payments or other benefits upon a termination of employment or a
change of ownership or control of the employer, except (I) as may be
required under existing agreements, (II) raises to Company Employees in
the ordinary course of business consistent with past practice or (III) any
increases, payments or benefits for which Seller shall be solely
obligated, or (B) terminate any executive officer or employee other than
in for cause or in the ordinary course of business consistent with past
practice;
(v) Indebtedness. Incur or assume any liabilities, obligations
or indebtedness for borrowed money or guarantee any such liabilities,
obligations or indebtedness, other than any indebtedness owing to Times
Mirror or any other person incurred in the ordinary course of business
consistent with past practice; provided that in no event shall Seller
incur, assume or guarantee any long-term indebtedness for borrowed money;
(vi) Encumbrances. Permit, allow or suffer any of the CRC
Assets to be subjected to any mortgage, pledge, lien, encumbrance,
restriction or charge of any kind, other than those excepted from the
representations set forth in Sections 5.10 and 5.11;
(vii) Cancellation of Indebtedness. Cancel any indebtedness
owing to Seller or waive any claims or rights, other than cancellations or
waivers in the ordinary course of business of trade Accounts Receivable
and cancellations or waivers that cover indebtedness, claims or rights
having a value of less than $25,000 and, in the aggregate, cover
indebtedness, claims or rights having a value of less than $1,000,000;
(viii) Related-Party Transactions. Except for (A) dividends or
distributions not prohibited under clause (i) above, (B) indebtedness not
prohibited by clause (v) above and (C) intercompany transactions in the
ordinary course of business and consistent with past practice, pay, loan
or advance any amount to, or sell, transfer or lease any of its assets to,
or enter into any agreement or arrangement with Times Mirror or any of its
Affiliates;
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(ix) Business and Accounting Policies. Make any change, or
agree to change, any business or accounting policies or practices relating
to CRC's Business, including, without limitation, advertising, marketing,
pricing, purchasing, personnel, sales, returns, budget or product
acquisition policies or practices in each case in a manner that could have
a material adverse effect on the CRC Assets or the business, financial
condition or results of operations of Seller, except any such change
required by GAAP or applicable law;
(x) Reorganizations. Acquire or agree to acquire by merging or
consolidating with, or by purchasing the stock of, or a substantial
portion of the assets of, or by any other manner, any business or any
corporation, partnership, association or other business organization or
division thereof or otherwise acquire or agree to acquire any assets
(other than inventory);
(xi) Capital Expenditures. Make or incur any capital
expenditures other than those made or incurred in accordance with Times
Mirror's fiscal year 1996 capital expenditure budget with respect to
Seller heretofore disclosed to Buyer;
(xii) Rights. Waive any right of material value to CRC's
Business;
(xiii) Contracts and Agreements. Terminate or amend any
contract or other agreement that is set forth on Schedule 5.13(a) through
5.13(l) or any lease with respect to the Leased Properties;
(xiv) Asset Dispositions. Sell, lease or otherwise dispose of,
or agree to sell, lease or otherwise dispose of, any of the CRC Assets,
except in the ordinary course of business; or
(xv) Agreements. Agree, whether in writing or otherwise, to do
any of the foregoing.
Section 7.03 Insurance. Seller shall keep, or cause to be kept, all
insurance policies presently maintained relating to CRC's Business or the CRC
Assets, or suitable replacements therefor, in full force and effect through the
close of business on the Closing Date. Schedule 7.03 sets forth all the
insurance policies presently owned and maintained by Seller. Any and all
additional insurance policies presently maintained relating to CRC's Business
and the CRC Assets are maintained by Times Mirror. Buyer will not have any
rights under any such insurance policies (including any insurance policies
written on a "claims-made" basis) from and after the Closing Date with the
exception of such policies that do not name Times Mirror any of its other
subsidiaries as named insureds and that are written on an
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"occurrence" basis to the extent that any claim is made after the Closing Date
with respect to an event occurring prior to the Closing Date.
Section 7.04 Accounts Receivable. Seller agrees promptly to forward or
cause to be forwarded to Buyer any and all proceeds from Accounts Receivable of
Buyer that are received by Seller after the Closing Date.
Section 7.05 Litigation. From the date hereof through the Closing Date,
Seller shall promptly notify Buyer of any investigations of which Times Mirror
or Seller has knowledge or any lawsuits, claims or proceedings which after the
date hereof are commenced or, to the Knowledge of Seller, threatened against
Seller or against any officer, director, employee, consultant, agent, broker or
other representative of Seller, in each case, arising out of or relating to the
affairs or conduct of CRC's Business or relating to the CRC Assets or the
transactions contemplated hereby.
Section 7.06 Confidentiality. Times Mirror and Seller shall keep secret
and retain in confidence consistent with Times Mirror's policies pertaining to
Times Mirror's confidential matters all confidential matters relating to CRC's
Business and the CRC Assets including, but not limited to, trade secrets,
customer lists, details of consultant contracts, pricing policies, operational
methods, marketing plans or strategies, product development techniques or plans,
business acquisition plans, technical processes, designs and design projects,
inventions, software, source codes, object codes, systems documentation and
research projects and other business affairs relating solely to CRC's Business
and shall not disclose them to anyone outside, of the Buyer and its Affiliates,
provided, however, this covenant shall not apply (a) to any information which is
or becomes generally available to the public other than as a result of
disclosure by Times Mirror or Seller, (b) to any information which Times Mirror
or Seller is required by subpoena, court order or other applicable law to
disclose, provided that Times Mirror or Seller shall give Buyer an opportunity
to obtain injunctive relief or a protective order with respect to such intended
disclosure.
Section 7.07 Performance of Obligations by Seller After Closing Date. On
and after the Closing Date, Seller shall duly, promptly and faithfully pay,
perform and discharge when due, subject to any available defenses and rights of
set-off, all of the CRC Excluded Liabilities.
Section 7.08 Payment of Stay Bonuses and Performance Bonuses. Times Mirror
shall duly, promptly and faithfully pay or cause to be paid when due, subject to
any available defenses and rights of set-off, all stay bonuses, performance
bonuses and similar bonuses that Times Mirror or Seller is obligated to pay
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pursuant to any bonus arrangement entered into by Times Mirror or Seller with
any Company Employee prior to the Closing Date.
ARTICLE EIGHT
COVENANTS OF BUYER
Section 8.01 Confidentiality. Buyer acknowledges that the information
being provided to it by Seller is subject to the terms of a confidentiality
agreement dated October 9, 1996 between Buyer and Times Mirror (the
"Confidentiality Agreement"), the terms of which are incorporated herein by
reference. Effective upon, and only upon, the Closing, the Confidentiality
Agreement will terminate only with respect to information relating solely to
Seller, the CRC Assets, and the CRC Assumed Liabilities; and Buyer acknowledges
that any and all other information provided to it by Times Mirror or Seller or
Times Mirror's or Seller's representatives concerning any other subsidiary of
Times Mirror or any other operations of Times Mirror shall remain subject to the
terms and conditions of the Confidentiality Agreement after the Closing Date.
Section 8.02 No Additional Representations. Buyer acknowledges that none
of Times Mirror, Seller or any other person has made any representation or
warranty, expressed or implied, as to the accuracy or completeness of any
information regarding the CRC Assets or CRC's Business except as expressly set
forth in this Agreement or the schedules hereto, and none of Times Mirror,
Seller or any other person will have or be subject to any liability or
indemnification obligation to Buyer or any other person resulting from the
distribution to Buyer, or Buyer's use of, any such information, including,
without limitation, the Confidential Offering Memorandum and any information,
document, or material made available to Buyer in certain "data rooms,"
management presentations or in any other form in expectation of the transactions
contemplated by this Agreement.
Section 8.03 Performance of Obligations by Buyer After Closing Date. On
and after the Closing Date, Buyer shall duly, promptly and faithfully pay,
perform and discharge when due, subject to any available defenses and rights of
set-off, all of the CRC Assumed Liabilities.
Section 8.04 Waiver of Bulk Sales Compliance. Buyer hereby waives
compliance by Seller with the requirements, if any, of Article 6 of the Uniform
Commercial Code as in force in any state in which the CRC Assets are located and
all other similar requirements of law applicable to bulk sales and transfers, to
the extent applicable to the transactions contemplated hereby.
ARTICLE NINE
MUTUAL COVENANTS
Each of Times Mirror, Seller and Buyer covenants and agrees as follows:
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Section 9.01 Use of Times Mirror's Name and Times Mirror's Marks. Times
Mirror grants to Buyer the right to leave Times Mirror's name and any of Times
Mirror's Marks on the inventory and promotional materials included in the CRC
Assets in the form it appears thereon on the Closing Date. Buyer shall not make
any other use of Times Mirror's name or Times Mirror's Marks, whether in
marketing or disposition of the inventory included in the CRC Assets or
otherwise. When Buyer reprints a current edition of any Publications or
promotional materials included in the CRC Assets, it shall remove Times Mirror's
name and Times Mirror's Marks. In addition, Buyer shall have the right to use
Times Mirror's name and Times Mirror's Marks, for a period of time not to exceed
one year following the Closing Date, for the purpose of identifying Times Mirror
as the previous owner of Seller but to the extent such identification is
necessary to avoid confusion or maintain the goodwill associated with CRC's
Business. Nothing in this Section 9.01 shall be construed to grant to Buyer any
rights whatsoever in Times Mirror's name or Times Mirror's Marks. As used in
this Section 9.01, references to Times Mirror's name shall mean "The Times
Mirror Company" and derivations thereof and to Times Mirror's Marks shall
include the stylized "T" with the eagle silhouette and any derivations thereof.
Section 9.02 Cooperation. Buyer, Times Mirror and Seller shall cooperate
with each other and shall cause their respective officers, employees,
affiliates, agents, auditors and representatives to cooperate with each other
after the Closing to ensure the orderly transfer of the CRC Assets and the CRC
Assumed Liabilities from Seller to Buyer and to minimize any disruption to the
respective businesses of Buyer or Seller, that might result from the
transactions contemplated hereby. None of the parties shall be required by this
Section 9.02 to take any action that would unreasonably interfere with the
conduct of its business.
Section 9.03 Publicity. Times Mirror, Seller and Buyer agree that, from
the date of this Agreement through the Closing Date, no public release or
announcement concerning the transactions contemplated hereby shall be issued by
any party without the prior consent of the other parties (which consent shall
not be unreasonably withheld), except as such release or announcement may be
required by law or the rules or regulations of any United States or foreign
securities exchange, in which case the party required to make the release or
announcement shall allow the other parties reasonable time to comment on such
release or announcement in advance of such issuance.
Section 9.04 Antitrust Notification. Each of Times Mirror and Buyer will
as promptly as practicable, but in no event later than five Business Days
following the execution and delivery of this Agreement, file or cause to be
filed with the United States Federal Trade Commission (the "FTC") and the United
States Department of Justice (the "DOJ") the notification and report form, if
any, required for the transactions contemplated hereby
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and any supplemental information requested in connection therewith pursuant to
the HSR Act. Any such notification and report form and supplemental information
will be in substantial compliance with the requirements of the HSR Act. Each of
Buyer and Times Mirror shall finish or cause to be furnished to the other such
necessary information and reasonable assistance as the other may reasonably
request in connection with its preparation of any filing or submission which is
necessary under the HSR Act. Times Mirror and Buyer shall keep each other
apprised of the status of any communications with, and inquiries or requests for
additional information from, the FTC and the DOJ and shall comply promptly with
any such reasonable inquiry or request. Each of Times Mirror and Buyer will use
its best efforts to obtain any clearance required under the HSR Act for the
consummation of the transactions contemplated hereby; provided, however, that
nothing herein shall require Buyer or any Affiliate of Buyer to divest or hold
separate any portion of its assets or the CRC Assets.
Section 9.05 Records.
(a) On the Closing Date, Times Mirror and Seller shall deliver or
cause to be delivered to Buyer all original agreements, documents, books,
records and files (collectively, "Records"), in the possession of Times Mirror
or Seller relating to the CRC Assets and the CRC Assumed Liabilities, subject to
the following exceptions:
(i) Mosby may retain Records until the Termination Date of the
Mosby Transition Services Agreement (as such term is defined therein) to
the extent necessary or convenient for the performance of its obligations
thereunder;
(ii) Buyer recognizes that certain Records may contain
incidental information relating to CRC's Business or may relate primarily
to subsidiaries or divisions of Times Mirror other than Seller or
businesses of Seller previously sold, and that Times Mirror or Seller may
retain such Records and shall provide copies of the relevant portions
thereof to Buyer;
(iii) Times Mirror may retain all Records prepared in
connection with the sale of the CRC Assets, including bids received from
other parties and analyses relating to Seller; and
(iv) The items described in Section 2.01(a)(ii)(B) shall not
be provided to Buyer.
(b) After the Closing, upon reasonable written notice, Buyer, Times
Mirror and Seller agree to furnish or cause to be furnished to each other and
their representatives, employees, counsel and accountants access, during normal
business hours, to such information (including Records pertinent to the
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CRC Assets and the CRC Assumed Liabilities) and assistance relating to the CRC
Asset and the CRC Assumed Liabilities as is reasonably necessary for financial
reporting and accounting matters, the preparation and filing of any Tax returns,
reports or forms, claims for refunds or other required or optional filings
relating to Taxes or the defense of any Tax Claim or assessment; provided,
however, that such access does not unreasonably disrupt the normal operations of
Times Mirror, Buyer or Seller.
Section 9.06 Allocation of Purchase Price. Buyer and Seller agree that
they shall negotiate in good faith to enter into an agreement on or after the
Closing Date concerning the allocation of the Purchase Price and the CRC Assumed
Liabilities among the CRC Assets (any agreed allocation hereinafter referred to
as the "Allocation"). If any Tax authority disputes the Allocation, Seller or
Buyer, as the case may be, shall promptly notify the other party of the nature
of such dispute.
Section 9.07 Buyer Representative. Times Mirror and Seller hereby
acknowledge and agree that from and after the date of this Agreement through the
earlier of the Closing Date or the date of termination of this Agreement
pursuant to Section 12.01, Buyer shall be entitled to maintain a representative
of Buyer (the "Buyer Representative") at Seller's principal place of business
for the purpose of ensuring Seller's compliance with Section 7.02; provided,
however, that all information and documentation made available to or otherwise
obtained by the Buyer Representative pursuant to the terms of this Section 9.07
shall be subject to the terms of the Confidentiality Agreement. Buyer
acknowledges and agrees that the Buyer Representative shall be on-site only for
the limited purpose set forth in this Section 9.07 and that the Buyer
Representative shall not in any way exercise or purport to exercise any
authority with respect to the management of Seller or CRC's Business.
Section 9.08 Sublease. Buyer acknowledges that, subject to Buyer's prior
written consent, after the date of this Agreement and prior to the Closing Date,
Seller intends to terminate its sublease with an Affiliate of Times Mirror with
respect to the Leased Property located at 11 Penn Plaza, New York, New York and
to enter into a sublease with Times Mirror with respect to the Leased Property
located at 535 Fifth Avenue, New York, New York, which sublease shall be on such
terms and subject to such conditions as are set forth in this Agreement and, to
the extent not in conflict with this Agreement, as are commercially reasonable
for the real estate market for commercial space in the area of New York, New
York in which such Leased Property is located, and shall, in any event, be in
form and substance reasonably satisfactory to Buyer and its counsel. The
sublease shall be for approximately 1,812 rentable square feet and shall provide
for an annual rent of approximately $21.00 per rentable square foot. The initial
term of such sublease shall not extend for more than six months after the
Closing Date and the sublease
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shall provide that Buyer or, with Buyer's prior written consent prior to the
Closing Date, Seller may extend the term of such sublease for up to 3 years
after the end of such six-month period.
Section 9.09 Further Assurances. From time to time, as and when requested
by any party hereto, the other parties shall execute and deliver, or cause to be
executed and delivered, all such documents and instruments and shall take, or
cause to be taken, all such further or other actions as such other parties may
reasonably deem necessary or desirable to consummate the transactions
contemplated by this Agreement.
ARTICLE TEN
EMPLOYEE AND RELATED MATTERS
Section 10.01 Offers of Employment. Schedule 10.01 sets forth a true and
complete list of all Company Employees who are employed as of the date hereof by
Seller (the "Listed Employees"). Except as may be otherwise agreed in writing by
the parties, not later than 10 days prior to the Closing Date, Buyer shall make
offers of employment, effective as of the Closing Date, to all Listed Employees
under terms and conditions which are substantially comparable to those provided
by comparable businesses of the same size and geographic location as Seller.
Listed Employees who accept such offer of employment from Buyer not later than
10 days after Buyer makes such offer are referred to herein as "Hired Company
Employees." Except as may be specifically provided by applicable law, Buyer
shall not be obligated to continue any employment relationship with any Hired
Company Employee for any specific period of time on or after the Closing Date.
Section 10.02 WARN Act and Other Severance Matters.
(a) WARN Act. As promptly after the date of this Agreement as
practicable, Seller shall give any notice under the Worker Adjustment and
Retraining (WARN) Act required by the consummation of the transactions
contemplated hereby. Seller shall be fully responsible for any liability arising
under the WARN Act in connection with the transactions contemplated by this
Agreement. Notwithstanding the foregoing and except as expressly otherwise
provided herein, all WARN Act liabilities related to the termination of the
employment of any of the Hired Company Employees after the Closing Date shall be
the responsibility of Buyer.
(b) Contractual Severance Benefits. Buyer shall be liable for all
individual agreements, plans or other arrangements to provide severance benefits
to certain Company Employees (including Hired Company Employees) as set forth on
Schedule 10.02(b). Except as otherwise provided in the preceding sentence or
Schedule 2.01(b)(i)(A), neither Buyer nor its Affiliates shall assume or have
direct or indirect obligations or liability of any
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nature, whether matured or unmatured, accrued or contingent, due or to become
due or otherwise, to any Company Employees, or to any dependent, survivor or
beneficiary thereof, arising out of or in relation to such person's employment
with or termination of employment by Seller or any of its Affiliates prior to
the Closing Date.
Section 10.03 Buyer's Benefit Responsibilities. Upon and for a period of
one year after the Closing Date, Buyer shall provide benefits to Hired Company
Employees which are substantially comparable in the aggregate to those provided
by businesses of comparable size and geography as Seller; provided, however,
Buyer shall not be required to provide Hired Company Employees any
post-employment welfare benefits, equity-based compensation, pension plans
(other than the Buyer 401(k) Plan) or participation in multiemployer plans. In
connection with welfare plan benefits and benefits under the Buyer 401(k) Plan,
Buyer shall recognize all service performed by Hired Company Employees under the
Times Mirror's or Seller's Plans prior to the Closing Date for purposes of
eligibility, vesting, benefit accrual, and benefit commencement, and shall waive
all preexisting condition exclusions under any health insurance plans (other
than such conditions for which coverage was precluded under Seller's health
insurance plans on the Closing Date).
Section 10.04 Disposition of TM 401(k) Plan Interests.
(a) Vesting. As of the Closing Date, Times Mirror shall cause all
Hired Company Employees to be fully vested in their account balances, inclusive
of PAYSOP account balances, under the TM 401(k) Plan.
(b) Transfer Pursuant to Code Section 401(k)(10). Times Mirror
shall, in a manner consistent with Code Section 401(k)(10), cause the account
balances, inclusive of the PAYSOP account balances, under the TM 401(k) Plan of
all Hired Company Employees who are participants in the TM 401(k) Plan as of the
Closing Date ("Affected Participants") to be available for distribution to the
Affected Participants. Buyer shall allow Affected Participants who have elected
to take such distributions and who are then employed by Buyer to transfer such
account balances to a defined contribution plan that is intended to meet the
qualification requirements of Code Section 401(a) that includes a cash or
deferred arrangement under Code Section 401(k) and that covers Hired Company
Employees, subject to minimum eligibility service requirements permitted under
the Code (the "Buyer 401(k)Plan").
(c) Transfer Other Than Pursuant to Code Section 401(k)(10).
Notwithstanding Section 10.04(b), above, if, after consultation with Buyer,
Times Mirror cannot reasonably conclude that a distribution under Code Section
401(k)(10) is permissible, then Times Mirror shall, in a manner consistent with
Code Section 414(l), cause the account balances, inclusive of the PAYSOP
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account balances, under the TM 401(k) Plan of all Affected Participants, to be
transferred directly to the Buyer 401(k) Plan. All amounts transferred from the
TM 401(k) Plan, other than amounts transferred in the form of stock of Times
Mirror, shall be transferred in the form of cash, unless Buyer consents to the
transfer of amounts in kind. The transfer shall occur on a date mutually
agreeable to Times Mirror and Buyer following delivery to Times Mirror of a
favorable determination letter issued by the IRS with respect to the
qualification of the Buyer 401(k) Plan under Code Section 401(a). The amount of
the transfer shall be equal to at least ninety percent of the aggregate account
balances of all such Affected Participants valued as of the most recently
completed valuation, as such term is defined in the TM 401(k) Plan, immediately
preceding the date of such transfer. No later than 90 days following the first
transfer described above, there shall be a second transfer to the Buyer 401(k)
Plan of the remainder of the aggregate account balances and any earnings or
losses, as the case may be, thereon through the date of the second transfer and
net earnings accrued with respect to the initially transferred account balances
from the valuation date used for the purposes of the first transfer to the date
of the first transfer. Pending such transfers, Times Mirror shall cause the
accounts of the Affected Participants to be maintained on the same basis as
other participants in the TM 401(k) Plan and shall cause distributions to be
made from the accounts of the Affected Participants to or for the benefit of the
Affected Participants as required under the terms of the TM 401(k) Plan, except
that no Affected Participant shall be eligible to make elective salary deferrals
or employee contributions or to receive allocations of employer contributions
under the TM 401(k) Plan after the Closing Date. After the transfers
contemplated by this Section 10.04, the Buyer 401(k) Plan shall be solely
responsible for any and all liabilities and obligations whatsoever in respect of
the transferred account balances of the Hired Company Employees and Times Mirror
shall be relieved of all such liabilities and obligations. In the event of a
transfer under this Section 10.04(c), Buyer agrees that the Buyer 401(k) Plan
shall provide, or shall be amended to provide, all optional forms of benefits
provided under the TM 401(k) Plan with respect to assets to be transferred from
the TM 401(k) Plan to the Buyer 401(k) Plan as provided in this Section 10.04,
to the extent required under Code Section 4ll(d)(6), including the right of a
participant to request distribution in kind with respect to shares of stock of
Times Mirror transferred in kind to the Buyer 401(k) Plan.
(d) Cooperation. Buyer and Times Mirror shall provide each other
with such records and information as may be necessary or appropriate to carry
out their obligations under this Section 10.04 or for the purposes of
administration of the Buyer 401(k) Plan, and shall cooperate in the filing of
all documents required for the transfer of assets and liabilities described
herein.
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Section 10.05 Continuation of Certain Welfare Benefits Through Closing
Date. Times Mirror and Seller agree to continue coverage of the Company
Employees under the Times Mirror Group Benefit Plan up to the Closing Date and
to provide benefits to or reimburse covered Company Employees for eligible
health care and other eligible welfare expenses and services incurred up to the
Closing Date in accordance with the terms of such plan. For purposes of the
foregoing, an expense or service is deemed incurred when the medical or dental
services are performed or, with respect to welfare benefits other than medical
or dental services, when the event giving rise to such expense or service
occurs.
Section 10.06 No Modifications. Neither Times Mirror nor Seller will
change the employment status of any Company Employee so as to promise employment
for any specified term of employment.
Section 10.07 Mutual Cooperation. Each of the parties hereto agrees to
cooperate, and agrees to use its best efforts to cause its Affiliates to
cooperate and in a complete, diligent and timely manner to provide each other
party with such compensation, service, payroll and other pertinent census data
as may be required by such other party for purposes of calculating or affecting
distribution of benefits to which any Hired Company Employee may be entitled
under any benefit plan established, maintained or contributed to by such other
party.
ARTICLE ELEVEN
INDEMNIFICATION
Section 11.01 Tax Indemnification by Times Mirror and Seller. Times Mirror
and Seller shall jointly and severally indemnify Buyer and its affiliates and
each of their respective officers, directors, employees and agents and hold them
harmless from any Losses suffered or incurred arising from liability for Taxes
of Times Mirror, Seller, or any other entity that is or has been affiliated with
Times Mirror or Seller and Taxes relating to the CRC Assets for the Tax period
(or portion thereof) ending on the Closing Date but unpaid as of the Closing
Date.
Section 11.02 Other Indemnification by Times Mirror and Seller. Times
Mirror and Seller shall jointly and severally indemnify Buyer, its affiliates
and each of their respective officers, directors, employees and agents and hold
them harmless from any Losses suffered or incurred by any such indemnified party
to the extent arising from (a) any failure of any representation or warranty of
Times Mirror or Seller, other than the representations and warranties contained
in Section 5.09, to be true and correct as of the Closing Date, (b) any breach
by Times Mirror or Seller of any covenant contained in this Agreement requiring
performance after the Closing Date, or (c) any liability of Seller other than a
CRC Assumed Liability (including any CRC Excluded Liability and Losses suffered
or incurred by any such indemnified party as a result of the failure
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of Seller to comply with any applicable Bulk Sales Laws referred to in Section
8.04); provided, however, that neither Times Mirror nor Seller shall have any
liability under clause (a) of this Section 11.02 unless the aggregate of all
Losses relating thereto for which Times Mirror or Seller would, but for this
provision, be liable exceeds on a cumulative basis an amount equal to $350,000,
in which case Times Mirror and Seller shall be responsible for all such Losses;
and provided further, however, that Times Mirror's and Seller's aggregate
liability under clause (a) of this Section 11.02 shall in no event exceed
$12,950,000.
Section 11.03 Indemnification by Buyer. Buyer shall indemnify Times Mirror
and Seller and their respective officers, directors, employees and agents
against and hold them harmless from any Losses suffered or incurred by any such
indemnified party to the extent arising from (a) any failure of any
representation or warranty of Buyer to be true and correct as of the Closing
Date, (b) any breach by Buyer of any covenant contained in this Agreement
requiring performance after the Closing Date and any actions of the Buyer
Representative, or (c) the CRC Assumed Liabilities; provided, however, that
Buyer shall not have any liability under clause (a) of this Section 11.03 unless
the aggregate of all Losses relating thereto for which Buyer would, but for this
provision, be liable exceeds on a cumulative basis an amount equal to $350,000,
in which case Buyer shall be responsible for all such Losses; and provided
further, however, that Buyer's aggregate liability under clause (a) of this
Section 11.03 shall in no event exceed an amount equal to $12,950,000.
Section 11.04 Losses Net of Insurance. The amount of any Losses for which
indemnification is provided under this Article 11 shall be net of any amounts
recovered or recoverable by the indemnified party under insurance policies with
respect to such Losses.
Section 11.05 Termination of Indemnification. The obligations to indemnify
and hold harmless a party hereto, (a) pursuant to Section 11.01, shall terminate
at the time the applicable statutes of limitations with respect to the Tax
liabilities in question expire (giving effect to any extension thereof by waiver
or otherwise), (b) pursuant to clause (a) of Sections 11.02 and 11.03, shall
terminate when the applicable representation or warranty terminates pursuant to
Section 12.04, and (c) pursuant clauses (b) and (c) of Sections 11.02 and 11.03,
shall not terminate; provided, however, that as to clauses (a) and (b) above,
such obligations to indemnify and hold harmless shall not terminate with respect
to any item as to which the person to be indemnified or the related party hereto
shall have, before the expiration of the applicable period, previously made a
claim by delivering a notice (setting forth the detailed basis of such claim) to
the indemnifying party.
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Section 11.06 Procedures Relating to Indemnification (Except Under Section
11.01). In order for a party (the "indemnified party") to be entitled to any
indemnification provided for under this Agreement (other than under Section
11.01) in respect of, arising out of or involving a claim or demand made by any
person, firm, governmental authority or corporation against the indemnified
party (a "Third-Party Claim"), such indemnified party must notify the
indemnifying party in writing, and in reasonable detail, of the Third-Party
Claim within 10 Business Days after receipt by such indemnified party of written
notice of the Third-Party Claim; provided, however, that failure to give such
notification shall not affect the indemnification provided hereunder except to
the extent the indemnifying party shall have been actually prejudiced as a
result of such failure (except that the indemnifying party shall not be liable
for any expenses incurred during the period in which the indemnified party
failed to give such notice). Thereafter, the indemnified party shall deliver to
the indemnifying party, within 5 Business Days after the indemnified party's
receipt thereof, copies of all notices and documents (including court papers)
received by the indemnified party relating to the Third-Party Claim.
If a Third-Party Claim is made against an indemnified party, the
indemnifying party will be entitled to participate in the defense thereof and,
if it so chooses, to assume the defense thereof with counsel selected by the
indemnifying party and reasonably satisfactory to the indemnified party. Should
the indemnifying party so elect to assume the defense of a Third-Party Claim,
the indemnifying party will not be liable to the indemnified party for legal
fees and expenses subsequently incurred by the indemnified party in connection
with the defense thereof. If the indemnifying party assumes such defense, the
indemnified party shall have the right to participate in the defense thereof and
to employ counsel, at its own expense, separate from the counsel employed by the
indemnifying party, it being understood that the indemnifying party shall
control such defense. The indemnifying party shall be liable for the fees and
expenses of counsel employed by the indemnified party for any period during
which the indemnifying party has not assumed the defense thereof (other than
during any period in which the indemnified party, shall have failed to give
notice of the Third-Party Claim as provided above). If the indemnifying party
chooses to defend or prosecute any Third-Party Claim, all the parties hereto
shall cooperate in the defense or prosecution thereof. Such cooperation shall
include the retention and (upon the indemnifying party's request) the provision
to the indemnifying party of records and information which are reasonably
relevant to such Third-Party Claim, and making employees available on a mutually
convenient basis to provide additional information and explanation of any
material provided hereunder. Whether or not the indemnifying party shall have
assumed the defense of a Third-Party Claim, the indemnified party shall not
admit any liability with respect to, or settle,
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compromise or discharge, such Third-Party Claim without the indemnifying party's
prior written consent (which consent shall not be unreasonably withheld). All
Tax Claims shall be governed by Section 11.07.
Section 11.07 Procedures Relating to Indemnification of Tax Claims. If a
claim shall be made by any Tax authority, which, if successful, would result in
an indemnity payment to Buyer or one of its Affiliates pursuant to Section 11.01
(a "Tax Claim"), Buyer shall promptly notify Times Mirror in writing of such Tax
Claim stating the nature and basis of such Tax Claim and the amount thereof, to
the extent known by Buyer. If notice of a Tax Claim is not given to Times Mirror
within a sufficient period of time to allow Times Mirror to effectively contest
such Tax Claim, or in reasonable detail to apprise Times Mirror of the nature of
the Tax Claim, in each case taking into account the facts and circumstances with
respect to such Tax Claim, neither Times Mirror nor Seller shall be liable to
Buyer or any of its Affiliates to the extent that Times Mirror's ability to
effectively contest such Tax Claim is actually prejudiced as a result thereof.
With respect to any Tax Claim, Times Mirror shall, upon timely notice to
Buyer, assume control all proceedings taken in connection with such Tax Claim
(including, without limitation, selection of counsel) and, without limiting the
foregoing, may in its sole discretion pursue or forego any and all
administrative appeals, proceedings, hearings and conferences with any Taxing
authority with respect thereto and may, in its sole discretion, either pay the
Tax claimed and sue for a refund where applicable law permits such refund suits
or contest the Tax Claim in any permissible manner. Buyer shall cooperate with
Times Mirror at Times Mirror's expense in contesting any Tax Claim, which
cooperation shall include, without limitation, the retention and (upon Times
Mirror's request) the provision to Times Mirror of records and information which
are reasonably relevant to such Tax Claim, and making employees available on a
mutually convenient basis to provide additional information or explanation of
any material provided hereunder or to testify at proceedings relating to such
Tax Claim.
Section 11.08 Exclusive Remedy. In the absence of fraud or willful
misconduct on the part of the indemnifying party, or any of its officers,
directors, employees or agents in connection with the negotiation, execution or
delivery of this Agreement or the consummation of the transactions contemplated
hereby, the remedy contained in Sections 11.01, 11.02 and 11.03 shall constitute
the sole and exclusive remedy of the indemnified party (and its affiliates and
each of their respective officers, directors, employees and agents) against the
indemnifying party for Losses suffered or incurred in connection with this
Agreement and the transactions contemplated hereby.
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ARTICLE TWELVE
TERMINATION
Section 12.01 Events of Termination. Anything contained herein to the
contrary notwithstanding, this Agreement may be terminated and the transactions
contemplated hereby abandoned at any time prior to the Closing Date:
(a) by written consent of Times Mirror, Seller and Buyer;
(b) by Buyer, if any of the conditions set forth in Section 4.01 and
Section 4.02 is not satisfied or, in the reasonable, good faith determination of
Buyer, not capable of being satisfied prior to January 31, 1997, and shall not
have been waived by Buyer;
(c) by Times Mirror or Seller if any of the conditions set forth in
Section 4.01 and Section 4.03 is not satisfied or, in the reasonable, good faith
determination of Times Mirror or Seller, not capable of being satisfied prior to
January 31, 1997, and shall not have been waived by Seller; or
(d) by any party hereto, if the Closing does not occur on or prior
to January 31, 1997;
provided, however, that the party seeking termination pursuant to clause (b),
(c) or (d) is not in breach of any of its representations, warranties, covenants
or agreements contained in this Agreement.
Section 12.02 Return of Confidential Information. In the event of
termination by Times Mirror, Seller or Buyer pursuant to Section 12.01, written
notice thereof shall forthwith be given to the other parties and the
transactions contemplated by this Agreement shall be terminated, without further
action by any party. If the transactions contemplated by this Agreement are
terminated as provided herein:
(a) Buyer shall return all documents and copies and other material
received from Times Mirror or Seller relating to the transactions contemplated
hereby, whether obtained before or after the execution hereof, to Times Mirror;
and
(b) All confidential information received by Buyer with respect to
CRC's Business shall be treated in accordance with the Confidentiality
Agreement, which shall remain in full force and effect notwithstanding the
termination of this Agreement.
Section 12.03 Effects of Termination. If this Agreement is terminated and
the transactions contemplated hereby are abandoned as described in Section
12.01, this Agreement shall become void and of no further force and effect,
except for the provisions of
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(a) Section 8.01 relating to the obligation of Buyer to keep confidential
certain information and data obtained by it, (b) Section 9.03 relating to
publicity, (c) Section 13.02 relating to attorneys' fees and expenses, (d)
Section 13.09 relating to finders' fees and brokers' fees, (e) Section 13.11
relating to dispute resolution and equitable enforcement and (f) this Article
12. Nothing in this Article 12 shall be deemed to release any party from any
liability for any breach by such party of the terms and provisions of this
Agreement or to impair the right of any party to compel specific performance by
the other parties of their respective obligations under this Agreement.
Section 12.04 Survival of Representations. The representations and
warranties in this Agreement (other than representations and warranties relating
to Taxes and environmental matters) and in any other document identified as
being delivered in connection with this Agreement shall survive the Closing
solely for the purposes of Sections 11.02 and 11.03 (and not for reaffirmation)
and shall terminate at the close of business on the first anniversary after the
Closing Date. The representations and warranties relating to Taxes and
environmental matters shall survive the Closing solely for the purposes of
Section 11.01 or 11.02, as the case may be, (and not for reaffirmation) and
shall terminate when the applicable statutes of limitations with respect to the
Tax or environmental liabilities in question expire (giving effect to any
extension thereof by waiver or otherwise).
ARTICLE THIRTEEN
MISCELLANEOUS
Section 13.01 Expenses. Whether or not the transactions contemplated
hereby are consummated, and except as otherwise provided in this Agreement, all
fees, costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby including, but not limited to, all fees and
expenses of agents, brokers, if any, representatives, counsel and accountants,
shall be paid by the party incurring such fees, costs or expenses.
Section 13.02 Attorneys' Fees. Should any arbitration, litigation, or any
other dispute resolution mechanism be commenced concerning this Agreement or the
rights and duties of any party with respect to it, the party prevailing shall be
entitled, in addition to such other relief as may be granted, to a reasonable
sum for such party's attorneys' fees and expenses determined by the arbitral
panel in such arbitration, by the court in such litigation or by an arbitral
panel or a court in a separate action brought for that purpose.
Section 13.03 Amendments. No amendment to this Agreement shall be
effective unless it shall be in writing and signed by all of the parties hereto.
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Section 13.04 Assignment. This Agreement and the rights and obligations
hereunder shall not be assignable or transferable by Buyer, Times Mirror or
Seller (including by operation of law in connection with a merger, or sale of
substantially all the assets, of Buyer, Times Mirror or Seller) without the
prior written consent of the parties hereto (except that nothing herein shall be
construed as obligating either Times Mirror or Seller to obtain the consent of
Times Mirror or Seller to any of the transactions described above); provided,
however, that no assignment shall limit or affect the assignor's obligations
hereunder.
Section 13.05 No Third-Party Beneficiaries. Except as provided in Article
11, this Agreement is for the sole benefit of the parties hereto and their
permitted assigns and nothing herein expressed or implied shall give or be
construed to give to any person or entity, other than the parties hereto and
such assigns, any legal or equitable rights hereunder.
Section 13.06 Notices. All notices or other communications required or
permitted to be given hereunder shall be in writing and shall be delivered by
hand or sent prepaid telecopy, or sent, postage prepaid, by registered,
certified or express mail, or reputable overnight courier service and shall be
deemed given when so delivered by hand or telecopied, or if mailed, three days
after mailing (one Business Day in the case of express mail or overnight courier
service), as follows:
(i) if to Buyer,
INFORMATION VENTURES LLC
c/o Warburg, Pincus Ventures, L.P.
466 Lexington Avenue
New York, New York 10017
Attention: Mason Slaine and
David Libowitz
Telecopier: 212-878-9351
with a copy to:
WILLKIE FARR & GALLAGHER
One Citicorp Center
153 East 53rd Street
New York, NY 10022-4677
Attention: Steven J. Gartner, Esq.
Telecopier: 212-821-8111
(ii) if to Times Mirror or Seller,
THE TIMES MIRROR COMPANY
Times Mirror Square
Los Angeles, California 90053
Attention: Kathleen G. McGuinness, Esq.
Telecopier: 213-237-3800
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<PAGE>
with a copy to:
GIBSON, DUNN & CRUTCHER LLP
333 South Grand Avenue
Los Angeles, California 90071
Attention: Peter F. Ziegler, Esq.
Telecopier: 213-229-7520
Section 13.07 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more such counterparts have been signed by
each of the parties and delivered to the other party.
Section 13.08 Entire Agreement. This Agreement, the Mosby Transition
Services Agreement and the Confidentiality Agreement contain the entire
agreement and understanding between the parties hereto with respect to the
subject matter hereof and supersede all prior agreements and understandings
relating to such subject matter.
Section 13.09 Severability. If any provision of this Agreement or the
application of any such provision to any person or circumstance shall be held
invalid, illegal or unenforceable in any respect by a court of competent
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision hereof.
Section 13.10 Dispute Resolution; Equitable Enforcement.
(a) Accounting Disputes. Notwithstanding anything to the contrary
contained in this Section 13.10, any controversy, dispute or claim arising under
this Agreement related to or arising out of accounting matters relating to this
Agreement shall be resolved by means of discussions between the regularly
retained independent certified public accountants of Buyer and Times Mirror. In
the event that the independent certified public accountants of each of Buyer and
Times Mirror are unable to resolve the dispute within 60 days after the dispute
is first submitted to them, then a third independent certified public accountant
of recognized national standing shall be selected by the independent certified
public accountants of each of Buyer and Times Mirror and the determination of
such third independent certified public accountant, with respect to the matter
in dispute, shall be rendered within 45 days after the dispute has been
submitted to it and such determination shall be final and binding on all of the
parties hereto.
(b) Arbitration. Except as otherwise provided in Section 13.10(a) or
(c), any controversy dispute or claim arising under this Agreement shall be
settled by arbitration conducted in New York, New York in accordance with the
rules of the American Arbitration Association as then in effect and judgment
upon any award rendered by the arbitrator may be entered by any federal or
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<PAGE>
state court having jurisdiction thereof. Any such arbitration shall be conducted
by a single arbitrator who shall be a retired judge of either the Supreme Court
of the State of New York, New York County, the United States District Court for
the Southern District of New York or the United States Court of Appeals for the
Second Circuit. The arbitrator shall comply with all rules of law, discovery and
evidence as then in effect in the Supreme Court of the State of New York, New
York County. The parties intend that this agreement to arbitrate be valid,
enforceable and irrevocable.
(c) Equitable Enforcement. Notwithstanding anything to the contrary
contained in this Section 13.10, any claim by any party for injunctive or other
equitable relief, including specific performance (including specific performance
of the agreement to resolve disputes related to or arising out of accounting
matters contained in Section 13.10(a) and the agreement to arbitrate contained
in Section 13.10(b)), may be brought in the Supreme Court of the State of New
York, New York County, or in the United States District Court for the Southern
District of New York before or as a result of arbitration, and any judgment,
order or decree relating thereto shall have precedence over any arbitral award
or proceeding. Each of Buyer, Times Mirror and Seller irrevocably submits to the
exclusive jurisdiction of (i) the Supreme Court of the State of New York, New
York County, and (ii) the United States District Court for the Southern District
of New York, for the purposes of any suit, action or other proceeding arising
out of this Agreement or any transaction contemplated hereby. Each of Buyer,
Times Mirror and Seller agrees to commence any action, suit or proceeding
relating hereto either in the United States District Court for the Southern
District of New York or, if, for jurisdictional reasons, such suit, action or
other proceeding may not be brought in such court, in the Supreme Court of the
State of New York, New York County. Each of Buyer, Times Mirror and Seller
further agrees that service of any process, summons, notice or document by U.S.
registered mail to such party's respective address set forth in Section 13.06
above shall be effective service of process for any action, suit or proceeding
in New York with respect to any matters to which it has submitted to
jurisdiction as set forth above in the immediately preceding sentence. Each of
Buyer, Times Mirror and Seller irrevocably and unconditionally waives any
objection to the laying of venue of any action, suit or proceeding arising out
of this Agreement or the transactions contemplated hereby in (x) the Supreme
Court of the State of New York, New York County, or (y) the United States
District Court for the Southern District of New York, and hereby further
irrevocably and unconditionally waives and agrees not to plead or claim in any
such court that any such action, suit or proceeding brought in any such court
has been brought in an inconvenient forum.
Section 13.11 No Consequential or Punitive Damages. Notwithstanding
anything to the contrary elsewhere in this
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Agreement, no party (or its Affiliates) shall, in any event, be liable to any
other party (or its Affiliates) for any consequential damages, including, but
not limited to, loss of revenue or income, or loss of business reputation or
opportunity, or any punitive damages relating to the breach or alleged breach of
this Agreement.
Section 13.12 Transfer Taxes. Buyer and Seller shall share equally and pay
when due all transfer, documentary, sales, use, registration, value-added and
other similar Taxes (including, but not limited to, all applicable real estate
transfer or gains taxes and any taxes resulting from actual or deemed sale of
assets) and related fees incurred in connection with this Agreement and the
transactions contemplated hereby. Seller and Buyer shall cooperate in timely
making all filings, returns, reports and forms as may be required to comply with
the provisions of such Tax laws, and such tax returns will be prepared in a
manner that is consistent with the Allocation. Buyer shall furnish Seller with a
form of resale certificate that complies with all applicable state Tax laws.
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first written above.
THE TIMES MIRROR COMPANY,
a Delaware corporation
By:
---------------------------
Name:
Title:
CRC PRESS, INC.,
a Florida corporation
By:
---------------------------
Name:
Title:
INFORMATION VENTURES LLC,
a Delaware limited liability company
By: /s/ Mason Slaine
---------------------------
Name: Mason Slaine
Title: President
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first written above.
THE TIMES MIRROR COMPANY,
a Delaware corporation
By:
---------------------------
Name:
Title:
CRC PRESS, INC.,
a Florida corporation
By: /s/ Mary L. Hurley
---------------------------
Name: Mary L. Hurley
Title: Senior Vice President, Finance Admin.
INFORMATION VENTURES LLC,
a Delaware limited liability company
By:
---------------------------
Name: Mason Slaine
Title: President
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first written above.
THE TIMES MIRROR COMPANY,
a Delaware corporation
By: /s/ Thomas Unterman
---------------------------
Name: Thomas Unterman
Title: Senior Vice President &
Chief Financial Officer
CRC PRESS, INC.,
a Florida corporation
By:
---------------------------
Name:
Title:
INFORMATION VENTURES LLC,
a Delaware limited liability company
By:
---------------------------
Name: Mason Slaine
Title: President
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Exhibit 10.7
================================================================================
ST. LUCIE PRESS, INC.,
ST. LUCIE PRESS (U.K.) LTD.
AND
CRC PRESS LLC
------------------------
ASSET PURCHASE AGREEMENT
------------------------
------------------------
Dated as of January 8, 1997
------------------------
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
Recitals.....................................................................1
1. DEFINITIONS.............................................................1
2. PURCHASE AND SALE OF THE PURCHASED PROPERTY.............................6
2.1. Transfer of Assets..............................................6
2.2. Sale at Closing Date............................................8
2.3. Subsequent Documentation........................................8
2.4. Assumption of Liabilities.......................................9
3. PURCHASE PRICE.........................................................10
3.1. Purchase Price.................................................10
3.2. Payment of Purchase Price......................................10
3.3. Post-Closing Adjustment to Purchase Price......................11
4. CLOSING................................................................12
5. REPRESENTATIONS AND WARRANTIES OF THE SELLER...........................12
5.1. Corporate Organization.........................................12
5.2. Qualification to Do Business...................................12
5.3. Authorization and Validity of Agreement........................12
5.4. No Conflict or Violation.......................................13
5.5. Consents and Approvals.........................................13
5.6. Financial Statements...........................................13
5.7. Absence of Certain Changes or Events...........................14
5.8. Tax Matters....................................................15
5.9. Absence of Undisclosed Liabilities.............................16
5.10. Real Property..................................................16
5.11. Equipment and Machinery........................................16
5.12. Intellectual Property..........................................16
5.13. Licenses, Permits and Governmental Approvals...................18
5.14. Compliance with Law; Licenses..................................18
5.15. Litigation.....................................................19
5.16. Contracts......................................................19
5.17. Receivables....................................................20
5.18. Inventories....................................................20
5.19. Employee Plans.................................................20
5.20. Customers, Suppliers and Competitors...........................21
5.21. Insurance......................................................21
5.22. Transactions with Directors, Officers and Affiliates...........22
5.23. Labor Matters..................................................22
5.24. Environmental Matters..........................................23
5.25. Accuracy of Information........................................23
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5.26. Survival.......................................................23
6. REPRESENTATIONS AND WARRANTIES OF THE BUYER............................24
6.1. Corporate Organization.........................................24
6.2. Qualification to Do Business...................................24
6.3. Authorization and Validity of Agreement........................24
6.4. No Conflict or Violation.......................................24
6.5. Approvals and Consents.........................................24
7. COVENANTS OF THE SELLERS...............................................25
7.1. Conduct of Business Before the Closing Date....................25
7.2. Consents and Approvals.........................................27
7.3. Access to Properties and Records...............................27
7.4. Negotiations...................................................27
7.5. Further Assurances.............................................28
7.6. Best Efforts...................................................28
7.7. Covenant Not To Compete........................................28
7.8. Non-Solicitation of Employees..................................29
7.9. Notice of Breach...............................................29
7.10. Bulk Sales Compliance..........................................29
7.11. Assignment of Contracts and Warranties.........................29
8. COVENANTS OF THE BUYER.................................................30
8.1. Actions Before Closing Date....................................30
8.2. Consents and Approvals.........................................30
9. EMPLOYEES AND EMPLOYEE PLANS...........................................30
9.1. Offer of Employment............................................30
9.2. Employee Benefits..............................................30
9.3. Liability......................................................30
9.4. Rights.........................................................30
10. TAXES.................................................................31
10.1. Allocation of Purchase Price and Purchase Price
Allocation Forms............................................31
11. INDEMNIFICATION.......................................................31
11.1. Indemnification by the Sellers................................31
11.2. Procedures for Indemnification by the Seller..................32
11.3. Indemnification by the Buyer..................................32
11.4. Procedures for Indemnification by the Buyer...................33
11.5. Successors and Assigns........................................34
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12. CONDITIONS TO OBLIGATIONS OF THE SELLERS..............................34
12.1. Representations and Warranties of the Buyer...................34
12.2. Performance of the Obligations of the Buyer...................34
12.3. Consents and Approvals........................................34
12.4. No Violation of Orders........................................34
12.5. Buda Employment Agreement.....................................34
13. CONDITIONS PRECEDENT TO THE PERFORMANCE BY THE BUYER..................34
13.1. Representations and Warranties of the Sellers.................35
13.2. Performance of the Obligations of the Sellers.................35
13.3. Consents and Approvals........................................35
13.4. No Violation of Orders........................................35
13.5. No Material Adverse Change....................................35
13.6. Opinion of Counsel............................................35
13.7. Other Closing Documents.......................................37
13.8. Legal Matters.................................................37
13.9. CRC Acquisition...............................................37
13.10. Buda Employment Agreement.....................................37
14. TERMINATION...........................................................37
14.1. Conditions of Termination.....................................37
14.2. Effect of Termination.........................................37
15. MISCELLANEOUS.........................................................37
15.1. Successors and Assigns........................................37
15.2. Governing Law; Jurisdiction...................................38
15.3. Expenses......................................................38
15.4. Broker's and Finder's Fees....................................38
15.5. Severability..................................................38
15.6. Notices.......................................................38
15.7. Amendments; Waivers...........................................39
15.8. Public Announcements..........................................40
15.9. Entire Agreement..............................................40
15.10. Parties in Interest...........................................40
15.11. Scheduled Disclosures.........................................40
15.12. Section and Paragraph Headings................................40
15.13. Counterparts..................................................40
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INDEX TO SCHEDULES
2.1(a) Publications
2.1(b) Retained Assets: Promissory Note, Equipment and Office
Furniture
2.4(b) Direct Marketing Mailing Expense
5.2 Qualification
5.5 Consents, Waivers, Authorizations and Approvals
5.6 Financial Statements
5.7 Material Changes or Events
5.8 Tax Matter Exceptions
5.9 Undisclosed Liabilities
5.10 Leases
5.11 Equipment and Machinery
5.12 Intellectual Property and Intangible Assets
5.13 Licenses, Permits and Governmental Approvals
5.14 Exceptions to Compliance with Law
5.15 Litigation
5.16 Contracts
5.17 Counterclaims and Set-Offs of Accounts Receivable
5.19(a) Employee Plans
5.20 Customers, Suppliers and Competitors
5.21 Insurance
5.22 Transactions with Directors, Officers and Affiliates
5.23(a) Employment and Labor Agreements
5.23(b) Exceptions to Compliance with Employment Laws
9.1 Employees
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT, dated as of January 8, 1997 by and
between ST. LUCIE PRESS, INC., a Florida corporation (the "Company"), ST. LUCIE
PRESS (U.K.) LTD., a United Kingdom corporation ("St. Lucie UK"), DENNIS BUDA
("Buda" and, together with the Company and St. Lucie UK, the "Sellers"), and CRC
PRESS LLC, a Delaware limited liability company (the "Buyer").
W I T N E S S E T H:
WHEREAS, the Company and St. Lucie UK (collectively, the
"Companies") are engaged in the business of publishing scientific, technical and
business books; and
WHEREAS, the Buyer desires to purchase the assets of the Companies
from the Sellers, and the Sellers desire to sell such assets to the Buyer, in
each case upon the terms and subject to the conditions set forth in this
Agreement;
NOW, THEREFORE, in consideration of the foregoing and the respective
covenants and agreements hereinafter contained, the parties hereto hereby agree
as follows:
SECTION 1. DEFINITIONS.
As used in this Agreement (including the recitals and Schedules
hereto), the following terms shall have the following meanings (such meanings to
be applicable equally to both singular and plural forms of the terms defined):
"Accounts Receivable" shall mean all accounts and notes receivable
of the Companies existing on the Closing Date;
"Affiliate" shall mean, as to any Person, any other Person which
directly or indirectly controls, or is under common control with, or is
controlled by, such Person. As used in this definition, "control" (including,
with its correlative meanings, "controlled by" and "under common control with")
shall mean possession, directly or indirectly, of the power to direct or cause
the direction of management or policies (whether through ownership of securities
or partnership or other ownership interests, by contract or otherwise) of such
Person;
"Allocation Statement" shall have the meaning set forth in Section
10.1 hereof;
"Assigned Contracts" shall mean the rights of the Companies under
the Contracts;
"Assumed Liabilities" shall have the meaning set forth in Section
2.4 hereof;
<PAGE>
"Buda Employment Agreement" shall mean the Employment Agreement, to
be dated the Closing Date, between the Buyer and Buda, in substantially the form
of Exhibit A hereto.
"Business" shall mean that all the business activities and
operations of the Companies, including without limitation, publishing
scientific, technical and business books;
"Business Day" shall mean days other than Saturdays, Sundays and
other legal holidays or days on which the principal office of Citibank, N.A. is
closed;
"Buyer" shall have the meaning set forth in the Preamble hereto;
"Buyer Event of Breach" shall have the meaning set forth in Section
11.3 hereof;
"Buyer Indemnitees" shall have the meaning set forth in Section 11.1
hereof;
"Closing" shall have the meaning set forth in Section 4 hereof;
"Closing Date" shall have the meaning set forth in Section 4;
"Closing Date Accounts Payable" shall have the meaning set forth in
Section 3.3(a) hereof;
"Code" shall mean the Internal Revenue Code of 1986, as amended;
"Companies" shall have the meaning set forth in the first recital
hereof.
"Contracts" shall mean, collectively, Purchase Orders, Sales Orders
and Other Contracts;
"Controlled Group" shall have the meaning set forth in Section
5.19(d) hereof;
"Employment and Labor Agreements" shall have the meaning set forth
in Section 5.23(a) hereof;
"Environmental Laws" shall have the meaning set forth in Section
5.24 hereof;
"Equipment and Machinery" shall mean (i) all the equipment,
machinery, furniture, fixtures and improvements, supplies and vehicles owned or
leased by the Companies on the Closing Date (including, without limitation, all
such items as set forth on the October Balance Sheet with additions thereto (net
of dispositions) in the ordinary course of business), (ii)
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all the replacements for any of the foregoing owned or leased by the Companies,
(iii) any rights of the Companies to the warranties (to the extent assignable)
and licenses received from manufacturers and sellers of the aforesaid items and
(iv) any related claims, credits, rights of recovery and set-off with respect
thereto;
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended;
"ERISA Affiliate" shall have the meaning set forth in Section 5.19
hereof;
"Excluded Liabilities" shall have the meaning set forth in Section
2.4 hereof;
"Files and Records" shall mean all files and records, whether in
hard copy or magnetic format, of the Companies specifically relating to the
Business or the Purchased Property, including, without limitation, the following
types of files and records specifically relating to the Business: customer and
supplier files, equipment maintenance records, equipment warranty information,
plant plans, specifications and drawings, trade secrets and customer
specifications and all files relating to employees of the Business employed by
the Buyer following the Closing, correspondence with national, state and local
governmental agencies relating to the operation of the Business and related
files and records of the Companies;
"Financial Statements" shall have the meaning set forth in Section
5.6 hereof;
"GAAP" shall mean United States generally accepted accounting
principles as in effect on the date on which the document or calculation to
which it refers relates, applied on a consistent basis throughout the periods
covered thereby;
"Government" shall mean any agency, division, subdivision, audit
group or procuring office of the Government of the United States or any foreign
government, including the employees or agents thereof;
"Intangible Assets" shall mean all intangible personal property
rights, including, without limitation, all rights on the part of the Companies
to proceeds of any insurance policies and all claims on the part of the
Companies for recoupment, reimbursement and coverage under any insurance
policies, in each case in connection with the Business and all goodwill of the
Sellers relating to the Business;
"Intellectual Property" shall have the meaning set forth in Section
5.12 hereof;
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<PAGE>
"Inventory" shall mean (i) all the finished goods, raw materials,
work in progress and inventoriable supplies owned by the Companies on the
Closing Date (including, without limitation, all such items as set forth on the
October Balance Sheet with additions thereto (net of dispositions) in the
ordinary course of business) specifically for use in the operations of the
Business, including inventory owned and held on consignment by any distributor
and/or customer of the Companies and (ii) any and all rights of the Companies to
the warranties received from its suppliers with respect to such inventory (to
the extent assignable) and related claims, credits, rights of recovery and
set-off with respect thereto;
"Leases" shall have the meaning set forth in Section 5.10 hereof;
"Licenses" shall have the meaning set forth in Section 5.12(c)
hereof;
"Lien" shall mean any mortgage, pledge, security interest,
encumbrance, lien (statutory or other) or conditional sale agreement;
"Listed Employee" shall have the meaning set forth in Section 9.1
hereof;
"Losses" shall have the meaning set forth in Section 11.1 hereof;
"Material Adverse Effect" shall mean a material adverse affect on
the business, operations, assets, properties, condition (financial or otherwise)
or prospects of the Companies taken as a whole;
"Multiemployer Pension Plan" shall have the meaning set forth in
Section (3)(37) of ERISA;
"Net Working Capital" shall have the meaning set forth in Section
3.3(a) hereof;
"NLRB" shall have the meaning set forth in Section 5.23(b) hereof;
"Obsolete Inventory" shall have the meaning set forth in Section
5.18 hereof;
"October Balance Sheet" shall have the meaning set forth in Section
5.6 hereof;
"Other Contracts" shall mean all Equipment and Machinery leases, and
all indentures, loan agreements, security agreements, all author, editor,
subscriber, license and distribution agreements or contracts, and all other
contracts, commitments, partnership or joint venture agreements, license
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agreements, service contracts, employment, commission, and consulting
agreements, suretyship contracts, letters of credit, reimbursement agreements,
contracts or commitments limiting or restraining the Companies or Buda with
respect to the Business from engaging or competing in any lines of business or
with any person, firm or corporation, documents granting the power of attorney
with respect to the affairs of the Companies, agreements not made in the
ordinary course of business of the Business, options to purchase any assets or
property rights of the Business, working capital maintenance or other form of
guaranty agreements, and all other agreements to which either of the Companies
is a party and which are related to the operation of the Business, but excluding
Leases, Purchase Orders, Sales Orders, severance pay plans, Employee Plans and
Benefit Plans;
"Permits" shall have the meaning set forth in Section 5.13 hereof;
"Person" shall mean and include any individual, corporation, limited
liability company, partnership, joint venture, association, joint-stock company,
trust, any other unincorporated organization or Government;
"Plans" shall have the meaning set forth in Section 5.19(a) hereof;
"Publications" shall have the meaning set forth in Section 2.1
hereof;
"Purchase Orders" shall mean all the Companies' outstanding purchase
orders, contracts or other commitments to suppliers of goods and services for
materials, supplies or other items used in the Business;
"Purchase Price" shall have the meaning set forth in Section 3.1
hereof;
"Purchased Property" shall have the meaning set forth in Section
2.1(a) hereof;
"Reproduction Materials" shall have the meaning set forth in Section
2.1(a) hereof;
"Restricted Period" shall have the meaning set forth in Section
7.7(a) hereof;
"Retained Assets" shall have the meaning set forth in Section 2.1(b)
hereof;
"Sales Orders" shall mean all the Companies' sales orders, contracts
or other commitments to purchasers of goods and services of the Business;
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"Seller Indemnitees" shall have the meaning set forth in Section
11.3 hereof;
"Sellers" shall have the meaning set forth in the Preamble hereto;
"Sellers' Event of Breach" shall have the meaning set forth in
Section 11.1 hereof;
"Surplus Inventory" shall have the meaning set forth in Section 5.18
hereof;
"Taxes" shall mean for all purposes of this Agreement all taxes
(including, without limitation, excise taxes, ad valorem taxes and transfer
taxes and fees) and other Governmental charges of any nature imposed upon a
Person, including without limitation, all taxes or Governmental charges of any
nature imposed upon any of the properties, tangible or intangible assets,
income, receipts, payrolls, transactions, stock transfers, capital, net worth or
franchises of a Person (including, without limitation, all sales, use,
withholding or other taxes which a Person is required to collect and/or pay over
to any Government), and all additions to tax, penalties or interest paid or
payable which relate in any way to such taxes and other Governmental charges, or
any assessment or collection thereof;
"Tax Returns" shall mean any return, report, information return or
other document (including any related or supporting information) filed or
required to be filed with any governmental body in connection with the
determination, assessment, collection or administration of any Taxes.
"Transferred Employee" shall have the meaning set forth in Section
9.2 hereof;
"Working Capital Statement" shall have the meaning set forth in
Section 3.3(a) hereof;
"Working Capital Statement Report" shall have the meaning set forth
in Section 3.3(a) hereof.
SECTION 2. PURCHASE AND SALE OF THE PURCHASED PROPERTY.
SECTION 2.1. Transfer of Assets.
(a) Subject to the terms and conditions herein set forth, the
Sellers shall sell, convey, transfer, assign and deliver to the Buyer, free and
clear of any Lien, and the Buyer shall purchase and accept from the Sellers, on
the Closing Date, all right, title and interest of the Sellers and its
affiliates in and to all of the Companies' assets, properties, rights and
business, tangible and intangible, of every type and description,
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wherever located, used or employed in connection with the Business as they exist
or shall exist on the Closing Date (all of such assets, properties, rights and
business being hereinafter collectively referred to as the "Purchased
Property"), including without limitation:
(i) the Accounts Receivable, Assigned Contracts, Equipment and
Machinery, Files and Records, Intangible Assets, Intellectual Property,
Inventory, Licenses and Permits (to the extent transferable by the
Companies), Premises and any prepaid expenses and other assets relating to
the operations of the Business on the Closing Date (including, without
limitation, all such items as are set forth on the October Balance Sheet
with additions thereto (net of dispositions) in the ordinary course of
business) and including all the tangible and intangible assets of the
Seller and its affiliates used in the Business and related thereto;
(ii) all right, title and interest in and to the publications
produced by the Companies, all of which are listed in Schedule 2.1 hereto,
whether complete, published, unpublished, in process or under contract
(the "Publications") including, without limitation, all updates,
supplements and revisions thereto, and other accompanying materials
relating to the Publications, and the literary content of all of the
above;
(iii) all camera-ready copy used for making negative films, film,
plates, plate-making film, paste-ups, tapes, illustrations and other
artwork, and other reproduction materials for the Publications
(collectively, the "Reproduction Materials"), permissions (to the extent
transferable) and vendor information, including, without limitation,
specifications for all published titles, and all manuscripts, proofs,
reviews, designs, artwork, covers, photographs and production-related
material for all unpublished titles;
(iv) all mailing lists for the Business and lists of present, former
and prospective customers to, and recipients of, any of the Publications
(both in hard copy and all available machine readable formats), including
names, addresses, expiration dates and other information customarily
maintained by the Companies, and all other lists, files and marketing and
promotional materials relating to the Business;
(v) all existing files specifically relating to the Business
including, without limitation, files relating to authors, author
prospects, editorial matters, reviewers, and unsigned projects;
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(vi) all right, title and interest in, and claims under, series
titles and titles of Publications;
(vii) all audio and video tapes, manuscripts, editorial material
(including, without limitation, revisions, plans, reviews, reviews of
competitive works, production records and author correspondence), back
issues and superseded editions of every sort and in any medium used in or
prepared for the Business; and
(viii) all databases, software, software programs, object codes,
source codes, systems documentation and user manuals used in connection
with the Business, and all proprietary information, trade secrets,
research records, test information, market surveys, marketing know-how,
inventions, processes and procedures owned or licensed to the Companies
and used in connection with the Business; and
(ix) all other assets, properties, and rights of every kind used
primarily in the Business, on the Closing Date, known or unknown, fixed or
unfixed, accrued, absolute, contingent or otherwise, whether or not
specifically referred to in this Agreement.
(b) Notwithstanding anything herein to the contrary, the Purchased
Property shall not include the following assets (the "Retained Assets"):
(i) any cash and cash equivalent items determined in
accordance with GAAP, including without limitation, checking
accounts, bank accounts, certificate of deposit, time deposits and
securities of the Companies on or prior to the Closing Date;
(ii) a certain promissory note set forth in Schedule 2.1(b);
(iii) the equipment and office furniture set forth in Schedule
2.1(b); and
(iv) any minute books, Tax Returns or other corporate
documents of the Companies.
SECTION 2.2. Sale at Closing Date. The sale, transfer, assignment
and delivery by the Sellers of the Purchased Property to the Buyer, as herein
provided, shall be effected on the Closing Date by deeds, bills of sale,
endorsements, assignments and other instruments of transfer and conveyance
satisfactory in form and substance to counsel for the Buyer.
SECTION 2.3. Subsequent Documentation. The Sellers shall, at any
time and from time to time after the Closing Date, upon the request of the Buyer
and at the expense of the Sellers, do, execute, acknowledge and deliver, or
cause to be done,
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executed, acknowledged and delivered, all such further deeds, assignments,
transfers and conveyances as may be required for the better assigning,
transferring, granting, conveying and confirming to the Buyer or its successors
and assigns, or for aiding and assisting in collecting and reducing to
possession, any or all of the Purchased Property. The Sellers hereby constitute
and appoint, effective as of the Closing Date, the Buyer, its successors and
assigns as the true and lawful attorney of the Sellers with full power of
substitution in the name of the Buyer or in the name of the Sellers but for the
benefit of the Buyer (a) to collect for the account of the Buyer all Accounts
Receivable and any other item of Purchased Property and (b) to institute and
prosecute all proceedings which the Buyer may in its discretion deem proper in
order to collect the Accounts Receivable or to assert or enforce any right,
title or interest in, to or under the Purchased Property and to defend or
compromise (subject to Section 11 hereof, if applicable) any and all actions,
suits or proceedings in respect of any of the Purchased Property. The Buyer
shall be entitled to retain for its own account any amounts collected pursuant
to the foregoing powers, including any amounts payable as interest in respect
thereof.
SECTION 2.4. Assumption of Liabilities. From and after the Closing,
the Buyer shall assume and the Buyer hereby agrees to pay, perform and discharge
when due (a) trade payables of the Companies arising in the ordinary course of
business in an amount not to exceed $50,000 except that this amount shall not
include printers' invoices for books shipped after December 20, 1996, provided,
however, that the aggregate liability for such printer's invoices does not
exceed Thirty Thousand Dollars ($30,000), (b) direct marketing mailing expenses
of the Companies for mailings entering the postal system after December 20,
1996, including paid for items designed for end of year mailing as set forth on
Schedule 2.4(b) which are expected to be approximately Ninety-Five Thousand
Dollars ($95,000) but in no event shall exceed One Hundred Thousand Dollars
($100,000), (c) all obligations of the Companies arising pursuant to the terms
of Contracts referred to in Schedule 5.16 (other than liabilities relating to
any breach or default of any Contract prior to the Closing Date), and (d) all
obligations of the Buyer arising after the Closing Date (collectively, the
"Assumed Liabilities"). Anything in this Agreement to the contrary
notwithstanding, the Sellers shall be responsible for all of the liabilities and
obligations not hereby expressly assumed by Buyer and Buyer shall not assume, or
in any way be liable or responsible for, any liabilities or obligations of the
Sellers except as specifically provided by this Section 2.4 (the "Excluded
Liabilities"). Without limiting the generality of the foregoing, Buyer shall not
assume any of the following:
(a) any liability or obligation under Contracts or Plans and other
agreements to which the Companies are a party or
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by or to which it or any of its assets, properties or rights are bound or
subject which are not reflected on Schedule 5.16;
(b) any liability or obligation of the Sellers arising out of (i)
the conduct of the Business prior to the Closing Date, or (ii) any liability or
obligation of the Sellers to any employees of the Companies, or, (iii) except
with respect to liabilities and obligations under the Contracts assumed by Buyer
pursuant to this Section 2.4 hereof, agents or contractors;
(c) any liability or obligation of the Companies owing to any
shareholder, subsidiary or Affiliate of the Companies;
(d) any liability or obligation of the Sellers arising out of or in
connection with the preparation of this Agreement and the consummation and
performance of the transactions contemplated by this Agreement, including, but
not limited to, (i) any tax liability so arising, or (ii) any liability to which
any of the parties may become subject as a result of the fact that the
transactions contemplated by this Agreement are being effected, at the request
of Sellers, without compliance with the provisions of any bulk sales act or any
similar statute as enacted in any jurisdiction;
(e) any liability or obligation of the Companies under any Lease;
(f) any liabilities arising under Environmental Law attributable to
or incurred as a result of any acts, omissions, or conditions prior to the
Closing Date, including, but not limited to, liabilities for the treatment,
storage or disposal of hazardous materials;
(g) any liability for Taxes imposed on any of the Sellers; and
(h) any royalty payments relating to any sales made on or prior to
the Closing Date.
SECTION 3. PURCHASE PRICE.
SECTION 3.1. Purchase Price. Upon the terms and subject to the
conditions set forth in this Agreement, in reliance on the representations,
warranties, covenants and agreements of the parties contained herein, the
purchase price for the sale and transfer of the Purchased Property is Two
Million Five Hundred Thousand Dollars ($2,500,000.00) in cash (the "Purchase
Price"), which price is payable and deliverable in accordance with Section 3.2
hereof and is subject to adjustment as provided in Section 3.3 hereof.
SECTION 3.2. Payment of Purchase Price. In payment for the Purchased
Property, the Buyer will pay to the Companies on the Closing Date the Purchase
Price by wire transfer of
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immediately available funds to the account of the Company at Citibank, Account
No. 3200120482. On the Closing Date, the Buyer shall in addition execute and
deliver to the Companies an instrument of assumption of liabilities with respect
to the Assumed Liabilities.
SECTION 3.3. Post-Closing Adjustment to Purchase Price. The Purchase
Price shall be subject to adjustment after the Closing as follows:
(a) Working Capital Statement. Within forty-five (45) calendar days
after the Closing Date, the Buyer shall deliver to the Sellers a Statement (the
"Working Capital Statement") which shall set forth the following information:
(i) the Accounts Receivable as of the Closing Date, determined in accordance
with GAAP, (ii) the accounts payable as of the Closing Date, adjusted to
eliminate any direct mailing expenses assumed by the Buyer pursuant to Section
2.4 hereof, determined in accordance with GAAP (the "Closing Date Accounts
Payable") and (iii) a calculation of the Accounts Receivable less the Closing
Date Accounts Payable (the "Net Working Capital"). During the period of any
dispute with respect to the application of this Section 3.3, the Buyer shall
provide the Sellers full access to the books, records, facilities and employees
of the Business, and shall cooperate with the Sellers to the extent reasonably
requested by the Sellers to investigate the basis for such dispute. Not later
than forty-five (45) calendar days after receipt of the Working Capital
Statement, the Sellers shall provide the Buyer with a list of those items, if
any, to which the Sellers take exception and the Sellers' proposed adjustment
(the "Working Capital Statement Report"). If the Sellers fail to deliver to the
Buyer the Working Capital Statement Report within forty-five (45) calendar days
following receipt of the Working Capital Statement, the Sellers shall be deemed
to have accepted the Working Capital Statement for the purposes of any Purchase
Price adjustment under Section 3.3(b) hereof. If the Buyer does not give the
Sellers notice of objections within thirty (30) calendar days following receipt
of the Working Capital Statement Report, the Buyer shall be deemed to have
accepted the Working Capital Statement Report for the purposes of any Purchase
Price adjustment under Section 3.3(b) hereof. If the Buyer gives the Sellers
notice of objections to the Working Capital Statement Report, and if the Buyer
and the Sellers are unable, within fifteen (15) calendar days after receipt by
the Sellers of the notice by the Buyer of objections, to resolve the disputed
exceptions, such disputed exceptions will be referred to a firm of independent
certified public accountants ("Independent Accounting Firm") mutually acceptable
to the Buyer and the Sellers. The Independent Accounting Firm shall, within
sixty (60) days following its selection, deliver to the Buyer and the Sellers a
written report determining such disputed exceptions, and its determinations will
be conclusive and binding upon the parties thereto for the purposes of any
Purchase Price adjustment under Section 3.3(b) hereof. The fees and
disbursements of the
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Independent Accounting Firm acting under this Section shall be shared equally by
the Buyer and the Sellers.
(b) Purchase Price Adjustment. Within three (3) calendar days
following the preparation or computation and final determination, pursuant to
Section 3.3(a) hereof, of the Working Capital Statement, and based upon such
final determination the Sellers shall promptly pay to the Buyer in immediately
available funds the amount, if any, by which the Net Working Capital is less
than Three Hundred Thousand Dollars ($300,000) or the Buyer shall promptly pay
to the Sellers by wire transfer of immediately available funds to the account of
the Company as set forth in Section 3.2, the amount if any, by which the Net
Working Capital is greater than Three Hundred Thousand Dollars ($300,000).
SECTION 4. CLOSING. The closing of the sale and purchase of the
Purchased Property (the "Closing") shall take place at the offices of Willkie
Farr & Gallagher at One Citicorp Center, 153 East 53rd Street, New York, New
York 10022 at 10:00 a.m. on January 13, 1997, or at such other place and time as
may be mutually agreed to by the parties hereto (the "Closing Date").
SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE SELLER. The Sellers
hereby, jointly and severally, represent and warrant to the Buyer as follows:
SECTION 5.1. Corporate Organization. Each of the Companies is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation, and has all requisite corporate power and
authority to own its properties and assets and to conduct its businesses as now
conducted. Copies of the Certificate or Articles of Incorporation and By-laws
(or equivalent documents) of the Companies, with all amendments thereto to the
date hereof, have been furnished to the Buyer or its representatives, and such
copies are accurate and complete as of the date hereof.
SECTION 5.2. Qualification to Do Business. Each of the Companies are
duly qualified to do business as a foreign corporation and are each in good
standing in every jurisdiction in which the character of the properties owned or
leased by it or the nature of the business conducted by it makes such
qualification necessary, except where the failure to be so qualified would not
have a Material Adverse Effect. Schedule 5.2 sets forth all jurisdictions in
which the each of the Companies is qualified to do business.
SECTION 5.3. Authorization and Validity of Agreement. Each of the
Companies has all requisite corporate power and authority to enter into this
Agreement and to carry out its obligations hereunder. The execution and delivery
of this Agreement and the performance of the Companies' obligations hereunder
have been duly authorized by all necessary corporate action by the Board of
Directors and stockholders of the
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Companies, and no other corporate proceedings on the part of the Companies are
necessary to authorize such execution, delivery and performance. This Agreement
has been duly executed by the Sellers and constitutes their valid and binding
obligations, enforceable against each of them in accordance with its terms,
except as may be limited by applicable bankruptcy, insolvency, moratorium or
similar laws of general application relating to or affecting creditors' rights
generally and except for the limitations imposed by general principles of
equity.
SECTION 5.4. No Conflict or Violation. The execution, delivery and
performance by each of the Sellers of this Agreement do not and will not violate
or conflict with any provision of the Certificate or Articles of Incorporation
or By-laws (or equivalent documents) of the Companies and do not and will not
violate any provision of law, or any order, judgment or decree of any court or
other governmental or regulatory authority, nor violate nor will result in a
breach of or constitute (with due notice or lapse of time or both) a default
under any contract, lease, loan agreement, mortgage, security agreement, trust
indenture or other agreement or instrument to which either of the Sellers is a
party or by which either of them is bound or to which any of their respective
properties or assets is subject, nor will result in the creation or imposition
of any Lien upon any of the Purchased Property, nor will result in the
cancellation, modification, revocation or suspension of any of the licenses,
franchises, permits, authorizations or approvals referred to in Section 5.13
hereof.
SECTION 5.5. Consents and Approvals. Schedule 5.5 sets forth a true
and complete list of each consent, waiver, authorization or approval of any
governmental or regulatory authority, domestic or foreign, or of any other
person, firm or corporation, and each declaration to or filing or registration
with any such governmental or regulatory authority, that is required in
connection with the execution and delivery of this Agreement by the Sellers or
the performance by the Sellers of their obligations hereunder.
SECTION 5.6. Financial Statements. Except as disclosed in Schedule
5.6, the balance sheets of the Company as of October 31, 1996 (the "October
Balance Sheet") and as of December 31, 1995 fairly present the financial
position of the Company in accordance with GAAP as of such dates, and the
related statements of income for the periods ended on such dates fairly present
the Company's results of operations in accordance with GAAP for the respective
periods indicated (collectively, the "Financial Statements"). The Financial
Statements including the schedules and notes thereto, (a) were prepared in
accordance with GAAP, (b) present fairly the financial condition of the Business
as of such date, (c) are complete, correct and in accordance with the books of
account and records of the Company, (d) can be legitimately reconciled with the
financial statements and the financial records maintained and the accounting
methods applied
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by the Company for federal income tax purposes and (e) reflects accurately all
accrued costs and expenses of the Company related to the Business.
SECTION 5.7. Absence of Certain Changes or Events.
(a) Except as set forth in Schedule 5.7, since December 31, 1995,
there has not been:
(i) any adverse change in the business, operations,
properties, assets, condition (financial or other) or prospects of
the Business, or any event that had had or is reasonably likely to
have a Material Adverse Effect, and no factor or condition exists
and no event has occurred that would be likely to result in any such
change;
(ii) any material loss, damage, destruction or other casualty
to the Purchased Property (whether or not insurance awards have been
received or guaranteed); or
(iii) any change in any method of accounting or accounting
practice of the Companies.
(b) Since December 31, 1995, the Sellers have operated the Business
in the ordinary course of its business consistent with past practice and, except
as set forth in Schedule 5.7 hereto, has not:
(i) incurred any material obligation or liability (whether
absolute, accrued, contingent or otherwise) relating to the
operations of the Companies except in the ordinary course of
business consistent with past practice;
(ii) failed to discharge or satisfy any Lien or pay or satisfy
any obligation or liability (whether absolute, accrued, contingent
or otherwise) arising from the operation of the Business, other than
liabilities being contested in good faith and for which adequate
reserves have been provided and Liens arising in the ordinary course
of business that do not, individually or in the aggregate, interfere
materially with the use, operation, enjoyment or marketability of
any of the Purchased Property;
(iii) mortgaged, pledged or subjected to any Lien any of the
Purchased Property, except for mechanics' liens and Liens for taxes
not yet due and payable and Liens arising in the ordinary course of
business that do not, individually or in the aggregate, interfere
materially with the use, operation, enjoyment or marketability of
any of the Purchased Property;
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(iv) sold or transferred any of the assets of the Business
material to the Business or canceled any debts or claims or waived
any rights material to the Business relating to the operations of
the Business, except in the ordinary course of business consistent
with past practice;
(v) disposed of any patents, trademarks or copyrights or any
patent, trademark, or copyright applications used in the operations
of the Business;
(vi) defaulted on any material obligation relating to the
operations of the Business;
(vii) entered into any transaction material to the Business or
relating to the Business, except in the ordinary course of business
consistent with past practice;
(viii) written down the value of any Inventory or written off
as uncollectible any accounts receivable specifically relating to
the Business or any portion thereof not reflected in the October
Balance Sheet;
(ix) granted any increase in the compensation or benefits of
employees of the Business other than increases in accordance with
past practice not exceeding 10% or entered into any employment or
severance agreement or arrangement with any of them;
(x) made any capital expenditure in excess of Twenty Thousand
Dollars ($20,000), or additions to property, plant and equipment
used in the operations of the Business other than ordinary repairs
and maintenance;
(xi) laid off any employees;
(xii) incurred any obligation or liability for the payment of
severance benefits; or
(xiii) entered into any agreement or made any commitment to do
any of the foregoing.
SECTION 5.8. Tax Matters. Except as set forth in Schedule 5.8, all
Tax Returns required to be filed before the Closing Date in respect of the
Companies have been (or will have been by the Closing Date) filed, and the
Sellers have (or will have by the Closing Date) paid, accrued or otherwise
adequately reserved for the payment of all Taxes required to be paid in respect
of the periods covered by such returns and have (or will have by the Closing
Date) adequately reserved for the payment of all Taxes with respect to periods
ended on or before the Closing Date for which Tax Returns have not yet been
filed. All Taxes of
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the Sellers have been paid or adequately provided for and the Sellers know of no
proposed additional tax assessment against them. The Company has validly elected
to be treated as an "S corporation" under Section 1236(a) of the Code and
corresponding provisions of state law for tax years beginning after 1992 through
the present.
SECTION 5.9. Absence of Undisclosed Liabilities. Except as set forth
on Schedule 5.9, the Companies do not have any indebtedness or liability,
absolute or contingent, known or unknown, which is not shown or provided for on
the October Balance Sheet other than liabilities as shall have been incurred or
accrued in the ordinary course of business since October 31, 1996. Except as
shown in the October Balance Sheet or on Schedule 5.9, the Companies are not
directly or indirectly liable upon or with respect to (by discount, repurchase
agreements or otherwise), or obliged in any other way to provide funds in
respect of, or to guarantee or assume, any debt, obligation or dividend of any
person, except endorsements in the ordinary course of business in connection
with the deposit, in banks or other financial institutions, of items for
collection.
SECTION 5.10. Real Property. The Companies own no real property.
Schedule 5.10 sets forth a list of all properties in which either of the
Companies has a leasehold interest (each, a "Lease" and collectively, the
"Leases").
SECTION 5.11. Equipment and Machinery. Schedule 5.11 sets forth a
complete and correct list and brief description of each item of Equipment and
Machinery having an original purchase cost or aggregate lease cost exceeding
$5,000. Except as set forth in Schedule 5.11, the Companies have good title,
free and clear of all title defects and objections, Liens (other than the Lien
of current property taxes and assessments not in default, if any) to the
Equipment and Machinery owned by it, except for sales and dispositions in the
ordinary course of business since such date. None of the title defects,
objections or Liens (if any) listed in Schedule 5.11 adversely affects the value
of any of the items of Equipment and Machinery or interferes with its use in the
conduct of the Business. Except as set forth in Schedule 5.11, the Companies
hold good and transferable leaseholds in all of the Equipment and Machinery
leased by it, in each case under valid and enforceable leases. The Companies are
not in default with respect to any item of Equipment and Machinery purported to
be leased by it, and no event has occurred that constitutes or with due notice
or lapse of time or both may constitute a default under any lease thereof. The
Equipment and Machinery is sufficient and adequate to carry on the Business as
presently conducted and as proposed by the Companies to be conducted, and all
items thereof are in good operating condition and repair.
SECTION 5.12. Intellectual Property.
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(a) "Intellectual Property" shall mean all of the following that are
owned or used in the operations of the Business or relating to the Purchased
Property: (i) trademarks and service marks (registered or unregistered), trade
dress, trade names and other names and slogans embodying business or product
goodwill or indications of origin, all applications or registrations in any
jurisdiction pertaining to the foregoing and all goodwill associated therewith;
(ii) patents, patentable inventions, discoveries, improvements, ideas, know-how,
formula methodology, processes, technology and computer programs, software and
databases (including source code, object code, development documentation,
programming tools, drawings, specifications and data) and all applications or
registrations in any jurisdiction pertaining to the foregoing, including all
reissues, continuations, divisions, continuations-in-art, renewals or extensions
thereof; (iii) trade secrets, including confidential and other non-public
information, and the right in any jurisdiction to limit the use or disclosure
thereof; (iv) copyrights in writings, sound recordings, software, artwork,
designs, mask works or other works, and registrations or applications for
registration of copyrights in any jurisdiction; (v) Internet Web sites, domain
names and registrations or applications for registration thereof; (vi) licenses,
immunities, covenants not to sue and the like relating to any of the foregoing;
(vii) books and records describing or used in connection with any of the
foregoing; and (viii) claims or causes of action arising out of or related to
infringement or misappropriation of any of the foregoing. The Companies own all
right, title and interest in the Intellectual Property except as set forth in
Schedule 5.12(b). Schedule 5.12(a) sets forth a complete list of all
applications and registrations for Intellectual Property other than copyrights
in one of the Company's name in all jurisdictions.
(b) Copyrights. Schedule 5.12(b) sets forth a list of (i) each
agreement, contract or license under which either of the Companies is or has
been obligated to pay fees or royalties to any Person in connection with the
reproduction, publication or distribution of any of the Publications and (ii)
all United States and foreign copyright registrations and applications for
registration with respect to all Publications. Except as disclosed in Schedule
5.12(b), the Companies have secured from all relevant authors of text,
illustrations, photographs or other contributions to the Publications and all
licensors or other Persons all copyrights in the Publications for the initial
term of copyright and all extensions or renewals thereof, in all territories
throughout the world and all languages in all media now known or hereafter
devised.
(c) Licenses. Except as disclosed on Schedule 5.12(c), none of the
Sellers or any Affiliate of them has licensed to any third party any right to
use or exploit any of the Publications in any jurisdiction. All rights in any of
the Publications granted to third parties are or have been set forth
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in written and executed contracts that, to the knowledge of Sellers has not been
breached by said third parties. Schedule 5.12(c) sets forth each agreement,
contract or license under which either of the Companies has licensed any rights
in any of the Publications to another Person (such agreements, contracts or
licenses and those referred to in clause (i) of Section 5.12(b) hereof, being
referred to collectively as the "Licenses").
(d) Claims. Except as set forth on Schedule 5.12(d), no claims are
pending, or, to the knowledge of Sellers, threatened, against or by either of
the Companies by or against any Person with respect to the ownership, validity,
enforceability or use of any Intellectual Property or otherwise challenging or
questioning the validity or effectiveness of any such Intellectual Property
except for any such claims that individually, or in the aggregate, have not had,
and would not be reasonably expected to have, a Material Adverse Effect. Except
as set forth on Schedule 5.12(d), no claims are pending, or, to the knowledge of
the Sellers, threatened, by or against either of the Companies against or by any
Person in which such Person alleges that any activities or conduct of business
of either of the Companies infringes upon the intellectual property rights of
any Person or that any product packaging design infringes upon a proprietary
packaging design of any Person, except for any such claims that individually, or
in the aggregate, have not had and would not be reasonably expected to have a
Material Adverse Effect.
SECTION 5.13. Licenses, Permits and Governmental Approvals. Schedule
5.13 sets forth a true and complete list of all licenses, permits, franchises,
authorizations and approvals issued or granted to either of the Companies with
respect to the Business by the Government, any state or local government, any
foreign national or local government, or any department, agency, board,
commission, bureau or instrumentality of any of the foregoing (the "Permits"),
and all pending applications therefor. Such list contains a summary description
of each such item and, where applicable, specifies the date issued, granted or
applied for, the expiration date and the current status thereof. Each Permit has
been duly obtained, is valid and in full force and effect, and is not subject to
any pending or threatened administrative or judicial proceeding to revoke,
cancel or declare such Permit invalid in any respect. The Permits are sufficient
and adequate in all respects to permit the continued lawful conduct of the
Business in the manner now conducted and as has been proposed by the Sellers to
be conducted, and none of the operations of the Business are being conducted in
a manner that violates any of the terms or conditions under which any Permit was
granted. Except as set forth in Schedule 5.13, no such Permit will in any way be
affected by, or terminate or lapse by reason of, the transactions contemplated
by this Agreement.
SECTION 5.14. Compliance with Law; Licenses. Except as set forth in
Schedule 5.14, the operations of the Business
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have been conducted in accordance with all applicable laws, regulations, orders
and other requirements of all courts and other governmental or regulatory
authorities having jurisdiction over either of the Companies and their
respective assets, properties and operations. Except as set forth in Schedule
5.14, neither of the Sellers has received notice of any violation of any such
law, regulation, order or other legal requirement, and the Companies are not in
default with respect to any order, writ, judgment, award, injunction or decree
of any national, state or local court or governmental or regulatory authority or
arbitrator, domestic or foreign, applicable to the Business or any of its
assets, properties or operations. The Sellers do not have knowledge of any
proposed change in any such laws, rules or regulations (other than laws of
general applicability) that would materially and adversely affect the
transactions contemplated by this Agreement or all or a material part of the
Business or the Purchased Property.
SECTION 5.15. Litigation. Except as set forth in Schedule 5.15,
there are no claims, actions, suits, proceedings, labor disputes or
investigations pending or, to the best knowledge of the Sellers, threatened,
before any national, state or local court or governmental or regulatory
authority, domestic or foreign, or before any arbitrator of any nature, brought
by or against either of the Companies or any of its officers, directors,
employees, agents or affiliates involving, affecting or relating to the
Business, the Purchased Property or the transactions contemplated by this
Agreement, nor is any basis known to the Sellers or any of the Companies'
directors or officers for any such action, suit, proceeding or investigation.
Schedule 5.15 sets forth a list and a summary description of all such pending
actions, suits, proceedings, disputes or investigations. Neither the Business
nor the Purchased Property is subject to any order, writ, judgment, award,
injunction or decree of any national, state or local court or governmental or
regulatory authority or arbitrator, domestic or foreign, that affects or might
affect the Business or the Purchased Property, or that would or might interfere
with the transactions contemplated by this Agreement.
SECTION 5.16. Contracts.
(a) Schedule 5.16 sets forth a complete and correct list and a
summary description of all Contracts (as in effect on the date hereof).
(b) Each Contract is valid, binding and enforceable against the
parties thereto in accordance with its terms, and in full force and effect on
the date hereof. The Companies have performed all obligations required to be
performed by it to date under, and is not in default or delinquent in
performance, status or any other respect (claimed or actual) in connection with,
any Contract, and no event has occurred which, with due notice or lapse of time
or both, would constitute such a default. To the
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best knowledge of the Sellers, no other party to any Contract is in default in
respect thereof, and no event has occurred which, with due notice or lapse of
time or both, would constitute such a default. The Sellers have delivered to the
Buyer or its representatives true and complete originals or copies of all the
Contracts.
SECTION 5.17. Receivables. Except as set forth in Schedule 5.17, all
accounts receivable payable to or for the benefit of the Business reflected on
the October Balance Sheet, or acquired by the Companies after the date thereof
and before the Closing Date have been collected or are (or will be) current and
collectible in amounts not less than the aggregate amount thereof (net of
reserves established in accordance with prior practice) carried (or to be
carried) on the books of the Companies, and are not subject to any counterclaims
or set-offs.
SECTION 5.18. Inventories. The Inventories are carried at not more
than the lower of cost or net realizable value, and do not include any Obsolete
Inventory or Surplus Inventory. As used herein, "Obsolete Inventory" is
Inventory which, at October 31, 1996, was not usable or saleable in the lawful
and ordinary course of business of the Business as now conducted and has been
proposed by the Companies to be conducted because of legal restrictions, failure
to meet specifications, loss of market, damage, physical deterioration or for
any other cause in each case net of reserves provided therefor on the October
Balance Sheet; and "Surplus Inventory" is Inventory that, at October 31, 1996
exceeded known or anticipated requirements in the reasonable business judgment
of the Sellers.
SECTION 5.19. Employee Plans.
(a) Except for those plans set forth on Schedule 5.19(a) hereto (the
"Plans"), neither the Companies nor any member of the Companies' "controlled
group" (within the meaning of Section 4971(e)(2)(B) of the Code) that includes
either of the Companies (hereinafter referred to as an "ERISA Affiliate") has
ever maintained or contributed to, or has any liability or contingent liability
with respect to, any "employee benefit plans," as that term is defined in
Section 3(3) of ERISA, or any other employee benefit arrangements, policies or
payroll practices, including, without limitation, severance pay, sick leave,
vacation pay, salary continuation for disability, retirement, deferred
compensation, bonus, stock purchase, hospitalization, medical insurance, life
insurance and scholarship programs, maintained by the Companies or to which
either of the Companies contributed or is obligated to contribute thereunder for
current or former employees of the Companies. None of the Plans is a
Multiemployer Plan. With respect to the Plans, the requirements of ERISA and the
Code, as applicable, have been fulfilled in all respects, including, without
limitation, any legally mandated continuation of health care coverage with
respect to any "group health plan" (as such term is
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defined in Section 607(1) of ERISA and Section 5001(b)(1) of the Code) as may be
required under Part 6 of Title I of ERISA and Section 4980B of the Code, and no
event has occurred nor does any condition exist which would subject the
Companies to any penalty, excise tax, or liability. The Buyer assumes no
liability or obligation with respect to, and receives no right or interest in,
any of such Plans.
(b) Neither the Companies nor any ERISA Affiliate of the Companies
has ever (i) failed to satisfy the minimum funding requirements of Section 412
of the Code and Section 302 of ERISA (or the quarterly contribution requirements
of Section 412(m) of the Code and Section 302(e) of ERISA), (ii) terminated an
"employee pension benefit plan," as defined in Section 3(2) of ERISA, subject to
Title IV of ERISA or (iii) contributed to any Multiemployer Plan or has effected
either a "complete withdrawal" or a "partial withdrawal," as those terms as
defined in Sections 4203 and 4205, respectively, of ERISA, from any such
Multiemployer Plan.
SECTION 5.20. Customers, Suppliers and Competitors. Schedule 5.20
sets forth a complete and correct list of (a) all customers whose purchases
exceeded five percent (5%) of the aggregate net sales of the Companies during
fiscal year 1995 and the period from January 1, 1996 through October 31, 1996,
and (b) the suppliers by dollar volume of the Business and the aggregate dollar
volume of purchases (broken down by principal categories) by the Business from
such suppliers for such periods. Except as set forth in Schedule 5.20, none of
such customers or suppliers has, or to the best knowledge of the Sellers,
intends to terminate or change significantly its relationship with the Business.
SECTION 5.21. Insurance. Schedule 5.21 lists the aggregate coverage
amount and type and generally applicable deductibles of all policies of title,
liability, fire, casualty, business interruption, workers' compensation and
other forms of insurance insuring the Business and the Purchased Property. The
Sellers have furnished a true, complete and accurate copy of all such policies
and bonds to the Buyer. Except as set forth in Schedule 5.21, all such policies
and bonds are in full force and effect, underwritten by financially sound and
reputable insurers and sufficient for all applicable requirements of law and
will not in any way be affected by or terminated or lapsed by reason of the
consummation of the transactions contemplated by this Agreement. The Companies
shall maintain the coverage under all policies and bonds listed in Schedule 5.21
in full force and effect through the Closing Date. The Companies are not in
material default under any provisions of any such policy of insurance nor has
received notice of cancellation of any such insurance. There is no claim pending
under any of such policies or bonds as to which coverage has been questioned,
denied or disputed by the underwriters of such policies or bonds.
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SECTION 5.22. Transactions with Directors, Officers and Affiliates.
Since January 1, 1995, except as set forth on Schedule 5.22, there have been no
transactions between the Companies and any director, officer, employee,
stockholder or other Affiliate of the Companies. To the best knowledge of the
Sellers, during the past three years none of the officers, directors or
employees of the Companies, or any spouse or relative of any of such persons,
has been a director or officer of, or has had any direct or indirect interest
in, any firm, corporation, association or business enterprise which during such
period has been a supplier, customer or sales agent of the Companies or has
competed with or been engaged in any business of the kind being conducted by the
Business. No Affiliate of the Companies owns or has any rights in or to any of
the assets, properties or rights used by the Business in the ordinary course of
its business.
SECTION 5.23. Labor Matters.
(a) Except as set forth in Schedule 5.23(a): (i) neither of the
Companies is a party to any outstanding employment or consulting agreements or
contracts with officers or employees of the Business that are not terminable at
will, or that provide for the payment of any bonus or commission; (ii) neither
of the Companies is a party to any agreement, policy or practice that requires
it to pay termination or severance pay to salaried, non-exempt or hourly
employees of the Business (other than as required by law); (iii) neither of the
Companies is a party to any collective bargaining agreement or other labor union
contract applicable to employees of the Business nor does either of the Sellers
know of any activities or proceedings of any labor union to organize any such
employees. The Sellers have furnished to the Buyer complete and correct copies
of all such agreements ("Employment and Labor Agreements"). The Companies have
not breached or otherwise failed to comply with any provisions of any Employment
or Labor Agreement, and there are no grievances outstanding thereunder.
(b) Except as set forth in Schedule 5.23(b): (i) each of the
Companies is in compliance with all applicable laws relating to employment and
employment practices, wages, hours, and terms and conditions of employment; (ii)
there is no unfair labor practice charge or complaint pending before the
National Labor Relations Board ("NLRB"); (iii) there is no labor strike,
material slowdown or material work stoppage or lockout pending or, to the best
knowledge of the Sellers, threatened against or affecting the Business, and
neither of the Companies has experienced any strike, material slow down or
material work stoppage, lockout or other collective labor action; (iv) there is
no representation claim or petition pending before the NLRB or any similar
foreign agency and no question concerning representation exists relating to the
employees of the Business; (v) there are no charges with respect to or relating
to the Companies or the Business pending before the Equal Employment
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Opportunity Commission or any state, local or foreign agency responsible for the
prevention of unlawful employment practices and (vi) neither of the Sellers has
received any notice from any national, state, local or foreign agency
responsible for the enforcement of labor or employment laws of an intention to
conduct an investigation of the Companies and no such investigation is in
progress.
SECTION 5.24. Environmental Matters. Each of the Companies has
obtained and maintained in effect all licenses, permits and other authorizations
required under all applicable laws, regulations and other requirements of
governmental or regulatory authorities relating to pollution or to the
protection of the environment ("Environmental Laws") and are in compliance with
all Environmental Laws and with all such licenses, permits and authorizations.
The Companies have not performed or suffered any act which could give rise to,
or has otherwise incurred, liability to any Person (governmental or not) under
the Comprehensive Environmental Response, Compensation and Liability Act, 42
U.S.C. ss. 9601 et seq. or any other Environmental Laws, nor have the Sellers
received notice of any such liability or any claim therefor or submitted notice
pursuant to Section 103 of such Act to any governmental agency with respect to
any of its assets. No hazardous substance, hazardous waste, contaminant,
pollutant or toxic substance (as such terms are defined in any applicable
Environmental Law) has been released, placed, dumped or otherwise come to be
located on, at, beneath or near any of the Purchased Assets or any surface
waters or groundwaters thereon or thereunder. Neither of the Companies owns or
operates, or has ever owned or operated, an underground storage tank containing
a regulated substance, as such term is defined in Subchapter IX of the Resource
Conservation and Recovery Act, 42 U.S.C.ss. 6991 et seq.
SECTION 5.25. Accuracy of Information. None of the Sellers'
representations, warranties or statements contained in this Agreement, or in the
exhibits hereto, contains any untrue statement of a material fact or omits to
state any material fact necessary in order to make any of such representations,
warranties or statements in light of the circumstances under which they were
made not misleading. All information relating to the Business that is known or
would on reasonable inquiry be known to the Sellers and that may be material to
a purchaser for value of the Purchased Property has been disclosed in writing to
the Buyer and any such information arising on or before the Closing Date will
forthwith be disclosed in writing to the Buyer.
SECTION 5.26. Survival. Each of the representations and warranties
set forth in this Article 5 shall be deemed represented and made by the Sellers
at the Closing as if made at such time and shall survive the Closing
notwithstanding any investigation on the part of the Buyer for a period
terminating on the third (3rd) anniversary the Closing Date, provided,
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however, that representations and warranties contained in Sections 5.8, 5.24 and
10 hereof shall survive indefinitely.
SECTION 6. REPRESENTATIONS AND WARRANTIES OF THE BUYER. The Buyer
hereby represents and warrants to the Sellers as follows:
SECTION 6.1. Corporate Organization. The Buyer is a limited
liability company duly organized, validly existing and in good standing under
the laws of the State of Delaware, and has all requisite corporate power and
authority to own its properties and assets and to conduct its businesses as now
conducted.
SECTION 6.2. Qualification to Do Business. The Buyer is duly
qualified to do business as a foreign corporation and is in good standing in
every jurisdiction in which the character of the properties owned or leased by
it or the nature of the business conducted by it makes such qualification
necessary, except where the failure to be so qualified would not have a material
adverse affect on the business, operations, assets, properties, condition
(financial or otherwise) or prospects of the Buyer.
SECTION 6.3. Authorization and Validity of Agreement. The Buyer has
all requisite power and authority to enter into this Agreement and to carry out
its obligations hereunder. The execution and delivery of this Agreement and the
performance of the Buyer's obligations hereunder have been duly authorized by
all necessary corporate action by the Buyer, and no other proceedings on the
part of the Buyer are necessary to authorize such execution, delivery and
performance. This Agreement has been duly executed by the Buyer and constitutes
its valid and binding obligation, enforceable against it in accordance with its
terms, except as may be limited by applicable bankruptcy, insolvency, moratorium
or similar laws of general application relating to or affecting creditors'
rights generally and except for the limitations imposed by general principles of
equity.
SECTION 6.4. No Conflict or Violation. The execution, delivery and
performance by the Buyer of this Agreement do not and will not violate or
conflict with any provision of the Certificate of Formation or Limited Liability
Company Agreement of the Buyer and do not and will not violate any provision of
law, or any order, judgment or decree of any court or other governmental or
regulatory authority, nor violate nor will result in a breach of or constitute
(with due notice or lapse of time or both) a default under any contract, lease,
loan agreement, mortgage, security agreement, trust indenture or other agreement
or instrument to which the Buyer is a party or by which it is bound or to which
any of its properties or assets is subject.
SECTION 6.5. Approvals and Consents. The execution, delivery and
performance of this Agreement on behalf of the Buyer does not require the
consent or approval of, or filing with, any
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government, governmental body or agency or other entity or person except (i) as
may be required to transfer any Permits, and (ii) such consents, approvals and
filings, the failure to obtain or make would not, individually or in the
aggregate, have a material adverse effect on the ability of the Buyer to
consummate the transactions contemplated hereby.
SECTION 7. COVENANTS OF THE SELLERS.
The Sellers covenant as follows:
SECTION 7.1. Conduct of Business Before the Closing Date.
(a) Without the prior written consent of the Buyer, between the date
hereof and the Closing Date, the Companies shall not, except as required or
expressly permitted pursuant to the terms hereof:
(i) make any material change in the conduct of the Business or enter
into any transaction other than in the ordinary course of business
consistent with past practices;
(ii) make any sale, assignment, transfer, abandonment or other
conveyance of the Purchased Property or any part thereof, except
transactions pursuant to existing contracts set forth in the Schedules
hereto and dispositions of inventory or of worn-out or obsolete equipment
for fair or reasonable value in the ordinary course of business consistent
with past practice;
(iii) subject any of the Purchased Property, or any part thereof, to
any Lien or suffer such to exist other than such Liens as may arise in the
ordinary course of business consistent with past practice by operation of
law and that will not, individually or in the aggregate, have a Material
Adverse Effect;
(iv) acquire any assets, raw materials or properties, or enter into
any other transaction, other than in the ordinary course of business
consistent with past practice;
(v) enter into any new (or amend any existing) employee benefit
plan, program or arrangement or any new (or amend any existing)
employment, severance or consulting agreement, grant any general increase
in the compensation of officers or employees (including any such increase
pursuant to any bonus, pension, profit-sharing or other plan or
commitment) or grant any increase in the compensation payable or to become
payable to any employee, except in accordance with pre-existing
contractual provisions or consistent with past practice;
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(vi) make or commit to make any capital expenditure in excess of Ten
Thousand Dollars ($10,000);
(vii) pay, lend or advance any amount to, or sell, transfer or lease
any properties or assets to, or enter into any agreement or arrangement
with, any of its Affiliates;
(viii) fail to keep in full force and effect insurance comparable in
amount and scope to coverage maintained in respect of the Business;
(ix) take any other action that would cause any of the
representations and warranties made by them in this Agreement not to
remain true and correct;
(x) make any change in any method of accounting or accounting
principle, method, estimate or practice except for any such change
required by reason of a concurrent change in GAAP or write down the value
of any inventory or write off as uncollectible any accounts receivable
except in the ordinary course of business consistent with past practice;
(xi) settle, release or forgive any claim or litigation or waive any
right;
(xii) make, enter into, modify, amend in any material respect or
terminate any Contract or expenditure with respect to the Business, where
such Contract, bid or expenditure is for (A) a Contract entailing payments
in excess of Ten Thousand Dollars ($10,000) or (B) a or Contract having a
term in excess of ninety (90) days; or
(xiii) commit to do any of the foregoing.
From and after the date hereof and until the Closing Date, the
Companies shall:
(i) continue to maintain, in all material respects, the Purchased
Property in accordance with present practice in a condition suitable for
its current use;
(ii) file, when due or required, national, state, foreign and other
tax returns and other reports required to be filed and pay when due all
taxes, assessments, fees and other charges lawfully levied or assessed
against them, unless the validity thereof is contested in good faith and
by appropriate proceedings diligently conducted;
(iii) continue to conduct the Business in the ordinary course
consistent with past practice;
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(iv) keep its books of account, records and files in the ordinary
course and in accordance with existing practice; and
(v) continue to maintain existing business relationships with
suppliers and customers other than relationships not economically
beneficial to the Business.
SECTION 7.2. Consents and Approvals. The Sellers (a) shall, at their
cost and expense, use their best efforts to obtain all necessary consents,
waivers, authorizations and approvals of all governmental and regulatory
authorities, domestic and foreign, and of all other Persons required in
connection with the execution, delivery and performance by it of this Agreement,
and (b) shall diligently assist and cooperate with the Buyer in preparing and
filing all documents required to be submitted by the Buyer to any governmental
or regulatory authority, domestic or foreign, in connection with such
transactions and in obtaining any governmental consents, waivers, authorizations
or approvals which may be required to be obtained by the Buyer in connection
with such transactions (which assistance and cooperation shall include, without
limitation, timely furnishing to the Buyer all information concerning the Seller
that counsel to the Buyer determines is required to be included in such
documents or would be helpful in obtaining any such required consent, waiver,
authorization or approval).
SECTION 7.3. Access to Properties and Records. The Sellers shall
afford to the Buyer, and to the accountants, counsel and representatives of the
Buyer, full access during normal business hours throughout the period prior to
the Closing Date (or the earlier termination of this Agreement pursuant to
Section 14 hereof) to all properties, books, contracts, commitments and records
of the Companies relating to the Business and, during such period, shall furnish
promptly to the Buyer all other information concerning the Business, its
properties and its personnel as the Buyer may reasonably request, provided that
no investigation or receipt of information pursuant to this Section 7.3 shall
qualify any representation or warranty of the Sellers or the conditions to the
obligations of the Buyer. The Sellers shall also afford the Buyer full access to
the Business, all operations of the Business and to all Purchased Property
throughout the period prior to the Closing Date.
SECTION 7.4. Negotiations. From and after the date hereof, neither
the Sellers, nor their officers or directors nor anyone acting on behalf of the
Sellers or such persons shall, directly or indirectly, encourage, solicit,
engage in discussions or negotiations with, or provide any information to, any
person, firm, or other entity or group (other than the Buyer or its
representatives) concerning any merger, sale of substantial assets, purchase or
sale of shares of capital stock or similar transaction involving the Companies
or the Business or any other transaction inconsistent with the transactions
contemplated
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hereby. The Sellers shall promptly communicate to the Buyer any inquiries or
communications concerning any such transaction which they may receive or of
which they may become aware.
SECTION 7.5. Further Assurances. Upon the request of the Buyer at
any time after the Closing Date, the Sellers shall forthwith execute and deliver
such further instruments of assignment, transfer, conveyance, endorsement,
direction or authorization and other documents as the Buyer or its counsel may
request to perfect title of the Buyer and its successors and assigns to the
Purchased Property or otherwise to effectuate the purposes of this Agreement.
SECTION 7.6. Best Efforts. Upon the terms and subject to the
conditions of this Agreement, the Sellers will use their best efforts to take,
or cause to be taken, all action, and to do, or cause to be done, all things
necessary, proper or advisable consistent with applicable law to consummate and
make effective in the most expeditious manner practicable the transactions
contemplated hereby.
SECTION 7.7. Covenant Not To Compete.
(a) The Sellers acknowledges that the agreements and covenants
contained in this Section 7.7 are essential to protect the value of the Business
being acquired by the Buyer. Therefore, the Sellers agree that for the period
commencing on the Closing Date and ending on the fifth (5th) anniversary of the
Closing Date (such period is hereinafter referred to as the "Restricted
Period"), the Sellers shall not participate or engage, directly or indirectly,
for themselves or on behalf of or in conjunction with any Person, whether as an
employee, agent, officer, director, shareholder, partner, joint venturer,
investor or otherwise, in any publishing business undertaken or expressly
contemplated to be undertaken by the Buyer or any of its Affiliates; provided,
however, that the foregoing shall not prohibit Buda from serving as an officer
and employee of the Buyer or any affiliate of the Buyer nor shall it prohibit
the ownership by the Sellers of equity securities of a public company in an
amount not to exceed 2% of the issued and outstanding shares of such company.
Notwithstanding the foregoing, in the event Buda's employment is terminated by
the Buyer prior to the second (2nd) anniversary of the date hereof without Just
Cause (as defined in the Buda Employment Agreement), the Restricted Period shall
mean the second anniversary of the date hereof.
(b) The Sellers agree that a monetary remedy for a breach of the
agreement set forth in Section 7.7(a) hereof will be inadequate and
impracticable and further agree that such a breach would cause the Buyer
irreparable harm, and that the Buyer shall be entitled to temporary and
permanent injunctive relief without the necessity of proving actual damages. In
the event of such a breach, the Sellers agree that the Buyer shall be entitled
to such injunctive relief, including temporary restraining
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orders, preliminary injunctions and permanent injunctions as a court of
competent jurisdiction shall determine.
(c) If any provision of this Section 7.7 is invalid in part, it
shall be curtailed, as to time, location or scope, to the minimum extent
required for its validity under the laws of the United States and shall be
binding and enforceable with respect to the Sellers as so curtailed.
SECTION 7.8. Non-Solicitation of Employees. The Sellers agree, for
the Restricted Period, not to make, offer, solicit or induce to enter into, any
written or oral arrangement, agreement or understanding regarding employment or
retention as a consultant with any person who was, on the date hereof, a
full-time employee of either of the Companies, and in each case to cause its
Affiliates not to engage in any such action, without the written consent of the
Buyer.
SECTION 7.9. Notice of Breach. Through the Closing Date, the Sellers
shall promptly give the Buyer written notice with particularity upon having
knowledge of any matter that may constitute a breach of any representation,
warranty, agreement or covenant contained in this Agreement.
SECTION 7.10. Bulk Sales Compliance. The Buyer hereby waives
compliance by the Companies with any applicable laws relating to bulk transfers
in connection with the transactions contemplated hereby. The Sellers shall
indemnify the Buyer with respect to any failure to comply with such bulk
transfer laws.
SECTION 7.11. Assignment of Contracts and Warranties. At the Closing
and effective as of the Closing Date, the Companies shall assign to the Buyer
all their respective rights under the Contracts. Notwithstanding the foregoing,
no Contract shall be assigned contrary to law or the terms of such Contract and,
with respect to Contracts that cannot be assigned to the Buyer at the Closing
Date, the performance obligations of the Companies thereunder shall, unless not
permitted by such Contract, be deemed to be subleased or subcontracted to the
Buyer until such Contract has been assigned. The Companies shall (i) use their
best efforts to obtain all necessary consents, (ii) cooperate with the Buyer in
any arrangement designed to provide to the Buyer the benefits (including the
exercise of the Companies' rights) under any such Contracts, including
enforcement for the benefit of the Buyer (and at the Buyer's expense) of any and
all rights of the Companies against a third party thereto arising out of the
breach or cancellation by such third party or otherwise, (iii) hold all monies
paid thereunder in trust for the account of the Buyer and (iv) remit such money
to the Buyer as promptly as possible.
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SECTION 8. COVENANTS OF THE BUYER.
SECTION 8.1. Actions Before Closing Date. The Buyer shall not take
any action which shall cause it to be in breach of any representations,
warranties, covenants or agreements contained in this Agreement. The Buyer shall
use its best efforts to perform and satisfy all conditions to Closing to be
performed or satisfied by the Buyer under this Agreement as soon as possible,
but in no event later than the Closing Date.
SECTION 8.2. Consents and Approvals. The Buyer shall use its best
efforts to obtain all consents and approvals of third parties required to be
obtained by the Buyer to effect the transactions contemplated by this Agreement.
SECTION 9. EMPLOYEES AND EMPLOYEE PLANS.
SECTION 9.1. Offer of Employment. Schedule 9.1 hereto sets forth a
true and complete list of all individual who are employees of the Business as of
the date hereof ("Listed Employees"). The Buyer may offer employment, under
substantially similar terms as those offered by the Companies, to as many Listed
Employees as is consistent with, and subject to, the Buyer's requirements and
employment policies. The Buyer shall notify the Seller in writing, with respect
to any determination made no later than two weeks after the Closing of (i) all
Listed Employees who will be offered a position with the Buyer following the
Closing and (ii) all Listed Employees with whom discussions regarding employment
with the Buyer have been terminated for any reason.
SECTION 9.2. Employee Benefits. The Listed Employees who accept the
Buyer's offer of employment (the "Transferred Employees") shall participate in
the employee benefit plans, programs, policies and arrangements of the Buyer in
accordance with the terms thereof generally applicable to employees of the
Buyer.
SECTION 9.3. Liability. Neither the Buyer nor its Affiliates shall
assume or have any direct or indirect obligation or liability of any nature,
whether matured or unmatured, accrued or contingent, due or to become due or
otherwise, to any Transferred Employee or other present or former employee of
the Seller or its affiliates or independent contractor regularly used by the
Companies, or to any dependent, survivor or beneficiary thereof, arising out of
or in relation to such person's employment with the Seller or its affiliates or
the termination of such employment prior to the Closing Date.
SECTION 9.4. Rights. Nothing herein expressed or implied shall
confer upon any Transferred Employee or other employee or former employee of the
Sellers or legal representatives thereof, any rights or remedies, including,
without limitation, right to employment or continued employment
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for any specified period, of any nature or kind whatsoever or any right to
specific terms or conditions of employment (including rate of pay, fringe
benefits or position under or by reason of this Agreement.
SECTION 10. TAXES.
The parties hereto hereby covenant and agree as follows:
SECTION 10.1. Allocation of Purchase Price and Purchase Price
Allocation Forms. The Buyer shall, as promptly as practicable after the Closing
Date, submit to the Seller a statement of the Buyer's allocation of the Purchase
Price to the different items of Purchased Property (the "Allocation Statement").
The Allocation Statement shall be, subject to further adjustment on the basis of
the Post-Closing Adjustment pursuant to Section 3.3 hereof, binding and
conclusive upon the parties hereto, unless the Seller objects in writing to any
item or items shown on the Allocation Statement within ten Business Days after
delivery thereof to the Seller. If the Buyer and the Seller shall be unable to
resolve any dispute with regard to the Allocation Statement within ten Business
Days after delivery of the Seller's written objections, the matter or matters in
dispute shall be submitted (at the expense of the Buyer) to the Buyer's
Accountant. The decision of the Buyer's Accountant shall be conclusive and
binding upon the Buyer and the Seller.
Promptly after the Closing Date (but not before a resolution of all
disputes, if any, with regard to the Allocation Statement and the Post Closing
Adjustment Statement), the Buyer's Accountant shall prepare, in consultation
with the Seller or the Seller's Accountant, those statements or forms (including
Form 8594 if available) required by Section 1060 of the Code and the regulations
promulgated thereunder with respect to the allocation of the Purchase Price.
Such statements or forms shall be prepared consistently with the allocation of
Purchase Price. Such statements or forms shall be filed by the parties on their
respective national income tax returns as required by Section 1060 of the Code
and the regulations promulgated thereunder and each party shall provide the
other party with a copy of such statement or form as filed.
SECTION 11. INDEMNIFICATION.
SECTION 11.1. Indemnification by the Sellers. Notwithstanding the
Closing or the delivery of the Purchased Property and regardless of any
investigation at any time made by or on behalf of the Buyer or of any knowledge
or information that the Buyer may have, the Sellers shall, jointly and
severally, indemnify and fully defend, save and hold the Buyer, any Affiliate of
the Buyer and its directors, officers and employees (the "Buyer Indemnities"),
harmless if any Buyer Indemnitee shall at any time or from time to time suffer
any damage, liability,
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loss, cost, expense (including all reasonable attorneys' fees), deficiency,
interest, penalty, impositions, assessments or fines (collectively, "Losses")
arising out of or resulting from, or shall pay or become obliged to pay any sum
on account of, any and all the Sellers' Event of Breach. As used herein,
"Sellers' Event of Breach" shall be and mean any one or more of the following:
(a) any untruth or inaccuracy in any representation of the Seller or
the breach of any warranty of the Seller contained in this Agreement;
(b) any failure of the Sellers duly to perform or observe any term,
provision, covenant, agreement contained herein on the part of the Sellers to be
performed or observed;
(c) any claim or cause of action by any party against any Buyer
Indemnitee, with respect to the Excluded Liabilities,
provided, however, that the Sellers shall have no obligation to make any payment
under Section 11.1(a) hereof with respect to any representation or warranty
unless the aggregate amount to which all Buyer Indemnitees, are entitled by
reason of all such claims exceeds Ten Thousand Dollars ($10,000), it being
understood that once such amount is exceeded, the aggregate of all such claims
shall be payable jointly and severally by the Sellers on demand by the Buyer.
SECTION 11.2. Procedures for Indemnification by the Seller. If a
Sellers' Event of Breach occurs or is alleged and a Buyer Indemnitee asserts
that the Sellers have become obligated to such Buyer Indemnitee pursuant to
Section 11.1 hereof, or if any suit, action, investigation, claim or proceeding
is begun, made or instituted as a result of which the Sellers may become
obligated to a Buyer Indemnitee hereunder, such Buyer Indemnitee shall give
written notice to the Sellers. The Sellers agree to defend, contest or otherwise
protect the Buyer Indemnitee against any such suit, action, investigation, claim
or proceeding at their sole cost and expense. The Buyer Indemnitee shall have
the right, but not the obligation, to participate at its own expense in the
defense thereof by counsel of the Buyer Indemnitee's choice and shall in any
event cooperate with and assist the Sellers to the extent reasonably possible.
If the Sellers fail timely to defend, contest or otherwise protect against such
suit, action, investigation, claim or proceeding, the Buyer Indemnitee shall
have the right to do so, including, without limitation, the right to make any
compromise or settlement thereof, and the Buyer Indemnitee shall be entitled to
recover the entire cost thereof from the Seller, including, without limitation,
reasonable attorneys' fees, disbursements and amounts paid as the result of such
suit, action, investigation, claim or proceeding.
SECTION 11.3. Indemnification by the Buyer. Notwithstanding the
Closing or the delivery of the Purchased
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Property, the Buyer shall indemnify and agree to fully defend, save and hold the
Sellers, any Affiliate of the foregoing, and its directors, officers and
employees (the "Seller Indemnitees"), harmless if any Seller Indemnitee shall at
any time or from time to time suffer any Losses arising out of or resulting
from, or shall pay or become obligated to pay any sum on account of, any and all
the Buyer Events of Breach. As used herein, "Buyer Event of Breach" shall be and
mean any one or more of the following:
(a) any untruth or inaccuracy in any representation of the Buyer or
the breach of any warranty of the Buyer contained in this Agreement;
(b) any failure of the Buyer duly to perform or observe any term,
provision, covenant, agreement or condition contained in this Agreement on the
part of the Buyer to be performed or observed;
(c) any claim or cause of action by any party arising after the
Closing Date against any Seller Indemnitees with respect to Assumed Liabilities,
provided, however, that the Buyer shall have no obligation to make any payment
under Section 11.3(a) hereof with respect to any representation or warranty
unless the aggregate amount to which all Seller Indemnitees are entitled by
reason of all such claims exceeds Ten Thousand Dollars ($10,000), it being
understood that once such amount is exceeded, the aggregate of all such claims
shall be payable by the Buyer on demand by the Sellers.
SECTION 11.4. Procedures for Indemnification by the Buyer. If a
Buyer Event of Breach occurs or is alleged and a Seller Indemnitee asserts that
the Buyer has become obligated to it pursuant to Section 11.3 hereof, or if any
suit, action, investigation, claim or proceeding is begun, made or instituted as
a result of which the Buyer may become obligated to a Seller Indemnitee
hereunder, such Seller Indemnitee shall give written notice to the Buyer. The
Buyer agrees to defend, contest or otherwise protect such Seller Indemnitee
against any such suit, action, investigation, claim or proceeding at its sole
cost and expense. Such Seller Indemnitee shall have the right, but not the
obligation, to participate, at its own expense, in the defense thereof by
counsel of its choice and shall in any event cooperate with and assist the Buyer
to the extent reasonably possible. If the Buyer fails timely to defend, contest
or otherwise protect against such suit, action, investigation, claim or
proceeding, such Seller Indemnitee shall have the right to do so, including,
without limitation, the right to make any compromise or settlement thereof, and
such Seller Indemnitee shall be entitled to recover the entire cost thereof from
the Buyer including without limitation, reasonable attorneys' fees,
disbursements and amounts paid as the result of such suit, action,
investigation, claim or proceeding.
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SECTION 11.5. Successors and Assigns. All of the rights and
obligations of the Sellers and the Buyer pursuant to this Section 11 shall
survive any sale, assignment or other transfer by the Buyer of title to or
interest in any of the Premises or any part thereof and shall apply to and bind
each and every successor and assign of the Buyer to any of the Premises.
SECTION 12. CONDITIONS TO OBLIGATIONS OF THE SELLERS. The
obligations of the Sellers to consummate the transactions contemplated by this
Agreement are subject to the fulfillment, at or before the Closing Date, of the
following conditions, any one or more of which may be waived by the Sellers in
their sole discretion:
SECTION 12.1. Representations and Warranties of the Buyer. All
representations and warranties made by the Buyer in this Agreement shall be true
and correct in all material respects on and as of the Closing Date as if again
made by the Buyer on and as of such date, and the Seller shall have received a
certificate dated the Closing Date and signed by a duly authorized
representative of the Buyer to that effect.
SECTION 12.2. Performance of the Obligations of the Buyer. The Buyer
shall have performed in all material respects all obligations required under
this Agreement to be performed by it on or before the Closing Date, and the
Sellers shall have received a certificate dated the Closing Date and signed a
duly authorized representative of the Buyer to that effect.
SECTION 12.3. Consents and Approvals. All consents, waivers,
authorizations and approvals of any governmental or regulatory authority,
domestic or foreign, and of any other Person, required in connection with the
execution, delivery and performance of this Agreement shall have been duly
obtained and shall be in full force and effect on the Closing Date.
SECTION 12.4. No Violation of Orders. No preliminary or permanent
injunction or other order issued by any court or other governmental or
regulatory authority, domestic or foreign, nor any statute, rule, regulation,
decree or executive order promulgated or enacted by any government or
governmental or regulatory authority, domestic or foreign, that declares this
Agreement invalid or unenforceable in any respect or which prevents the
consummation of the transactions contemplated hereby shall be in effect
SECTION 12.5. Buda Employment Agreement. The Buyer shall have
executed and delivered to Buda the Buda Employment Agreement.
SECTION 13. CONDITIONS PRECEDENT TO THE PERFORMANCE BY THE BUYER.
The obligations of the Buyer to consummate the transactions contemplated by this
Agreement are subject to the fulfillment, at or before the Closing Date, of the
following
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conditions, any one or more of which may be waived by the Buyer in its sole
discretion:
SECTION 13.1. Representations and Warranties of the Sellers. All
representations and warranties made by the Sellers in this Agreement shall be
true and correct in all material respects on and as of the Closing Date as if
again made by the Sellers on and as of such date, and the Buyer shall have
received a certificate dated the Closing Date and signed by the Chairman of the
Board or President and by the chief financial officer of the Companies and by
Buda to that effect.
SECTION 13.2. Performance of the Obligations of the Sellers. The
Sellers shall have performed in all material respects all obligations required
under this Agreement to be performed by them on or before the Closing Date, and
the Buyer shall have received a certificate dated the Closing Date and signed by
the Chairman of the Board or President and the chief financial officer of the
Companies and by Buda to that effect.
SECTION 13.3. Consents and Approvals. All consents, waivers,
authorizations and approvals of any governmental or regulatory authority,
domestic or foreign, and of any other person, firm or corporation, required in
connection with the execution, delivery and performance of this Agreement shall
have been duly obtained and shall be in full force and effect on the Closing
Date.
SECTION 13.4. No Violation of Orders. No preliminary or permanent
injunction or other order issued by any court or governmental or regulatory
authority, domestic or foreign, nor any statute, rule, regulation, decree or
executive order promulgated or enacted by any government or governmental or
regulatory authority, which declares this Agreement invalid in any respect or
prevents the consummation of the transactions contemplated hereby, shall be in
effect.
SECTION 13.5. No Material Adverse Change. During the period from
October 31, 1996 to the Closing Date, there shall not have been any material
adverse change in the assets, properties, business, operations, prospects, net
income or financial condition of the Business.
SECTION 13.6. Opinion of Counsel. The Buyer shall have received a
favorable opinion, dated as of the Closing Date, from Leo Fox, counsel to the
Sellers, in form and substance reasonably satisfactory to the Buyer and its
counsel, that:
(a) Each of the Company is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation, and each of the Companies has all requisite corporate power and
authority to own its properties and assets and to conduct its business as now
conducted. The Companies are duly qualified to do business as a
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foreign corporation and is in good standing in every jurisdiction where the
character of the properties owned or leased by it or the nature of the business
conducted by it makes such qualification necessary and in which the absence of
such qualification could have a Material Adverse Effect.
(b) Each of the Companies has the corporate power to enter into this
Agreement and to carry out its obligations hereunder. The execution and delivery
of this Agreement and the performance of the obligations of the Companies
hereunder have been duly authorized by the Board of Directors and stockholders
of the Companies, and no other corporate proceedings on the part of the
Companies are necessary to authorize such execution, delivery and performance.
This Agreement has been duly executed by the Sellers and constitutes the legal,
valid and binding obligation of the Sellers, enforceable against each Seller in
accordance with its terms, except as the same may be limited by bankruptcy,
insolvency, reorganization or other laws relating to or affecting the
enforceability of creditors' rights generally and except that the remedy of
specific performance or similar equitable relief may be subject to equitable
defenses and to the discretion of the court before which enforcement is sought.
(c) The execution, delivery and performance by the Companies of this
Agreement do not and will not violate or conflict with any provision of the
charter documents or By-laws of the Companies and do not and will not violate
any provision of law or, to such counsel's knowledge, any order, judgment or
decree of any court or other governmental or regulatory authority, nor violate
nor will result in a breach of or constitute (with due notice or lapse of time
or both) a default under any contract, lease, loan agreement, mortgage, security
agreement, trust indenture or other agreement or instrument known to such
counsel (after inquiry of appropriate officers of the Companies) to which either
of the Companies is a party or by which it is bound or to which its properties
or assets is subject, nor will result in the creation or imposition of any Lien
upon any of the properties or assets of the Companies.
(d) To the best of such counsel's knowledge after inquiry of
appropriate officers of the Companies, there are no claims, actions, suits,
proceedings, labor disputes or investigations of any nature pending or
threatened before any national, state or local court or governmental or
regulatory authority, domestic or foreign, or before any arbitrator, brought by
or against the Sellers, any of its officers, directors, employees, agents or
Affiliates involving, affecting or relating to the Purchased Property, the
Business or the transactions contemplated by this Agreement.
In rendering such opinion, such counsel may rely upon certificates
of public officials, upon opinions of local counsel and, as to matters of fact,
upon certificates of officers of the Seller or its Affiliates, and such counsel
may assume that this
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Agreement has been duly authorized, executed and delivered by the Buyer.
SECTION 13.7. Other Closing Documents. The Buyer shall have received
such other certificates, instruments and documents in confirmation of the
representations and warranties of the Sellers or in furtherance of the
transactions contemplated by this Agreement as the Buyer or its counsel may
reasonably request.
SECTION 13.8. Legal Matters. All certificates, instruments, opinions
and other documents required to be executed or delivered by or on behalf of the
Sellers under the provisions of this Agreement, and all other actions and
proceedings required to be taken by or on behalf of the Sellers in furtherance
of the transactions contemplated hereby, shall be reasonably satisfactory in
form and substance to counsel for the Buyer.
SECTION 13.9. CRC Acquisition. The acquisition of certain assets of
CRC Press, Inc. pursuant to the Asset Purchase Agreement, dated December 4,
1996, by and among The Times Mirror Company, CRC Press, Inc. and Information
Ventures LLC shall have been consummated.
SECTION 13.10. Buda Employment Agreement. Buda shall have executed
and delivered to the Buyer the Buda Employment Agreement.
SECTION 14. TERMINATION.
SECTION 14.1. Conditions of Termination. Notwithstanding anything to
the contrary contained herein, this Agreement may be terminated at any time
before the Closing (a) by mutual consent of the Sellers and the Buyer, (b) by
the Sellers if the conditions set forth in Section 12 hereof are not satisfied
or waived by the Closing Date, (c) by the Buyer if the conditions set forth in
Section 13 hereof are not satisfied or waived by the Closing Date or (d) by
either party hereto if the Closing shall not have occurred on or prior to March
31, 1997.
SECTION 14.2. Effect of Termination. In the event of termination
pursuant to Section 14.1 hereof, this Agreement shall become null and void and
have no effect, with no liability on the part of the Sellers or the Buyer, or
their directors, officers, agents or stockholders, with respect to this
Agreement, except for the (i) liability of a party for expenses pursuant to
Section 15.3 hereof and (ii) liability for breach of this Agreement.
SECTION 15. MISCELLANEOUS.
SECTION 15.1. Successors and Assigns. Except as otherwise provided
in this Agreement, no party hereto shall assign this Agreement or any rights or
obligations hereunder without the prior written consent of the other party
hereto and
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any such attempted assignment without such prior written consent shall be void
and of no force and effect, provided, that the Buyer may assign its rights
hereunder to an Affiliate and to any party providing financing in connection
with the transactions contemplated hereby, provided further, that no such
assignment shall reduce or otherwise vitiate any of the obligations of the
Sellers hereunder. This Agreement shall inure to the benefit of and shall be
binding upon the successors and permitted assigns of the parties hereto.
SECTION 15.2. Governing Law; Jurisdiction. This Agreement shall be
construed, performed and enforced in accordance with, and governed by, the laws
of the State of New York, without giving effect to the principles of conflicts
of laws thereof. The parties hereto irrevocably elect as the sole judicial forum
for the adjudication of any matters arising under or in connection with this
Agreement, and consent to the jurisdiction of, the courts of the State of New
York located in New York, New York.
SECTION 15.3. Expenses. Except as otherwise provided herein, each of
the parties hereto shall pay its own expenses in connection with this Agreement
and the transactions contemplated hereby, including, without limitation, any
legal and accounting fees, whether or not the transactions contemplated hereby
are consummated. The Sellers shall pay all state and local sales, transfer,
excise, value-added or other similar taxes, and all recording and filing fees
that may be imposed by reason of the sale, transfer, assignment and delivery of
the Purchased Property.
SECTION 15.4. Broker's and Finder's Fees. Each of the parties
represents and warrants that it has dealt with no broker or finder in connection
with any of the transactions contemplated by this Agreement and, insofar as it
knows, no other broker or other person is entitled to any commission or finder's
fee in connection with any of these transactions.
SECTION 15.5. Severability. In the event that any part of this
Agreement is declared by any court or other judicial or administrative body to
be null, void or unenforceable, said provision shall survive to the extent it is
not so declared, and all of the other provisions of this Agreement shall remain
in full force and effect.
SECTION 15.6. Notices. All notices, requests, demands and other
communications under this Agreement shall be in writing and shall be deemed to
have been duly given (i) on the date of service if served personally on the
party to whom notice is to be given, (ii) on the day of transmission if sent via
facsimile transmission to the facsimile number given below, and telephonic
confirmation of receipt is obtained promptly after completion of transmission,
(iii) on the day after delivery to Federal Express or similar overnight courier
or the Express Mail service
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maintained by the United States Postal Service or (iv) on the fifth day after
mailing, if mailed to the party to whom notice is to be given, by first class
mail, registered or certified, postage prepaid and properly addressed, to the
party as follows:
If to the Seller:
St. Lucie Press, Inc.
100 East Linton Boulevard
Suite 403B
Del Ray, Florida 33483
Attention: Dennis Buda
Telecopy: (561) 274-9927
Copy to:
Leo Fox, Esq.
133 Boca Raton Road
Boca Raton, Florida 33432
Telecopy: (407) 368-0687
If to the Buyer:
CRC PRESS LLC
2000 Corporate Boulevard, N.W.
Boca Raton, Florida 33431
Attention: Mason Slaine
Telecopy: (561) 241-7856
Copy to:
Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, New York 10022
Attn: Steven J. Gartner, Esq.
Telecopy: (212) 821-8111
Any party may change its address for the purpose of this Section by
giving the other party written notice of its new address in the manner set forth
above.
SECTION 15.7. Amendments; Waivers. This Agreement may be amended or
modified, and any of the terms, covenants, representations, warranties or
conditions hereof may be waived, only by a written instrument executed by the
parties hereto, or in the case of a waiver, by the party waiving compliance. Any
waiver by any party of any condition, or of the breach of any provision, term,
covenant, representation or warranty contained in this Agreement, in any one or
more instances, shall not be deemed to be nor construed as further or continuing
waiver of any such condition, or of the breach of any other provision, term,
covenant, representation or warranty of this Agreement.
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SECTION 15.8. Public Announcements. The parties agree that after the
signing of this Agreement, neither party shall make any press release or public
announcement concerning this transaction without the prior written approval of
the other party unless a press release or public amendment is required by law.
If any such announcement or other disclosure is required by law, the disclosing
party agrees to give the nondisclosing party prior notice and an opportunity to
comment on the proposed disclosure.
SECTION 15.9. Entire Agreement. This Agreement contains the entire
understanding between the parties hereto with respect to the transactions
contemplated hereby and supersedes and replaces all prior and contemporaneous
agreements and understandings, oral or written, with regard to such
transactions. All schedules hereto and any documents and instruments delivered
pursuant to any provision hereof are expressly made a part of this Agreement as
fully as though completely set forth herein.
SECTION 15.10. Parties in Interest. Nothing in this Agreement is
intended to confer any rights or remedies under or by reason of this Agreement
on any persons other than the Sellers, and the Buyer and their respective
successors and permitted assigns. Nothing in this Agreement is intended to
relieve or discharge the obligations or liability of any third persons to the
Sellers or the Buyer. No provision of this Agreement shall give any third
persons any right of subrogation or action over or against the Sellers or the
Buyer.
SECTION 15.11. Scheduled Disclosures. Disclosure of any matter, fact
or circumstance in a Schedule to this Agreement shall not be deemed to be
disclosure thereof for purposes of any other Schedule hereto.
SECTION 15.12. Section and Paragraph Headings. The section and
paragraph headings in this Agreement are for reference purposes only and shall
not affect the meaning or interpretation of this Agreement.
SECTION 15.13. Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which shall
constitute the same instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized as of the
date first above written.
ST. LUCIE PRESS, INC.
By: /s/ Dennis Buda
-------------------------------
ST. LUCIE PRESS (U.K.) LTD.
By: /s/ Dennis Buda
-------------------------------
CRC PRESS LLC
By: /s/ Mason Slaine
-------------------------------
/s/ Dennis Buda
-----------------------------------
Dennis Buda
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Exhibit 10.8
ASSET PURCHASE AGREEMENT
AGREEMENT, dated as of June 5, 1997, by and between Thomson Information
Services Inc., a New York corporation (the "Seller"), Thomson Licensing
Corporation, a Delaware corporation ("TLC") and CRC Press LLC, a Delaware
limited liability company (the "Buyer").
The Buyer wishes to purchase from the Seller, and the Seller wishes to
sell to the Buyer, all of the Seller's right, title and interest in and to the
assets of the Auerbach division (the "Business") of the Seller's Research
Institute of America Group Division ("RIAG"), on the terms and subject to the
conditions set forth in this Agreement.
Accordingly, the parties agree as follows:
1. Sale of Assets.
1.1. Assets to be Sold.
(a) Subject to the terms and conditions set forth in this Agreement,
including without limitation Section 1.2, the Seller hereby sells, assigns,
transfers and delivers to the Buyer, free and clear of any lien or other
encumbrance, all of the Seller's right, title and interest in and to the
following assets, properties and rights of the Seller relating to or used or
employed in connection with the Business, but excluding the Excluded Assets (all
of such assets, properties and rights, together with those assets, properties
and rights set forth in subsection (b) below, being hereinafter sometimes
collectively called the "Purchased Assets"):
(i) all assets, properties and rights reflected on the balance
sheet for the Business as at March 31, 1997 (annexed hereto as Schedule
1.1(a)(i)) (the "Balance Sheet"), subject to changes therein in the ordinary
course of business through the Closing Date;
(ii) all of the Seller's right, title and interest in and to
the publications, products and services set forth on Schedule 1.1(a)(ii),
whether complete, published, unpublished, or in-process or under contract
(collectively, the "Products"), including, without limitation, all updates,
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supplements and revisions thereto, and other accompanying materials relating to
the Products and the literary content of all of the above;
(iii) all finished goods inventory for the Products and all
raw materials and work-in-process;
(iv) all of the Seller's right, title and interest in, and
claims under, any author contracts and other agreements relating specifically to
the Business, (excluding those contracts and other agreements relating
specifically to the Business but shared with other businesses of RIAG) which are
listed on Schedule 1.1(a)(iv) (collectively, the "Contracts");
(v) except to the extent assigned and transferred pursuant to
Section 1.1(b), all of the Seller's right, title and interest in, and claims
under, the Intellectual Property relating specifically to the Products. For
purposes of this Agreement "Intellectual Property" shall mean all of the
following owned by the Seller or used in connection with the Products: (A)
patents, patentable inventions, discoveries, improvements, ideas, know-how,
processes and computer programs, software and databases (including source code);
(B) trade secrets and the right to limit the use or disclosure thereof; (C)
copyrights in all works (registered and unregistered) including software
programs (other than off-the-shelf software and software used in connection with
the Products shared with other businesses of RIAG); (D) domain names; including
registrations and applications in any jurisdiction pertaining to the foregoing;
(vi) all lists of present, former and prospective customers,
subscribers, clients and prospects as included in RIAG's customer fulfillment
system as of the Closing Date (including names, addresses and other information
customarily maintained by RIAG), suppliers and vendors, and all other lists,
files and marketing and promotion materials used in connection with or related
to the Products or the Purchased Assets, including information produced by the
"Fast Track" system", "Fax Sheets on Line", Rolodex cards, information on the
"Vantive I" system and orders received and unfilled on the Closing Date;
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(vii) all camera-ready copy used for making negative films,
film, plates, platemaking film, paste-ups, tapes, illustrations and other
artwork, and other reproduction materials for the Products (collectively, the
"Reproduction Materials"), permissions (to the extent transferable) and vendor
information, including, without limitations, specifications for all published
titles, and all manuscripts, proofs, reviews, designs, artwork, covers,
photographs and production-related material for all unpublished titles;
(viii) all databases, software (other than off-the-shelf
software and software used in connection with the Products shared with other
businesses of RIAG), software programs (other than off-the-shelf software and
software used in connection with the Products shared with other businesses of
RIAG), object codes, source codes, systems documentation and user manuals
specifically used to produce the Products, and all proprietary information,
trade secrets, research records, test information, market surveys, marketing
know-how, inventions, processes and procedures owned or licensed to the Seller
and used in connection with the Products;
(ix) all existing files specifically relating to the Products
including, without limitation, files relating to authors, author prospects,
editorial matters, reviewers, and unsigned projects;
(x) all audio and video tapes, manuscripts, editorial material
(including, without limitation, revisions, plans, reviews of competitive works,
production records and author correspondence), back issues and superseded
editions of every sort and in any medium used in or prepared for the Products;
(xi) all proprietary information, trade secrets, research
records, test information, market surveys, marketing know-how, inventions,
processes and procedures owned or licensed to the Seller and used in connection
with the Products;
(xii) all of the goodwill of the Seller relating specifically
to the Products.
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In confirmation of the foregoing sale, assignment and transfer, the
Seller shall execute and deliver to the Buyer at the Closing a Bill of Sale in
the form of Exhibit A hereto and such other instruments and assignments as may
be reasonably necessary to convey to the Buyer good title to the Purchased
Assets.
(b) Subject to the terms and conditions set forth in this Agreement,
TLC hereby sells, assigns, transfers and delivers to the Buyer all of TLC's
right, title and interest in and to the name "Auerbach" and all names and marks
similar thereto and all other trademarks and service marks (registered or
unregistered) and trade names relating specifically to the Products, and all
goodwill associated therewith (the "Trademarks"). In confirmation of the
foregoing sale, assignment and transfer, TLC shall execute and deliver to the
Buyer at the Closing an Assignment of Trademarks in the form of Exhibit B
hereto.
1.2. Excluded Assets. The Purchased Assets shall not include the following
assets (collectively, the "Excluded Assets"): accounts receivable relating to
the Business (provided, however, that renewal invoices for subscriptions
relating to subscription periods commencing after the Closing Date shall not be
deemed accounts receivable) and cash and cash equivalent items, including
without limitation, checking accounts, bank accounts, certificates of deposit,
time deposits and securities of the Business on or prior to the Closing Date,
and all equipment (including without limitation, computer hardware and
off-the-shelf software or any other software used in connection with the
Products that is shared with other businesses of the Seller), furniture and
fixtures used in the operation of the Business.
2. Assumption of Liabilities.
2.1. Liabilities Assumed by the Buyer. In partial payment of the Purchase
Price (as defined in Section 3.1), subject to the terms and conditions set forth
in this Agreement, the Buyer hereby assumes and agrees to pay, perform and
discharge, by an Undertaking in the form of Exhibit C hereto, (a) any and all
deferred subscription liability recorded by the Seller on the Closing Date
consistent with
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past practices in an amount not to exceed $1 million, (b) the Seller's
liabilities and obligations under each of the Contracts as and to the extent
requiring performance on or after the Closing Date (other than liabilities
relating to any breach or default of any Contract prior to the Closing Date),
and (c) liabilities and obligations arising out of the operations of the
Business after the Closing Date. The specific liabilities to be assumed by the
Buyer pursuant to this Agreement are hereinafter sometimes collectively referred
to as the "Assumed Liabilities".
2.2. Liabilities Not Assumed by the Buyer. Anything in this Agreement to
the contrary notwithstanding, the Seller or TLC, as the case may be, shall be
responsible for all of its liabilities and obligations not hereby expressly
assumed by the Buyer ("Retained Liabilities") and the Buyer shall not assume, or
in any way be liable or responsible for, any liabilities or obligations of the
Seller or TLC except as specifically provided in Section 2.1. Without limiting
the generality of the foregoing, the Buyer shall not assume or have any
liability for:
(i) any liability or obligation of the Seller arising out of
(A) the conduct of the Business prior to the Closing Date (including returns of
Products sold on or prior to the Closing Date) or (B) any liability or
obligation of the Seller to any of its employees, or except with respect to
liabilities and obligations under the Contracts assumed by Buyer pursuant to
Section 2.1, agents or contractors, arising prior to the Closing Date or (C) for
payments of any kind under the Employment Retirement Income Security Action of
1974, as amended ("ERISA") or any comparable law with respect to benefit plans
offered employees of the Business on or prior to the Closing Date;
(ii) any liabilities relating to (A) Income Taxes of the
Seller, (B) except to the extent provided under Section 8.1, Taxes attributable
to the transfer of the Purchased Assets pursuant to this Agreement, (C) all
other Taxes attributable to periods ending on or prior to the Closing Date, or
(D) Taxes of any other person pursuant to an agreement or otherwise;
(iii) any royalty payments relating to sales made on or prior
to the Closing Date;
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(iv) any liability or obligation under contracts and other
agreements to which the Seller is a party or by to which it or any of its
assets, properties or rights are bound or subject which are not reflected on
Schedule 1.1(a)(iv);
(v) any liability or obligation of the Seller owing to any
shareholder, subsidiary or affiliate of the Seller;
(vi) any liability or obligation of the Seller arising out of
or in connection with the preparation of this Agreement and the consummation and
performance of the transactions contemplated by this Agreement, including,
without limitation, (A) any tax liability so arising, or (B) any liability to
which any of the parties may become subject as a result of the fact that the
transactions contemplated by this Agreement are being effected, at the request
of the Seller, without compliance with the provisions of any bulk sales act or
any similar statute as enacted in any jurisdiction; or
(vii) any liability or obligation of the Seller under any real
estate lease or sublease.
3. Consideration and Payment.
3.1. Purchase Price. Upon the terms and subject to the conditions set
forth in this Agreement, in reliance on the representations, warranties,
covenants and agreements of the parties contained herein, the purchase price for
the Purchased Assets shall be Eight Million Dollars ($8,000,000.00) and the
assumption of the Assumed Liabilities, which price is subject to adjustment as
provided in Section 3.4 hereof (the "Purchase Price").
3.2. Payment of Purchase Price. The Buyer shall pay the Purchase Price by
(a) delivering to TLC at the Closing, by wire transfer of immediately available
funds, the amount of One Million Three Hundred Fifty Thousand Dollars
($1,350,000), (b) delivering to the Seller at the Closing, by wire transfer of
immediately available funds, the amount of Six Million Six Hundred Fifty
Thousand Dollars ($6,650,000.00) and (c) assuming the Assumed Liabilities.
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3.3. Allocation of Purchase Price. The Purchase Price shall be allocated
among the Assets in accordance with the fair market values detailed in Schedule
3.3 hereof, which Schedule shall be prepared by the Buyer but subject to the
Seller's reasonable approval. The Seller and the Buyer agree to report the
allocation as provided in the applicable sections of the Internal Revenue Code
of 1986 and the rules and regulations promulgated thereunder and in accordance
with such allocation and agree to prepare and file all income tax returns in a
manner consistent with such allocation.
3.4. Adjustment to Purchase Price.
(a) Within 45 days following the Closing Date, the Seller shall
deliver to the Buyer a statement executed on behalf of the Seller by its chief
financial officer setting forth in reasonable detail the amount of revenues for
the period commencing on January 1, 1997 and ending on the Closing Date. Such
statement shall describe the assumptions made in determining the amount of
revenues, such as the amounts of anticipated returns and uncollectible accounts,
which assumptions shall be made in good faith consistent with past practice.
Within 180 days following the Closing Date, the Seller shall deliver to the
Buyer a revised statement executed on behalf of the Seller by its chief
financial officer setting forth in reasonable detail the amount of revenues for
such period, which shall be based on the assumption that there will be no
further returns and that no outstanding accounts will be collected.
(b) On or prior to April 15, 1998, the Buyer shall deliver to the
Seller a statement executed on behalf of the Buyer by its chief financial
officer setting forth in reasonable detail the amount of revenues for the period
commencing on the day immediately following the Closing Date and ending on
December 31, 1997. Such statement shall describe the assumptions made in
determining the amounts of revenues, such as the amounts of anticipated returns
and uncollectible accounts, which assumptions shall be made in good faith
consistent with past practice.
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(c) If the aggregate revenues for the fiscal year ending December
31, 1997 exceed Six Million Dollars ($6,000,000), then the Buyer shall so notify
the Seller and, on or prior to May 31, 1998, the Buyer shall make a cash payment
to the Seller equal to the amount of such excess.
(d) For purposes of this Section 3.4, "revenues" for any period
shall mean the revenues attributable to the Purchase Assets or the Products or
any improvements thereto recognized during such period in accordance with
generally accepted accounting principles consistent with past practices.
(e) If the Seller disagrees with the amount of revenues set forth on
the Buyer's statement, the Seller shall be entitled to, within thirty (30) days
of receipt of the Buyer's statement, have the Buyer's books and records audited
by Price Waterhouse, the Seller's regularly retained outside auditors. The
auditor's calculations of the amount of revenues for the period commencing on
the day immediately following the Closing Date and ending on December 31, 1997
shall be final and binding. In the event the Buyer's statement understates the
revenues for such period by more than 5%, the cost of such audit shall be paid
by the Buyer; otherwise such cost shall be paid by the Seller.
4. Deliveries at Closing.
4.1. Closing; Closing Date. The closing of the sale and purchase of the
Purchased Assets contemplated hereby (the "Closing") shall take place at the
offices of the Seller, at 395 Hudson Street, New York, New York simultaneously
with the execution of this Agreement. The time and date upon which the Closing
occurs is herein called the "Closing Date".
4.2. Deliveries by Seller. At Closing, the Seller and/or TLC, as
applicable, is delivering to the Buyer:
(a) a Bill of Sale in the form of Exhibit A hereto;
(b) an Assignment of Trademarks in the form of Exhibit B
hereto;
(c) an Assignment of Copyrights in the form of Exhibit D
hereto;
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(d) an opinion of counsel of the Seller in the form of Exhibit
E hereto; and
(e) any other documents required by this Agreement to be
delivered by the Seller and/or TLC, as applicable, to the Buyer at or prior to
the Closing.
4.3. Deliveries by Buyer. At Closing, the Buyer is delivering to the
Seller and/or TLC, as applicable:
(a) by wire transfer to the account of Seller, the sum of Six
Million Six Hundred Fifty Thousand Dollars ($6,650,000.00);
(b) by wire transfer to the account of TLC, the sum of One
Million Three Hundred Fifty Thousand Dollars ($1,350,000);
(c) an Undertaking in the form of Exhibit C hereto;
(d) an opinion of counsel of the Buyer in the form of Exhibit
F hereto; and
(e) any other documents required by this Agreement to be
delivered by the Buyer to the Seller and/or TLC at or prior to Closing.
5. Representations and Warranties of the Seller. The Seller represents and
warrants to the Buyer as of the Closing Date as follows:
5.1. Due Incorporation and Qualification. The Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
New York, and has the corporate power and lawful authority to own, lease and
operate its assets, properties and business and to carry on its business as now
conducted. The Seller is duly qualified to do business as a foreign corporation
and is in good standing in every jurisdiction in which the character of the
properties owned or leased by it or the nature of the business conducted by it
makes such qualification necessary. Schedule 5.1 hereto sets forth all
jurisdictions in which the Seller is qualified to do business. The Business is a
division of Research Institute of America Group, which is a division of the
Seller.
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5.2. Authority to Execute and Perform Agreements. The Seller has the full
legal and corporate right, power and authority required to enter into, execute
and deliver this Agreement and to perform fully the Seller's obligations
hereunder. The execution and delivery of this Agreement and the performance of
the Seller's obligations hereunder have been duly authorized by all necessary
corporate action by the Board of Directors of the Seller and no other corporate
proceedings on the part of the Seller are necessary to authorize such execution,
delivery and performance. This Agreement has been duly executed and delivered
and is the valid and binding obligation of the Seller enforceable in accordance
with its terms, except as may be limited by bankruptcy, moratorium, insolvency
or other similar laws generally affecting the enforcement of creditors' rights
or equitable principles. No approval or consent of any foreign, federal, state,
county, local or other governmental or regulatory body, and (except as otherwise
specified in this Agreement or any Schedule hereto) no approval or consent of
any other person, is required in connection with the execution and delivery by
the Seller of this Agreement and the consummation and performance by the Seller
of the transactions contemplated hereby except where failure to obtain such
approval or consent would not prevent the Seller from performing any of its
material obligations under this Agreement and would not have a material adverse
effect on the operations or condition (financial or otherwise) of the Business.
The execution, delivery and performance of this Agreement and the consummation
of the transactions contemplated hereby shall not violate, conflict with or
otherwise result in the breach or violation of any of the terms and conditions
of, result in a material modification of or constitute (or with notice or lapse
of time or both would constitute) a default under (a) the Certificate of
Incorporation or bylaws of the Seller, (b) except as would not, individually or
in the aggregate, have a material adverse effect on the operations or condition
(financial or otherwise) of the Business, any instrument, material contract or
other agreement to which the Seller is a party or by or to which it or any of
its assets or properties is bound or subject, or (c) except as would not,
individually or in the aggregate, have a material adverse effect on the
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operations or condition (financial or otherwise) of the Business, any statute or
any regulation, order, judgment, injunction, award or decree of any court,
arbitrator or governmental or regulatory body against or binding upon or
applicable to, the Seller or upon the securities, properties or business of the
Seller.
5.3. Compliance with Laws. Except as would not have a material adverse
effect on the operations or condition (financial or otherwise) of the Business,
the Seller has complied with all federal, state, county, local and foreign laws,
ordinances, regulations, orders, judgments, injunctions, awards or decrees
applicable to the Products or the Purchased Assets and has not received any
notice of violation of any of the foregoing. Except for authorizations generally
required by a corporation doing business in a foreign jurisdiction, no license,
permit, order, franchise, authorization or approval of any federal, state,
county, local or foreign governmental or regulatory body (collectively the
"Permits") is material to or necessary for the conduct of the Business.
5.4. Litigation. Except as set forth on Schedule 5.4, there are no
outstanding orders, judgments, injunctions, awards or decrees of any court,
arbitrator, governmental or regulatory body against or involving the Seller
which relate in any way, directly or indirectly, to the Products, the Purchased
Assets, the Business or the transactions contemplated herein that, individually
or in the aggregate, would prevent the Seller from performing any of its
material obligations under this Agreement or would have a material adverse
effect on the operations or condition (financial or otherwise) of the Business.
The Seller is not a party to, or to the knowledge of the Seller threatened with,
any litigation or judicial, administrative or arbitration proceeding which if
decided adversely to the Seller could have a material adverse effect upon the
transactions contemplated hereby or upon the Seller's assets, properties,
business, operations or condition (financial or otherwise) as relates to the
Products, the Purchased Assets or the Business, or which could create a material
liability of the Seller as relates to the Products or the Purchased Assets.
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5.5. Agreements. The Contracts represent all material contracts and other
agreements relating specifically to the Business (whether written or oral)
except for those contracts and other agreements relating specifically to the
Business but shared with other businesses of RIAG. The Contracts are, to the
Seller's knowledge, valid, subsisting agreements, in full force and effect and
binding upon the parties thereto in accordance with their terms, and the Seller
is not in default under any of them, nor to the Seller's knowledge is any other
party to any Contract in default thereunder nor does any condition exist which
with notice or lapse of time or both would constitute a default thereunder.
Except as separately identified on Schedule 5.5, no approval or consent of any
person is needed in order that the Contracts shall continue in full force and
effect with the Buyer following the consummation of the transactions
contemplated by this Agreement.
5.6. Inventory. The inventory reflected on the Balance Sheet is valued at
the respective paper, printing and binding costs therefor. The net inventory of
the Products reflected on the Balance Sheet, as the same exists on the date of
this Agreement, is generally in usable and salable condition as first quality
goods in the ordinary course of business at the amounts carried on the books and
records of the Seller. The inventory is generally suitable for its intended
purpose and is not in excess of the normal purchasing patterns of the Seller as
it relates to the Products.
5.7. Intangible Property. Schedule 5.7 sets forth all Intellectual
Property and all permits, grants and licenses or other rights running to or from
the Seller relating to any of the Products. To the Seller's knowledge, none of
the Products contains any libelous material or infringes any trade name,
trademark, copyright or patent and, to the knowledge of the Seller, none of the
Products contains any obscene material or injurious formulas. The rights of the
Seller in the property set forth on Schedule 5.7 are free and clear of any liens
or other encumbrances. Except as set forth on Schedule 5.7, the Seller does not
have any notice of any adversely held patent, invention, copyright, trademark,
service mark or trade name of any other person or notice of any claim of any
other person relating to any of the property set forth on Schedule 5.7, and the
Seller does not know of any basis for any valid charge
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or claim. With respect to all Intellectual Property listed on Schedule 5.7: (a)
each is in full force and effect and has not been adjudged invalid or
unenforceable; (b) each is valid and enforceable; and (c) no claim has been made
that the use of any violates or may violate the rights of any third person.
Other than the Trademarks, there are no trademarks relating to the Products.
5.8. Liens. The Seller owns outright and has good and marketable title to
the Purchased Assets, free and clear of any lien or other encumbrance (other
than obligations, liabilities or encumbrances assumed by the Buyer pursuant to
Section 2.1 or otherwise expressly disclosed in this Agreement or in any
Schedule hereto).
5.9. Financial Statements, Absence of Undisclosed Liabilities.
(a) The balance sheets of the Business as at December 31, 1996 (the
"December Balance Sheet") and March 31, 1997 (the "Balance Sheet") and the
statements of income of the Business for the twelve (12) months ended December
31, 1996 and the three (3) months ended March 31, 1997 are attached hereto as
Schedule 5.9 (collectively "Financials"). Except as disclosed on Schedule 5.9,
the Financials have been prepared from the books and records of Seller as of the
dates and for the periods indicated and present fairly the financial position of
the Business as at the dates indicated and the results of operations for the
Business through such dates and have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis.
(b) Since the date of the Balance Sheet, there has not been (i) any
materially adverse change in the business, operations, properties, assets,
condition (financial or otherwise) or prospects of the Business, or any event
that has had a material adverse effect on the business, operations, properties,
assets, condition (financial or otherwise) or prospects of the Business, or (ii)
any material loss, damage, destruction or other casualty to the Purchased Assets
(whether or not covered by insurance). Since the date of the Balance Sheet, the
Seller has operated the Business in the ordinary course of its business
consistent with past practices and, except as set forth on Schedule 5.9, has
not:
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(A) sold or transferred any of the assets of the Business
other than in the ordinary course;
(B) waived any rights material to the Business relating to the
operations of the Business;
(C) disposed of any trademarks or copyrights or any trademark
or copyright application used in the operation of this Business;
(D) defaulted on any material obligation relating to the
operation of the Business;
(E) entered into any material transaction material to the
Business;
(F) written down the value of any inventory specifically
relating to the Business;
(G) granted any increase in the compensation of any employee
listed on Schedule 8.4, other than increases in accordance with past practice
not exceeding 10%, or entered into any employment or severance agreement with
any employee listed on Schedule 8.4 except for severance agreements required by
the terms of this Agreement or as necessitated by the transactions contemplated
hereby; or
(H) taken any action to materially reduce or increase the
amount of cash available to the Seller relating to the Business as of the date
of the Balance Sheet, other than actions taken in the ordinary course of
business consistent with past practice.
5.10. Tax Matters. (a) The Seller has filed all Tax Returns which the
Seller is required to file with respect to the Business; (b) all such Tax
Returns were true, correct and complete; (c) the Seller has paid, accrued or
otherwise adequately reserved for the payment of all Taxes required to be paid
in respect of the periods covered by such Tax Returns and has adequately
reserved for the payment of all Taxes with respect to periods ended on or before
the Closing Date for which Tax Returns have not yet been filed; and (d) the
Seller has withheld and paid all Taxes related to the
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Business and required to be withheld with respect to amounts paid or owing to
any employee, creditor, independent contractor or other third party. For
purposes of this Agreement, "Taxes" shall mean any and all federal, state, local
and foreign taxes, levies, fees, imposts, duties and charges of whatever kind
(including any interest, penalties or additions to the tax imposed in connection
therewith), whether or not imposed on the Seller, including, without limitation,
taxes imposed on, or measured by, income, franchise, profits or gross receipts,
and also ad valorem, value added, sales, use, service, real or personal
property, capital stock, license, payroll, withholding, employment, social
security, workers' compensation, unemployment compensation, utility, severance,
production, excise, stamp, occupation, premium, windfall profits, transfer and
gains taxes and custom duties; and "Tax Returns" shall mean returns, reports,
information statements and other documentation (including any additional or
supporting material) filed or maintained in connection with the calculation,
determination, assessment or collection of any Tax.
5.11. Employees.
(a) Schedule 5.11 contains a true and complete list of all full-time
and part-time employees of the Business (the "Business Employees"), as of April
30, 1997, including the job title, salary and compensation of each Business
Employee. To the Seller's knowledge, no Business Employees has any plans to
terminate employment with the Business. Since April 30, 1997, except as set
forth on Schedule 5.11, there has been no increase in the salary or compensation
of any Business Employee.
(b) Except as set forth in Schedule 5.11, the Seller has paid or
made provision for the payment of all salaries, commissions and accrued wages of
the Business Employees, and 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, unemployment insurance, collective
bargaining and the payment and withholding of taxes, except where failure to
comply would not have a material adverse effect on the operations or condition
(financial or otherwise) of the Business, and the
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Seller has withheld all amounts required by law or agreement to be withheld from
the wages or salaries of the Business Employees and, to Seller's knowledge, is
not liable for any arrears of wages or other taxes or penalties for failure to
comply with any of the foregoing to the extent they are applicable to the
Business Employees. There is not pending or, to the knowledge of the Seller,
threatened, any labor dispute, strike, work stoppage, or union organizing
efforts involving the Business Employees.
5.12. Employee Benefit Plans.
(a) Schedule 5.12 lists (i) all employee benefit plans as defined in
Section 3(3) of ERISA, (ii) all bonus, stock option, stock purchase, restricted
stock and incentive plans, retirement programs or arrangements, and (iii) all
written employment, severance or compensation agreements, as each of the
foregoing were entered into, maintained, or contributed to, by the Seller, with
respect to the Business Employees (collectively, the "Plans"). Except as set
forth on Schedule 5.12, each Plan is in writing and the Seller has made
available to the Buyer a complete and accurate copy of each Plan document or
agreement and, if applicable, the summary plan description and any summary of
material modifications.
(b) To the knowledge of the Seller, each Plan has been operated in
substantial compliance with its terms and the material requirements of
applicable law, where a failure to do so would be reasonably expected to have a
material adverse effect on the operations or condition (financial or otherwise)
of the Business. No legal action, suit or claim is pending or, to the knowledge
of the Seller, threatened, with respect to any Plan (other than claims for
benefits in the ordinary course), and to the knowledge of the Seller, no fact or
event exists that could reasonably be expected to give rise to any such action,
suit or claim, in each case, where such action, suit or claim would reasonably
be expected to have a material adverse effect on the operations or condition
(financial or otherwise) of the Business.
5.13. No Broker. No broker, finder, agent or similar intermediary has
acted for or on behalf of the Seller in connection with this Agreement or the
transactions contemplated hereby, and no
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broker, finder, agent or similar intermediary is entitled to any broker's,
finder's or similar fee or other commission in connection therewith based on any
agreement, arrangement or understanding with the Seller or any action taken by
the Seller.
5.14. Intercompany Services. Except as described on Schedule 5.14, there
are no intercompany services currently being provided (a) by the Business to the
Seller or its affiliates or (b) by the Seller or its affiliates to the Business,
and there are no contracts between the Business, on the one hand, and the Seller
and any of its affiliates on the other.
5.15. Products. The Products represent all the publications, products and
services published, produced or provided, in whole or in part, by the Business.
6. Representations and Warranties of TLC. TLC represents and warrants to the
Buyer as of the Closing Date as follows:
6.1. Due Incorporation and Qualification. TLC is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and has the corporate power and lawful authority to own, lease and
operate its assets, properties and business and to carry on its business as now
conducted. TLC is a wholly owned subsidiary of the Seller.
6.2. Authority to Execute and Perform Agreements. TLC has the full legal
and corporate right, power and authority required to enter into, execute and
deliver this Agreement and to perform fully its obligations hereunder. The
execution and delivery of this Agreement and the performance of TLC's
obligations hereunder have been duly authorized by all necessary corporate
action by the Board of Directors of TLC and no other corporate proceedings on
the part of TLC are necessary to authorize such execution, delivery and
performance. This Agreement has been duly executed and delivered and is the
valid and binding obligation of TLC to the extent applicable to it enforceable
in accordance with its terms, except as may be limited by bankruptcy,
moratorium, insolvency or other similar laws generally affecting the enforcement
of creditors' rights or equitable principles. No approval or consent
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of any foreign, federal, state, county, local or other governmental or
regulatory body, and (except as otherwise specified in this Agreement or any
Schedule hereto) no approval or consent of any other person, is required in
connection with the execution and delivery by TLC of this Agreement and the
consummation and performance by TLC of its obligations hereunder, except where
failure to obtain such approval or consent would not prevent TLC from performing
any of its material obligations under this Agreement and would not have a
material adverse effect on the Trademarks. The execution, delivery and
performance of this Agreement and the consummation of TLC's obligations
hereunder shall not violate, conflict with or otherwise result in the breach or
violation of any of the terms and conditions of, result in a material
modification of or constitute (or with notice or lapse of time or both would
constitute) a default under (a) the Certificate of Incorporation or bylaws of
TLC, (b) except as would not, individually or in the aggregate, have a material
adverse effect on the Trademarks, any instrument, material contract or other
agreement to which TLC is a party or by or to which it or any of its assets or
properties is bound or subject, or (c) except as would not, individually or in
the aggregate, have a material adverse effect on the Trademarks, any statute or
any regulation, order, judgment, injunction, award or decree of any court,
arbitrator or governmental or regulatory body against or binding upon or
applicable to, TLC or upon the securities, properties or business of TLC.
6.3. Intangible Property. Schedule 6.3 sets forth all Trademarks or other
rights running to or from TLC relating to any of the Products. To TLC's
knowledge, none of the Products infringe any trade name or trademark. Except as
set forth on Schedule 6.3, TLC does not have any notice of any adversely held
trademark, service mark or trade name of any other person or notice of any claim
of any other person relating to any of the property set forth on Schedule 6.3,
and TLC does not know of any basis for any valid charge or claim. With respect
to all Trademarks listed on Schedule 6.3: (a) each is in full force and effect
and has not been adjudged invalid or unenforceable; (b) each is valid and
enforceable; and (c) no claim has been made that the use of any violates or may
violate the rights of any third person.
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6.4. Liens. TLC owns outright and has good and marketable title to the
Trademarks, free and clear of any lien or other encumbrance (other than
obligations, liabilities or encumbrances assumed by the Buyer pursuant to
Section 2.1 or otherwise expressly disclosed in this Agreement or in any
Schedule or Exhibit hereto).
7. Representations and Warranties of the Buyer. The Buyer represents and
warrants to the Seller and TLC as of the Closing Date as follows:
7.1. Due Incorporation. The Buyer is a limited liability company duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has the corporate power and lawful authority to own, lease and
operate its assets, properties and business and to carry on its business as now
conducted.
7.2. Authority to Execute and Perform Agreements. The Buyer has the full
legal right, power and authority required to enter into, execute and deliver
this Agreement and to perform fully the Buyer's obligations hereunder. The
execution and delivery of this Agreement and the performance of the Buyer's
obligations hereunder have been duly authorized by all necessary corporate
action by the Buyer and no other corporate proceedings on the part of the Buyer
are necessary to authorize such execution, delivery and performance. This
Agreement has been duly executed and delivered and is the valid and binding
obligation of the Buyer enforceable in accordance with its terms, except as may
be limited by bankruptcy, moratorium, insolvency or other similar laws generally
affecting the enforcement of creditors' rights or equitable principles. No
approval or consent of any foreign, federal, state, county, local or other
governmental or regulatory body, and (except as otherwise specified in this
Agreement or any Schedule hereto) no approval or consent of any other person, is
required in connection with the execution and delivery by the Buyer of this
Agreement and the consummation and performance by the Buyer of the transactions
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contemplated hereby and thereby. The execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby will not
violate, conflict with or otherwise result in the breach or violation of any of
the terms and conditions of, result in a material modification of or constitute
(or with notice or lapse of time or both would constitute) a default under (a)
the Certificate Formation or Limited Liability Company Agreement of the Buyer,
(b) any instrument, material contract or other agreement to which the Buyer is a
party or by or to which it or any of its assets or properties is bound or
subject, (c) any statute or any regulation, order, judgment, injunction, award
or decree of any court, arbitrator or governmental or regulatory body against or
binding upon or applicable to, the Buyer or upon the securities, properties or
business of the Buyer.
7.3. No Broker. No broker, finder, agent or similar intermediary has acted
for or on behalf of the Buyer in connection with this Agreement or the
transaction contemplated hereby, and no broker, finder, agent or similar
intermediary is entitled to any broker's, finder's or similar fee or other
commission in connection therewith based on any agreement, arrangement or
understanding with the Buyer or any action taken by the Buyer.
8. Covenants and Agreements. The parties covenant and agree as follows:
8.1. Expenses of Sale. Except as is otherwise set forth in Article 9
hereof , the parties to this Agreement shall bear their respective direct and
indirect expenses incurred in connection with the negotiation, preparation,
execution and performance of this Agreement and the transactions contemplated
hereby, including, but not limited to, all fees and expenses of agents,
representatives, counsel and accountants. Any and all sales, use, transfer,
transfer gains or similar Taxes, excluding income Taxes, resulting from the
sale, assignment, transfer and delivery hereunder of the Purchased Assets shall
be paid equally by the Buyer and the Seller.
8.2. Covenants Against Competition.
8.2.1. Non-Compete. The Seller acknowledges that the agreements and
covenants contained on this Section 8.2 are essential to protect the value of
the Business being acquired by the
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Buyer. In consideration of the Purchase Price, and other good and valuable
consideration the receipt of which is hereby acknowledged, from the date hereof
and for a period of three (3) years thereafter (the "Restricted Period"),
neither the Seller nor any of the Seller's affiliates within the Thomson
Financial and Professional Publishing Group ("Seller's Affiliates") shall, other
than as provided herein, directly or indirectly, (a) engage in a business which
produces or publishes publications or products directly competitive with the
Products; (b) assist (whether as stockholder, partner, joint venturer,
consultant, owner, lender or otherwise) any person in conducting a business
which produces or publishes publications or products directly competitive with
the Products provided, however, that this is not intended to restrict the
Seller's or the Seller's Affiliates' cumulative ownership of up to 5% of the
issued and outstanding securities of a person who produces or publishes
publications or products directly competitive with the Products; (c) interfere
with business relationships (whether formed heretofore or hereafter) between
Buyer and subscribers of, customers of or suppliers to the Products. Without the
prior written consent of the Buyer, neither the Seller nor the Seller's
Affiliates shall, during the period of two (2) years after the Closing Date,
directly or indirectly, offer, solicit or encourage, any then current full-time
employee of the Buyer to leave the employment of the Buyer or hire any such
employee. The Seller agrees that a monetary remedy for a breach of this Section
8.2.1 will be inadequate and impracticable and further agrees that such breach
would cause the Buyer irreparable harm, and that, in the event of a breach or
threatened breach by the Seller or the Seller's Affiliates of this section, the
Buyer shall be entitled to temporary and permanent injunctive relief. Nothing
hereunder, however, shall be construed as prohibiting the Buyer from pursuing
any other remedies available to it in law or in equity. If any provision of this
Section 8.2.1 is invalid in part, it shall be curtailed, as to time, location or
scope, to the minimum extent required for its validity under applicable laws and
shall be binding and enforceable with respect to the Seller and the Seller's
Affiliates as so curtailed.
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8.2.2. Confidential Information. For a period of three (3) years
from and after Closing, the Seller shall keep secret and retain in strictest
confidence, and shall not use for the benefit of itself or others, except in
connection with the business and affairs of the Buyer and its affiliates, all
confidential matters relating specifically to the Business including, but not
limited to, trade secrets, customer and subscriber lists, details of contracts,
pricing policies, operational methods, marketing plans or strategies, product
development techniques or plans, business acquisition plans, technical
processes, designs and design projects, inventions, software, source codes,
object codes, systems documentation and research projects and other business
affairs relating specifically to the Business and shall not disclose them to
anyone outside of the Buyer and its affiliates, provided, however, this covenant
shall not apply to confidential information:
(a) which at the date hereof or thereafter becomes a matter of
public knowledge without breach by the Seller or Seller's Affiliates of this
Agreement;
(b) which is obtained by the Seller from a third party under
circumstances permitting its disclosure to others; or
(c) which is required to be disclosed by law or legal process,
provided that the Seller gives the Buyer an opportunity to obtain injunctive
relief or a protective order with respect to such intended disclosure.
8.3. Transition Services.
(a) In order to allow the Buyer to make alternative arrangements,
the Seller shall use its best efforts to provide, or cause to be provided to the
Buyer, the following services as more particularly described on Schedule 8.3
(the "Transition Services") for the period of time indicated below at a price
equal to the Seller's reasonable and directly related costs of providing such
services:
(i) circulation, fulfillment and order systems from the
Closing Date through July 31, 1997; and
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(ii) all other operational services necessary to operate the
Business (including, without limitation, continuation of payroll and benefits
with respect to the employees named on Schedule 8.4(a), which amounts shall be
reimbursed by the Buyer) and the availability of work space in each of the
Seller's New York City and Boston locations for use by the employees listed on
Schedule 8.4(a) from the Closing Date through July 31, 1997 as well as for use
by a representative of the Buyer from the Closing Date through August 21, 1997.
For purposes of this Section 8.3, the parties acknowledge and agree that
the Seller shall be deemed to be using its best efforts to provide the
Transition Services provided the Seller continues to perform the Transition
Services in substantially the same manner as such services were performed prior
to the Closing Date.
(b) The Buyer shall have the right to extend the services described
in subsection (a)(ii) above (other than the availability of work space for use
by the employees listed on Schedule 8.4(a)) until September 21, 1997, provided
the Buyer gives written notice to the Seller of its intention to exercise such
right to extend by July 31, 1997. In addition, all the dates contained in
Sections 8.3(a)(ii) and (b) shall be automatically extended by one day for each
day that the Closing occurs after May 15, 1997, provided that in no event shall
the Buyer have the right to extend any of the Transition Services past September
21, 1997.
(c) The Transition Services shall be provided, to the extent
practicable, in a manner substantially consistent with the manner in which they
were provided to the Business prior to the Closing.
(d) The obligations of the Seller under this Section 8.3 shall be
suspended with respect to any specified Transition Services during the
applicable period and to the extent that the Seller is prevented or hindered
from providing such Transition Service by any law or governmental order, rule,
regulation or direction, whether domestic or foreign, or by any cause beyond the
control of the Seller including, without limitation, acts of God, strikes,
lockouts and other labor and industrial
23
<PAGE>
disputes and disturbances, shortage of necessary equipment, materials or labor,
or restrictions thereon or limitations upon the use thereof. In such event, the
Seller shall give written notice of suspension as soon as reasonably practicable
to the Buyer stating the date and extent of such suspension and the cause
thereof, and the Seller shall resume the performance of its obligations under
this Section 8.3 as soon as reasonably practicable after the removal of the
cause, if at all, and the Seller shall so notify the Buyer. At the request of
the Buyer, the period during which Transition Services are to be provided shall
be extended by the number of days for which such services were suspended.
(e) The Seller shall not have any duties or responsibilities
pursuant to this Section 8.3 other than those specifically set forth herein and
no implied obligations shall be read into this Section 8.3. The Seller shall not
be liable for any action taken or omitted to be taken by it under or in
connection with this Section 8.3, except that the Seller shall be liable for
losses incurred by the Buyer arising out of the willful misconduct of the Seller
in the performance of the Transition Services.
(f) The Buyer may terminate or partially limit any Transition
Service being provided to it at any time, provided the Buyer gives the Seller at
least two (2) weeks prior written notice and pays to the Seller an amount equal
to the aggregate out of pocket costs actually and reasonably incurred by the
Seller for such Transition Service for the period from the date of termination
until the expiration of the applicable period during which such Transition
Service was to be provided in accordance with the terms hereof.
(g) In furtherance of the Transition Services to be provided
hereunder, the Seller agrees to remit to the Buyer, on a monthly basis for the
period during which the Transition Services are provided and for a period of six
(6) months thereafter (the "Remittance Period"), an amount equal to the net cash
generated by the operations of the Business together with a statement supporting
the Seller's calculation of such amount. For purposes of this Section 8.3, "net
cash" shall mean all cash generated by the operations of the Business less cash
collections on accounts receivable relating to the Business on or prior to the
Closing Date less costs incurred by the Seller for providing the Transition
24
<PAGE>
Services to the Buyer. Such amount and supporting statement shall be remitted by
the Seller to the Buyer no later than the 15th of every month during the
Remittance Period commencing on July 15, 1997.
8.4. Employees.
(a) The Buyer shall offer employment to all of the full-time, fully
dedicated employees of the Business set forth on Schedule 8.4(a) and shall offer
such employees substantially similar benefits to those they are currently
receiving (other than retirement or pension benefits, which will be provided on
substantially the same basis as to similarly situated employees of the Buyer),
and such employees' years of service for the Seller shall count towards any
eligibility or vesting requirements as well as severance calculations. Promptly
following the Closing, the Seller shall provide the Buyer with copies of
personnel files for those employees who accept the Buyer's offer. The Buyer
shall be solely responsible for any liability relating to such employees with
respect to their employment by the Buyer. The Seller shall be solely responsible
for any severance or other liability relating to the employees of the Business
who are not set forth on Schedule 8.4(a). The Seller shall also be solely
responsible for any severance or other liability relating to any employee on
Schedule 8.4(a) who does not accept employment with the Buyer, which employee
shall be terminated from his or her employment with the Seller effective as of
the Closing Date and shall not be rehired for a period of six months thereafter.
None of the foregoing shall be construed to diminish or eliminate the Seller's
responsibility for any severance or other liability relating to the Business
Employees on or prior to the Closing Date.
(b) The Seller agrees to pay to the Buyer a sum equal to $10,000 per
year per employee set forth on Schedule 8.4(b) for a total of three (3) years,
to be used by the Buyer to supplement the wages of such employees, provided such
employees remain employed by the Buyer during such three (3) year period.
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<PAGE>
(c) Without the prior written consent of the Seller, the Buyer shall
not, during the period of two (2) years after the Closing Date, directly or
indirectly, offer, solicit or encourage, any employee of the Seller listed on
Schedule 8.4(c), which list of employees shall not exceed fifteen (15) people.
8.5. Bulk Transfer Laws. The Buyer hereby waives compliance by the Seller
with any applicable bulk sale or bulk transfer laws of any jurisdiction in
connection with the sale of the Purchased Assets to the Buyer. The Seller shall
indemnify and hold harmless the Buyer against any and all liabilities (including
Tax liabilities) that may be asserted by third parties against the Buyer as a
result of noncompliance by the Seller with any such bulk transfer law.
8.6. Further Assurances. Each of the parties shall execute such documents
and other papers and perform such further acts as may be reasonably required or
desirable to carry out the provisions hereof and the transactions contemplated
hereby including, without limitation, copyright and trademark assignments and
the transfer of the toll-free telephone numbers used solely by the Business.
8.7. Assignment of Contracts and Warranties. At the Closing and effective
as of the Closing Date, the Seller shall assign to the Buyer all of its rights
under the Contracts. Notwithstanding the foregoing, no Contract shall be
assigned contrary to law or the terms of such Contract and, with respect to
Contracts that cannot be assigned to the Buyer at the Closing Date, the
performance obligations of the Seller thereunder shall, unless not permitted by
such Contract, be deemed to be subleased or subcontracted to the Buyer until
such Contract has been assigned. The Seller shall (a) use its best efforts to
obtain all necessary consents, (b) cooperate with the Buyer in any arrangement
designed to provide to the Buyer the benefits (including the exercise of the
Seller's rights) under any such Contracts, including enforcement for the benefit
of the Buyer (and at the Buyer's expense) of any and all rights of the Seller
against a third party thereto arising out of the breach or cancellation by such
third party or otherwise, (c) hold all monies paid thereunder in trust for the
account of the Buyer and (d) remit such money to the Buyer as promptly as
possible.
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<PAGE>
8.8. Proration of Personal Property Taxes. Personal property Taxes and
assessments on the Purchased Assets shall be prorated between the Buyer and the
Seller as of the Closing Date. All such prorations shall be allocated so that
items relating to time periods ending on or prior to the Closing Date shall be
allocated to the Seller and items relating to time periods beginning after the
Closing Date shall be allocated to the Buyer. The amount of all such prorations
shall be settled and paid on the Closing Date, provided that final payments with
respect to prorations that are not able to be calculated as of the Closing Date
shall be calculated and paid as soon as practicable thereafter.
8.9. Forwarding Inquiries. The Seller shall, and shall cause all of its
subsidiaries and affiliates to, use reasonable efforts to promptly forward to
the Buyer any mail or telephone inquiries relating to the Purchased Assets and
the Products, which reasonable efforts shall include, at a minimum, referring
all customers orders received by the Seller to the Buyer by forwarding a copy of
the original purchase order or a "facsimile" purchase order that includes all
information received for billing and shipping a customer's order. All such
orders will be forwarded to a location designated by the Buyer not less
frequently than weekly.
9. Indemnification.
9.1. Seller's Indemnification. The Seller hereby agrees to indemnify and
hold the Buyer harmless from, against and in respect of any and all loss,
liability, or damage, costs or expenses (including reasonable attorneys' fees)
suffered or incurred by the Buyer by reason of any breach of representation or
warranty by the Seller or the failure of the Seller to perform any covenant or
agreement contained in this Agreement, or any Retained Liabilities.
9.2. Buyer's Indemnification. The Buyer hereby agrees to indemnify and
hold the Seller harmless from, against and in respect of any and all loss,
liability, or damage, costs or expenses (including reasonable attorneys' fees)
suffered or incurred by the Seller resulting from any breach of
27
<PAGE>
representation or warranty by the Buyer or the failure of the Buyer to perform
any covenant or agreement contained in this Agreement, and Assumed Liabilities.
9.3. Survival of Representations and Warranties. All representations and
warranties made by either party to this Agreement shall survive the Closing, but
only if a claim initiated by any of the parties hereto with respect thereto is
made on or before the second anniversary of the Closing. Claims by the Seller
relating to Assumed Liabilities and claims by the Buyer relating to Retained
Liabilities (as well as any other indemnification provisions hereunder) shall
survive indefinitely.
9.4. Control of Litigation. If any action, suit or proceeding be
commenced, or if any claim, demand or assessment be asserted, in respect of
which one of the parties to this Agreement proposes to demand indemnification
(the "Indemnitee") as aforesaid, the party from whom indemnification is demanded
(the "Indemnitor") shall be given prompt and timely notice thereof and shall
have the right to participate in the defense, compromise or settlement thereof
through its own attorneys and at its own expense and, in connection therewith;
provided, however, that the failure to given prompt and timely notice shall not
relieve the Indemnitor of its obligations hereunder except to the extent such
failure shall have materially prejudiced the Indemnitor. The Indemnitee shall
cooperate fully to make available to the Indemnitor all pertinent information
under its control or relating thereto. The Indemnitor also shall have the right
to assume, at its own expense, entire control of the defense, compromise or
settlement of any such action, suit, proceeding, claim, demand or assessment,
and after any such assumption the Indemnitee shall bear the fees and expenses of
any counsel retained by it. The Indemnitor shall not settle or compromise any
action, suit, proceeding, claim, demand or assessment unless there is no finding
or admission of any violation of law on the part of any Indemnitee and the sole
relief provided is monetary damages. The Indemnitee shall not have the right to
compromise or settle any claim whether before or after the commencement of
litigation without the prior written consent of the Indemnitor unless the
Indemnitor shall have failed to timely assume the defense of any such
litigation.
28
<PAGE>
9.5. Conditions to Indemnification.
(a) Any contrary provision of this Agreement notwithstanding, Seller
shall not have any liability under the terms of Section 9.1 (except with respect
to Retained Liabilities), and Buyer shall not have any liability under the terms
of Section 9.2, unless (except with respect to Assumed Liabilities), and then
only to the extent that, the aggregate amount of claims, losses, liabilities,
damages, costs and expenses incurred by the party seeking indemnification based
thereon or resulting therefrom exceeds $20,000, it being the intention of the
parties that such amount constitutes a deductible.
(b) Any indemnification payment made shall be limited to the amount
of any liability that remains after deducting any tax benefit to the Indemnitee
resulting from such liability or damage and any insurance proceeds recovered by
the Indemnitee from any third party.
(c) Any indemnification payment made shall be treated as an
adjustment to the Purchase Price for all federal, state or local income Tax
purposes.
(d) Notwithstanding anything contained in this Agreement, each
party's total indemnification obligation to the other under this Agreement shall
not in the aggregate exceed the Purchase Price, and in no event shall either
party be liable for consequential damages.
10. Miscellaneous.
10.1. Consent to Jurisdiction and Service of Process. Any legal action,
suit or proceeding arising out of or relating to this Agreement or the
transactions contemplated hereby may be instituted in any state or federal court
in the State of New York, provided that venue for such action, suit or
proceeding shall be in New York County, and each party agrees not to assert, by
way of motion, as a defense, or otherwise, in any such action, suit or
proceeding, any claim that it is not subject personally to the jurisdiction of
such court, that its property is exempt or immune from attachment or execution,
that the action, suit or proceeding is brought in an inconvenient forum, that
the venue of the action,
29
<PAGE>
suit or proceeding is improper or that this Agreement or the subject matter
hereof may not be enforced in or by such court. Each party further irrevocably
submits to the jurisdiction of any such court in any such action, suit or
proceeding. Any and all service of process and any other notice in any such
action, suit or proceeding shall be effective against (a) the Buyer if given by
registered or certified mail, return receipt requested, postage prepaid, mailed
to Buyer as herein provided, and (b) the Seller, if given to the Seller by
registered or certified mail, return receipt requested, postage prepaid, and
mailed to the Seller as herein provided. Buyer or Seller may designate a
different address by giving notice thereof in the manner provided herein.
10.2. Publicity. No publicity release or announcement concerning this
Agreement or the transactions contemplated hereby shall be issued without
advance approval of the form and substance thereof by the Seller and the Buyer.
10.3. Confidentiality. The Seller and the Buyer agree to keep the terms
and conditions of this Agreement confidential except insofar as disclosure may,
in the disclosing party's reasonable judgment, be required by law or regulation
or legal process. In the event of legal process the party so required to
disclose shall provide the other party with prompt notice to enable it to seek a
protective order or other appropriate remedy preventing disclosure.
10.4. Notices. Any notice or other communication required or which may be
given hereunder shall be in writing and shall be delivered personally,
telegraphed, telexed, sent by facsimile transmission or sent by certified,
registered or express mail, postage prepaid, and shall be deemed given when so
delivered personally, telegraphed, telexed, or sent by facsimile transmission or
if mailed, five days after the date of mailing, as follows:
30
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(a) if to the Buyer, to:
CRC Press LLC
2000 Corporate Boulevard
Boca Raton, FL 33431
Attn: Mason Slaine
with a copy to:
Wilkie Farr & Gallagher
153 East 53d Street
New York, NY 10022
Attn: Steven J. Gartner
(b) if to the Seller, to:
Research Institute of America Group
395 Hudson Street
New York, NY 10014
Attn: CEO
with a copy to:
The Thomson Corporation
1 Station Place
Stamford, CT 06901
Attn: General Counsel
Any party may, by notice given in accordance with this Section, to the other
party, designate another address or person for receipt of notices hereunder.
10.5. Entire Agreement. This Agreement (including the Exhibits and
Schedules hereto) and the collateral agreements executed in connection with the
consummation of the transactions contemplated herein contain the entire
agreement among the parties with respect to the purchase of the Purchased Assets
and related transactions and supersede all prior agreements, written or oral,
with respect thereto.
10.6. Waivers and Amendments. This Agreement may be amended, modified,
superseded, canceled, renewed or extended, and the terms and conditions hereof
may be waived, only by a written instrument signed by the parties hereto or, in
the case of a waiver, by the party waiving compliance. No delay on the part of
any party in exercising any right, power or privilege hereunder shall operate as
31
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a waiver thereof, nor shall any waiver on the part of any party of any right,
power or privilege hereunder, nor any single or partial exercise of any right,
power or privilege hereunder, preclude any other or further exercise thereof or
the exercise of any other right, power or privilege hereunder. The rights and
remedies herein provided are cumulative and are not exclusive of any rights or
remedies which any party may otherwise have at law or in equity.
10.7. Exhibits and Schedules. The Exhibits and Schedules to this Agreement
are a part of this Agreement as if set forth in full herein. All exhibits and
schedules attached to this Agreement are part of the substance of this
Agreement. An item described on any schedule or exhibit attached hereto shall be
deemed disclosed for all purposes under this Agreement.
10.8. Counterparts. This Agreement may be executed in one or more
counterparts, all of which together shall constitute a single document.
10.9. Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of New York applicable to agreements made
and to be performed within such State.
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10.10. No Third-Party Beneficiary. The provisions of this Agreement are
for the sole purpose of setting forth the respective rights and obligations of
the Buyer, TLC and the Seller. The parties agree that none of the provisions of
this Agreement are intended for the benefit of any third party, and that no such
third party shall have the right to enforce the provisions of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
first above written.
THOMSON INFORMATION SERVICES INC
By: /s/ Edward A. Friedland
- ----------------------------------- ------------------------------------
Federal Tax I.D. Number Name: Edward A. Friedland
Title: Vice President
THOMSON LICENSING CORPORATION
51-0363240 By: /s/ James R. Schurr
- ----------------------------------- ------------------------------------
Federal Tax I.D. Number Name: James R. Schurr
Title: President
CRC PRESS LLC
By: /s/ Mason Slaine
- ----------------------------------- ------------------------------------
Federal Tax I.D. Number Name: Mason Slaine
Title: Chairman
33
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Exhibit 10.9
================================================================================
MICROPATENT,
OPUS PUBLICATIONS, INC.
DORINDA DEVELOPMENTS, INC.
SUSAN SEVERTSON, AND
ROBERT ASLESON
as Sellers
and
MICROPATENT LLC
as Buyer
------------------------
ASSET PURCHASE AGREEMENT
------------------------
------------------------
Dated as of July 2, 1997
------------------------
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
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RECITALS....................................................................1
1. Definitions.............................................................1
2. PURCHASE AND SALE OF THE PURCHASED PROPERTY.............................6
2.1. Transfer of Assets..............................................6
2.2. Sale at Closing Date............................................8
2.3. Subsequent Documentation by Sellers.............................8
2.4. Assumed Liabilities and Excluded Liabilities....................9
2.5. Assumption by Buyer at Closing Date............................11
2.6. Subsequent Documentation by Buyer..............................11
3. Purchase Price.........................................................11
3.1. Purchase Price.................................................11
3.2. Payment of Purchase Price......................................11
3.3. Post-Closing Adjustment to Purchase Price......................12
4. CLOSING................................................................13
5. REPRESENTATIONS AND WARRANTIES OF THE SELLERS..........................13
5.1. Corporate Organization.........................................13
5.2. Qualification to Do Business...................................13
5.3. Authorization and Validity of Agreement........................13
5.4. No Conflict or Violation.......................................14
5.5. Consents and Approvals.........................................14
5.6. Financial Statements...........................................14
5.7. Absence of Certain Changes or Events...........................14
5.8. Tax Matters....................................................16
5.9. Absence of Undisclosed Liabilities.............................16
5.10. Real Property.................................................17
5.11. Equipment and Machinery.......................................17
5.12. Intellectual Property.........................................18
5.13. Licenses, Permits and Governmental Approvals..................19
5.14. Compliance with Law; Licenses.................................19
5.15. Litigation....................................................20
5.16. Contracts.....................................................20
5.17. Receivables...................................................21
5.18. Inventory.....................................................21
5.19. Employee Plans................................................21
5.20. Customers, Suppliers and Competitors..........................22
5.21. Insurance.....................................................22
5.22. Transactions with Directors, Officers and Affiliates..........22
5.23. Labor Matters.................................................23
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Page
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5.24. Environmental Matters.........................................23
5.25. Assets of the Company.........................................24
5.26. Accuracy of Information.......................................24
5.27. Survival......................................................24
6. REPRESENTATIONS AND WARRANTIES OF EACH SELLER..........................24
6.1. Corporate Organization.........................................24
6.2. Authorization and Validity of Agreement........................24
6.3. No Conflict or Violation.......................................25
6.4. Consents and Approvals.........................................25
6.5. Accuracy of Information........................................25
6.6. Survival.......................................................25
7. REPRESENTATIONS AND WARRANTIES OF THE BUYER............................25
7.1. Corporate Organization.........................................26
7.2. Qualification to Do Business...................................26
7.3. Authorization and Validity of Agreement........................26
7.4. No Conflict or Violation.......................................26
7.5. Approvals and Consents.........................................26
7.6. Survival.......................................................26
8. COVENANTS OF THE SELLERS...............................................26
8.1. Intentionally Omitted..........................................27
8.2. Consents and Approvals.........................................27
8.3. Intentionally Omitted..........................................27
8.4. Intentionally Omitted..........................................27
8.5. Further Assurances.............................................27
8.6. Best Efforts...................................................27
8.7. Covenant Not To Compete........................................27
8.8. Non-Solicitation of Employees..................................28
8.9. Notice of Breach...............................................28
8.10. Bulk Sales Compliance..........................................28
8.11. Assignment of Contracts and Warranties.........................28
8.12. Change of Name.................................................29
8.13. Forwarding Inquiries...........................................29
8.14. Audits.........................................................29
9. COVENANTS OF THE BUYER.................................................29
9.1. Actions Before Closing Date....................................29
9.2. Consents and Approvals.........................................29
9.3. Further Assurances.............................................29
9.4. Accuracy of Information........................................30
9.5. Forwarding Inquiries...........................................30
10. EMPLOYEES AND EMPLOYEE PLANS..........................................30
10.1. Offer of Employment...........................................30
-ii-
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Page
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10.2. Employee Benefits.............................................30
10.3. Liability.....................................................31
10.4. Rights........................................................31
11. TAXES.................................................................31
11.1. Allocation of Purchase Price and Purchase Price
Allocation Forms..............................................31
11.2. Indemnification Payments......................................31
11.3. Proration of Real and Personal Property Taxes.................31
12. INDEMNIFICATION.......................................................31
12.1. Indemnification by the Sellers................................32
12.2. Procedures for Indemnification by the Sellers.................33
12.3. Joint and Several Liability...................................34
12.4. Indemnification by the Buyer..................................34
12.5. Procedures for Indemnification by the Buyer...................34
12.6. Successors and Assigns........................................35
13. CONDITIONS TO OBLIGATIONS OF THE SELLERS..............................35
SECTION 13.2. Intentionally Omitted..................................35
13.3. Consents and Approvals........................................35
13.4. No Violation of Orders........................................35
13.5. Escrow Agreement..............................................36
13.6. Consulting Agreement..........................................36
13.7. Buyer Closing Documents.......................................36
14. CONDITIONS TO THE OBLIGATIONS OF THE BUYER............................36
SECTION 14.1. Intentionally Omitted...................................36
SECTION 14.2. Intentionally Omitted...................................36
14.3. Consents and Approvals........................................36
14.4. No Violation of Orders........................................37
14.5. No Material Adverse Change....................................37
14.6. Opinion of Counsel............................................37
14.7. Escrow Agreement..............................................37
14.8. Consulting Agreement..........................................37
14.9. State Taxes...................................................37
14.10. FIRPTA Withholding Certificate...............................37
14.11. Seller Closing Documents.....................................37
14.12. Legal Matters................................................38
14.13. Completion of Due Diligence..................................38
15. Intentionally Omitted.................................................38
16. MISCELLANEOUS.........................................................38
16.1. Successors and Assigns........................................38
16.2. Governing Law; Jurisdiction...................................38
16.3. Expenses......................................................38
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16.4. Broker's and Finder's Fees....................................39
16.5. Severability..................................................39
16.6. Notices.......................................................39
16.7. Amendments; Waivers...........................................40
16.8. Public Announcements..........................................40
16.9. Entire Agreement..............................................41
16.10. Parties in Interest..........................................41
16.11. Scheduled Disclosures........................................41
16.12. Section and Paragraph Headings...............................41
16.13. Counterparts.................................................41
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Exhibits:
Exhibit A - Escrow Agreement
Exhibit B - Consulting Agreement
Exhibit C - Opinion of Counsel to the Sellers Exhibit D - Opinion of Counsel to
Buyer Exhibit E - FIRPTA Withholding Certificate
Index To Schedules:
2.1(a) Products
2.1(b) Retained Assets
5.2 Qualification
5.4 No Conflict or Violation
5.5 Consents, Waivers, Authorizations and Approvals
5.6 Financial Statements
5.7 Material Changes or Events
5.8 Tax Matter Exceptions
5.9 Undisclosed Liabilities
5.10(b) Leased Real Property
5.11 Equipment and Machinery
5.12 Intellectual Property and Intangible Assets
5.13 Licenses, Permits and Governmental Approvals
5.14 Exceptions to Compliance with Law
5.15 Litigation
5.16 Contracts
5.17 Counterclaims and Set-Offs of Accounts Receivable
5.18 Inventory
5.19(a) Employee Plans
5.20 Customers and Suppliers
5.21 Insurance
5.22 Transactions with Directors, Officers and Affiliates
5.23 (a) Employment and Labor Agreements
5.23 (b) Exceptions to Compliance with Employment Laws
5.25 Assets of Company
6.4 Consents and Approvals
7.5 Approvals and Consents
8.8 Non-Solicitation of Employees
10.1 Employees of the Company
11.1 Allocation Statements
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT, dated as of July 2, 1997 by and among
MICROPATENT, a New York general partnership (the "Company"), Opus Publications,
Inc., a Connecticut corporation ("Opus"), Dorinda Developments, Inc., a Delaware
corporation ("Dorinda"), Susan Severtson, an individual ("Severtson") and Robert
Asleson, an individual ("Asleson," together with the Company, Opus, Dorinda and
Severtson, the "Sellers"), and MicroPatent LLC, a Delaware limited liability
company (the "Buyer").
W I T N E S S E T H:
WHEREAS, the Company is engaged in the business of maintaining,
producing, and distributing databases of patent and trademark information
filings made with governmental Patent and Trademark authorities and affiliated
patent and trademark organizations throughout the world and producing and
distributing customized derivative information from such databases
(collectively, the "Business");
WHEREAS, Opus, Dorinda, Severtson and Asleson are general partners
of the Company owning 51%, 40%, 5% and 4% of the partnership interests of the
Company, respectively; and
WHEREAS, the Buyer desires to purchase substantially all of the
assets of the Company from the Sellers, and the Sellers desire to sell such
assets to the Buyer, in each case upon the terms and subject to the conditions
set forth in this Agreement and the Escrow Agreement.
NOW, THEREFORE, in consideration of the foregoing and the respective
covenants and agreements hereinafter contained, the parties hereto hereby agree
as follows:
SECTION 1. DEFINITIONS.
As used in this Agreement (including the recitals and Schedules
hereto), the following terms shall have the following meanings (such meanings to
be applicable equally to both singular and plural forms of the terms defined):
"Accounts Receivable" shall mean all accounts and notes receivable
of the Company existing on the Closing Date except those expressly defined as
Retained Assets;
"Affiliate" shall mean, as to any Person, any other Person which
directly or indirectly controls, or is under common control with, or is
controlled by, such Person. As used in this definition, "control" (including,
with its correlative meanings, "controlled by" and "under common control with")
shall mean possession, directly or indirectly, of the power to direct or cause
the direction of management or policies (whether through ownership of securities
or partnership or other ownership interests, by contract or otherwise) of such
Person;
"Allocation Statement" shall have the meaning set forth in Section
11.1 hereof;
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"Asleson" shall have the meaning set forth in the Preamble hereto;
"Assigned Contracts" shall mean the rights of the Company which will
be assumed by the Buyer on the Closing Date, under the Contracts;
"Assumed Liabilities" shall have the meaning set forth in Section
2.4 hereof;
"Business" shall have the meaning set forth in the first recital
hereto;
"Business Day" shall mean days other than Saturdays, Sundays and
other legal holidays or days on which the principal office of Citibank, N.A.
is closed;
"Buyer" shall have the meaning set forth in the Preamble hereto;
"Buyer Event of Breach" shall have the meaning set forth in Section
12.3 hereof;
"Buyer Indemnitees" shall have the meaning set forth in Section 12.1
hereof;
"Buyer Losses" shall have the meaning set forth in Section 12.1
hereof;
"Cash Purchase Price" shall have the meaning set forth in Section
3.1 hereof;
"Closing" shall have the meaning set forth in Section 4 hereof;
"Closing Date" shall have the meaning set forth in Section 4 hereof;
"Closing Date Current Assets" shall have the meaning set forth in
Section 3.3(a) hereof;
"Closing Date Current Liabilities" shall have the meaning set forth
in Section 3.3(a) hereof;
"Code" shall mean the Internal Revenue Code of 1986, as amended;
"Company" shall have the meaning set forth in the Preamble hereto;
"Consulting Agreement" shall have the meaning set forth in Section
13.6 hereof.
"Contracts" shall mean, collectively, Purchase Orders, Sales Orders
and Other Contracts;
"Dorinda" shall have the meaning set forth in the Preamble hereto;
"Employment and Labor Agreements" shall have the meaning set forth
in Section 5.23(a) hereof;
"Environmental Laws" shall have the meaning set forth in Section
5.24 hereof;
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"Equipment and Machinery" shall mean (i) all the equipment,
machinery, furniture, fixtures and improvements, supplies and vehicles owned or
leased by the Company on the Closing Date (including, without limitation, all
such items as set forth on the March Balance Sheet with additions thereto (net
of dispositions) in the ordinary course of business), (ii) all the replacements
for any of the foregoing owned or leased by the Company, (iii) any rights of the
Company to the warranties (to the extent assignable) and licenses received from
manufacturers and sellers of the aforesaid items and (iv) any related claims,
credits, rights of recovery and set-off with respect thereto;
"Escrow Agreement" shall have the meaning set forth in Section 3.2
hereof;
"Escrow Amount" shall have the meaning set forth in Section 3.1
hereof;
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended;
"ERISA Affiliate" shall have the meaning set forth in Section 5.19
hereof;
"Excluded Liabilities" shall have the meaning set forth in Section
2.4(b) hereof;
"Files and Records" shall mean all files and records, whether in
hard copy or magnetic format, of the Company specifically relating to the
Business or the Purchased Property, including, without limitation, the following
types of files and records specifically relating to the Business: customer and
supplier files, equipment maintenance records, equipment warranty information,
plant plans, specifications and drawings, trade secrets and customer
specifications and all files relating to Transferred Employees, correspondence
with federal, state and local governmental agencies relating to the operation of
the Business and related files and records of the Company;
"Financial Statements" shall have the meaning set forth in Section
5.6 hereof;
"GAAP" shall mean United States generally accepted accounting
principles as in effect on the date on which the document or calculation to
which it refers relates, applied on a consistent basis throughout the periods
covered thereby;
"Government" shall mean any agency, division, subdivision, audit
group or procuring office of the Government of the United States, any state of
the United States or any foreign government, including the employees or agents
thereof;
"Hazardous Materials" shall have the meaning set forth in Section
5.24 hereto;
"Independent Accounting Firm" shall have the meaning set forth in
Section 3.3(a) hereto;
"Intangible Assets" shall mean all intangible personal property
rights, including, without limitation, all rights on the part of the Company to
proceeds of any insurance policies and all claims on the part of the Company for
recoupment, reimbursement and coverage under any
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insurance policies, in each case in connection with the Business and all
goodwill of the Sellers relating to the Business;
"Intellectual Property" shall have the meaning set forth in Section
5.12(a) hereof;
"Inventory" shall mean (i) all the finished goods, raw materials,
work in progress and inventoriable supplies owned by the Company on the Closing
Date (including, without limitation, all such items as set forth on the March
Balance Sheet with additions thereto (net of dispositions) in the ordinary
course of business) specifically for use in the operations of the Business and
(ii) any and all rights of the Company to the warranties received from its
suppliers with respect to such inventory (to the extent assignable) and related
claims, credits, rights of recovery and set-off with respect thereto;
"June Balance Sheet" shall have the meaning set forth in Section 5.6
hereof;
"Licenses" shall have the meaning set forth in Section 5.12(c)
hereof;
"Lien" shall mean any mortgage, pledge, security interest,
encumbrance, lien (statutory or other) or conditional sale agreement;
"Listed Employee" shall have the meaning set forth in Section 10.1
hereof;
"March Balance Sheet" shall have the meaning set forth in Section
5.6 hereof;
"Material Adverse Effect" shall mean a material adverse affect on
the business, operations, assets, properties, condition (financial or otherwise)
or prospects of the Company, taken as a whole;
"Net Working Capital" shall have the meaning set forth in Section
3.3(a) hereof;
"Neato" shall mean Neato LLC, a Connecticut limited liability
company;
"Neato Amount" shall mean the amount owing to the Company from Neato
as of the Closing, which amount has been determined by the Sellers to be Four
Hundred Fifty-One Thousand Dollars ($451,000).
"Neato Receivable" shall mean the amount owing to the Company from
Neato as of the Closing Date;
"NLRB" shall have the meaning set forth in Section 5.23(b) hereof;
"Obsolete Inventory" shall have the meaning set forth in Section
5.18 hereof;
"Opus" shall have the meaning set forth in the Preamble hereto;
"Other Contracts" shall mean all Equipment and Machinery leases, and
all indentures, loan agreements, security agreements, and all other contracts,
commitments,
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partnership or joint venture agreements, license agreements, service contracts,
employment, commission, and consulting agreements, suretyship contracts, letters
of credit, reimbursement agreements, contracts or commitments limiting or
restraining the Company with respect to the Business from engaging or competing
in any lines of business or with any person, firm or corporation, documents
granting the power of attorney with respect to the affairs of the Company,
agreements not made in the ordinary course of business of the Business, options
to purchase any assets or property rights of the Business, working capital
maintenance or other form of guaranty agreements, and all other agreements to
which the Company is a party and which are related to the operation of the
Business, but excluding Real Property Leases, Purchase Orders, Sales Orders and
Plans;
"Permits" shall have the meaning set forth in Section 5.13 hereof;
"Person" shall mean and include any individual, corporation, limited
liability company, partnership, joint venture, association, joint-stock company,
trust, any other unincorporated organization or Government;
"Plans" shall have the meaning set forth in Section 5.19(a) hereof;
"Products" shall have the meaning set forth in Section 2.1(a)
hereof;
"Purchase Orders" shall mean all the Company's outstanding purchase
orders, contracts or other commitments to suppliers of goods and services for
materials, supplies or other items used in the Business;
"Purchase Price" shall have the meaning set forth in Section 3.1
hereof;
"Purchased Property" shall have the meaning set forth in Section
2.1(a) hereof;
"Proceeding" shall have the meaning set forth in Section 12.2
hereof;
"Real Property Leases" shall have the meaning set forth in Section
5.10(b) hereof;
"Reimbursed Claims" shall have the meaning set forth in Section 12.1
hereof;
"Restricted Period" shall have the meaning set forth in Section
8.7(a) hereof;
"Retained Assets" shall have the meaning set forth in Section 2.1(b)
hereof;
"Sales Orders" shall mean all of the Company's sales orders,
contracts or other commitments to purchasers of goods and services of the
Business;
"Seller Indemnitees" shall have the meaning set forth in Section
12.3 hereof;
"Seller Losses" shall have the meaning set forth in Section 12.3
hereof;
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"Sellers" shall have the meaning set forth in the Preamble hereto;
"Sellers' Event of Breach" shall have the meaning set forth in
Section 12.1 hereof;
"Severtson" shall have the meaning set forth in the Preamble hereto;
"Surplus Inventory" shall have the meaning set forth in Section 5.18
hereof;
"Taxes" shall mean all federal, state, local or foreign taxes,
including, but not limited to, income, gross income, gross receipts, capital,
production, excise, employment, sales, use, transfer, transfer gain, ad valorem,
premium, profits, license, capital stock, franchise, severance, stamp,
withholding, Social Security, employment, unemployment, disability, worker's
compensation, payroll, utility, windfall profit, custom duties, personal
property, real property, environmental, registration, alternative or add-on
minimum, estimated and other taxes, governmental fees or like charges of any
kind whatsoever, including any interest, penalties or additions thereto whether
disputed or not;
"Tax Returns" shall mean any return, report, information return or
other document (including any related or supporting information) filed or
required to be filed with any governmental body in connection with the
determination, assessment, collection or administration of any Taxes.
"Transaction Documents" shall mean this Agreement, the Escrow
Agreement, the Consulting Agreement, the exhibits and schedules hereto, and all
other agreements, instruments, certificates and other documents to be entered
into or delivered by any party in connection with the transactions contemplated
to be consummated pursuant to any of the foregoing;
"Transferred Employees" shall have the meaning set forth in Section
10.1 hereof;
"Transfer Taxes" shall have the meaning set forth in Section 16.3
hereof;
"Working Capital Statement" shall have the meaning set forth in
Section 3.3(a) hereof;
"Working Capital Statement Report" shall have the meaning set forth
in Section 3.3(a) hereof.
SECTION 2. PURCHASE AND SALE OF THE PURCHASED PROPERTY.
SECTION 2.1. Transfer of Assets.
(a) Subject to the terms and conditions herein set forth, the
Sellers shall sell, convey, transfer, assign and deliver to the Buyer, free and
clear of any Lien, and the Buyer shall purchase and accept from the Sellers, on
the Closing Date, all right, title and interest of the Sellers and their
Affiliates in and to all of the Company's assets, properties, rights and
business, tangible
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and intangible, of every type and description, wherever located, used or
employed in connection with the Business as they exist or shall exist on the
Closing Date (all of such assets, properties, rights and business being
hereinafter collectively referred to as the "Purchased Property"), including
without limitation:
(i) any cash and cash equivalent items, including without
limitation, checking accounts, bank accounts, certificate of deposit, time
deposit and securities of the Company on the Closing Date;
(ii) the Accounts Receivable, Assigned Contracts, Equipment and
Machinery, Files and Records, Intangible Assets, Intellectual Property,
Inventory, Licenses, Real Property Leases and any prepaid expenses and
other assets relating to the operations of the Business on the Closing
Date (including, without limitation, all such items as are set forth on
the March Balance Sheet with additions thereto (net of dispositions) in
the ordinary course of business) and including all the tangible and
intangible assets of the Company and its Affiliates used in the Business
and related thereto;
(iii) all right, title and interest in and to the products produced
by the Company, all of which are listed in Schedule 2.1(a) hereto, whether
complete, published, unpublished, in process or under contract (the
"Products") including, without limitation, all updates, supplements and
revisions thereto, and other accompanying materials relating to the
Products and the literary content of all of the above;
(iv) all databases, software, software programs, object codes,
source codes, systems documentation and user manuals used in connection
with the Business, and all proprietary information, trade secrets,
research records, test information, market surveys, marketing know-how,
inventions, processes and procedures owned by the Company and used in
connection with the Business;
(v) all audio and video tapes, manuscripts, editorial material
(including, without limitation, revisions, plans, reviews, reviews of
competitive works, production records and author correspondence), back
issues and superseded editions of every sort and in any medium used in or
prepared for the Business;
(vi) all stock and inventory including, without limitation,
advertising materials, exhibit booths and related materials, subscription
forms, database search guides, promotional material, camera-ready and
electronic stock and customer documentation;
(vii) all of the Sellers' claims, refunds, causes of action, choses
in action, rights of recovery and rights of setoff of any kind relating to
the Business;
(viii) the right to receive and retain mail, Accounts Receivable
payments and other communications relating to the Business;
(ix) the right to bill and receive payment for products shipped or
delivered and services performed but unbilled or unpaid as of the Closing;
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(x) all lists, records and other information pertaining to accounts,
personnel and referral sources, all lists and records pertaining to
suppliers and customers; and all books, ledgers, files, business records,
legal files and legal records of every kind; whether evidenced in writing,
electronically (including, without limitation, by computer) or otherwise
except for Tax Returns and related records;
(xi) all mailing lists for the Business and lists of present, former
and prospective subscribers to, and recipients of, any of the Products
(both in hard copy and all available machine readable formats), including
names, addresses, expiration dates and other information customarily
maintained by Company, and all other lists, files and advertising,
marketing and promotional materials, studies, reports and all other
printed or written materials relating to the Business;
(xii) to the extent transferable, all telephone numbers (e.g., toll
free numbers), fax numbers, Internet addresses and similar numbers or
addresses ; and
(xiii) all other assets, properties, and rights of every kind used
primarily in the Business, on the Closing Date, known or unknown, fixed or
unfixed, accrued, absolute, contingent or otherwise, whether or not
specifically referred to in this Agreement.
(b) Notwithstanding anything herein to the contrary, the Purchased
Property shall not include the following assets (the "Retained Assets"):
(i) any minute books, Tax Returns and related records, or other
partnership documents of the Company;
(ii) Tax refunds relating to Taxes paid prior to the Closing;
(iii) the Neato Receivable; and
(iv) the assets listed in Schedule 2.1(b).
SECTION 2.2. Sale at Closing Date. The sale, transfer, assignment
and delivery by the Sellers of the Purchased Property to the Buyer, as herein
provided, shall be effected on the Closing Date by deeds, bills of sale,
endorsements, assignments and other instruments of transfer and conveyance
satisfactory in form and substance to counsel for the Buyer.
SECTION 2.3. Subsequent Documentation by Sellers. The Sellers shall,
at any time and from time to time after the Closing Date, upon the reasonable
request of the Buyer and at the expense of the Sellers, do, execute, acknowledge
and deliver, or cause to be done, executed, acknowledged and delivered, all such
further deeds, assignments, transfers and conveyances as may be required for the
better assigning, transferring, granting, conveying and confirming to the Buyer
or its successors and assigns, or for aiding and assisting in collecting and
reducing to possession, any or all of the Purchased Property. The Sellers hereby
constitute and appoint, effective as of the Closing Date, the Buyer, its
successors and assigns as the true and lawful attorney of the Sellers with full
power of substitution in the name of the Buyer or in the name of the Sellers but
for the benefit of the Buyer (a) to collect for the account of the Buyer all
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Accounts Receivable and any other item of Purchased Property and (b) to
institute and prosecute all proceedings which the Buyer may in its discretion
deem proper in order to collect the Accounts Receivable or to assert or enforce
any right, title or interest in, to or under the Purchased Property and to
defend or compromise (subject to Section 12 hereof, if applicable) any and all
actions, suits or proceedings in respect of any of the Purchased Property. The
Buyer shall be entitled to retain for its own account any amounts collected
pursuant to the foregoing powers, including any amounts payable as interest in
respect thereof.
SECTION 2.4. Assumed Liabilities and Excluded Liabilities.
(a) Assumption of Liabilities. As additional consideration for the
Purchased Property, from and after the Closing, the Buyer shall assume and the
Buyer hereby agrees to pay, perform and discharge when due:
(i) trade payables of the Company arising in the ordinary course of
business as of the Closing Date, excluding any trade payables that were
incurred prior to June 30, 1996, but including without limitation accrued
liabilities, accrued vacation, accrued royalties, commissions payable,
accounts payable and all current and long-term capital lease obligations,
all to the extent set forth in the books and records of the Company as of
the Closing, and including the commission payable due to Chadwyck Healey
in an amount equal to the lesser of fifty percent (50%) thereof as of the
Closing Date and forty eight thousand dollars ($48,000);
(ii) any and all deferred revenue liability recorded by the Company
on the Closing Date consistent with past practices in an amount not to
exceed the amount set forth on the March Balance Sheet;
(iii) all obligations of the Company arising pursuant to the terms
of Real Property Leases referred to in Schedule 5.10 and Contracts
referred to in Schedule 5.16 (other than liabilities (A) due or payable by
the Company prior to June 30, 1996 or (B) relating to any breach or
default of any Contract or Real Property Lease prior to the Closing Date
unless such breach or default arises solely from the failure to pay an
obligation after becoming due and payable and has been recorded as a
current liability on the Company's books and records as of the Closing);
and
(iv) obligations of the Company arising out of the employment of
Transferred Employees to the extent accrued by the Company on its books
and records as of the Closing (collectively, the "Assumed Liabilities");
(b) Excluded Liabilities. Anything in this Agreement to the contrary
notwithstanding, the Sellers shall be responsible for all of the liabilities and
obligations not hereby expressly assumed by Buyer and Buyer shall not assume, or
in any way be liable or responsible for, any liabilities or obligations of the
Sellers except as specifically provided by this Section 2.4 (the "Excluded
Liabilities"). Without limiting the generality of the foregoing, Buyer shall not
assume any of the following:
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(i) accrued royalties due to Jouve Software, Incorporated (which
accrued prior to June 30, 1996) as of the Closing, which as of the March
Balance Sheet were approximately in the amount of $60,000;
(ii) the trade payable due to the U.S. Patent Office (which accrued
prior to June 30, 1996) as of the Closing, which as of the March Balance
Sheet was approximately $96,000;
(iii) any indebtedness of the Company due under any line of credit,
including, without limitation, the indebtedness due to the Bank of New
Haven in the approximate amount of $300,000;
(iv) the portion of the commission payable due to Chadwyck Healey
that is not expressly assumed pursuant to Section 2.4(a)(i);
(v) any liability or obligation under Contracts or other agreements
to which any Seller is a party or by or to which it or any of its assets,
properties or rights are bound or subject which are not reflected on
Schedule 5.16 unless otherwise expressly assumed by the Buyer in the
Transaction Documents;
(vi) any liability or obligation arising out of (A) the employment
by the Company of any employees, whether before or after the Closing Date
and whether or not such employees become Transferred Employees, except as
set forth in written employment agreements expressly assumed by the Buyer
pursuant to Section 2.4(a)(iii) or to the extent accrued on the Company's
books and records as of the Closing and expressly assumed pursuant to
Section 2.4(a)(i), or (B) the retention by the Company of any agents or
contractors, whether before or after the Closing Date unless under the
written terms of an Assigned Contract and expressly assumed pursuant to
Section 2.4(a)(iii) or to the extent accrued as a trade payable on the
Company's books and records as of the Closing and expressly assumed
pursuant to Section 2.4(a)(i);
(vii) any liability or obligation of the Company owing to any
stockholder, subsidiary or Affiliate thereof other than the portion of the
commission payable due to Chadwyck Healey which is expressly assumed
pursuant to Section 2.4(a)(i) hereof;
(viii) any liabilities related to (A) income Taxes of the Company,
(B) Taxes attributable to the transfer of the Purchased Property pursuant
to this Agreement, (C) all other Taxes attributable to periods ending on
or prior to the Closing Date, or (D) Taxes of any other Person pursuant to
an agreement or otherwise unless under the written terms of an Assigned
Contract;
(ix) any liabilities of the Company arising under Environmental Laws
attributable to or incurred as a result of any acts, omissions, or
conditions first occurring or in existence as of or prior to the Closing
Date, including, without limitation, liabilities for the release,
handling, discharge treatment, storage, disposal, or presence of Hazardous
Materials;
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(x) any liability or obligation of the Sellers arising out of or in
connection with the preparation of this Agreement and the consummation and
performance of the transactions contemplated by this Agreement, including
without limitation, any liability to which any of the parties may become
subject as a result of the fact that the transactions contemplated by this
Agreement are being effected, at the request of Sellers, without
compliance with the provisions of any bulk sales acts or any similar
statute as enacted in any jurisdiction;
(xi) any liability or obligation of the Company under any Plan; and
(xii) any liability or obligation of the Company arising out of or
in connection with any suit, action, investigation, claim or proceeding
with respect to actions or omissions, or alleged action or omissions, of
the Company or its officers, partners, agents or affiliates prior to the
Closing, including without limitation, any disputes pertaining to patents
the Company assigned to Neato on May 19, 1997 and other claims referred to
on Schedule 5.15 other than liabilities accrued by the Buyer post-Closing
in connection with the trademark dispute with Derwent set forth on
Schedule 5.15.
SECTION 2.5. Assumption by Buyer at Closing Date. The assumption by
the Buyer of the Assumed Liabilities from the Sellers, as herein provided, shall
be effected on the Closing Date by endorsements, assignments and other
instruments of transfer and assumption satisfactory in form and substance to
counsel to the Sellers.
SECTION 2.6. Subsequent Documentation by Buyer. The Buyer shall, at
any time and from time to time after the Closing Date, upon the reasonable
request of the Sellers and at the expense of the Buyer, do, execute, acknowledge
and deliver, or cause to be done, executed, acknowledged and delivered, all such
further documents, assignments, transfers and conveyances as may be required for
the better assuming, transferring, granting, conveying and confirming to the
Sellers or their successors and assigns, any or all of the Assumed Liabilities.
SECTION 3. PURCHASE PRICE.
SECTION 3.1. Purchase Price. Upon the terms and subject to the
conditions set forth in this Agreement, in reliance on the representations,
warranties, covenants and agreements of the parties contained herein, the
purchase price for the sale and transfer of the Purchased Property to be
delivered at Closing by the Buyer shall consist of (i) Seven Million Nine
Hundred Thousand Dollars ($7,900,000) less the Neato Amount (the "Purchase
Price"), which Purchase Price is subject to adjustment as provided in Section
3.3 hereof, of which ten percent (10%) of the Purchase Price will be placed in
escrow (the "Escrow Amount") and (ii) the assumption by the Buyer of the Assumed
Liabilities.
SECTION 3.2. Payment of Purchase Price. On the Closing Date, the
Buyer shall (i) pay the Purchase Price less the Escrow Amount (the "Cash
Purchase Price") by wire transfer of immediately available funds to the account
of the Company c/o Siegel, O'Connor, Schiff & Zangari, PC IOLTA Account at Fleet
Bank, Account No.-0084-6204, ABA 0115000100, (ii) deposit the Escrow Amount in
an Escrow Fund pursuant to an Escrow Agreement substantially in the form of
Exhibit A attached hereto (the "Escrow Agreement") between the Sellers, the
Buyer
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and IBJ Schroder Bank & Trust Company, as Escrow Agent, and (iii) execute and
deliver to the Sellers an instrument of assumption of liabilities with respect
to the Assumed Liabilities.
SECTION 3.3. Post-Closing Adjustment to Purchase Price. The Cash
Purchase Price shall be subject to adjustment after the Closing as follows:
(a) Working Capital Statement. Within forty-five (45) calendar days
after the Closing Date, the Buyer shall deliver to the Sellers a Statement (the
"Working Capital Statement") which shall set forth the following information:
(i) the current assets as of the Closing Date which are included within the
Purchased Property, adjusted to eliminate any deferred subscription costs,
determined consistent with the Company's past practice (the "Closing Date
Current Assets"), (ii) the current liabilities as of the Closing Date which are
included within the Assumed Liabilities, adjusted to eliminate any deferred
revenue, determined consistent with the Company's past practice (the "Closing
Date Current Liabilities") and (iii) a calculation of the Closing Date Current
Assets less the Closing Date Current Liabilities (the "Net Working Capital").
During the period of any dispute with respect to the application of this Section
3.3, the Buyer shall provide the Sellers full access to the books, records,
facilities and employees of the Business, and shall cooperate with the Sellers
to the extent reasonably requested by the Sellers to investigate the basis for
such dispute. Not later than forty-five (45) calendar days after receipt of the
Working Capital Statement (such 45-day period shall be extended for such period
of time that the Buyer refuses to provide the Sellers with full access to the
books, records, facilities and employees of the Business), the Sellers shall
provide the Buyer with a list of those items, if any, to which the Sellers take
exception and the Sellers' proposed adjustment (the "Working Capital Statement
Report"). If the Sellers fail to deliver to the Buyer the Working Capital
Statement Report within forty-five (45) calendar days following receipt of the
Working Capital Statement, the Sellers shall be deemed to have accepted the
Working Capital Statement for the purposes of any Purchase Price adjustment
under Section 3.3(b) hereof. If the Buyer does not give the Sellers notice
within thirty (30) calendar days following receipt of the Working Capital
Statement Report, the Buyer shall be deemed to have accepted the Working Capital
Statement Report for the purposes of any Purchase Price adjustment under Section
3.3(b) hereof. If the Buyer gives the Sellers notice of objections to the
Working Capital Statement Report, and if the Buyer and the Sellers are unable,
within fifteen (15) calendar days after receipt by the Sellers of the notice by
the Buyer of objections, to resolve the disputed exceptions, such disputed
exceptions will be referred to a firm of independent certified public
accountants ("Independent Accounting Firm") mutually acceptable to the Buyer and
the Sellers. If the Buyer, on the one hand, and the Sellers, on the other hand,
are not able to agree upon an Independent Accounting Firm, the Buyer, on the one
hand, and the Sellers, on the other hand, shall each select a firm of
independent certified public accountants and those two firms shall together
select the Independent Accounting Firm. The Independent Accounting Firm shall,
within sixty (60) days following its selection, deliver to the Buyer and the
Sellers a written report determining such disputed exceptions, and its
determinations will be conclusive and binding upon the parties thereto for the
purposes of any Purchase Price adjustment under Section 3.3(b) hereof. The fees
and disbursements of the Independent Accounting Firm acting under this Section
shall be shared equally by the Buyer, on the one hand, and the Sellers, on the
other hand.
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(b) Purchase Price Adjustment. Within three (3) calendar days
following the preparation or computation and final determination, pursuant to
Section 3.3(a) hereof, of the Working Capital Statement, and based upon such
final determination, the Sellers shall promptly pay to the Buyer in immediately
available funds the amount, if any, by which the Net Working Capital is less
than Two Hundred Sixty Three Thousand Dollars ($263,000) (the "Buyer
Adjustment") (which amount equals the amount of working capital set forth on the
March Balance Sheet, adjusted to eliminate the Neato Receivable, deferred
subscription costs, deferred revenue, the unassumed portion of the trade payable
due to Chadwyck Healey Ltd., the trade payables due to Jouve and the European
Patent Office, and the indebtedness due to the Bank of New Haven set forth on
the March Balance Sheet) (provided, however, that if the amount of the Buyer
Adjustment is less than twenty-five percent (25%) of the amount deposited under
the Escrow Agreement, the Buyer shall collect the Buyer Adjustment from the
Escrow Agent and shall not be entitled to payment from the Sellers) or the Buyer
shall promptly pay to the Sellers by wire transfer of immediately available
funds to the account of the Company as set forth in Section 3.2, the amount if
any, by which the Net Working Capital is greater than Two Hundred Sixty Three
Thousand Dollars ($263,000).
SECTION 4. CLOSING. The closing of the sale and purchase of the
Purchased Property (the "Closing") shall take place at the offices of Willkie
Farr & Gallagher at One Citicorp Center, 153 East 53rd Street, New York, New
York 10022 at 10:00 a.m. on July 1, 1997, or at such other place and time as may
be mutually agreed to by the parties hereto (the "Closing Date").
SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE SELLERS. The
Sellers hereby, jointly and severally, represent and warrant to the Buyer as
follows:
SECTION 5.1. Organization. The Company is a general partnership duly
organized and validly existing under the laws of the jurisdiction of its
formation, and has all requisite partnership power and authority to own its
properties and assets and to conduct its businesses as now conducted. Copies of
the general partnership agreement of the Company, with all amendments thereto to
the date hereof, have been furnished to the Buyer or its representatives, and
such copies are accurate and complete as of the date hereof. The Company does
not have any subsidiaries of any kind, and does not have any direct or indirect
ownership, membership or beneficial interest in the outstanding shares or other
equity securities or other equity investment in any other Person.
SECTION 5.2. Qualification to Do Business. The Company is duly
qualified to do business as a foreign general partnership in every jurisdiction
in which the character of the properties owned or leased by it or the nature of
the business conducted by it makes such qualification necessary, except where
the failure to be so qualified would not have a Material Adverse Effect.
Schedule 5.2 sets forth all jurisdictions in which the Company is qualified to
do business.
SECTION 5.3. Authorization and Validity of Agreement. The Company
has all requisite power and authority (partnership or otherwise) to enter into
the Transaction Documents to which it is a party and to carry out its respective
obligations hereunder and thereunder. The
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execution and delivery of the Transaction Documents and the performance of the
Company's obligations hereunder and thereunder have been duly authorized by all
necessary action of the Company, and no other proceedings on the part of the
Company is necessary to authorize such execution, delivery and performance. The
Transaction Documents have been duly executed by the Company and constitute its
valid and binding obligations, enforceable it in accordance with their terms,
except as may be limited by applicable bankruptcy, insolvency, moratorium or
similar laws of general application relating to or affecting creditors' rights
generally and except for the limitations imposed by general principles of
equity.
SECTION 5.4. No Conflict or Violation. Except as set forth in
Schedule 5.4, the execution, delivery and performance by the Company of the
Transaction Documents does not and will not violate or conflict with any
provision of the general partnership agreement of the Company and do not and
will not violate any applicable provision of law, or any order, judgment or
decree of any court or other governmental or regulatory authority, nor violate
nor will result in a breach of or constitute (with due notice or lapse of time
or both) a default under any contract, lease, loan agreement, mortgage, security
agreement, trust indenture or other agreement or instrument to which the Company
is a party or by which it is bound or to which any of its properties or assets
is subject, nor will result in the creation or imposition of any Lien upon any
of the Purchased Property, nor will result in the cancellation, modification,
revocation or suspension of any of the licenses, franchises, Permits,
authorizations or approvals referred to in Sections 5.13 or 5.14 hereof.
SECTION 5.5. Consents and Approvals. Schedule 5.5 sets forth a true
and complete list of each consent, waiver, authorization or approval of any
governmental or regulatory authority, domestic or foreign, or of any other
Person, and each declaration to or filing or registration with any such
governmental or regulatory authority, that is required in connection with the
execution and delivery of the Transaction Documents by the Company or the
performance by the Company of its obligations hereunder or thereunder.
SECTION 5.6. Financial Statements. Except as set forth in Schedule
5.6, the payables balance sheets of the Company as of June 30, 1996 (the "June
Balance Sheet") and June 30, 1995 and the unaudited balance sheet of the Company
as of March 31, 1997 (the "March Balance Sheet") fairly present the financial
position of the Company as of the dates thereof, and the related statements of
income for the fiscal periods ended on such dates fairly present the results of
operations and changes in cash flows of the Company for the respective periods
indicated (collectively, the "Financial Statements"). Except as set forth in
Schedule 5.6, the Financial Statements, (a) were prepared in accordance with
GAAP, (b) present fairly the financial condition and results of operations of
the Business as of such date, (c) are complete, correct in all material respects
and in accordance with the books of account and records of the Company, (d) can
be legitimately reconciled with the financial statements and the financial
records maintained and the accounting methods applied by the Company for federal
income tax purposes and (e) reflects accurately all accrued costs and expenses
of the Company related to the Business.
SECTION 5.7. Absence of Certain Changes or Events.
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(a) Except as set forth in Schedule 5.7, since December 31, 1996,
there has not been:
(i) redeemed, retired, purchased or otherwise acquired, directly or
indirectly, any partnership interest in the Company, or declared, set
aside or paid any dividends or other distributions in respect of such
partnership interests;
(ii) any material adverse change in the business, operations,
properties, assets, condition (financial or other) or prospects of the
Business, or any event that has had or is reasonably likely to have a
Material Adverse Effect, and no factor or condition exists and no event
has occurred that would be likely to result in any such change; provided,
however, that the representations made with respect to the Company under
this subsection (ii) shall not apply to any events, facts or conditions
affecting the Company's industry as a whole, as to which the Sellers have
no knowledge;
(iii) any material loss, damage, destruction or other casualty to
the Purchased Property (whether or not insurance awards have been received
or guaranteed); or
(iv) any change in any method of accounting or accounting practice
of the Company.
(b) Since March 31, 1997, the Sellers have operated the Business in
the ordinary course of business and consistent with past practice and, except as
set forth in Schedule 5.7 hereto, have not:
(i) incurred any material obligation or liability (whether absolute,
accrued, contingent or otherwise) relating to the operations of the
Company except in the ordinary course of business consistent with past
practice;
(ii) failed to discharge or satisfy any Lien or pay or satisfy any
obligation or liability (whether absolute, accrued, contingent or
otherwise) arising from the operation of the Business, other than
liabilities being contested in good faith and for which adequate reserves
have been provided and Liens arising in the ordinary course of business
that do not, individually or in the aggregate, interfere materially with
the use, operation, enjoyment or marketability of any of the Purchased
Property;
(iii) mortgaged, pledged or subjected to any Lien any of the
Purchased Property, except for mechanics' liens and Liens for Taxes, in
each case, not yet due and payable and Liens arising in the ordinary
course of business that do not, individually or in the aggregate,
interfere materially with the use, operation, enjoyment or marketability
of any of the Purchased Property;
(iv) sold or transferred any of the assets of the Business material
to the Business or canceled any debts or claims or waived any rights
material to the Business relating to the operations of the Business,
except in the ordinary course of business consistent with past practice;
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(v) disposed of any patents, trademarks or copyrights or any patent,
trademark, or copyright applications used in the operations of the
Business;
(vi) defaulted on any material obligation relating to the operations
of the Business;
(vii) entered into any transaction material to the Business or
relating to the Business, except in the ordinary course of business
consistent with past practice;
(viii) written down the value of any Inventory or written off as
uncollectible any Accounts Receivable specifically relating to the
Business or any portion thereof not reflected in the March Balance Sheet;
(ix) granted any increase in the compensation or benefits of
employees of the Business other than increases in accordance with past
practice not exceeding 5% or entered into any employment or severance
agreement or arrangement with any of them;
(x) made any capital expenditure in excess of $20,000, or additions
to property, plant and equipment used in the operations of the Business
other than ordinary repairs and maintenance;
(xi) laid off any employees;
(xii) incurred any obligation or liability for the payment of
severance benefits; or
(xiii) entered into any agreement or made any commitment to do any
of the foregoing.
SECTION 5.8. Tax Matters. Except as set forth in Schedule 5.8, all
Tax Returns required to be filed before the Closing Date in respect of the
Company have been (or will have been by the Closing Date) filed, and the Company
has (or will have by the Closing Date) paid, accrued or otherwise adequately
reserved for the payment of all Taxes required to be paid in respect of the
periods covered by such returns and has (or will have by the Closing Date)
adequately reserved for the payment of all Taxes with respect to periods ended
on or before the Closing Date for which tax returns have not yet been filed. All
Taxes of the Company have been paid or adequately provided for and the Company
knows of no proposed additional Tax assessment against it. In addition, (i) the
Company has withheld and paid all Taxes required to be withheld with respect to
amounts paid or owing to any employee, creditor, independent contractor or other
third party, (ii) none of the Purchased Property is subject to any Tax Lien, and
(iii) none of the Purchased Property is "tax-exempt use property" within the
meaning of Section 168(h) of the Code. The Company has not entered into any Tax
sharing agreements or Tax indemnification agreements (other than as may be
entered into pursuant to this Agreement).
SECTION 5.9. Absence of Undisclosed Liabilities. Except as set forth
on Schedule 5.9, the Company does not have any indebtedness or liability,
absolute or contingent, known or unknown, which is not shown or provided for on
the March Balance Sheet other than liabilities as shall have been incurred or
accrued in the ordinary course of business since March 31, 1997. Except as shown
in the March Balance Sheet or on Schedule 5.9, the Company is not
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directly or indirectly liable upon or with respect to (by discount, repurchase
agreements or otherwise), or obliged in any other way to provide funds in
respect of, or to guarantee or assume, any debt, obligation or dividend of any
person, except endorsements in the ordinary course of business in connection
with the deposit, in banks or other financial institutions, of items for
collection.
SECTION 5.10. Real Property.
(a) Owned Real Property. The Company owns no real property.
(b) Lease Obligations. Schedule 5.10(b) contains a list of all
leases, licenses, permits, subleases, and occupancy agreements, together with
any amendments thereto (the "Real Property Leases"), with respect to (i) all
real property leased by the Company (whether as lessor or lessee and including
those in the names of nominees or other entities) and used or occupied in
connection with the Business, and (ii) all real property leased or subleased by
the Company, as lessor or sublessor, to third parties. Except as identified on
Schedule 5.10(b) true, complete and accurate copies of the Real Property Leases
have been delivered to the Buyer, and each of such Real Property Leases is in
full force and effect without modification or amendment from the form delivered.
No option has been exercised under any of such Real Property Leases, except
options whose exercise has been evidenced by a written document, a true,
complete and accurate copy of which has been delivered to the Buyer with the
corresponding Real Property Lease. Except as identified on Schedule 5.10(b), the
transfer of the Real Property Leases to the Buyer does not require the consent
or approval of the other party to the Real Property Lease. neither the Company
nor, to Sellers' knowledge, any of the other parties to the Real Property
Leases, is in material default under any of the Real Property Leases, and no
material amount due under the Real Property Leases remains unpaid, no material
controversy, claim, dispute or disagreement exists between the parties to the
Real Property Leases, and no event has occurred which with the passage of time
or giving of notice, or both would constitute a material default thereunder.
(c) Foreign Investments. None of the Sellers is a "foreign person"
within the meaning of Section 1445(f) of the Code.
(d) No Commissions. All brokerage commissions and other compensation
and fees payable by reason of the Real Property Leases, have been paid in full
or are reflected in the March Balance Sheet, except for such commissions and
other compensation related to options or extensions in the Real Property Leases
which are not yet exercised.
SECTION 5.11. Equipment and Machinery. Schedule 5.11 sets forth a
complete and correct list and brief description of each item of Equipment and
Machinery having an original purchase cost or aggregate lease cost exceeding
$5,000. Except as set forth in Schedule 5.11, the Company has good title, free
and clear of all title defects and objections, Liens (other than the Lien of
current property taxes and assessments not in default, if any) to the Equipment
and Machinery owned by it, except for sales and dispositions in the ordinary
course of business since such date. None of the title defects, objections or
Liens (if any) listed in Schedule 5.11 adversely affects the value of any of the
items of Equipment and Machinery or interferes with its use in the conduct of
the Business. Except as set forth in Schedule 5.11, the Company holds good and
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transferable leaseholds in all of the Equipment and Machinery leased by it, in
each case under valid and enforceable leases. The Company is not in default with
respect to any item of Equipment and Machinery purported to be leased by it, and
no event has occurred that constitutes or with due notice or lapse of time or
both may constitute a default under any lease thereof. The Equipment and
Machinery is sufficient and adequate to carry on the Business as presently
conducted and as proposed by the Company to be conducted, and all items thereof
are in good operating condition and repair.
SECTION 5.12. Intellectual Property.
(a) "Intellectual Property" shall mean all of the following that are
owned or used in the operation of the Business or in connection with the
Purchased Property: (i) trademarks and service marks (registered or
unregistered), trade dress, trade names and other names and slogans embodying
business or product goodwill or indications of origin, all applications or
registrations in any jurisdiction pertaining to the foregoing and all goodwill
associated therewith, including without limitation, the trade name MICROPATENT;
(ii) patents, patentable inventions, discoveries, improvements, ideas, know-how,
formula methodology, processes, technology, and computer programs, software,
databases (including source code, object code, development documentation,
programming tools, drawings, specifications and data) and all applications or
registrations in any jurisdiction pertaining to the foregoing, including all
reissues, continuations, divisions, continuations-in-art, renewals or extensions
thereof; (iii) trade secrets, including confidential and other non-public
information, and the right in any jurisdiction to limit the use or disclosure
thereof; (iv) copyrights in writings, designs, mask works or other works, and
registrations or applications for registration of copyrights in any
jurisdiction; (v) Internet Web sites, domain names and registrations or
applications for registration thereof; (vi) licenses, immunities, covenants not
to sue and the like relating to any of the foregoing; (vii) books and records
describing or used in connection with any of the foregoing; and (viii) claims or
causes of action arising out of or related to infringement or misappropriation
of any of the foregoing. Except as set forth in Schedule 5.12(a), the Company
owns all right, title and interest in the Intellectual Property. Schedule
5.12(a) sets forth a complete list of all applications and registrations for
Intellectual Property other than copyrights in the Company's name in all
jurisdictions.
(b) Copyrights. Schedule 5.12(b) sets forth a list of (i) each
agreement, contract or license under which the Company is or has been obligated
to pay fees or royalties to any Person in connection with the reproduction,
publication or distribution of any of the Products or otherwise in connection
with the Business and (ii) all United States and foreign copyright registrations
and applications for registration owned by the Company. Except as disclosed in
Schedule 5.12(b), the Company has secured from all relevant authors of text,
illustrations, photographs or other contributions to the Products and all
licensors or other Persons with any rights therein all copyrights in the
Products for the initial term of copyright and all extensions or renewals
thereof, in all territories throughout the world and all languages in all media
now known or hereafter devised.
(c) Licenses. Except as disclosed on Schedule 5.12(c), neither the
Company nor any Affiliate of it has licensed to any third party any right to use
or exploit any of the
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Intellectual Property or any of the Products in any jurisdiction. All rights in
any of the Intellectual Property or any of the Products granted to third parties
are or have been set forth in written and executed contracts that, to the
knowledge of the Sellers, have not been breached by said third parties. Schedule
5.12(c) sets forth each agreement, contract or license under which the Company
has licensed any rights in any of the Intellectual Property or the Products to
another Person (such agreements, contracts or licenses and those referred to in
clause (i) of Section 5.12(b) hereof, being referred to, collectively, as the
"Licenses").
(d) Claims. Except as set forth on Schedule 5.12(d), no claims are
pending, or, to the knowledge of the Sellers, threatened, against or by the
Company by or against any Person with respect to the ownership, validity,
enforceability or use of any Intellectual Property or otherwise challenging or
questioning the validity or effectiveness of any such Intellectual Property.
Except as set forth on Schedule 5.12(d), no claims are pending or, to the
knowledge of the Sellers, threatened by or against the Company in which any
Person alleges that activities or conduct of the Business infringes upon the
intellectual property rights of any Person or that any product packaging design
infringes upon a proprietary packaging design of any Person.
SECTION 5.13. Licenses, Permits and Governmental Approvals. Schedule
5.13 sets forth a true and complete list of all licenses, permits, franchises,
authorizations and approvals issued or granted to the Company with respect to
the Business by the Government, any state or local government, any foreign
national or local government, or any department, agency, board, commission,
bureau or instrumentality of any of the foregoing (the "Permits"), and all
pending applications therefor. Such list contains a summary description of each
such item and, where applicable, specifies the date issued, granted or applied
for, the expiration date and the current status thereof. Each Permit has been
duly obtained, is valid and in full force and effect, and is not subject to any
pending or threatened administrative or judicial proceeding to revoke, cancel or
declare such Permit invalid in any respect. The Permits are sufficient and
adequate in all respects to permit the continued lawful conduct of the Business
in the manner now conducted and as has been proposed by the Company to be
conducted, and none of the operations of the Business are being conducted in a
manner that violates any of the terms or conditions under which any Permit was
granted. Except as set forth in Schedule 5.13, no such Permit will in any way be
affected by, or terminate or lapse by reason of, the transactions contemplated
by the Transaction Documents.
SECTION 5.14. Compliance with Law; Licenses. Except as set forth in
Schedule 5.14, the operations of the Business have been conducted in accordance
with all applicable laws, regulations, orders and other requirements of all
courts and other governmental or regulatory authorities having jurisdiction over
the Company and its assets, properties and operations. Except as set forth in
Schedule 5.14, no Seller has received notice of any violation of any such law,
regulation, order or other legal requirement, and the Company is not in default
with respect to any order, writ, judgment, award, injunction or decree of any
federal, state or local court or governmental or regulatory authority or
arbitrator, domestic or foreign, applicable to the Business or any of its
assets, properties or operations. The Sellers do not have actual knowledge of
any proposed change in any such laws, rules or regulations (other than laws of
general applicability) that would materially and adversely affect the
transactions contemplated by the Transaction Documents or all or a material part
of the Business or the Purchased Property.
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SECTION 5.15. Litigation. Except as set forth in Schedule 5.15,
there are no claims, actions, suits, proceedings, labor disputes or
investigations pending or, to the best knowledge of the Sellers, threatened,
before any federal, state or local court or governmental or regulatory
authority, domestic or foreign, or before any arbitrator of any nature, brought
by or against the Company or any of its officers, directors, employees, agents
or Affiliates involving, affecting or relating to the Business, the Purchased
Property, the Plans or the transactions contemplated by the Transaction
Documents, nor is any basis known to the Sellers or any of their partners,
directors or officers for any such action, suit, proceeding or investigation.
Schedule 5.15 sets forth a list and a summary description of all such pending
actions, suits, proceedings, disputes or investigations. Neither the Business
nor the Purchased Property is subject to any order, writ, judgment, award,
injunction or decree of any national, state or local court or governmental or
regulatory authority or arbitrator, domestic or foreign, that affects or might
affect the Business or the Purchased Property, or that would or might interfere
with the transactions contemplated by the Transaction Documents.
SECTION 5.16. Contracts.
(a) Schedule 5.16 (a) sets forth a complete and correct list of all
Contracts which will be assumed by the Buyer as of the Closing (as in effect on
the date hereof), copies of which have been provided to the Buyer. Except as set
forth in Schedule 5.16(a), each Contract is valid, binding and enforceable
against the parties thereto in accordance with its terms, and in full force and
effect on the date hereof. The Company has performed all obligations required to
be performed by it to date under, and is not in default or delinquent in
performance, status or any other respect (claimed or actual) in connection with,
any Contract, and no event has occurred which, with due notice or lapse of time
or both, would constitute such a default. To the best knowledge of the Sellers,
except as set forth in Schedule 5.16(a), no other party to any Contract is in
default in respect thereof, and no event has occurred which, with due notice or
lapse of time or both, would constitute such a default. The Sellers have
delivered to the Buyer or its representatives true and complete originals or
copies of all the Contracts.
(b) Other than the Transaction Documents or as described on Schedule
5.16(b), the Company is not a party to any written or oral:
(i) contract for the employment or engagement as an independent
contractor of any Person on a full-time, part-time, consulting or other
basis;
(ii) contract pursuant to which the Company has advanced or loaned
funds or agreed to advance or loan funds, to any other Person;
(iii) contract or indenture relating to any indebtedness or the
mortgaging, pledging or otherwise placing a Lien on any of the Purchased
Property;
(iv) contract pursuant to which the Company is the lessor of, or
permit any third party to hold or operate, any real or personal property
of which the Company is a lessee;
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(v) contract prohibiting the Company from freely engaging in any
business anywhere in the world;
(vi) independent sales representative or distributorship agreement
with respect to the Business; or
(vii) contract with a customer or supplier, whether or not in
writing, relating to changes in prices or allowances.
SECTION 5.17. Receivables. Except as set forth in Schedule 5.17, all
notes and accounts receivable payable to or for the benefit of the Business
reflected on the March Balance Sheet, or acquired by the Company after the date
thereof and before the Closing Date have been collected or are (or will be)
collectible in amounts not less than the aggregate amount thereof (net of
reserves established, if any) carried (or to be carried) on the books of the
Company and are not subject to any counterclaims or set-offs.
SECTION 5.18. Inventory. The value of the net Inventory included on
the March Balance Sheet is carried at not more than cost and except as set forth
in Schedule 5.18, does not include any Obsolete Inventory or Surplus Inventory.
As used herein, "Obsolete Inventory" is Inventory which, at March 31, 1997, was
not usable or salable as first quality goods in the lawful and ordinary course
of business of the Business as now conducted and has been proposed by the
Sellers to be conducted because of legal restrictions, failure to meet
specifications, loss of market, damage, physical deterioration or for any other
cause in each case net of reserves, if any, provided therefor on the March
Balance Sheet; and "Surplus Inventory" is Inventory that, at March 31, 1997 is
(a) more than 12 months old and (b) the amount of Inventory that is in excess of
the amount of Inventory that would constitute 12 months of supply based upon the
prior year's historical rate of sales of the Business or is otherwise in excess
of the normal purchasing patterns of the Company.
SECTION 5.19. Employee Plans.
(a) Except for those plans set forth on Schedule 5.19(a) hereto (the
"Plans"), neither the Company nor any member of the Company's "controlled group"
(within the meaning of Section 4971(e)(2)(B) of the Code) that includes the
Company (hereinafter referred to as an "ERISA Affiliate") has ever maintained or
contributed to, or has any liability or contingent liability with respect to,
any "employee benefit plans," as that term is defined in Section 3(3) of ERISA,
or any other employee benefit arrangements, policies or payroll practices,
including, without limitation, severance pay, sick leave, vacation pay, salary
continuation for disability, retirement, deferred compensation, bonus, stock
purchase, hospitalization, medical insurance, life insurance and scholarship
programs, maintained by the Company or to which the Company contributed or is
obligated to contribute thereunder for current or former employees of the
Company. None of the Plans is a Multiemployer Plan. With respect to the Plans,
the requirements of ERISA and the Code, as applicable, have been fulfilled in
all material respects, including, without limitation, any legally mandated
continuation of health care coverage with respect to any "group health plan" (as
such term is defined in Section 607(1) of ERISA and Section 5001(b)(1) of the
Code) as may be required under Part 6 of Title I of ERISA and Section
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4980B of the Code, and no event has occurred nor does any condition exist which
would subject the Company to any penalty, excise tax, or liability. The Buyer
assumes no liability or obligation with respect to, and receives no right or
interest in, any of such Plans.
(b) Neither the Company nor any ERISA Affiliate of the Company has
ever (i) failed to satisfy the minimum funding requirements of Section 412 of
the Code and Section 302 of ERISA (or the quarterly contribution requirements of
Section 412(m) of the Code and Section 302(e) of ERISA), (ii) terminated an
"employee pension benefit plan," as defined in Section 3(2) of ERISA, subject to
Title IV of ERISA or (iii) contributed to any Multiemployer Plan or has effected
either a "complete withdrawal" or a "partial withdrawal," as those terms as
defined in Sections 4203 and 4205, respectively, of ERISA, from any such
Multiemployer Plan.
SECTION 5.20. Customers and Suppliers . Schedule 5.20 sets forth a
complete and correct list of (a) all customers whose purchases exceeded two
percent (2%) of the aggregate net sales of the Company from July 1, 1996 through
the Closing Date, and (b) the suppliers by dollar volume of the Business in
excess of five thousand dollars ($5,000) and the aggregate dollar volume of
purchases (broken down by principal categories) by the Business from such
suppliers for such periods. Except as set forth in Schedule 5.20, none of such
customers or suppliers has, or to the best knowledge of the Sellers, intends to
terminate or change significantly its relationship with the Business.
SECTION 5.21. Insurance. Schedule 5.21 lists the aggregate coverage
amount and type and generally applicable deductibles of all policies of title,
liability, fire, casualty, business interruption, workers' compensation and
other forms of insurance insuring the Business and the Purchased Property. The
Company has furnished a true, complete and accurate copy of all such policies
and bonds to the Buyer. Except as set forth in Schedule 5.21, all such policies
and bonds are in full force and effect, underwritten by reputable insurers and
sufficient for all applicable requirements of law. The Company shall maintain
the coverage under all policies and bonds listed in Schedule 5.21 in full force
and effect through the Closing Date. The Company is not in material default
under any provisions of any such policy of insurance nor has received notice of
cancellation of any such insurance. There is no claim pending under any of such
policies or bonds as to which coverage has been questioned, denied or disputed
by the underwriters of such policies or bonds.
SECTION 5.22. Transactions with Directors, Officers and Affiliates.
Except as set forth on Schedule 5.22 and not relating directly to such person's
employment with the Company in ordinary course of business, (a) since November
1, 1996, there have been no transactions between the Company and any director,
officer, employee, stockholder or other Affiliate of the Company and, since
January 1, 1995, there have been no transactions between the Company and any
director, officer, employee, stockholder or other Affiliate of the Company of an
amount in excess of sixty thousand dollars ($60,000), (b) during the past three
years none of the officers, or directors of the Company, or any spouse or
relative of any of such persons, has been a director or officer of, or has had
any direct or indirect interest in, any firm, corporation, association or
business enterprise which during such period has been a supplier, customer or
sales agent of the Company or has competed with or been engaged in any business
of the kind being
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conducted by the Business, and (c) no Affiliate of the Company owns or has any
rights in or to any of the assets, properties or rights used by the Business in
the ordinary course of its business.
SECTION 5.23. Labor Matters.
(a) Except as set forth in Schedule 5.23(a): (i) the Company is not
a party to any outstanding employment or consulting agreements or change in
control or other contracts with officers or employees of the Business that are
not terminable at will without payment of compensation beyond what is owed for
services performed through the date of termination, or that require the payment
of any bonus or commission; (ii) the Company is not a party to any agreement,
policy or practice that requires it to pay termination or severance pay to
salaried, non-exempt or hourly employees of the Business (other than as required
by law); (iii) the Company is not a party to any collective bargaining agreement
or other labor union contract applicable to employees of the Business nor,
within the last three years have there been any organizational activities with
respect to the employees of the Business not covered by a collective bargaining
agreement nor does the Company know of any pending or threatened activities or
proceedings of any labor union to organize any such employees. The Company has
furnished to the Buyer complete and correct copies of all such agreements and
all agreements set forth on Schedule 5.23 ("Employment and Labor Agreements").
Except as set forth on Schedule 5.23, the Company has not breached or otherwise
failed to comply with any provisions of any Employment or Labor Agreement, and
there are no grievances outstanding thereunder.
(b) Except as set forth in Schedule 5.23(b): (i) the Company is in
compliance with all applicable laws relating to employment and employment
practices, wages, hours, and terms and conditions of employment; (ii) there is
no unfair labor practice charge or complaint pending before the National Labor
Relations Board ("NLRB") or, to the Sellers' knowledge, threatened, against the
Company brought by or on behalf of any of the Company's current or former
employees or any current or former collective bargaining unit representing any
current or former employees of the Company; (iii) there is no labor strike,
slowdown, work stoppage or lockout, pending or, to the knowledge of the Sellers,
threatened against or affecting the Business, and the Company has not
experienced any strike, slow down or work stoppage, lockout or other collective
labor action; (iv) there is no representation claim or petition pending before
the NLRB or any similar foreign agency and no question concerning representation
exists relating to the employees of the Business; (v) there are no charges with
respect to or relating to the Company or the Business pending before the Equal
Employment Opportunity Commission or any state, local or foreign agency
responsible for the prevention of unlawful employment practices and (vi) no
Seller has received any notice from any federal, state, local or foreign agency
responsible for the enforcement of labor or employment laws of an intention to
conduct an investigation of the Company and no such investigation is in
progress.
SECTION 5.24. Environmental Matters. The Company has obtained,
maintained in effect and is in compliance with all licenses, permits and other
authorizations required under all applicable laws, regulations and other
requirements of governmental or regulatory authorities relating to pollution or
to health, safety or to the protection of the environment ("Environmental Laws")
and is and has in the past been in compliance with all Environmental Laws. The
Company has not performed or suffered any act which could give rise to, or has
otherwise incurred, liability
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to any Person (governmental or not) under the Comprehensive Environmental
Response, Compensation and Liability Act, 42 U.S.C. ss. 9601 et seq. or any
other Environmental Laws, nor have the Sellers received notice of any such
liability or any claim therefor or submitted notice pursuant to Section 103 of
such Act or any analogous state or local statute, rule or regulation to any
governmental agency with respect to any of its assets. No hazardous substance,
hazardous waste, contaminant, pollutant or toxic substance (as such terms are
defined in any applicable Environmental Law, "Hazardous Materials") has been
released, placed, dumped or otherwise come to be located on, at, beneath or near
any of the Purchased Property or any surface waters or groundwaters thereon or
thereunder. The Company does not own or operate, and has never owned or
operated, an underground storage tank containing a regulated substance, as such
term is defined in Subchapter IX of the Resource Conservation and Recovery Act,
42 U.S.C. ss. 6991 et seq., or a surface impoundment, lagoon, landfill, PCB
containing electrical equipment, or asbestos containing materials.
SECTION 5.25. Assets of the Company. Except as provided in Schedule
5.25, the Purchased Assets include all the tangible and intangible assets
necessary for the Buyer to operate the Business in the same manner operated by
the Company prior to the Closing Date.
SECTION 5.26. Accuracy of Information. None of the Sellers'
representations, warranties or statements contained in the Transaction Documents
(except with respect to Section 6 hereof to which this sentence does not apply),
or in the exhibits hereto, contains any untrue statement of a material fact or
omits to state any material fact necessary in order to make any of such
representations, warranties or statements in light of the circumstances under
which they were made not misleading. All information relating to the Business
that is known or would on reasonable inquiry be known to the Sellers and that
may be material to a purchaser for value of the Purchased Property has been
disclosed to the Buyer and any such information arising on or before the Closing
Date will forthwith be disclosed to the Buyer.
SECTION 5.27. Survival. Each of the representations and warranties
set forth in this Section 5 shall be deemed represented and made by the Sellers
at the Closing as if made at such time and shall survive the Closing,
notwithstanding any investigation on the part of the Buyer and shall terminate
eighteen (18) months after the Closing Date, provided, however, that
representations and warranties contained in Sections 5.8 and 5.24 hereof shall
survive the Closing and shall terminate two (2) months after the expiration of
the applicable statutes of limitation.
SECTION 6. REPRESENTATIONS AND WARRANTIES OF EACH SELLER. Each
Seller, except for the Company, severally hereby represents and warrants to the
Buyer as follows:
SECTION 6.1. Corporate Organization. With respect to each Seller
that is a corporation, such Seller is a corporation duly organized and validly
existing and in good standing under the laws of the jurisdiction of its
formation, and has all requisite corporate power and authority to own its
properties and assets and to conduct its business as now conducted.
SECTION 6.2. Authorization and Validity of Agreement. Such Seller
has all requisite power and authority to enter into the Transaction Documents to
which it is a party and
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to carry out its obligations hereunder and thereunder. With respect to Opus and
Dorinda only, the execution and delivery of the Transaction Documents and the
performance of its obligations hereunder and thereunder have been duly
authorized by all necessary corporate action by the Board of Directors of such
Seller, and no other corporate proceedings on the part of such Seller is
necessary to authorize such execution, delivery and performance. The Transaction
Documents have been duly executed by such Seller and constitute its valid and
binding obligations, enforceable it in accordance with their terms, except as
may be limited by applicable bankruptcy, insolvency, moratorium or similar laws
of general application relating to or affecting creditors' rights generally and
except for the limitations imposed by general principles of equity.
SECTION 6.3. No Conflict or Violation. The execution, delivery and
performance by such Seller of the Transaction Documents to which it is a party
do not and will not violate or conflict with any provision of the Certificate or
Articles of Incorporation or By-laws (or equivalent documents) of such Seller,
with respect to Opus and Dorinda, and do not and will not violate any provision
of law, or any order, judgment or decree of any court or other governmental or
regulatory authority, nor violate nor will result in a breach of or constitute
(with due notice or lapse of time or both) a default under any contract, lease,
loan agreement, mortgage, security agreement, trust indenture or other agreement
or instrument to which any of the Purchased Property is subject, nor will result
in the creation or imposition of any Lien upon any of the Purchased Property,
nor will result in the cancellation, modification, revocation or suspension of
any of the licenses, franchises, Permits, authorizations or approvals referred
to in Sections 5.13 or 5.14 hereof.
SECTION 6.4. Consents and Approvals. Except as set forth in Schedule
6.4 and as otherwise stated in Section 7.5 and the Schedule referenced therein,
no consent, waiver, authorization or approval of any governmental or regulatory
authority, domestic or foreign, or of any other Person, or any declaration to or
filing or registration with any such governmental or regulatory authority is
required in connection with the execution and delivery of the Transaction
Documents to which it is a party by such Seller or the performance by such
Seller of its obligations hereunder and thereunder.
SECTION 6.5. Accuracy of Information. None of the Sellers'
representations, warranties or statements contained in this Section 6 contains
any untrue statement of a material fact or omits to state any material fact
necessary in order to make any of such representations, warranties or statements
in light of the circumstances under which they were made not misleading.
SECTION 6.6. Survival. Each of the representations and warranties
set forth in this Section 6 shall be deemed represented and made by the Sellers
at the Closing as if made at such time and shall survive the Closing,
notwithstanding any investigation on the part of the Buyer, and shall terminate
eighteen (18) months after the Closing Date.
SECTION 7. REPRESENTATIONS AND WARRANTIES OF THE BUYER. The Buyer
hereby represents and warrants to the Sellers as follows:
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SECTION 7.1. Organization. The Buyer is a limited liability company
duly organized and, validly existing and in good standing under the laws of the
State of Delaware, and has all requisite power and authority to own its
properties and assets and to conduct its businesses as now conducted.
SECTION 7.2. Qualification to Do Business. The Buyer is duly
qualified to do business as a foreign limited liability company and is in good
standing in every jurisdiction in which the character of the properties owned or
leased by it or the nature of the business conducted by it makes such
qualification necessary, except where the failure to be so qualified would not
have a material adverse affect on the business, operations, assets, properties,
condition (financial or otherwise) or prospects of the Buyer.
SECTION 7.3. Authorization and Validity of Agreement. The Buyer has
all requisite power and authority to enter into the Transaction Documents and to
carry out its obligations hereunder and thereunder. The execution and delivery
of the Transaction Documents and the performance of the Buyer's obligations
hereunder and thereunder have been duly authorized by all necessary action by
the Buyer, and no other proceedings on the part of the Buyer are necessary to
authorize such execution, delivery and performance. The Transaction Documents
have been duly executed by the Buyer and constitute its valid and binding
obligations, enforceable against it in accordance with its terms, except as may
be limited by applicable bankruptcy, insolvency, moratorium or similar laws of
general application relating to or affecting creditors' rights generally and
except for the limitations imposed by general principles of equity.
SECTION 7.4. No Conflict or Violation. The execution, delivery and
performance by the Buyer of the Transaction Documents do not and will not
violate or conflict with any provision of the Certificate of Formation or
Limited Liability Company Agreement of the Buyer and do not and will not violate
any provision of law, or any order, judgment or decree of any court or other
governmental or regulatory authority.
SECTION 7.5. Approvals and Consents. Except (i) as set forth on
Schedule 7.5, (ii) as may be required to transfer any Permits, and (iii) such
consents, approvals and filings, the failure to obtain or make would not,
individually or in the aggregate, have a material adverse effect on the ability
of the Buyer to consummate the transactions contemplated hereby, the execution,
delivery and performance of the Transaction Documents on behalf of the Buyer do
not require the consent or approval of, or filing with, any government,
governmental body or agency or other entity or Person.
SECTION 7.6. Survival. Each of the representations and warranties
set forth in this Section 7 shall be deemed represented and made by the Buyer at
the Closing as if made at such time and shall survive the Closing,
notwithstanding any investigation on the part of the Sellers, and shall
terminate eighteen (18) months after the Closing Date.
SECTION 8. COVENANTS OF THE SELLERS.
The Sellers covenant as follows:
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SECTION 8.1. Intentionally Omitted.
SECTION 8.2. Consents and Approvals. The Sellers (i) shall, at their
cost and expense, use their best efforts to obtain all necessary consents,
waivers, authorizations and approvals of all governmental and regulatory
authorities, domestic and foreign, and of all other Persons required in
connection with the execution, delivery and performance by them of the
Transaction Documents, and (ii) shall diligently assist and cooperate with the
Buyer in preparing and filing all documents required to be submitted by the
Buyer to any governmental or regulatory authority, domestic or foreign, in
connection with such transactions and in obtaining any governmental consents,
waivers, authorizations or approvals which may be required to be obtained by the
Buyer in connection with such transactions (which assistance and cooperation
shall include, without limitation, timely furnishing to the Buyer all
information concerning the Sellers that counsel to the Buyer determines is
required to be included in such documents or would be helpful in obtaining any
such required consent, waiver, authorization or approval).
SECTION 8.3. Intentionally Omitted.
SECTION 8.4. Intentionally Omitted.
SECTION 8.5. Further Assurances. Upon the request of the Buyer at
any time after the Closing Date, the Sellers shall forthwith execute and deliver
such further instruments of assignment, transfer, conveyance, endorsement,
direction or authorization and other documents as the Buyer or its counsel may
request to perfect title of the Buyer and its successors and assigns to the
Purchased Property or otherwise to effectuate the purposes of the Transaction
Documents, provided, however that if such request occurs later than three (3)
months after the Closing, the Buyer shall pay any reasonable and necessary
out-of-pocket expenses of the Sellers actually incurred in connection with such
request.
SECTION 8.6. Best Efforts. Upon the terms and subject to the
conditions of this Agreement, the Sellers will use their best efforts to take,
or cause to be taken, all action, and to do, or cause to be done, all things
necessary, proper or advisable consistent with applicable law to consummate and
make effective in the most expeditious manner practicable the transactions
contemplated by the Transaction Documents.
SECTION 8.7. Covenant Not To Compete.
(a) The Sellers acknowledge that the agreements and covenants
contained in this Section 8.7 are essential to protect the value of the Business
being acquired by the Buyer. Therefore, the Sellers severally, but not jointly,
agree that for the period commencing on the Closing Date and ending on the fifth
(5th) anniversary of the Closing Date (such period is hereinafter referred to as
the "Restricted Period"), the Sellers shall not anywhere in the United States
participate or engage, directly or indirectly, for themselves or on behalf of or
in conjunction with any Person, whether as an employee, agent, officer,
consultant, director, shareholder, partner, joint venturer, investor or
otherwise, in any business that is in competition with the Business; provided,
however, that the foregoing shall not prohibit the ownership by the Sellers of
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equity securities of a public company in an amount not to exceed 5% of the
issued and outstanding shares of such company.
(b) The Sellers agree that a monetary remedy for a breach of the
agreement set forth in Section 8.7(a) hereof will be inadequate and
impracticable and further agree that such a breach would cause the Buyer
irreparable harm, and that the Buyer shall be entitled to temporary and
permanent injunctive relief without the necessity of proving actual damages. In
the event of such a breach, the Sellers agree that the Buyer shall be entitled
to such injunctive relief, including temporary restraining orders, preliminary
injunctions and permanent injunctions as a court of competent jurisdiction shall
determine.
(c) If any provision of this Section 8.7 is invalid in part, it
shall be curtailed, as to time, location or scope, to the minimum extent
required for its validity under applicable law and shall be binding and
enforceable with respect to the Sellers as so curtailed.
SECTION 8.8. Non-Solicitation of Employees. The Sellers agree, for
the Restricted Period, not to make, offer, solicit or induce to enter into, any
written or oral arrangement, agreement or understanding regarding employment or
retention as a consultant with any person who was, on the date hereof, a
full-time employee of the Company except for those persons set forth on Schedule
8.8, and in each case to cause its Affiliates not to engage in any such action,
without the written consent of the Buyer. Notwithstanding the foregoing
sentence, the Sellers may hire any person who was on the date hereof, a
full-time employee of the Company, if on the date of such hiring, such employee
was not an employee of the Buyer or any of its Affiliates at any time during the
six (6)-month period immediately preceding such date, and provided further that
the Sellers did not directly or indirectly solicit such employee prior to the
termination of such six (6)-month period.
SECTION 8.9. Notice of Breach. Through the Closing Date, the Sellers
shall promptly give the Buyer written notice with particularity upon having
knowledge of any matter that may constitute a breach of any representation,
warranty, agreement or covenant contained in this Agreement.
SECTION 8.10. Bulk Sales Compliance. The Buyer hereby waives
compliance by the Company with any applicable laws relating to bulk transfers in
connection with the transactions contemplated hereby. The Sellers shall
indemnify the Buyer with respect to any failure to comply with such bulk
transfer laws.
SECTION 8.11. Assignment of Contracts and Warranties. At the Closing
and effective as of the Closing Date, the Sellers shall assign to the Buyer all
their rights under the Contracts. Notwithstanding the foregoing, no Contract
shall be assigned contrary to law or the terms of such Contract and, with
respect to Contracts that cannot be assigned to the Buyer at the Closing Date,
the performance obligations of the Company thereunder shall, unless not
permitted by such Contract, be deemed to be subleased or subcontracted to the
Buyer until such Contract has been assigned. The Sellers shall (i) use their
best efforts to obtain all necessary consents, (ii) cooperate with the Buyer in
any arrangement designed to provide to the Buyer the benefits (including the
exercise of any Seller's rights) under any such Contracts, including enforcement
for
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the benefit of the Buyer (and at the Buyer's expense) of any and all rights
of the Company against a third party thereto arising out of the breach or
cancellation by such third party or otherwise, (iii) hold all monies paid
thereunder in trust for the account of the Buyer and (iv) remit all such money
without set-off of any kind whatsoever to the Buyer as promptly as possible.
SECTION 8.12. Change of Name. As soon as practicable after the
Closing Date, the Sellers shall take all action necessary to change the name of
the Company to a name that is not (and that is not confusingly similar to)
MicroPatent, it being the intent of the parties hereto that from and after the
Closing Date, the Buyer will have the sole and exclusive right as against the
Sellers and all other Persons to conduct business under such name and that the
Buyer may commence doing so at time of the Closing.
SECTION 8.13. Forwarding Inquiries. The Sellers shall, and shall
cause all of their Affiliates, to use reasonable efforts to promptly forward to
the Buyer any mail or telephone inquiries relating to the Purchased Assets and
the Business, which reasonable efforts shall include, at a minimum, referring
all customers orders received by the Company to Buyer by forwarding a copy of
the original purchase order or a "facsimile" purchase order that includes all
information received for billing and shipping a customer's order. All such
orders will be forwarded to a location designated by Buyer not less frequently
than weekly.
SECTION 8.14. Audits. Upon the request of the Buyer at any time
after the Closing Date, the Sellers shall and shall cause all of their
Affiliates to, diligently assist and cooperate with the Buyer and the
accountants, counsel and representatives of the Buyer, with any audit that the
Buyer may perform in connection with the Business; provided that any such audit
shall only include periods from and including the year ended June 30, 1994. The
Buyer shall pay out-of-pockets expenses of the Sellers reasonably incurred in
connection with any such audit. In connection with any such audit, the Sellers
shall also afford to the Buyer, and to the accountants, counsel and
representatives of the Buyer, full access during normal business hours to all
properties, books, contracts, commitments and records of the Company relating to
the Business.
SECTION 9. COVENANTS OF THE BUYER.
SECTION 9.1. Actions Before Closing Date. The Buyer shall not take
any action which shall cause it to be in breach of any representations,
warranties, covenants or agreements contained in this Agreement. The Buyer shall
use its best efforts to perform and satisfy all conditions to Closing to be
performed or satisfied by the Buyer under this Agreement as soon as possible,
but in no event later than the Closing Date.
SECTION 9.2. Consents and Approvals. The Buyer shall use its best
efforts to obtain all consents and approvals of third parties required to be
obtained by the Buyer to effect the transactions contemplated by the Transaction
Documents.
SECTION 9.3. Further Assurances. Upon the request of the Sellers at
any time after the Closing Date, the Buyer shall forthwith execute and deliver
such further documents as the Sellers or its counsel may request to effectuate
the purposes of the Transaction Documents. Upon the reasonable request of the
Sellers at any time after the Closing Date, in connection with
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any audit that the Sellers may be required to perform, the Buyer shall afford to
the Sellers, and to the accountants, counsel and representatives of the Sellers,
reasonable access during normal business hours to all properties, books,
contracts, commitments and records of the Buyer relating to the Business prior
to the Closing Date, provided, however, that if such request occurs later than
three (3) months after Closing, the Sellers shall pay any reasonable and
necessary out-of-pocket expenses of the Buyer actually incurred with such
request.
SECTION 9.4. Accuracy of Information. Prior to Closing, the Buyer
shall in good faith disclose to the Sellers any information actually known to it
which would render any representations of the Sellers untrue in any material
respect and shall provide the Sellers the opportunity to deliver corrected
disclosure schedules to the Buyer. Within thirty (30) days of the Closing, Buyer
shall review the books and records of the Company. If within such thirty
(30)-day period, the Buyer becomes aware of any information which would render
any representations of the Sellers untrue in any material respect, the Buyer
shall provide notice of the same to the Company within fifteen (15) days of its
discovery thereof. The covenants contained in this Section 9.4 shall survive the
Closing for a period of sixty (60) days.
SECTION 9.5. Forwarding Inquiries. The Buyer shall, and shall cause
all of its Affiliates, to use reasonable efforts to promptly forward to the
Company any mail or telephone inquiries relating to Neato, which reasonable
efforts shall include, at a minimum, referring all customers orders received by
the Buyer to the Company by forwarding a copy of the original purchase order or
a "facsimile" purchase order that includes all information received for billing
and shipping a customer's order. All such orders will be forwarded to a location
designated by the Company not less frequently than weekly.
SECTION 10. EMPLOYEES AND EMPLOYEE PLANS.
SECTION 10.1. Offer of Employment. Schedule 10.1 hereto sets forth a
true and complete list of all individuals who are full-time employees of the
Business, except for Peter Tracy, as of the date hereof ("Listed Employees").
Listed Employees shall not include any employees of the Business who are also
employed by Neato. The Buyer shall offer to hire, effective as of the Closing
Date, each Listed Employee who continues to be actively employed by the Company
on the employment offer date. The employees who accept such offers of employment
shall be referred to herein as "Transferred Employees,." provided, however that
with respect to the Company's U.K. employees, the transactions contemplated
hereunder are acknowledged by the parties to be a "transfer of an undertaking"
under U.K. law and that all of the individuals who are "wholly or mainly"
employed by the Company in the United Kingdom shall automatically become
employees of the Buyer from the first moment of the transfer contemplated by
this Agreement under the same terms and conditions they previously held as
employees of the Company except in relation to "occupational pension schemes."
SECTION 10.2. Employee Benefits. Transferred Employees shall
participate in the employee benefit plans, programs, policies and arrangements
of the Buyer in accordance with the terms thereof generally applicable to
employees of the Buyer, which plans, programs, policies and arrangements shall
be at least as favorable to the Transferred Employees as those of the Company's
in existence on the date hereof.
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SECTION 10.3. Liability. Except to the extent of Buyer obligations
to the contrary under one or more written employment agreements which are
assigned to and assumed by the Buyer pursuant to Section 2.4(a)(iii) or accrued
on the Company's books and records as of the Closing pursuant to Section
2.4(a)(i), neither the Buyer nor its Affiliates shall assume or have any direct
or indirect obligation or liability of any nature, whether matured or unmatured,
accrued or contingent, due or to become due or otherwise, to any Transferred
Employee or other present or former employee of any Sellers or any Affiliates
thereof, or to any dependent, survivor or beneficiary thereof, arising out of or
in relation to such person's employment with any Seller or any Affiliates
thereof or the termination of such employment prior to the Closing Date.
SECTION 10.4. Rights. Nothing herein expressed or implied shall
confer upon any Transferred Employee or other employee or former employee of the
Sellers or legal representatives thereof, any rights or remedies, including,
without limitation, right to employment or continued employment for any
specified period, of any nature or kind whatsoever or any right to specific
terms or conditions of employment (including rate of pay, fringe benefits or
position) under or by reason of this Agreement.
SECTION 11. TAXES.
The parties hereto hereby covenant and agree as follows:
SECTION 11.1. Allocation of Purchase Price and Purchase Price
Allocation Forms. Following the Closing, the Buyer and the Sellers will attempt
in good faith to complete the allocation of the Purchase Price that is
satisfactory to all parties in accordance with Schedule 11.1 attached hereto.
The parties agree to comply with Section 1060 of the Code and the Treasury
regulations promulgated thereunder with respect to the allocation of the
Purchase Price, and if the parties reach agreement on the allocation of Purchase
Price, to jointly file the statements and forms (including form 8594, if
available) required thereby. If agreement cannot be reached, the parties shall
separately prepare and file such statements or forms in accordance with Schedule
11.1 and each party shall provide the other party with a copy of such statement
or form as filed.
SECTION 11.2. Indemnification Payments. Any indemnification payments
made pursuant to Section 12.1 shall constitute a purchase price adjustment for
Tax purposes.
SECTION 11.3. Proration of Real and Personal Property Taxes. Real
and personal property Taxes, assessments on the Purchased Property, utility
charges and rental payments, except to the extent accrued on the Company's books
and records as of the Closing and assumed by the Buyer pursuant to Section
2.4(a)(i), shall be prorated between the Buyer and the Sellers as of the Closing
Date. All such prorations shall be allocated so that items relating to time
periods ending on or prior to the Closing Date shall be allocated to the Sellers
and items relating to time periods beginning after the Closing Date shall be
allocated to the Buyer, provided, however, that the parties shall allocate any
real property Tax in accordance with Section 164(d) of the Code. The amount of
all such prorations shall be settled and paid within thirty (30) days of the
Closing Date.
SECTION 12. INDEMNIFICATION.
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SECTION 12.1. Indemnification by the Sellers. Notwithstanding the
Closing or the delivery of the Purchased Property and regardless of any
investigation at any time made by or on behalf of the Buyer or of any knowledge
or information that the Buyer may have, the Sellers shall, jointly and
severally, indemnify and fully defend, save and hold the Buyer, any Affiliate of
the Buyer and its directors, officers and employees (the "Buyer Indemnitees"),
harmless if any Buyer Indemnitee shall at any time or from time to time suffer
any damage, liability, loss, cost, expense (including all reasonable attorneys'
fees and reasonable expenses of investigation by third-party agents incurred by
the Buyer Indemnitees in any action or proceeding between the Sellers and the
Buyer Indemnitees or between the Buyer Indemnitees and any third party),
deficiency, interest, penalty, impositions, assessments or fines (collectively,
"Buyer Losses") arising out of or resulting from, or shall pay or become obliged
to pay any sum on account of, any and all the Sellers' Events of Breach. As used
herein, "Sellers' Event of Breach" shall be and mean any one or more of the
following:
(a) any untruth or inaccuracy in any representation of any Seller or
the breach of any warranty of any Seller contained in any Transaction Documents;
(b) any failure of the Sellers duly to perform or observe any term,
provision, covenant or agreement contained in any Transaction Document on the
part of any Seller to be performed or observed;
(c) any claim or cause of action by any party against any Buyer
Indemnitee, with respect to the Excluded Liabilities or the Retained Assets;
(d) the filing, application and prosecution of a registration for
the mark "MICROPATENT" for goods and services in International Classes 9, 35 and
42, on the Principal Register of the United States Patent and Trademark Office
(the "PTO"), including any expenses (including attorneys' fees and costs)
incurred in defending any oppositions to such trademark application or in
negotiating settlements to such oppositions;
(e) defense of that certain application Serial No. 74/617,387 to
register the mark "PATENTWEB" in International Class 9 on the Principal Register
of the PTO from opposition by Derwent Inc. or the negotiation of any settlement
to such opposition, including any attorneys' fees and costs incurred in
connection therewith; provided, that in the event that the Company defends any
other marks from opposition by Derwent Inc., the Sellers shall be liable
hereunder only with respect to expenses relating to the "PATENTWEB" mark, as
allocated in good faith by the Buyer;
(f) any excess of the Neato Receivable (determined in accordance
with past practice of the Company) over the Neato Amount provided, however, that
the aggregate liability under this subsection (f) shall in no event exceed One
Hundred Thousand Dollars ($100,000);
(g) any liability, claim or cause of action arising out of or in
connection with actions or omissions or alleged actions or omissions of the
Company prior to the Closing with respect to any employee of the Company in the
U.K. other than accrued vacation recorded on the books and records of the
Company as of the Closing; and
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(h) the failure of the Sellers to obtain the consents of Innovator
Corporation or the European Patent Office required in connecton with the
execution, delivery and performance by them of the Transaction Documents;
provided, however, that the Sellers shall have no obligation to make any payment
under Section 12.1(a) or (b) hereof with respect to a Sellers' Event of Breach
unless the aggregate amount to which all Buyer Indemnitees are entitled by
reason of all such claims exceeds Seventy Five Thousand Dollars ($75,000) after
credit for any insurance proceeds actually received by the Buyer and
seventy-five percent (75%) of the direct tax benefits, if any, actually received
by the Buyer by reason of or as a result thereof ("Reimbursed Claims"),
(provided, however, that Buyer shall not be required to file any insurance
claims), it being understood that once such amount is exceeded, the aggregate of
all such claims net of Reimbursed Claims shall be payable by the Sellers on
demand by the Buyer. Notwithstanding the foregoing, the Sellers shall have no
liability under this Section 12.1 (a), (b) or (f) to the extent, and only by
such extent, that the aggregate of all such Buyer Losses exceeds an amount equal
to the Purchase Price plus the value of the Assumed Liabilities as of the
Closing Date.
SECTION 12.2. Procedures for Indemnification by the Sellers. If with
respect to a third party a Sellers' Event of Breach occurs or is alleged and a
Buyer Indemnitee asserts that the Sellers have become obligated to such Buyer
Indemnitee pursuant to Section 12.1 hereof, or if any suit, action,
investigation, claim or proceeding (a "Proceeding") is begun, made or instituted
by a third party as a result of which the Sellers may become obligated to a
Buyer Indemnitee hereunder, such Buyer Indemnitee shall give prompt written
notice to the Sellers; provided, however, that a failure to give such prompt
notice to the Sellers will not affect any right to indemnification pursuant to
this Agreement except to the extent, if any, and only by such extent, that the
Sellers are materially prejudiced by such failure to give prompt notice. The
Sellers agree to defend, contest or otherwise protect the Buyer Indemnitee
against any Proceeding at their sole cost and expense. The Buyer Indemnitee
shall have the right, but not the obligation, to participate at its own expense
in the defense thereof by counsel of the Buyer Indemnitee's choice and shall in
any event cooperate with and assist the Sellers to the extent reasonably
possible. If the Sellers fail timely to defend, contest or otherwise protect
against such Proceeding, the Buyer Indemnitee shall have the right to do so,
including, without limitation, the right to make any compromise or settlement
thereof, and the Buyer Indemnitee shall be entitled to recover the entire cost
thereof from the Sellers, including, without limitation, reasonable attorneys'
fees, disbursements and amounts paid as the result of such Proceeding, and the
Sellers shall be bound by any determination made in such Proceeding or any
compromise or settlement effected by the Buyer. If the Sellers assume the
defense of any Proceeding, (a) it will be conclusively established for purposes
of this Agreement that the claims made in that Proceeding are within the scope
of and subject to indemnification, (b) no compromise or settlement of such
claims may be effected by the Sellers without the Buyer Indemnitee's consent
unless (i) there is no finding or admission of any violation of federal, state,
local, municipal, foreign, international, multinational or other administrative
order, law, ordinance, principal of common law, regulation, statute or treaty or
any violation of the rights of any Person and no effect on any other claims that
may be made against the Buyer Indemnitee and (ii) the sole relief provided is
monetary damages that are paid in full by the Sellers; and (c) the Buyer
Indemnitee will have no liability with respect to any compromise or settlement
of such claims effected without its consent.
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SECTION 12.3. Joint and Several Liability. The Sellers shall have
joint and several liability for one hundred percent (100%) of all Buyer Losses
subject to indemnification under this Section 12; provided that the liability
for any Buyer Loss resulting from a breach of the representations in Section 6
or the covenants in Sections 8.7 and 8.8 hereof shall be several and not joint
with respect to the breaching Seller.
SECTION 12.4. Indemnification by the Buyer. Notwithstanding the
Closing or the delivery of the Purchased Property, the Buyer shall indemnify and
agree to fully defend, save and hold the Sellers, any Affiliate of the Sellers,
and their directors, officers and employees (the "Seller Indemnitees"), harmless
if any Seller Indemnitee shall at any time or from time to time suffer any
damage, liability, loss, cost, expense (including all reasonable attorneys' fees
and reasonable expenses of investigation by third-party agents incurred by the
Seller Indemnitees in any action or proceeding between the Buyer and the Seller
Indemnitees or between the Seller Indemnitees and any third party, deficiency,
interest, penalty, impositions, assessments or fines (collectively, "Seller
Losses") arising out of or resulting from, or shall pay or become obligated to
pay any sum on account of, any and all the Buyer Events of Breach. As used
herein, "Buyer Events of Breach" shall be and mean any one or more of the
following:
(a) any untruth or inaccuracy in any representation of the Buyer or
the breach of any warranty of the Buyer contained in any Transaction Document;
(b) any failure of the Buyer duly to perform or observe any term,
provision, covenant, agreement or condition contained in any Transaction
Document on the part of the Buyer to be performed or observed; and
(c) any claim or cause of action by any party arising after the
Closing Date against any Seller Indemnitee with respect to the Assumed
Liabilities;
provided, however, that the Buyer shall have no obligation to make any payment
under Section 12.3(a) or (b) hereof with respect to a Buyer Events of Breach
unless the aggregate amount to which all Seller Indemnitees are entitled by
reason of all such claims exceeds Seventy Five Thousand Dollars ($75,000) after
credit for any Reimbursed Claims (provided, however, that Sellers shall not be
required to file any insurance claims), it being understood that once such
amount is exceeded, the aggregate of all such claims net of Reimbursed Claims
shall be payable by the Buyer on demand by the Sellers. Notwithstanding the
foregoing, the Buyer shall have no liability under this Section 12.4 (a) and (b)
to the extent, and only by such extent, that the aggregate of all such Seller
Losses exceeds an amount equal to the Purchase Price plus the value of the
Assumed Liabilities as of the Closing Date.
SECTION 12.5. Procedures for Indemnification by the Buyer. If with
respect to a third party a Buyer Event of Breach occurs or is alleged and a
Seller Indemnitee asserts that the Buyer has become obligated to such Seller
Indemnitee pursuant to Section 12.4 hereof, or if any Proceeding is begun, made
or instituted by a third party as a result of which the Buyer may become
obligated to a Seller Indemnitee hereunder, such Seller Indemnitee shall give
prompt written notice to the Buyer; provided, however, that a failure to give
such prompt notice to the Buyer will not affect any right to indemnification
pursuant to this Agreement except to the extent,
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if any, and only by such extent, that the Buyer is materially prejudiced by such
failure to give prompt notice. The Buyer agrees to defend, contest or otherwise
protect the Seller Indemnitee against any Proceeding at its sole cost and
expense. The Seller Indemnitee shall have the right, but not the obligation, to
participate at its own expense in the defense thereof by counsel of the Seller
Indemnitee's choice and shall in any event cooperate with and assist the Buyer
to the extent reasonably possible. If the Buyer fails timely to defend, contest
or otherwise protect against such Proceeding, the Seller Indemnitee shall have
the right to do so, including, without limitation, the right to make any
compromise or settlement thereof, and the Seller Indemnitee shall be entitled to
recover the entire cost thereof from the Buyer, including, without limitation,
reasonable attorneys' fees, disbursements and amounts paid as the result of such
Proceeding, and the Buyer shall be bound by any determination made in such
Proceeding or any compromise or settlement effected by the Sellers. If the Buyer
assumes the defense of any Proceeding, (a) it will be conclusively established
for purposes of this Agreement that the claims made in that Proceeding are
within the scope of and subject to indemnification, (b) no compromise or
settlement of such claims may be effected by the Buyer without the Seller
Indemnitee's consent unless (i) there is no finding or admission of any
violation of federal, state, local, municipal, foreign, international,
multinational or other administrative order, law, ordinance, principal of common
law, regulation, statute or treaty or any violation of the rights of any Person
and no effect on any other claims that may be made against the Seller Indemnitee
and (ii) the sole relief provided is monetary damages that are paid in full by
the Buyer; and (c) the Seller Indemnitee will have no liability with respect to
any compromise or settlement of such claims effected without its consent.
SECTION 12.6. Successors and Assigns. All of the rights and
obligations of the Sellers and the Buyer pursuant to this Section 12 shall
survive any sale, assignment or other transfer by the Buyer of title to or
interest in any of the Purchased Property or any part thereof and shall apply to
and bind each and every successor and assign of the Buyer to any of the
Purchased Property.
SECTION 13. CONDITIONS TO OBLIGATIONS OF THE SELLERS. The
obligations of the Sellers to consummate the transactions contemplated by this
Agreement are subject to the fulfillment, at or before the Closing Date, of the
following conditions, any one or more of which may be waived by the Sellers in
their sole discretion:
SECTION 13.1. Intentionally Omitted.
SECTION 13.2. Intentionally Omitted.
SECTION 13.3. Consents and Approvals. All consents, waivers,
authorizations and approvals of any governmental or regulatory authority,
domestic or foreign, and of any other Person, required in connection with the
execution, delivery and performance of the Transaction Documents shall have been
duly obtained and shall be in full force and effect on the Closing Date.
SECTION 13.4. No Violation of Orders. No preliminary or permanent
injunction or other order issued by any court or other governmental or
regulatory authority, domestic or foreign, nor any statute, rule, regulation,
decree or executive order promulgated or enacted by any government or
governmental or regulatory authority, domestic or foreign, that declares any of
the
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Transaction Documents invalid or unenforceable in any respect or which prevents
the consummation of the transactions contemplated hereby shall be in effect.
SECTION 13.5. Escrow Agreement. The Buyer shall have executed and
delivered to the Sellers the Escrow Agreement.
SECTION 13.6. Consulting Agreement. The Buyer shall have executed
and delivered to Peter Tracy dated as of the Closing Date a consulting agreement
(the "Consulting Agreement"), substantially in the form of Exhibit B hereto.
SECTION 13.7. Buyer Closing Documents. The Buyer shall have
delivered to the Sellers the following documents:
(a) all instruments that are necessary or desirable to effect the
assumption by Buyer of the Assumed Liabilities;
(b) a copy of the resolutions duly adopted by the Buyer authorizing
the execution, delivery and performance of the Transaction Documents and the
consummation of the transactions contemplated thereby, as in effect as of the
Closing Date, certified by an officer of the Buyer;
(c) a certification (dated not less than 5 Business Days prior to
the Closing Date) of the Secretary of State of the jurisdiction of its formation
as to the good standing of the Buyer in such jurisdiction; and
(d) such other documents relating to the transactions contemplated
by the Transaction Documents to be consummated at the Closing as the Sellers
shall reasonably request.
All proceedings or actions taken or required to be taken by the Buyer in
connection with the transactions contemplated by Transaction Documents, and all
documents incident thereto, must be reasonably satisfactory in form and
substance to the Sellers and their legal counsel.
SECTION 13.8. Opinion of Counsel. The Sellers shall have received a
favorable opinion, dated as of the Closing Date, from Willkie Farr & Gallagher,
counsel to the Buyer, substantially in the form of Exhibit D hereto.
SECTION 14. CONDITIONS TO OBLIGATIONS OF THE BUYER. The obligations
of the Buyer to consummate the transactions contemplated by this Agreement are
subject to the fulfillment, at or before the Closing Date, of the following
conditions, any one or more of which may be waived by the Buyer in its sole
discretion:
SECTION 14.1. Intentionally Omitted.
SECTION 14.2. Intentionally Omitted.
SECTION 14.3. Consents and Approvals. All consents, waivers,
authorizations and approvals of any governmental or regulatory authority,
domestic or foreign, required in
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connection with the execution, delivery and performance of the Transaction
Documents shall have been duly obtained and shall be in full force and effect on
the Closing Date.
SECTION 14.4. No Violation of Orders. No preliminary or permanent
injunction or other order issued by any court or other governmental or
regulatory authority, domestic or foreign, nor any statute, rule, regulation,
decree or executive order promulgated or enacted by any government or
governmental or regulatory authority, domestic or foreign, that declares any of
the Transaction Documents invalid or unenforceable in any respect or which
prevents the consummation of the transactions contemplated hereby shall be in
effect.
SECTION 14.5. No Material Adverse Change. During the period from
March 31, 1997 to the Closing Date, there shall not have been any material
adverse change in the assets, properties, business, operations, prospects, net
income or financial condition of the Business.
SECTION 14.6. Opinion of Counsel. The Buyer shall have received a
favorable opinion, dated as of the Closing Date, from Siegal, O'Connor, Schiff &
Zangari, P.C., counsel to the Sellers, substantially in the form of Exhibit C
hereto.
SECTION 14.7. Escrow Agreement. Each of the Sellers shall have
executed and delivered to the Buyer the Escrow Agreement.
SECTION 14.8. Consulting Agreement. Peter Tracy shall have executed
and delivered to the Buyer the Consulting Agreement.
SECTION 14.9. State Taxes. The Buyer shall have received any and all
clearance certificates or similar documents that may be required by any state
Tax authority in order to relieve the Buyer of any obligation to withhold any
portion of the Purchase Price. The Sellers shall provide reasonable assistance
to the Buyer in obtaining appropriate certificates or documents and shall
provide to the Buyer a list of the states in which the Business is conducted.
SECTION 14.10. FIRPTA Withholding Certificate. The Buyer shall have
received a certificate from each of the Sellers substantially in the form of
Exhibit E hereto.
SECTION 14.11. Seller Closing Documents. The Sellers shall have
delivered to the Buyer the following documents:
(a) a copy of the resolutions duly adopted by the Company's partners
and each of the Partner's Board of Directors, authorizing such of the execution,
delivery and performance of the Transaction Documents to which it is a party and
the consummation of the transactions contemplated thereby, as in effect as of
the Closing Date, certified by an officer or partner of each such Seller;
(b) with respect to Opus and Dorinda, a certificate (dated not less
than 5 Business Days prior to the Closing Date) of the Secretary of State of the
jurisdiction of its formation as to the good standing of such Partner in such
jurisdiction;
(c) the Files and Records forming a part of the Purchased Property;
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(d) such bills of sale, special warranty deeds, assignments of
contracts, assignments of leases and all other instruments of conveyance that
are necessary to effect the purchase and sale of the Purchased Property;
(e) copies of the consents, waivers and approvals specified on
Schedule 5.5, except those the failure of which to be obtained will not have a
material adverse effect on the Business, provided that all consents, waivers and
approvals specified in Schedule 5.5 shall remain subject to Section 8.2;
(f) such other documents relating to the transactions contemplated
by the Transaction Documents as the Buyer reasonably requests; and
(g) physical possession and control of the Purchased Property.
SECTION 14.12. Legal Matters. All certificates, instruments,
opinions and other documents required to be executed or delivered by or on
behalf of the Sellers under the provisions of the Transaction Documents, and all
other actions and proceedings required to be taken by or on behalf of the
Sellers in furtherance of the transactions contemplated hereby and thereby,
shall be reasonably satisfactory in form and substance to counsel for the Buyer.
SECTION 14.13. Completion of Due Diligence. The Buyer shall have
completed its due diligence examination of the Company and the results of such
examination shall be satisfactory to the Buyer.
SECTION 15. Intentionally Omitted.
SECTION 16. MISCELLANEOUS.
SECTION 16.1. Successors and Assigns. Except as otherwise provided
in this Agreement, no party hereto shall assign this Agreement or any rights or
obligations hereunder without the prior written consent of the other parties
hereto and any such attempted assignment without such prior written consent
shall be void and of no force and effect, provided, that the Buyer may assign
its rights hereunder to an Affiliate and to any party providing financing in
connection with the transactions contemplated hereby, provided further, that no
such assignment shall reduce or otherwise vitiate any of the obligations of the
Sellers hereunder. This Agreement shall inure to the benefit of and shall be
binding upon the successors and permitted assigns of the parties hereto.
SECTION 16.2. Governing Law; Jurisdiction. This Agreement shall be
construed, performed and enforced in accordance with, and governed by, the laws
of the State of New York, without giving effect to the principles of conflicts
of laws thereof. The parties hereto irrevocably elect as the sole judicial forum
for the adjudication of any matters arising under or in connection with this
Agreement, and consent to the jurisdiction of, the courts of the State of New
York located in White Plains, New York.
SECTION 16.3. Expenses. Except as otherwise provided herein, each of
the parties hereto shall pay its own expenses in connection with this Agreement
and the transactions
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contemplated hereby, including, without limitation, any legal and accounting
fees, whether or not the transactions contemplated hereby are consummated. The
Sellers shall pay all state and local sales, use, transfer, transfer gains,
excise, value-added or other similar taxes, and all recording and filing fees
that may be imposed by reason of the sale, transfer, assignment and delivery of
the Purchased Property ("Transfer Taxes") and shall prepare and file any related
Tax Returns required to be filed in connection with the payment of such Transfer
Taxes on a timely basis..
SECTION 16.4. Broker's and Finder's Fees. Each of the parties
represents and warrants that it has dealt with no broker or finder in connection
with any of the transactions contemplated by the Transaction Documents and,
insofar as it knows, no other broker or other person, except the Chief Financial
Officer of the Company, is entitled to any commission or finder's fee in
connection with any of these transactions.
SECTION 16.5. Severability. In the event that any part of this
Agreement is declared by any court or other judicial or administrative body to
be null, void or unenforceable, said provision shall survive to the extent it is
not so declared, and all of the other provisions of this Agreement shall remain
in full force and effect.
SECTION 16.6. Notices. All notices, requests, demands and other
communications under this Agreement shall be in writing and shall be deemed to
have been duly given (i) on the date of service if served personally on the
party to whom notice is to be given, (ii) on the day of transmission if sent via
facsimile transmission to the facsimile number given below, and telephonic
confirmation of receipt is obtained promptly after completion of transmission,
(iii) on the day after delivery to Federal Express or similar overnight courier
or the Express Mail service maintained by the U.S. Postal Service or (iv) on the
fifth day after mailing, if mailed to the party to whom notice is to be given,
by first class mail, registered or certified, postage prepaid and properly
addressed, to the party as follows:
If to the Sellers:
MicroPatent
c/o Neato, LLC
250 Dodge Avenue
East Haven, Connecticut 06512
Attention: Peter Tracy
Telecopy: (203) 453-5334
and
Dorinda Developments, Inc.
1101 King Street
Alexandria, Virginia 22314
Attention: Sir Charles Chadwyck-Healey
Telecopy: (703) 683-7589
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Copy to:
Siegel O'Connor Schiff & Zangari, P.C.
171 Orange Street
New Haven, Connecticut 06510
Attention: Mario Zangari, Esq.
Telecopy: (203) 782-2766
Rubin Baum Levin Constant & Friedman
30 Rockefeller Plaza
New York, New York 10112
Attention: Burton R. Rubin, Esq.
Telecopy: (212) 481-1638
If to the Buyer:
MicroPatent LLC
c/o Information Ventures LLC.
263 Tresser Boulevard, 6th Floor
Stamford, Connecticut 06901
Attention: Mason Slaine
Telecopy: (203) 327-9653
Copy to:
Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, New York 10022
Attn: Steven J. Gartner, Esq.
Telecopy: (212) 821-8111
Any party may change its address for the purpose of this Section by giving the
other party written notice of its new address in the manner set forth above.
SECTION 16.7. Amendments; Waivers. This Agreement may be amended or
modified, and any of the terms, covenants, representations, warranties or
conditions hereof may be waived, only by a written instrument executed by the
parties hereto, or in the case of a waiver, by the party waiving compliance. Any
waiver by any party of any condition, or of the breach of any provision, term,
covenant, representation or warranty contained in this Agreement, in any one or
more instances, shall not be deemed to be nor construed as further or continuing
waiver of any such condition, or of the breach of any other provision, term,
covenant, representation or warranty of this Agreement.
SECTION 16.8. Public Announcements. The parties agree that after the
signing of this Agreement, neither party shall make any press release or public
announcement concerning
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the transactions contemplated by the Transaction Documents without the prior
written approval of the other parties unless a press release or public amendment
is required by law. If any such announcement or other disclosure is required by
law, the disclosing party agrees to give the nondisclosing parties prior notice
and an opportunity to comment on the proposed disclosure.
SECTION 16.9. Entire Agreement. The Transaction Documents contain
the entire understanding between the parties hereto with respect to the
transactions contemplated thereby and supersedes and replaces all prior and
contemporaneous agreements and understandings, oral or written, with regard to
such transactions. All schedules hereto and any documents and instruments
delivered pursuant to any provision hereof are expressly made a part of this
Agreement as fully as though completely set forth herein.
SECTION 16.10. Parties in Interest. Nothing in this Agreement is
intended to confer any rights or remedies under or by reason of this Agreement
on any persons other than the Sellers, and the Buyer and their respective
successors and permitted assigns. Nothing in this Agreement is intended to
relieve or discharge the obligations or liability of any third persons to the
Sellers or the Buyer. No provision of this Agreement shall give any third
persons any right of subrogation or action over or against the Sellers or the
Buyer.
SECTION 16.11. Scheduled Disclosures. Disclosure of any matter, fact
or circumstance in a Schedule to this Agreement shall not be deemed to be
disclosure thereof for purposes of any other Schedule hereto.
SECTION 16.12. Section and Paragraph Headings. The section and
paragraph headings in this Agreement are for reference purposes only and shall
not affect the meaning or interpretation of this Agreement.
SECTION 16.13. Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which shall
constitute the same instrument.
[Signature page follows.]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized as of the
date first above written.
MICROPATENT
By: Opus Publications, Inc.
Its General Partner
By: /s/ Peter H. Tracy
----------------------------------------
Name: /s/ Peter H. Tracy
Title: President
OPUS PUBLICATIONS, INC.
By: /s/ Peter H. Tracy
----------------------------------------
Name: /s/ Peter H. Tracy
Title: President
DORINDA DEVELOPMENTS, INC.
By: /s/ Charles E. Chadwyck-Healey
----------------------------------------
Name: Sir Charles E. Chadwyck-Healey
Title: President
/s/ Susan Severtson
--------------------------------------------
SUSAN SEVERTSON
/s/ Robert Asleson
---------------------------------------------
ROBERT ASLESON
MICROPATENT LLC
By: /s/ Mason Slaine
----------------------------------------
Name: Mason Slaine
Title: Chief Executive Officer
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THE UNDERSIGNED AGREES TO GUARANTEE THE
PROMPT PAYMENT IN FULL OF THE PURCHASE
PRICE PURSUANT TO SECTION THREE
INFORMATION VENTURES LLC
By: /s/ Mason Slaine
----------------------------------------
Name: Mason Slaine
Title: President
THE UNDERSIGNED, THE SOLE OWNER OF OPUS, IN
CONSIDERATION OF THE PORTION OF THE PURCHASE
PRICE TO BE RECEIVED BY OPUS, HEREBY AGREES
TO COMPLY WITH THE COVENANT SET FORTH IN
SECTION 8.7 AS THOUGH HIS NAME APPEARED
THEREIN IN PLACE OF "THE SELLERS"
/s/ Peter H. Tracy
--------------------------------------------
Peter Tracy
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Exhibit 10.10
THIS LEASE made the lst day of December, 1980 between STARKOFF ASSOCIATES,
a Florida general partnership, hereinafter referred to as "Lessor", and CRC
PRESS, INC., a Florida corporation, hereinafter referred to as "Lessee",
WITNESSETH:
ARTICLE 1
DEFINITIONS; MISCELLANEOUS
SECTION 1.01: For the purpose of this lease, unless the context otherwise
plainly requires, the following words and phrases shall have the following
meanings:
(a) "Basic Rent" refers not only to the rental specified in Sec. 2.03 (a)
but also to the adjustments thereto, if any, made pursuant to Sec. 2.03 (b) and
(c);
(b) "Demised Premises" shall mean, collectively, the Land and Structures,
unless a different meaning is plainly stated;
(c) "Event of Default" shall have the meaning set forth in Article 15
hereof;
(d) "Fee Mortgage" shall mean any Mortgage constituting a lien upon all or
any interest in the Land or the Structures, or both, to which this lease is
subordinate;
(e) "Fee and Leasehold Mortgage" shall mean a Fee Mortgage which is also a
Leasehold Mortgage;
(f) "Institution" shall mean a bank; a savings and loan association; a
trust company; an insurance company; a college, university or other educational
institution not for profit (organized under the laws of Florida, New York,
Massachusetts,
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Connecticut, Pennsylvania or New Jersey); or a governmental or public employees'
welfare, pension, profit-sharing, endowment or retirement fund, plan or system;
provided that any such institution shall, if acting as a Trustee, be included in
this definition only if the beneficiary of the trust is itself an Institution;
(g) "Institutional" shall mean originally payable to, and at all times
held by, an Institution;
(h) "Land" shall mean the real property situated, lying and being in the
County of Palm Beach, Florida, described on Exhibit "A" annexed to and made a
part hereof;
(i) "Lease Year" shall mean a one-year period beginning on the Use Date or
an anniversary thereof;
(j) "Leasehold Mortgage" shall mean any pledge, assignment or security
agreement constituting a lien on the rental, proceeds and avails of this Lease;
(k) "Mortgage" shall include either or both an indenture of mortgage and a
deed of trust, held by an Institution;
(l) "Mortgagee" shall mean the then holder of a Mortgage;
(m) "Property" shall mean the Demised Premises and the fixtures, machinery
and equipment to which Section 13.03B applies, collectively;
(n) "Structures" shall mean the buildings, parking facilities and other
improvements described in Article 13, as from time to time repaired, added to
and altered pursuant to this Lease, and personal property described in Paragraph
B of Section 13.03;
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(o) "Termination of this Lease" shall mean the expiration of the Lease
Term, or to the termination of the term of this Lease prior to its expiration
pursuant to the provisions hereof, whichever first occurs;
(p) "Unencumbered" shall mean without regard to any mortgage or lien or
claim, and without regard to this Lease or any lease or tenancy; and
(q) "Use Date" shall mean the date of this instrument.
SECTION 1.02: No discretion, right, authority or power referred to
anywhere in this instrument as that of a mortgagee or mortgage holder shall
benefit, apply to or refer to other than an Institutional Mortgagee.
SECTION 1.03: No mortgage encumbering any or all of the Land, Structures,
or rentals, proceeds and avails of this Lease, or any interest in the same,
shall be made or binding as against Lessee unless it is an Institutional
Mortgage at all times.
Neither Lessee's interest in this Lease or in any new lease made pursuant
to Section 15.07 hereof or any renewal hereof or thereof nor the leasehold
estate created hereby or thereby shall be subject or subordinate to the lien of
any mortgage subsequent hereto during the term of this Lease except to the
extent Lessee and the then holder of any Mortgage shall have expressly in signed
writing subordinated this Lease thereto. Any mortgage which is subject and
subordinate to this Lease or to any new lease made pursuant to Section 15.07
hereof, or to any renewal hereof or thereof, shall continue to be so
notwithstanding any agreement hereafter made modifying or
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amending this Lease or any such new lease or any renewal hereof or thereof,
provided, however, that any such modification or amendment which is made after
any mortgage shall have been recorded and which shall (i) reduce the amount of
the Basic Rent payable hereunder or (ii) relieve Lessee from the obligation to
make payment of any imposition (as such term is used or defined in Sections 3.01
and 3.02 hereof) or to take out, pay for or maintain any of the insurance
provided in Article 4 hereof, or (iii) shorten the terms or extend the payment
dates hereof or of any such new lease, or (iv) amend Article 9 hereof, shall to
the extent necessary to protect the then holder of said Mortgage not be binding
upon a holder for value of the Fee Mortgage or purchaser at foreclosure of so
much of the Demised Premises as is subject to any such Fee Mortgage, or upon the
grantee in any deed given in lieu of the foreclosure of a Fee Mortgage, or their
successors or assigns, and any such purchaser or grantee shall to the extent
necessary to protect their interests be entitled to enforce this Lease or any
such new lease or renewal hereof or thereof in accordance with its terms prior
to any such modification or amendment.
SECTION 1.04: No consent or approval of Lessor's anywhere in this Lease
referred to shall be unreasonably delayed or denied.
ARTICLE 2
DEMISED PREMISES - LEASE TERM - BASIC AND ADJUSTED RENTS, NET
SECTION 2.01: Lessor, for an in consideration of the rents, covenants and
agreements hereinafter reserved and contained to be
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paid, kept and performed by Lessee, its successors and assigns, has demised and
leased, and by these presents does demise and lease, unto Lessee, and Lessee
does hereby take and hire, upon and subject to the covenants and agreements
hereinafter expressed, the Demised Premises, AS IS as of the Use Date;
TO HAVE AND TO HOLD the Demised Premises unto Lessee, its successors and
assigns, for a term (the Lease Term) from the date hereof until July 31, 2006.
SECTION 2.02: Lessor covenants and agrees that Lessee, upon paying the
Basic Rent, additional rent and all other charges herein provided for and upon
observing and keeping all of the covenants, agreements and provisions of this
Lease on its part to be observed and kept, shall lawfully and quietly hold,
occupy and enjoy the Demised Premises during the term of this Lease without
hindrance or molestation by or from anyone claiming by, through or under Lessor.
SECTION 2.03: Lessee covenants to pay to Lessor in such coin or currency
of the United States of America as at the time of payment shall be legal tender
for the payment of public and private debts, at the offices of Lessor in Palm
Beach County, Florida, or at such place in said county as Lessor may from time
to time designate in writing, a net annual basic rental (the "Basic Rent") over
and above all other and additional payments to be made by Lessee as hereinafter
provided, during the term of this Lease as follows:
(a) Commencing as of the Use Date, Basic Rent in the amount of TWO HUNDRED
FORTY THOUSAND DOLLARS ($240,000.00) per year,
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payable in equal monthly installments, the first installment to be paid on the
Use Date and thereafter monthly in advance.
(b) Beginning five (5) years after the Use Date, the annual Basic Rent
shall be increased or decreased once each year so as to correspond to changes in
the cost of living as conclusively established by the statistics published by
the U.S. Department of Labor, Bureau of Labor Statistics, designated "Consumer
Price Index-U.S. city average--all consumers (1967 = 100) (hereinafter such
Index is referred to as the CPI) taking the month of the 5th anniversary of the
Use Date as the base and the first month of the one-year period to be adjusted
as the then current standard.
In the event such statistics are no longer practically available or
can no longer be meaningfully correlated to the base figure, the parties shall
agree on a substitute method, failing which the matter shall be arbitrated under
Article 22.
(c) Whether increases or decreases shall be made shall in all events be
determined by, and shall proportionately correspond to, increases and decreases
in the CPI. Any language above (or elsewhere in this Lease) notwithstanding, no
decrease in the annual Basic Rent shall ever be made which reduces it to less
than TWO HUNDRED FORTY THOUSAND DOLLARS ($240,000.00) per year.
(d) Lessee shall pay prior to their becoming delinquent any and every
sales and other tax, assessment, charge, levy or other imposition on this Lease
or on, or measured by, the rentals called for by this Lease, subject to Section
3.02.
SECTION 2.04: Lessor and Lessee intend that the Basic Rent shall be paid
to Lessor absolutely net, without notice or demand,
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and without abatement, reduction or set-off of any amount whatsoever, except as
otherwise expressly provided in this Lease. All costs, expenses and obligations
of every kind and nature whatsoever relating to the Demised Premises and the
use, operation or occupancy thereof shall be paid by Lessee (except as provided
in Section 3.02 hereof) and Lessee agrees to indemnify and to save Lessor
harmless from and against the same. No specific provision, in Section 3.01 or
elsewhere in this Lease, shall limit the generality of the foregoing unless such
limitation is express, and not by implication, interpretive principle or other
non-express means.
ARTICLE 3
PAYMENT OF TAXES, ASSESSMENTS, ETC.
SECTION 3.01: Lessee covenants and agrees to pay (subject to Section
1.02), and to pay prior to the time when any fine, penalty, interest or cost may
be added thereto for non-payment or late payment thereof, all ad valorem real
estate taxes and tangible personal property taxes (including but not limited to
1980 taxes in full); all assessments, water and sewer rates and charges, and all
other governmental charges, general and special, ordinary and extraordinary,
unforeseen as well as foreseen, of any kind and nature whatsoever which are or
may become against the Property (or the sidewalks or streets in front of or
adjoining the Demised Premises) or any part thereof (all of which taxes,
assessments, water and sewer rates or charges, and other governmental charges
are in this Lease sometimes referred to as "impositions"), which are assessed,
levied, confirmed, imposed,
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become a lien, or become payable during the Lease Term; provided however, that
if, by law, any such imposition may at the option of the payer be paid in
installments (whether or not interest shall accrue on the unpaid balance of such
imposition), Lessee may exercise the option to pay the same (and any interest
which accrues prior to the expiration of the Lease Term on the unpaid balance of
such imposition) in installments and, if said option be thus exercised, Lessee
shall pay only such installments thereof as may become due during the Lease Term
as the same respectively become due and shall make such installment payments
prior to the time any fine, penalty, interest or cost may be added thereto for
the non-payment or late payment of any such installment and interest; and
provided further, that any imposition relating to a fiscal period of the taxing
authority, a part of which period is included within the Lease Term and a part
of which is included in a period of time after the termination of this Lease,
other than a termination of this Lease pursuant to Article 15 hereof, shall
whether or not such imposition shall be assessed, levied, confirmed, imposed or
become a lien upon the Demised Premises, or shall become payable, during the
Lease Term, be adjusted between Lessor and Lessee as of the expiration of the
Lease Term, so that Lessor shall pay that portion of such imposition which that
part of such fiscal period included in the period of time after the Lease Term
bears to such fiscal period, and Lessee shall pay the remainder thereof.
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Any fine, charge, cost, penalty, interest, fee or expense arising out of
Lessee's non-payment or late payment shall be borne by Lessee.
SECTION 3.02: Nothing in this Lease contained shall require Lessee to pay
any income tax, excess profits tax, or revenue tax of Lessor, nor any stamp or
transfer tax of Lessor's (except on this Lease itself). No tax, assessment,
charge or levy of the character hereinabove in this Section 3.02 described be
deemed to be included within the term "imposition" as defined in Section 3.01 of
this Article.
SECTION 3.03: Lessee covenants, upon request of Lessor, to furnish to
Lessor for inspection by it or by the holder of any Fee Mortgage (or both)
within thirty (30) days after the date when any imposition is payable, official
receipts of the appropriate taxing authority, or other evidence satisfactory to
Lessor and such holder, evidencing the full payment thereof.
SECTION 3.04: Lessee shall have the right to contest the amount or
validity (or both), in whole or in part, of any imposition by appropriate
proceedings, and Lessor agrees not to withhold unreasonably its joinder therein
or its consent to proceedings in Lessor's name, as and if required for effective
contest.
Notwithstanding the provisions of Section 3.01 or 3.03 of this Article,
except as may be required by a Leasehold Mortgage or by a Fee Mortgage, Lessee
may postpone or defer payment of such imposition if and while engaged in bona
fide contest of it, or may pay under protest and seek refund, as its discretion
deems
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best, provided Lessee shall have bonded or otherwise secured payment of same so
as to prevent loss or diminution of Lessor's estate, in a manner and to an
extent reasonably satisfactory to Lessor.
Lessor shall not ultimately be subjected to any liability for the payment
of any costs or expenses (which shall include but not be limited to reasonable
attorneys' fees, if the same are required) in connection with any such contest
or proceeding, and Lessee covenants to indemnify and save harmless Lessor from
any such costs or expenses. Lessee shall be entitled promptly to any refund of
any such imposition and penalties or interest thereon, which have been paid by
Lessee, or which have been paid by Lessor and for which Lessor has been fully
reimbursed.
ARTICLE 4
INSURANCE
SECTION 4.01: At all times Lessee shall at its expense keep the Demised
Premises insured (either without coinsurance requirements or in amounts
sufficient to prevent Lessor or Lessee from becoming a coinsurer within the
terms of the applicable policies) for the mutual benefit of Lessor and Lessee as
named insureds, as their interests may appear, against
(a) loss or damage by fire, vandalism, malicious mischief and such other
risks as may be included in the standard form of extended coverage insurance
from time to time available, in an amount not less than one hundred per cent
(100%) of the then full insurable value of the Structures;
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(b) loss or damage from leakage or malfunction of sprinkler systems now or
hereafter installed in the Structures, in such amount(s) as Lessor may
reasonably require; and
(c) loss or damage by explosion of steam boiler, air conditioning
equipment, pressure vessels or similar apparatus, now or hereafter installed in
the Structures; in such limits of liability with respect to any one accident as
may reasonably be requested by Lessor from time to time, but not less than ONE
HUNDRED THOUSAND DOLLARS ($100,000.00);
(d) flood damage, in coverages and amounts satisfactory to Lessor, while
(i) the Demised Premises are identified by HUD as a special hazard area, and
(ii) such insurance is available under the 1968 Flood Insurance Act; and
(e) such other hazards and in such amounts as Lessor or the holder of a
Leasehold Mortgage may reasonably require.
SECTION 4.02: At all times Lessee shall also at its expense maintain:
(a) Lessor's rental insurance for a period of at least six (6 months from
the date of damage or destruction of any of the Structures; and
(b) Business interruption insurance sufficient to provide Lessee six (6)
month's income; and
(c) for the mutual benefit of Lessor and Lessee as named insureds, as
their interest may appear, insurance against claims for personal bodily injury
or property damage, under a policy of general public liability insurance, with
such limits as may reasonably be requested by Lessor from time to time, but not
less
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than TWO HUNDRED FIFTY THOUSAND/ONE MILLION DOLLARS ($250,000.00/ $1,000,000.00)
in respect of bodily injury or death, and ONE HUNDRED THOUSAND DOLLARS
($100,000.00) for property damage.
SECTION 4.03: Except as may be more strictly required by a Mortgagee, the
term "full insurable value" shall mean the then actual replacement cost of the
Structures (excluding foundation and excavation costs) less physical
depreciation, and said "full insurable value" shall be determined at the written
request of Lessor by an architect, appraiser or appraisal company nominated by
any one of the insurers, reasonably acceptable to Lessor, selected and paid by
Lessee, but such determination shall not be required to be made more frequently
than once every three (3) years. In the event of a dispute between Lessor and
Lessee as to the limits of insurance which may be requested by Lessor pursuant
to Section 4.01 or 4.02, or in the event of a dispute between Lessor and Lessee
as to the character of any hazards which Lessor may require Lessee to insure
against as provided in Section 4.01 hereof, or as to the limits of such
insurance, such dispute shall be determined by arbitration in the manner
provided in Article 22 hereof.
SECTION 4.04: All insurance provided for under this Lease shall be
effected under valid enforceable policies issued by insurers licensed to do
business in the State of Florida. The original policies shall be delivered to
the holder of the senior Mortgage constituting a lien on the Structures (alone
or together with other property), if any, or if there be none, to Lessor. At
least ten (10) days prior to the expiration date of any policy
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the original renewal policy for such insurance shall be delivered by Lessee to
the holder of the original of the expiring policy, together with the
satisfactory evidence of payment of the premium on such policy. To the extent
obtainable, all such policies shall contain agreements by the insurers that (i)
any loss shall be payable to the parties and to the holder(s) of any Mortgage on
all or any part of the Demised Premises to whom loss may be payable as in this
Lease provided, as their interests may appear, notwithstanding any act or
negligence of Lessee which might otherwise result in forfeiture of said
insurance; (ii) such policies shall not be cancelled except upon ten (10) days
prior written notice to each named insured and loss payee; and (iii) the
coverage afforded thereby shall not be affected by the performance of any work
in or about the Demised Premises.
SECTION 4.05: Subject to the provisions and limitations hereinafter set
forth in this Section 4.05 and Sections 4.06 and 4.07 hereof, all policies of
the character referred to in Section 4.01 of this Article shall also provide, if
required by either party hereto, for any loss thereunder to be payable to the
then holder(s) of the Fee and Leasehold Mortgage(s), Leasehold Mortgage(s), and
Fee Mortgage(s) (if any) or the property insured, as the respective interests of
such holders may appear. The loss, if any, under said policies referred to in
said Section 4.01 shall be adjusted with the insurance companies by Lessee and
such Mortgagees, except that in the event of casualty resulting in damage or
destruction exceeding $100,000.00 in the aggregate, no adjustment shall be made
with the insurance companies without
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the prior approval of Lessor, unless the senior Leasehold Mortgagee (or if none,
the senior Fee Mortgagee) shall have agreed to the amount of the adjustment, in
which event Lessor's prior approval shall not be required.
SECTION 4.06: Except as may be required by the terms of any Leasehold
Mortgage (1) the loss, if any, under all policies of the character referred to
in Section 4.01 hereof shall be payable (a) in the case of any particular
casualty resulting in a loss payment not exceeding $100,000.00, to Lessee, or
(b) in case of any particular casualty resulting in a loss payment in excess of
$100,000.00, to a bank with trust powers or a trust company, as insurance
trustee (the "Insurance Trustee") to be designated by Lessor in a notice given
to the insurance companies and to Lessee promptly following notice to Lessor of
the magnitude of the loss payment, which Insurance Trustee company shall have
its principal office in the State of Florida and have a trust assets under
management, according to its then most current published statement, in excess of
$50,000,000.00; and (2) all policies of the character aforesaid shall expressly
provide that loss thereunder shall be adjusted and paid as provided in Section
4.05 and this Section 4.06.
Lessee shall forthwith upon receipt notify Lessor of any loss payment in
excess of $50,000.00 received by Lessee.
SECTION 4.07: Any loss paid under any insurance policy to Lessee shall be
held by Lessee for application to the cost of restoring, repairing, replacing,
or rebuilding the Structures.
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Any loss so paid to the Insurance Trustee shall be disbursed by it in accordance
with the provisions of Article 11 hereof.
SECTION 4.08: Nothing in this Article shall prevent Lessee from taking out
insurance of the kind and in the amount provided for under any section hereof
under or as part of a blanket insurance policy or policies (copies of which
shall be delivered to Lessor) which contains other coverages or covers other
properties owned or operated by Lessee as well as the Demised Properties.
SECTION 4.09: The gross premium on all insurance policies (other than
non-required coverages under any policy of blanket insurance of the kind
referred to in Section 4.08 of this Article) in force at the termination of this
Lease pursuant to Article 15 hereof shall be pro rated between Lessor and
Lessee, except that Lessor, at its option, may require Lessee to cancel such
policies in which event Lessee shall be entitled to receive the unexpired
premiums, if any, payable as a result of such cancellation.
ARTICLE 5
LESSOR'S RIGHT TO PERFORM LESSEE'S COVENANTS-ADDITIONAL RENT
SECTION 5.01: Lessee covenants and agrees that if it shall at any time
fail to pay any imposition in accordance with the provisions of Article 3, or to
take out, pay for, maintain or deliver any of the insurance policies provided
for in Article 4, or fail to cause any lien of the character in Article 12
referred to be discharged as therein provided, or shall fail, within the time
limited in clause (b) of Section 15.01 hereof after the
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notice therein specified of any default has been given thereunder, to perform
any other act on its part to be performed, then Lessor may, in addition to all
other remedies in this Lease provided, without further notice or demand upon
Lessee and without waiving or releasing Lessee from any obligations of Lessee in
this Lease contained, (a) pay any imposition payable by Lessee pursuant to the
provisions of Article 3, or (b) take out, pay for and maintain any of the
insurance policies provided for in Article 4, or (c) discharge any lien of the
character referred to in Article 12 as therein provided, or (d) perform any
other act on Lessee's part to be performed as in this Lease provided; provided,
however, that so long as a Leasehold Mortgage or Fee and Leasehold Mortgage
shall be outstanding,
(i) Lessor shall not take any action of the character specified in
the foregoing clauses (a), (b), (c) or (d) (except in the case of emergency, or
threatened lapse of insurance) until after the expiration of the time limited in
Section 15.03 after the notice therein specified has been given to the Leasehold
Mortgagee or Fee Mortgagee, and
(ii) with respect to any action of the character specified in the
foregoing clause (d), Lessor shall not take any such action (except in the case
of an emergency or threatened lapse of insurance) if the holder of a Leasehold
Mortgage or a Fee Mortgage, prior to the expiration of the time limited in
Section 15.03 hereof, shall have given the notice provided for in clause (a) of
said Section 15.03 and shall have delivered the instrument provided for in
clause (b) of said Section 15.03.
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All sums so paid by Lessor and all necessary incidental costs and
expenses paid or incurred by Lessor in connection with the performance of any
such act by Lessor, together with interest thereon at the rate of eighteen per
centum (18%) per annum from the date of making of such expenditure by Lessor,
shall be payable to Lessor on demand, or at the option of Lessor may be added to
any installment of Basic Rent then due or thereafter becoming due under this
Lease, and Lessee covenants to pay any such sum or sums with interest as
aforesaid.
SECTION 5.02: All sums which may become payable to Lessor by Lessee as in
this Article provided; all sums payable by Lessee for impositions pursuant to
Article 3 or insurance premiums pursuant to Article 4; and all other charges and
expenses of whatsoever nature which Lessee assumes or agrees to pay pursuant to
this Lease, shall be deemed additional rent hereunder, and in the event of the
non-payment of any such sums by Lessee, Lessor shall have (in addition to any
other right or remedy of Lessor) the same rights, security and remedies as in
the case of default by Lessee in the payment of the Basic Rent.
ARTICLE 6
COVENANTS AGAINST WASTE AND ABOUT MAINTENANCE AND REPAIR OF THE
DEMISED PREMISES
SECTION 6.01: Lessee shall not cause or permit any waste, damage or injury
to the Structures or any overloading of any floor therein.
SECTION 6.02: Lessee, at its sole expense, shall keep the Demised Premises
and the adjoining sidewalks and curbs clean and
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in good condition, free of accumulations of dirt and rubbish and shall make all
repairs (including structural repairs) and replacements necessary to maintain
the Demised Premises in a condition appropriate for buildings of similar
construction, use and class in their neighborhood, provided that in any event
Lessee shall make all repairs necessary to avoid any structural damage or injury
to the Structures. Lessor shall not be required to furnish any services or
facilities, or to make any repairs or alterations, whatsoever to the Demised
Premises, and Lessee hereby assumes the full and sole responsibility for the
condition, operation, repair, replacement, maintenance and management of the
Demised Premises.
SECTION 6.03: Neither party shall remove or permit the removal of any of
the permanent furnishings, fixtures or other property or equipment and
constituting a part of the Structures unless other property at least equal in
utility and value shall be promptly substituted therefor. Nothing herein shall
impair or limit Lessor's distraint or other remedies for a default on Lessee's
part.
SECTION 6.04: Lessee shall allow any person, municipality or agency
authorized by law and proposing to excavate upon the land or street adjoining
the Demised Premises to enter the Demised Premises and shore up any walls
thereon during any such excavation to the extent required. Lessee shall at its
expense, repair or cause to be repaired, any damage to any part of the Demised
Premises resulting from any excavation, construction work or other work of a
similar nature which may be done on any
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property or street adjacent to the Demised Premises; and Lessor hereby assigns
to Lessee any and all rights to sue for and recover, against any party causing
such damage, (i) the expenses and other damages incurred by Lessee because of
the provisions of this Section and (ii) any and all damages resulting to the
Demised Premises, or any part thereof, from such shoring up, excavation,
construction work, or other work of a similar nature.
ARTICLE 7
COMPLIANCE WITH ORDERS, ORDINANCES, ETC.
SECTION 7.01: Lessee covenants throughout the term of this Lease, at
Lessee's sole cost and expense, promptly to cause the Demised Premises to
comply, with (i) all laws and ordinances, and the orders, rules, regulations and
requirements of all federal, state, county and municipal governments and
appropriate departments, commissions, boards and officers thereof; (ii) all
policies of public liability, fire and other insurance at any time in force with
respect to the Demised Premises or any part thereof; (iii) all requirements of
any Fee or Leasehold Mortgage; and (iv) the orders, rules and regulations of the
local board of fire underwriters, or any other body hereafter constituted
exercising similar functions, foreseen or unforeseen, ordinary as well as
extraordinary, which may be applicable to (or to the use of) (i) any or all of
the Property, or (ii) the sidewalks, curbs, and swales adjoining the Demised
Premises, or (iii) both.
SECTION 7.02: Lessee shall have the right to contest by appropriate legal
proceedings, in the name of Lessee or Lessor or both, without cost or expense to
Lessor, the validity or
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application of any law, ordinance, order, rule, regulation or requirement of the
nature herein referred to, and Lessee may postpone compliance therewith until
the final determination of any proceedings, provided that all such proceedings
shall be prosecuted with all due diligence and dispatch, and Lessee shall hold
Lessor harmless from any loss or injury by reason of such non-compliance or
delay. Lessor agrees to execute and deliver any papers which may be necessary to
permit Lessee to effectively contest the validity or application of any such
law, ordinance, order, rule, regulation or requirement.
ARTICLE 8
DAMAGE TO OR DESTRUCTION OF THE STRUCTURES
SECTION 8.01: Lessee covenants that in case of damage to or destruction of
the Structures, or any part thereof, by fire or any other cause, similar or
dissimilar, insured or uninsured, Lessee will promptly, at its sole cost and
expense, but subject to reimbursement to the extent provided in Article 11
hereof, restore, repair, replace or rebuild the Structures as nearly as possible
to the condition, quality and class they were in immediately prior to such
damage or destruction, or with such changes or alterations as Lessee shall elect
to make in conformity with Article 10 hereof. Such restoration, repairs,
replacement or rebuilding shall be commenced promptly and prosecuted with
reasonable diligence.
If at any time during the last ten (10) years of the term hereby granted,
or during any renewal thereof, the Structures shall be so damaged by fire or
other casualty that the cost of
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restoration shall exceed 50% of the replacement value thereof, valued as of
immediately prior to such damage, then Lessee at its election, (but provided
Lessee shall have received at the time the written consent of the holder of
every then Leasehold and Fee Mortgage, and shall have delivered a true copy of
each such consent to Lessor) may within ninety (90) days of such damage, give
notice of Lessee's election to terminate this Lease, in which event this Lease,
any renewal, any option under it, and any right to renew or extend it shall
cease and come to an end on the date of the termination set forth in such notice
with the same force and effect as if such date were the date originally fixed
for the expiration of the term herein demised, and the rent shall be apportioned
and paid to the time of such termination, PROVIDED that, if the then Lessor
derives its title by, through or under a Leasehold Mortgage or a Fee and
Leasehold Mortgage, Lessee may not terminate this Lease without the then
Lessor's consent. In the event of such termination, Lessee shall have no
obligation to repair or rebuild and the entire insurance proceeds shall be and
remain the outright property of Lessor. If Lessor and Lessee are unable to agree
as to whether the damage is sufficiently substantial to vest the aforesaid
option in Lessee, then such dispute shall be resolved according to Article 22,
and the time for the Lessee to exercise the option to cancel shall be extended
to twenty (20) days after a final determination has been made by the
arbitrators.
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ARTICLE 9
CONDEMNATION
SECTION 9.01: If at any time during the term of this Lease, there shall be
a total taking or a substantially total taking, actual or constructive, of the
fee title to the Demised Premises in condemnation proceedings or by any right of
eminent domain, this Lease shall terminate on the date of such taking and the
rent and other charges payable by Lessee hereunder shall be apportioned and paid
to the date of such taking. For the purposes of the Article the term
"substantially total taking" shall mean a taking (other than a temporary taking)
of such scope that the untaken portion of the Land is insufficient to permit the
construction thereon, according to then applicable laws, of a complete, rentable
office building, capable of producing a proportionately fair and reasonable net
annual income to an owner thereof, after the payment of (i) all operating
expenses thereof, (ii) the Basic Rent (if and as reduced as in Section 9.04
provided), (iii) additional rent and other charges herein reserved, and (iv) the
annual debt service charges for interest and amortization payable under every
then Fee and Leasehold Mortgage, and after performance of all covenants and
agreements herein provided to be performed by Lessee. As used above, the term
"operating expenses" shall be deemed to exclude depreciation, income taxes and
any franchise taxes of Lessee.
A "partial taking" shall be any taking other than a temporary, total
or substantially total taking.
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In the event of a dispute between Lessor and Lessee as to whether or
not there has been a "partial taking" or a "substantially total taking" within
the meaning above set forth, such dispute shall be determined by arbitration in
the manner provided in Article 22 hereof.
SECTION 9.02: In the event of a partial taking, this Lease shall not
terminate or be affected in any way, except as provided in Section 9.04 hereof.
After payment in full of all Mortgages to which this Lease is subject or
subordinate, in accordance with their respective priorities, to the extent they
are required by the then holder to be paid in such event, (i) Lessor shall be
entitled to that portion of the condemnation proceeds as shall equal the fair
market value of the part of the Demised Premises so taken, plus consequential
damages, if any, to the portion of the Demised Premises not so taken, plus
interest thereon at the then legal rate, less amounts paid against such
mortgages as encumber Lessor's estate or interest, and the balance of the award,
if any, plus consequential damages to Lessee, if any, shall be Lessee's, and
(ii) proceeds of the award shall be paid, if $100,000.00 or less, in trust to
Lessee for application by Lessee to the cost of restoring, altering, repairing,
replacing or rebuilding the Structures, but if in excess of $100,000.00, to a
bank or trust company designated by Lessee which shall have the same
qualifications as the insurance trustee referred to in the case of the payment
of proceeds of insurance pursuant to Section 4.06. The portion of the
condemnation proceeds so paid to such
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bank or trust company shall be disbursed by it in accordance with the provisions
of Article 11 hereof.
SECTION 9.03: To the extent condemnation proceeds are made available after
compliance with all mortgages to which this Lease is subject, in the event of a
partial taking, Lessee, at its sole cost and expense, but subject to
reimbursement as provided in Article 11 hereof, and whether or not the
condemnation proceeds shall be sufficient for the purpose, shall proceed with
due diligence to restore, repair, replace or rebuild the remaining part of the
Structures to as substantially the same as their former condition as is
feasible, or with such changes or alterations as Lessee may elect to make in
conformity with Article 10 hereof, but in any event so as to constitute a
complete, rentable building.
SECTION 9.04: In the event of a partial taking, this Lease shall terminate
as to the portion of the Demised Premises so taken and the Basic Rent for the
balance of the term of this Lease, from the effective date of such taking, shall
be equitably reduced by mutual agreement between the parties and in the event of
their inability to agree upon the amount of such equitable reduction, then by
submission to arbitration in the manner provided for in Article 22 hereto. Until
the amount of the reduction of the Basic Rent shall have been determined, Lessee
shall pay Lessor a proportion of the basic Rent corresponding to the ratio of
the enclosed square feet of office space remaining useable to the total number
of original square feet of office space, and upon such determination the
differential between the
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amount so paid and the amount so determined shall be promptly paid.
SECTION 9.05: If, at any time during the term of this Lease, the whole or
any part of the Demised Premises, or of Lessee's leasehold estate under this
Lease, shall be taken in condemnation proceedings or by any right of eminent
domain for use or occupancy not in excess of one year's duration (a "temporary
taking") the foregoing provisions of this Article shall not apply and Lessee
shall continue during such temporary taking to pay, in the manner and at the
same times herein specified, the original Basic Rent, unadjusted, plus all other
charges payable by Lessee hereunder, and, except only to the extent that Lessee
may be prevented from doing so pursuant to the terms of the order of the
condemning authority, Lessee shall perform all of the other terms, covenants,
conditions and obligations hereof upon the part of Lessee to be performed and
observed, as though such taking had not occurred. In the event of any such
taking of the character described in this Section 9.05 and the payment of a lump
sum award therefor for the entire period of such taking, then the amount of such
award, whether paid by way of damages, rent, cost of restoration, or otherwise,
shall be paid to be a bank or trust company selected by Lessor as Trustee, to be
held in escrow, as the case may be, to secure the performance of Lessee's
obligations hereunder upon the terms and conditions as follows:
(a) Lessee and Lessor shall agree upon a reasonable amount of such award
to be held for the cost of repair, maintenance and
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restoration of the Demised Premises upon the termination of any such temporary
taking (or failing such agreement the parties shall resolve the question under
Article 22) and such amount shall be paid to Lessee in accordance with the
provisions of Article 11;
(b) Moving expenses and other damages awarded to Lessee alone shall be
paid over to Lessee, to the extent remaining proceeds are sufficient; and
(c) The balance of such award, if any, shall then be divided into equal
parts, one part for each calendar month or major fraction thereof cumulatively
representing the period for which the award was made, and the Trustee shall pay
to Lessor, and Lessor shall credit against the rent then due, one part as so
determined on the first day of each month during the period of such temporary
taking. Any excess of such balance or of such payments over the rent otherwise
payable for the period involved shall be paid to Lessee.
SECTION 9.06: Any other language to the contrary notwithstanding, in the
event a partial taking leaves a portion of the Demised Premises which is
inadequate to house (i) Lessee's then business operation, or (ii) some part or
parts of said operation which it is economically feasible for Lessee to house
separately from the remainder of said operation, (bearing in mind, inter alia,
the extent (if any) to which Lessee's condemnation proceeds shall have
compensated such economic unfeasibility) then Lessee may vacate the remaining
premises and freely sublease them and Lessor shall have the rebuilding
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discretions and responsibilities herein referred to as those of Lessee.
Nothing herein shall excuse Lessee from payment of rent, whether or not
reduced under Section 9.04.
ARTICLE 10
CHANGES AND ALTERATIONS BY LESSEE
SECTION 10.01: Subject to the requirements of any Leasehold Mortgage,
Lessee shall have the right, at any time and from time to time, during the term
of this Lease at its expense to make or permit such changes and alterations,
structural or otherwise, to the Structures as Lessee shall deem necessary or
desirable, and Lessor agrees to subordinate this Lease to reasonable
Institutional Mortgage financing, payable by Lessee, of such changes or
alterations. Such changes, alterations, demolition or new construction (herein
collectively referred to as "changes and alterations" or "changes or
alterations") shall be made in all cases subject to the following conditions
which Lessee covenants to observe and perform:
(a) An integrated program of related changes or alterations shall for all
purposes hereof be deemed a single change or alteration;
(b) No change or alteration shall be undertaken until Lessee shall have
procured and paid for, so far as the same may be required, from time to time,
all municipal and other governmental permits and authorizations of the various
municipal departments and governmental subdivisions having jurisdiction,
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and Lessor agrees to join the application for such permits and authorizations
whenever such action is necessary;
(c) Any structural change or alteration costing $50,000.00 or more, shall
be conducted under the supervision of an architect or engineer licensed as such
in the State of Florida selected by Lessee;
(d) In the case of a change or alteration involving partial or total
demolition and the construction of a new building or portion, Lessee shall,
prior to the commencement of demolition establish to the reasonable satisfaction
of Lessor that (1) such new building or portion will be (A) physically and
esthetically integrated with the remainder of the structures; and (B) of value
and utility not substantially less than the value of the building or portion to
be demolished; and (2) payment for all costs, fees and expenses incident to such
change or alteration is secured;
(e) All work done in connection with any change or alteration shall be
done in a good and workmanlike manner and in compliance with local building and
zoning laws and with all laws, ordinances, orders and requirements of all
federal, state, county and municipal governments and the appropriate
departments, commissions, board and officers thereof;
(f) The cost of any such change or alteration shall be paid in cash or its
equivalent, so that the Demised Premises shall at all time be free of liens for
labor and materials supplied or claim to have been supplied;
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(g) The work of any change or alteration shall be prosecuted with
reasonable dispatch, unavoidable delays excepted; and
(h) Workmen's compensation insurance covering all persons employed in
connection with the work and with respect to whom death or bodily injury claims
could be asserted against Lessor, Lessee or the Demised Premises and general
liability and property damage insurance (which may be effected by endorsement,
if obtainable, on the insurance then being carried pursuant to Article 4 hereof)
for the mutual benefit of Lessee and Lessor with limits of not less than those
required to be carried pursuant to said Article 4 shall be maintained by Lessee
at Lessee's sole cost and expense at all times when any work is in process in
connection with any change or alteration.
SECTION 10.02: Lessee covenants that in performing any work on, repairs
to, or restoration, replacement or rebuilding of, any of the Structures required
to be performed by Lessee pursuant to the provisions of Article 6, Article 7,
Article 8, or Article 9, Lessee will observe and perform, insofar as the nature
of such work, repairs, restoration, replacement or rebuilding make such
observation and performance appropriate, the conditions relating to changes and
alterations set forth in Section 10.01 of this Article.
SECTION 10.03: Anything herein to the contrary notwithstanding, Lessee
shall not make any changes in that part of the premises which then has been
improved for the parking of motor vehicles so as to decrease the number or
utility of motor
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vehicle parking spaces without Lessor's prior written consent, which consent
shall not be unreasonably withheld or delayed.
SECTION 10.04: The provisions of this Section 10 shall not authorize any
action which is contrary to any then existing Fee or Leasehold Mortgage, and
shall not be binding upon one who (or upon the successors or assigns of one who)
having been previously a mortgagee, has become Lessor under this Lease by
foreclosure or by deed or assignment in lieu of foreclosure.
ARTICLE 11
DISBURSEMENTS OF DEPOSITED MONIES
SECTION 11.01: All sums of the character referred to in Sections 4.05,
9.02, 9.05, or 10.01 hereof, (hereinafter collectively referred to as "Deposited
Sums") paid to or deposited with a bank or trust company (herein called the
"Depositary") shall, subject to the provisions of the laws of the State of
Florida, be disbursed in the manner hereinafter provided.
SECTION 11.02: From time to time as any change or alteration of the
character described in Section 10.01 progresses, or as the restoration,
alteration, repairs, replacement or rebuilding of the Structures or any portion
thereof damaged or destroyed by fire or any other cause, or not taken in a
proceeding of the character described in Section 9.02 or 9.05 hereof,
(hereinafter collectively referred to as the "Work") progresses, disbursement of
any monies of the character referred to in Section 11.01 hereof shall be made in
payment for the work upon receipt by the Depositary of the following:
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A. A certificate signed by an architect or engineer licensed as such in
the State of Florida selected by Lessee dated not more than fifteen (15) days
prior to the application for such disbursement, setting forth in substance the
following:
1. That the sum then requested to be disbursed is justly due to
contractors, subcontractors, materialmen, engineers, architects or other persons
(whose names and addresses shall be stated) who have rendered and furnished
certain labor and materials for the Work and giving a brief description of such
services and materials and the principal subdivisions or categories thereof and
the several amounts so paid or due to each of said persons in respect thereof,
and stating the progress of the Work up to the date of said certificate;
2. Whether and to what extent the sum then requested has previously
been paid by Lessor, or if the same be unknown to the certificate maker, that
the same is unknown;
3. That the sum then requested to be disbursed, plus all sums
previously disbursed, does not exceed the cost of the Work insofar as actually
accomplished up to the date of such certificate;
4. Assurances satisfactory to Lessor that the balance of the
Deposited sums will be sufficient to pay in full for the completion of the Work,
failing which assurances Lessor shall be entitled to receive other assurances
satisfactory to it of payment in full for completion thereof;
5. That no part of the cost of the services and materials described
in the foregoing subparagraph A 1 has been or
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is being, in any previous or then pending application, made the basis for the
disbursement of any part of the Deposited Sums or has been paid out of insurance
monies not required to be paid to the Depositary; and
6. That except for the amounts, in any, stated in said certificate
pursuant to the foregoing subparagraph A 1 to be due for services or materials,
there is no outstanding indebtedness known to the person signing the
certificate, after due inquiry, which is then due and payable for work, labor,
services and materials in connection with the Work, which, if unpaid, might
become the basis of a vendor's, mechanic's, laborer's, or materialman's
statutory or similar lien upon Lessee's leasehold estate or Lessor's interest in
the Demised Premises or any part thereof.
B. A certificate signed by Lessee dated not more than ten (10) days prior
to the application for such disbursement, setting forth in substance, to the
best knowledge of Lessee, after due inquiry, that all materials and all property
described in the certificate furnished pursuant to the foregoing subparagraph A
(hereinafter said certificate) and every part thereof, are free and clear of all
mortgages, liens, charges or encumbrances, except encumbrances specified in said
certificate, if any, securing indebtedness due to persons whose names and
addresses and the several amounts due them shall be stated in said certificate,
which encumbrances will be discharged upon payment of such indebtedness; and
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C. A current certificate of a lawyer or title company reasonably
satisfactory to Lessor showing that there has not been filed, with respect to
the Demised Premises, or any part thereof, or any interest therein or in this
Lease, any vendor's, mechanic's, laborer's, or materialman's statutory or
similar lien which has not been discharged of record, except such as will be
discharged upon payment of the amount then requested to be disbursed.
Upon compliance with the foregoing provisions of this Section, the
Depositary shall, out of the Deposited Sums, disburse to the persons named in
said certificate to be due to them and shall then disburse to Lessee the amounts
stated in said certificate to have been paid by Lessee.
SECTION 11.03: Upon receipt by the Depositary of (a) a certificate signed
by an officer of either Lessor or Lessee, dated not more than ten (10) days
prior to the application for such disbursement, setting forth in substance the
following: (i) that the Work has been completed in full; (ii) that all amounts
which Lessee is or may be entitled to have disbursed to Lessee of others under
the foregoing provisions of this Section on account of services rendered or
materials furnished in connection with the Work have been disbursed under said
provisions; (iii) that all amounts for whose payment Lessee is or may become
liable in respect of the Work have been paid in full; and (iv) that no Event of
Default has occurred which has not been remedied and (b) a current lawyer's
search or a certificate of a title company reasonably satisfactory to Lessor
showing that
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there has not been filed with respect to Lessee's leasehold estate of Lessor's
interest in the Demised Premises or any part thereof, any vendor's, mechanic's,
laborer's or materialman's statutory or similar lien which has not been
discharged of record, then the whole balance of the Deposited Sums not
theretofore disbursed pursuant to the foregoing provisions of this Section shall
be disbursed to the then holder of any Leasehold Mortgage, and then any Fee
Mortgage, in order of lien seniority, as a reduction in the principal of said
mortgage(s), or if there be no such mortgage, to Lessor.
SECTION 11.04: If an Event of Default shall have occurred and be uncured
at the time proposed for any disbursement of the Deposited Sums or any part
thereof, Lessor may notify the Depositary thereof and thereupon the Depositary
shall have not further right or obligation to disburse any of the Deposited Sums
to Lessee as herein provided, but shall disburse the same to or for the account
of the Mortgagee who shall have delivered the instrument referred to in Section
15.03 hereof, or in the event of the termination of this Lease, who shall have
obtained a new lease pursuant to Section 15.07 hereof, or, if any such Mortgagee
shall not have elected within the period specified in said Section 15.07 to
obtain such new lease; to Lessor upon Lessor's direction so to do.
SECTION 11.05: Lessor and Lessee agree that the Depositary shall have the
right to deduct from the Deposited Sums prior to any disbursement thereof
pursuant to Section 11.02 hereof its
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reasonable charge for acting as Depositary hereunder, which charge shall be
ultimately borne by Lessee.
SECTION 11.06: In the event there is then a Mortgage on Lessor's interest
in this Lease, or on the Demised Premises, all certificates and assurances
required by Section 11.02 shall be subject to the approval of the then holder of
the most senior of such Mortgages. In the event a Mortgagee has become Lessor
under this Lease, through foreclosure or assignment or deed in lieu of
foreclosure, all certificates and, assurances required under Section 11.02 shall
also be subject to the then Lessor's approval.
SECTION 11.07: Any other provision notwithstanding, disbursements by the
Depositary shall comply with all terms of and procedures under the Mechanic's
Lien Law as then amended and in effect, so as to keep the Demised Premise free
of lien claims, and Lessee shall furnish proofs of such compliance to Lessor.
ARTICLE 12
MECHANIC'S LIENS
SECTION 12.01: Lessor's estate shall not be subject to claim of lien as a
result of any action or inaction by Lessee, Lessee having no power to encumber
Lessor's estate, (and Lessee shall not cause, suffer or permit any mechanic's
liens to be filed against the Demised Premises, nor against Lessee's leasehold
interest therein) by reason of work, labor, services, or materials supplied or
claimed to have been supplied to Lessee or to anyone holding any interest in the
Demised Premises, or any part thereof, through or under Lessee, whether or not
the work,
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labor, services or materials are authorized under this Lease as change or
alteration, Work, or otherwise. If claim of any mechanic's lien thus prohibited
shall at any time be filed, and if Lessee shall fail to cause the same to be
discharged of record by payment, deposit, bond, order of a court of competent
jurisdiction or otherwise within 60 days of filing of such claim then, in lieu
of any other right or remedy of Lessor, Lessor may but shall not be obligated
to, discharge the same either by paying the amount claimed to be due or by
procuring the discharge of such lien by deposit or by bonding proceedings, and,
in the latter event Lessor shall be entitled, if Lessor so elects, to compel the
prosecution of an action to resolve all issues with respect to such mechanic's
lien and to pay the amount of the judgment in favor of the lienor (if any) with
interest, costs and allowances. If Lessor shall pay, bond off or otherwise
procure discharge of such lien then the amount so paid by Lessor shall be
repaid, forthwith upon Lessor's demand, by Lessee to Lessor with interest at the
rate of eighteen per cent (18%) from Lessor's payment to the date of Lessee's
repayment, together with reasonable attorney's fees, if any, incurred by Lessor
in connection therewith.
Nothing in this Lease contained shall be deemed or construed in any way as
constituting the consent or request of Lessor, express or implied by inference
or otherwise, to any contractor, subcontractor, laborer or materialman, for the
performance of any labor or the furnishing of any materials for any specific
improvement, alteration to or repair of the Demised Premises or
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any part thereof, nor as giving Lessee a right, power or authority to contract
for or permit the rendering of any services or the furnishing of any materials
under circumstances that would give rise to the filing of any mechanic's liens
against Lessor's interest in the Demised Premises or in this lease.
ARTICLE 13
BUILDING, LAWFUL USE, INSPECTION AND
SURRENDER OF DEMISED PREMISES
SECTION 13.01: The parties acknowledge that Lessee is in possession of the
Demised Premises, free and clear of any and all tenancies or occupancies other
than Lessee's.
The parties agree that at Lessor's expense there has been a multi-storied,
24,000-square-foot (approximately) office building and related improvements
constructed on the Land, substantially in accordance with plans, sketches and
specifications marked for CRC Press office building (collectively the "Plans")
prepared by Schwab & Twitty, Architects of Palm Beach, Florida, and dated May
18, 1978, as revised, copies of which are in the possession of Lessee.
SECTION 13.02: The Structures shall be maintained substantially as built
(subject to Article 10) in a good and workmanlike manner. There shall be no
substantial changes in the construction of the Structures except for such
changes, repairs, alterations and additions as are authorized or required by
this Lease as from time to time modified; or as are requested or required by:
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(a) the governmental authorities or insurance underwriters having
jurisdiction thereover, or
(b) either or both of the holder of a permanent (i) Leasehold Mortgage or
(ii) Fee Mortgage to which the lease is subordinate.
Lessor shall under no circumstances be liable for any cost or expense of
such repairs, restorations, alterations or improvements.
SECTION 13.03: A. At all times during this Lease, and upon either
termination of this Lease (for any reason and in any manner) or the expiration
of this Lease, Lessor shall be the sole owner, as between the parties, of the
Structures and of any and every improvement and Alteration then upon the Land,
all without consideration other than the express terms of this Lease.
B. Lessor shall as between the parties be the sole
owner of all fixtures, machinery and equipment which are not the subject of
separate, written agreement between the parties and which are then customarily
used in connection with operation and maintenance of the Demised Premises (as
distinct from operation of Lessee's business on the Demised Premises). Subject
to Section 6.03 hereof, Lessee shall be unrestricted in its freedom to acquire,
replace, maintain and trade in or otherwise transfer any and every such fixture,
machinery and equipment as appropriate in the ordinary course of operation of
the Demised Premises. Nothing herein shall include or refer to personalty which,
by the terms of any sublease approved by Lessor, is to remain the subtenant's
property.
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ARTICLE 14
ASSIGNMENT OR ENCUMBRANCE OF LEASEHOLD; SUBLEASING
SECTION 14.01: Lessee shall have the right, from time to time, to mortgage
this Lease and the leasehold estate hereby created, or any combination of them,
to an Institutional Mortgagee. The execution and delivery of any such mortgage
shall not be deemed to constitute an assignment or transfer of this Lease so as
to require prior consent of Lessor.
SECTION 14.02: Except as provided in Section 14.01, Lessee may not,
without the prior written consent of Lessor, which consent shall not be
unreasonably withheld or delayed, assign or transfer this Lease or Sublease any
part of the Demised Premises to any persons, firms, corporations, or other
entity, except to an Exempt Assignee, as that term is hereinafter defined. As to
any assignment or transfer, whether with the approval of the Lessor or to an
Exempt Assignee, Lessee shall deliver to Lessor on Lessor's demand, (a) a
duplicate original of the instrument or instruments of transfer of this Lease in
recordable form, containing the name and address of the transferee thereof, and
(b) an instrument of assumption by said transferee of all of Lessee's
obligations under this Lease, failing which assumption such assignment or
transfer shall be void.
SECTION 14.03: No assignment or transfer or sublease shall release Lessee
from any of its obligations under this Lease.
SECTION 14.04: "Exempt Assignee" shall refer only to persons, firms,
corporations or any other entities becoming co-venturers with Lessee and jointly
and severally liable with
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Lessee, or such entities of which Lessee owns or controls not less than 51% of
all beneficial interests therein. Exempt Assignees may assign or transfer their
respective interests to each other in the manner above specified for assignments
by Lessee to Exempt Assignees without any such assignment constituting a
violation of Section 14.02.
ARTICLE 15
DEFAULT PROVISIONS-TERMINATION-REMEDIES
SECTION 15.01: In case one or more of the following events (herein called
an "Event of Default") shall have occurred:
(a) failure in the payment of the Basic Rent or in payment of any item of
(or obligation which Lessor must or may treat as) additional rent or in payment
of any part thereof, and such default shall continue for a period of thirty (30)
days after written notice thereof, specifying such default, shall have been
given to Lessee; or
(b) default shall be made in the performance of any other covenant or
agreement on the part of Lessee to be performed hereunder, and such default
shall continue for a period of sixty (60) days after written notice thereof
specifying such default shall have been given to Lessee; provided, however, in
the case of a default which cannot with due diligence be remedied within a
period of sixty (60) days, if Lessee proceeds with due diligence as promptly as
reasonably possible after the service of such notice to prosecute the remedying
of such default, the period of time after the giving of such notice within which
to remedy the
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default shall be extended for such period as may be necessary to remedy the same
with due diligence; or
(c) if, pursuant to an order, judgment or decree entered by (or
proceedings in) any court of competent jurisdiction:
(i) a receiver, trustee or liquidator of Lessee or of all or a
substantial part of Lessee's assets shall be appointed and not be
removed within thirty (30) days after such appointment;
(ii) Lessee shall be, and continue for thirty (30) consecutive days
to have been adjudicated bankrupt or insolvent;
(iii) a petition seeking reorganization of the Lessee or an
arrangement with creditors or to take advantage of any insolvency or
bankruptcy law shall be approved, and as a result of any or all of
(i), (ii) or (iii) the obligation of Lessee to pay the Basic Rent or
any item of additional rent shall be modified or abrogated; or
(iv) this Lease or any of the obligations of Lessee hereunder are
disaffirmed by any trustee in or out of bankruptcy, or by any
receiver or liquidator of Lessee appointed in any proceeding by any
court of competent jurisdiction (regardless of whether or not such
trustee, receiver or liquidator shall continue in possession of the
Demised Premises or shall pay an amount for the use and occupancy
thereof which may be
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equal to or in excess of the Basic Rent and all items of additional
rent payable by Lessee hereunder)
then Lessor may, at its option, give to Lessee a notice of election to end the
term of this Lease at the expiration of five (5) days from the date of service
of such notice, (provided Lessor has also served any such in conformity with the
provisions of Article 21 hereof) and if such notice of election is given, then,
at the expiration of said five (5) days the term of this Lease and all right,
title and interest of Lessee hereunder, and any and every option of any nature
hereunder, shall expire as fully and completely as if that day were the date
herein specifically fixed for the final expiration of the term of this Lease,
and Lessee will then quit and surrender the Demised Premises to Lessor, but
Lessee shall remain liable as hereinafter provided.
SECTION 15.02: If Lessor shall become entitled to serve a notice of
election to end the term of this Lease upon the occurrence of an Event of
Default, Lessor will, before serving such notice, give to the holder of any
Leasehold Mortgage and any Fee Mortgage, a prior notice that a specified default
remains unremedied and that Lessor is entitled to serve such notice, and the
holder of the Leasehold Mortgage or Fee Mortgage shall have the right to remedy
any such default within the time Lessee could have remedied the same had the
date of such Event of Default been the date of such prior notice. Such prior
notice may be given simultaneously with or at any time after the notice of
default to Lessee.
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SECTION 15.03: In case of the occurrence of an Event of Default (other
than an Event of Default of the character specified in Section 15.01(a) hereof)
Lessor agrees that if, within twenty (20) days after the prior notice referred
to in Section 15.02 hereof is given by Lessor to the holder of a Leasehold
Mortgage or Fee Mortgage, such holder shall:
(a) notify Lessor of its election to proceed with due diligence promptly
to acquire possession of the Demised Premises, or to foreclose its mortgage, or
otherwise to eliminate Lessee's interest in this Lease; and
(b) deliver to Lessor an instrument in writing duly executed and
acknowledged wherein the holder of the Leasehold Mortgage or Fee Mortgage agrees
that:
(i) during the period that such holder shall be in possession of the
Demised Promises, including possession through a judicially appointed officer,
and during the pendency of any such foreclosure or other proceedings and until
the interest of the lessee in this Lease shall terminate, it will pay or cause
to be paid to Lessor all sums from time to time becoming due under this Lease
for Basic Rent or any item of, or treated as, additional rent; and
(ii) if final delivery of possession of the Demised Premises shall
be made to such holder, whether voluntarily or pursuant to any foreclosure or
other proceedings or otherwise, such holder shall, promptly following such
delivery of possession, thenceforth perform or cause to be performed in full all
the covenants and agreements herein contained on Lessee's part to be performed;
then Lessor will postpone the service of notice of election to end the term of
this Lease as in Section 15.01 hereof provided for such period or periods of
time as may be necessary for such holder, with the exercise of due diligence, to
extinguish lessee's interest in this Lease, as aforesaid, and to perform or
cause to be performed all of the said covenants and agreements herein contained,
as aforesaid. Upon such final extinguishment of lessee's interest in this lease
and such performance by such
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holder or such nominee, or by any purchaser of the Lease pursuant to any
foreclosure proceeding, both (i) Lessor's right to serve a notice of election to
end the term of this Lease as in Section 15.01 hereof provided, based upon the
occurrence of any such Event of Default, and (ii) the existence of any such
Event of Default which cannot with the exercise of due diligence be remedied by
such holder or its nominee or by such purchaser, shall thereupon be irrevocably
waived.
SECTION 15.04: Upon the termination of this lease, Lessee shall surrender
to Lessor the Demised Premises in good order and repair, reasonable wear and
tear excepted and also except as Lessee may have been prevented from maintaining
the Structures in good order and repair by occupation of the Structures by any
sovereign or agent who shall have lawfully taken the temporary use thereof and
shall then be in possession thereof. Upon such termination, Lessee shall also
deliver to Lessor all leases, lease files, plans, specifications, drawings,
contracts, records, registers and all other papers and documents which may be
necessary or of substantial aid for the proper operation and management of the
Demised Premises in their then form.
SECTION 15.05: Upon the expiration or termination of the term of this
Lease, pursuant to any of the provisions of this Article or otherwise, it shall
be lawful for Lessor, without formal demand or notice of any kind, to re-enter
the Demised Premises by summary dispossess proceedings or any other action or
proceedings authorized by due process of law, or by force, changing of locks,
erection of barricades or otherwise, and to
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remove Lessee therefrom without being liable for any damages therefor.
SECTION 15.06: Nothing in this Lease shall limit the right of Lessor to
recover possession of the Demised Premises for non-payment of the Basic Rent or
any item of (or treated as) additional rent pursuant to any summary proceeding
or other proceeding or remedy available to it by statute or other law at any
time after (i) the occurrence of an Event of Default of the character specified
in Section 15.01(a) hereof and (ii) the expiration of the period within which
the holder of the Leasehold Mortgage or Fee Mortgage shall be entitled to remedy
such default.
SECTION 15.07: In case of the termination of this Lease, Lessor shall give
prompt notice thereof to the holder of any Leasehold Mortgage. Lessor shall, on
written request of such holder, made at any time within forty (40) days after
the giving of such notice by Lessor, enter into a new lease of the Demised
Premises with such holder, or its designee, within twenty (20) days after
receipt of such request, which new lease shall be effective as of the date of
such termination of this Lease for the remainder of the term of this Lease, at
the same rent and upon the same terms, covenants, conditions and agreements as
are herein contained and not previously fully and finally performed, provided
that the holder of such Leasehold Mortgage shall:
(a) contemporaneously with the delivery of such request, pay to Lessor all
the installments of Basic Rent and all items of
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(or treated as) additional rent which are due and unpaid through the termination
of this Lease;
(b) pay to Lessor at the time of the execution and delivery of said new
lease any and all sums for Basic Rent and additional rent which would (had this
lease not been terminated) have been due hereunder from the date of termination
of this Lease to and including the date of the execution and delivery of said
new lease, less the net amount of all sums received by Lessor from any leases of
the Demised Premises up to the date of commencement of such new lease; and
(c) on or prior to the execution and delivery of said new lease, agree in
writing that promptly following the delivery of such new lease, such holder or
its designee will thereupon with due diligence perform or cause to be performed
all of the covenants and agreements herein contained on Lessee's part to be
performed, whether thenceforth or, to the extent that Lessee shall have failed
to perform the same, prior to the date of delivery of such new lease.
Nothing contained herein shall be deemed to impose any obligation on
the part of Lessor to deliver physical possession of Demised Premises to such
holder of a Leasehold Mortgage unless Lessor at the time of the execution and
delivery of such new lease shall have obtained physical possession thereof.
SECTION 15.08: In the event of termination of this Lease by Lessor, Lessor
shall be entitled (i) to accelerate and recover from Lessee all rent for the
remainder of the original term, to the extent not paid by a new lessee (under
Paragraph 15.07 or
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otherwise), and (ii) to recover from Lessee all costs and expenses of reletting,
including but not limited to any expense incurred by the Lessor in performing
any of the work which is the obligation of the Lessee hereunder and any expenses
(including but not limited to reasonable attorneys' fees) incurred by the Lessor
for the repossession, repair, or remodeling of the premises following
repossession, and reasonable brokerage commissions incurred in such reletting.
SECTION 15.09: Pursuit of any remedy provided for in this lease shall not
preclude pursuit of any other remedy provided elsewhere in this lease or by law,
nor shall the pursuit of any remedy constitute a forfeiture or waiver of (i) any
rent due to the Lessor hereunder or (ii) any damage accruing to the Lessor by
reason of violation by the Lessee of any of the terms, provisions and covenants
herein contained.
ARTICLE 16
INDEMNIFICATION OF LESSOR
SECTION 16.01: Lessee agrees to indemnify and save harmless Lessor against
and from any and all claims by or on behalf of any person arising from the
conduct or management of, or from any work or thing whatsoever done in or on,
the Demised Premises, and will further indemnify and save Lessor harmless
against and from any and all claims arising during the term of this Lease from
any condition of the Demised Premises or any street, curb or sidewalk adjoining
the Demised Premises, or of any vaults, passageways or space therein or
appurtenant thereto, or arising from any breach or default on the part of Lessee
in
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the performance of any covenant or agreement on the part of Lessee to be
performed, pursuant to this Lease, or arising from any act or negligence of
Lessee, or any subtenant or occupant of the Structures or any part thereof, or
of Lessee's or occupants' agents, contractors, servants, employees or licensees,
or arising from any accident, injury or damage whatsoever caused to any person
or property occurring during the term of this Lease in or about the Demised
Premises, or upon or under the sidewalks, and the land adjacent thereto, and
from and against all judgments, costs, fees, expenses and liabilities incurred
in or about any such claim or action or proceeding brought thereon.
ARTICLE 17
RENEWAL PRIVILEGES
SECTION 17.01: There shall be no privilege to Lessee of renewal of the
term of this Lease. The parties may or may not subsequently agree to renewal
rights in Lessee; renewal thereunder shall be subject to all terms of this lease
pertaining to renewal not specifically modified in writing as part of such
subsequent agreement. There is no understanding or obligation with respect to
such subsequent agreement or the discussion or negotiation thereof.
ARTICLE 18
LIMITATION OF LESSOR'S LIABILITY
SECTION 18.01: The term "Lessor" as used in this Lease so far as covenants
or obligations on the part of Lessor are concerned shall be limited to mean and
include the owner or owners, at the time in question, of the fee title to the
Demised
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Premises. In the event of any transfer or transfers of the title to such fee
title, the Lessor herein named (and in case of any subsequent transfers or
conveyances the then grantor) shall be automatically freed and relieved from and
after the date of such transfer or conveyance of all liability as respects the
performance of any covenants or obligations on the part of Lessor contained in
this Lease thereafter to be performed, provided that any funds in the hands of
such Lessor or the then grantor at the time of such transfer, in which Lessee
has an interest, shall be turned over to the then transferee or grantee and any
amount due and payable therefrom to Lessee shall be paid to Lessee, and provided
further that upon any such transfer, the grantee or transferee shall be deemed
to have expressly assumed, subject to the limitations of this Article, all of
the terms, covenants and conditions in this Lease contained on the part of
Lessor thereafter to be performed, it being intended hereby that the covenants
and obligations contained in this Lease on the part of Lessor shall, subject as
aforesaid, be binding on Lessor and its successors and assigns, but only during
and in respect of their respective periods of ownership.
ARTICLE 19
INVALIDITY OF PARTICULAR PROVISIONS
SECTION 19.01: If any term or provision of this Lease or the application
thereof to any person or circumstance, shall to any extent be invalid or
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unenforceable, the remainder of this Lease, or the application of such term or
provision to persons or circumstances other than those as to which it is invalid
or unenforceable, shall not be affected thereby. Each term and provision of this
lease shall be valid and be enforced to the fullest extent permitted by law.
ARTICLE 20
CERTIFICATES OF LESSOR AND LESSEE
SECTION 20.01: Each party agrees at any time and from time to time, upon
not less than twenty (20) days prior notice by the other party or by the holder
of any Fee or Leasehold Mortgage, to execute, acknowledge and deliver to the
other party and to the holder of such mortgage, a statement in writing
certifying that this Lease is unmodified and in full force and effect (or if
there have been modifications, that the Lease is in full force and effect as
modified and stating the modifications) and the dates to which the Basic Rent
has been paid, and stating whether or not to the best knowledge of the party
signing such statement the other party is in default in keeping, observing or
performing any term, covenant, agreement, provision, condition or limitation
contained in this Lease (or if in default, specifying each such default), it
being intended that any such statement delivered pursuant to this Section may be
relied upon by the requesting party, any prospective purchaser of the fee title,
assignee or subtenant of Lessee, holder or prospective holder of any mortgage,
or assignee of any such mortgage(s), but reliance on such statement may not
extend to any default as to which the party making the statement shall have had
no occasion to acquire actual knowledge with reasonable diligence.
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ARTICLE 21
NOTICES
SECTION 21.01: Any notice, demand or request which, under the terms of
this Lease or under any statute, must be given or made by the parties hereto,
must be in writing, and must be given or made by personal service or by mailing
the same by registered or certified mail addressed to Lessor at 5550 Glades
Road, Suite 400, Boca Raton, Florida 33431, and to Lessee at the Demised
Premises. Any mailed notice given hereunder shall be deemed delivered when
deposited in a United States general or branch office, properly sealed or
enclosed, registered or certified, postage and mailing charges prepaid. If
requested in writing by the holder of any Fee or Leasehold Mortgage (which
request shall be made in the manner hereinabove provided for notices between the
parties hereto and shall specify and address to which notices or demands shall
be given or made) any such notice or demand shall also be given or made in the
manner herein specified and contemporaneously to such holder. Either party, and
the holder of the Leasehold Mortgage (which request shall be made in the manner
hereinabove provided for notices between the parties hereto and shall specify an
address to which notices or demands shall be given or made) any such notice or
demand shall also be given or made in the manner herein specified and
contemporaneously to such holder. Either party, and the holder of the Leasehold
Mortgage or Fee and Leasehold Mortgagee who shall have made the request
hereinabove referred to, may designate by notice in writing given in the manner
herein
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specified a new or other address to which such notice or demand shall thereafter
be so given or made. No Event of Default predicated on the giving of any notice
to Lessee shall be complete unless such notice shall have been given
contemporaneously therewith to each holder of a Fee or Leasehold Mortgage who
shall have made a request for notices and demands as above provided.
SECTION 21.02: If at any time there shall be more than one Leasehold
Mortgage or Fee Mortgage, the holder of each Mortgage having a first lien on the
Fee or Leasehold (or both) shall be vested with the rights under Sections 15.02,
15.03 and 15.07 of Article 15 hereof to the exclusion of the holder of any
mortgage junior thereto; provided, however, that if the holder of a Mortgage
prior in lien to any other Mortgage shall fail or refuse to exercise the rights
set forth in said Sections of said Article 15, each holder of a Mortgage in the
order of the priority of their respective liens shall have the right to exercise
such rights and provided further, however, that with respect to the right of the
holder of a Mortgage under Section 15.07 hereof to request a new lease, such
right shall, notwithstanding the limitation of time set forth in said Section,
be extended serially for 20-day periods to the holder(s) of each junior
Leasehold Mortgage. Mortgage in the order of the priority of their liens, until
a holder exercises such right (or until all holders of such Leasehold Mortgages
shall not have timely exercised such right).
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ARTICLE 22
DISPUTES; COUNSEL FEES
SECTION 22.01: In the event of any dispute required by this Lease to be
submitted to and settled by arbitration, then such dispute shall be determined
in the City of Boca Raton, Florida, by binding arbitration in accordance with
the Commercial Arbitration Rules then obtaining of the American Arbitration
Association, or, if such Association shall not then be in existence, such other
organization, if any, as shall then have become the successor of said
Association, and in accordance with the then prevailing laws of the State of
Florida relating to arbitration. If allowed by the tribunal having jurisdiction,
Lessee and Lessor shall each appoint a fit and impartial person as arbitrator,
and the tribunal a third and last arbitrator.
SECTION 22.02: If the matter involves an appraisal of the value of the
Demised Premises or the leasehold estate or any other portion thereof or
interest therein, then each arbitrator so selected by a party (if any) shall be
a person who has had not less than five (5) years' experience in appraising
commercial real estate in Palm Beach County, Florida.
SECTION 22.03: The fees of the arbitrators and the expenses incident to
the arbitration proceedings, including costs of making a record, shall be borne
equally by the parties. The fees and expenses of counsel for the respective
parties and witnesses shall be paid by the respective party engaging such
counsel or calling such witness.
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SECTION 22.04: If either or both parties shall fail diligently to proceed
with any matter which is the subject of arbitration hereunder, the holder of the
Leasehold Mortgage (or, if none, the Fee Mortgage) prior in lien among such
holders who wish to do so shall have the right, in place and stead of such party
or parties, to cause arbitration of said dispute as herein provided and any
award made in said arbitration proceeding shall be binding upon the parties with
the same force and effect as if the parties had proceeded with said arbitration.
SECTION 22.05: In any litigation arising out of or relating to this Lease,
the prevailing party shall be entitled to its reasonable counsel fees, as well
as all other costs and expenses.
SECTION 22.06: Any reference in this Article or elsewhere in this lease to
counsel fees, attorney fees, or words of like import, shall include fees in all
proceedings, in or out of court, at all levels, hearing, trial and appellate.
ARTICLE 23
REMEDIES - NO WAIVER - CHANGES - JURY TRIAL WAIVER
SECTION 23.01: The specified remedies to which either party may resort
under the terms of this Lease are cumulative and are not intended to be
exclusive of each other or of any other remedies or means of redress to which a
party may be lawfully entitled in case of any breach or threatened breach, by
the other party, of any provision of this Lease.
In addition to the other remedies in this Lease provided, each party shall
be entitled to the restraint by injunction of
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the violation, or attempted or threatened violation, of any of the covenants,
conditions or provisions of this Lease.
SECTION 23.02: One or more failures of a party to insist upon strict
performance of the covenants, conditions or other terms of this Lease, or to
exercise any option conferred anywhere in this lease upon such party in any one
or more instances, shall not be construed as a waiver or relinquishment for the
future by such party of any covenants, conditions, options or terms, but the
same shall be and remain in full force and effect. The acceptance by Lessor of
rent with or without knowledge of the breach of any covenant hereof shall not be
deemed a waiver of such breach. No waiver by a party of any provision hereof
shall be deemed to have been made, nor shall voluntary surrender of the Demised
Premises prior to July 31, 2006, be valid unless expressly agreed to in writing.
This Lease shall not be modified by any simultaneous or subsequent implied
agreement or by course of dealing, custom or usage hereafter arising, all of the
terms of the contract between Lessor and Lessee having been fully set forth
herein.
SECTION 23.03: Except in the case of any action, proceeding or
counterclaim brought by either of the parties against the other for personal
injury or property damage, Lessor and Lessee hereby waive a trial by jury of any
and all issues arising in any action or proceeding or counter claim between the
parties hereto or their successors arising out of or in any way connected with
this Lease, or any of its provisions, or Lessee's use or occupancy of the
Demised Premises, or any claim of injury
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or damage. Lessee hereby expressly reserves the right to interpose its then
grievances, causes and claims (if any) as against Lessor in any action or
proceeding for distress, termination of this Lease, removal of Lessee or other
possessory remedy brought by Lessor against Lessee pursuant to this Lease.
SECTION 23.04: This Lease cannot be changed orally but only by an
agreement in writing executed and acknowledged by Lessor and Lessee.
ARTICLE 24
INTERPRETATION
SECTION 24.01: Neither the Table of Contents nor the Article numeration
nor the headings of Articles shall affect interpretation of this Lease. The
parties agree they have not relied on the presence or absence of such Table or
headings, or of any language in either of them, in understanding or agreeing to
this Lease, but the same are merely conveniences and not intended to be a
comprehensive index, notice or summary of the contents of this Lease.
ARTICLE 25
PARKING; OPTION TO LEASE
SECTION 25.01: The parties acknowledge that Lessor presently intends, but
is not bound to Lessee or to anyone else, to construct upon so much of Tract A
of the plat of "STARKOFF ASSOCIATES, a Florida general partnership", according
to the plat thereof recorded in Plat Book 35, Page 101, of the Public Records of
Palm Beach County, Florida, as is not described on Exhibit A hereto, an office
building having a design and usability
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compatible with the Structures (the "new building"), Lessor hereby grants to
Lessee an option to lease up to one-third (1/3) of net rentable space in such
new building for the rental of $14.00 per square foot of space rented, which
rental shall be net of expenses and taxes to the same extent as the rentals
under the within Lease are net to Lessor, and shall be subject to adjustment for
changes in the CPI in the same manner, to the same extent, and at the same
times, as the Basic Rent under the within Lease is required to be adjusted under
Section 2.03 of the foregoing Lease. Computations of area rented shall be by the
same method as such computations pertaining to the Demised Premises were made.
SECTION 25.02: The option hereby granted shall apply only to contiguous
space, and must be exercised by notice in writing to Lessor, delivered to Lessor
within sixty (60) days after Lessor shall have furnished Lessee a copy of the
plans and specifications for the new building and notified Lessee in writing
that the new building and related improvements are under contract to be
constructed. Lessee shall have the right to inquire, at any time prior to the
time it is required to exercise its option, as to Lessor's best estimate of the
completion date of the new building.
SECTION 25.03: Lessee shall, if and to the extent the foregoing option is
not exercised, have the right to rent such contiguous space in the new building
upon said terms at any time within two (2) years of issuance of certificate of
occupancy for
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the new building while the same shall not be subject to any lease with a third
party.
SECTION 25.04: Any and all leases of space in said new building by and
between the parties shall be upon Lessor's then standard lease form for said new
improvements, except as expressly modified by written agreement between the
parties, including but not limited to the foregoing provisions of this Article.
SECTION 25.05: Lessor reserves the right to use so much of the Demised
Premises as may be necessary to carry on construction of such additional
improvements from time to time, but shall use commercially reasonable best
efforts not to interfere with the operations of Lessee in the Structures. Lessor
further reserves the right to connect said new building and the Structures by
landscaping, sidewalks, walkways at the first or second story level and other
means reasonably believed by Lessor to facilitate the then current or future
value, use or rental of the Structures and the new building. Lessor further
reserves the right to afford to occupants of the new building parking rights on
any and all of the Land, provided that Lessor must also provide to Lessee
parking rights on the Land in connection with its use and occupancy of the
Structures on terms at least as favorable as those afforded any tenant in the
new building. Lessee agrees to enter into any support, easement, cross-parking
and related agreements which may reasonably be required by Lessor or the holder
of any Fee Mortgage or Leasehold Mortgage, or the holder of any mortgage on such
new building and additional improvements,
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the land upon which they are placed or in connection with which they are used,
or any lease of space in the new building.
SECTION 25.06: Unless and until such new improvements shall be
constructed, Lessee shall have the exclusive use of any and all parking spaces
on the Land, or upon the abutting land described in Section 25.01. It is the
intention and agreement of the parties that, even if additional improvements are
constructed on abutting land, the parking on such abutting land and the parking
on the Land shall be usable by tenants in any and all improvements (whether the
Structures or new building) consistent with then applicable laws and
regulations, the requirements of any Fee or Leasehold Mortgage, and the best
interests of tenants in the Structures and new building, as reasonably
determined by Lessor.
ARTICLE 26
ENCUMBRANCES
SECTION 26.01: No part of the Land, the Structures, or any interest under
this Lease, shall be subject to or encumbered by any lien other than impositions
not due or an Institutional Mortgage as defined in this Lease.
ARTICLE 27
PETITION FOR ZONING CHANGES
SECTION 27.01: Lessee is hereby authorized and empowered, for an on behalf
of Lessor and as the attorney in fact of Lessor, to execute on Lessor's behalf a
consent to petition for any zoning change relating to the Land or the
Structures, or both, where the zoning change is required for the purpose of
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authorizing the operation of the Land and Structures for any purpose of Lessee's
not inconsistent with the terms of this Lease, or to join in any petition for a
release from restrictive covenants which interfere with the operation or
improvement of the Land or Structures (or both) for such purpose.
ARTICLE 28
COVENANTS TO BIND AND BENEFIT THE RESPECTIVE PARTIES
SECTION 28.01: It is further covenanted and agreed by and between the
parties hereto that the covenants and agreements herein contained shall bind and
inure to the benefit of Lessor and Lessee and their respective heirs, executors,
administrators, representatives, successors and assigns.
ARTICLE 29
ERASURES
SECTION 29.01: Erasures initialled by the parties hereto or intialled
interlineations, if any, were made prior to the execution and acknowledgment of
this Lease.
ARTICLE 30
RECORDATION
SECTION 30.01: The parties hereto agree not to record this Lease but to
execute and acknowledge before a Notary Public in a summary form sufficient for
recording in the Public Record of
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Palm Beach County, Florida, a certificate as to the existence of this Lease.
IN WITNESS WHEREOF, this Lease has been duly executed by Lessor and Lessee
the day and year first above written.
Witnesses as to Lessor: STARKOFF ASSOCIATES, a Florida
General Partnership
/s/ Glenna F. Orsbin BY:/s/ B.J. Starkoff
- -------------------------- ------------------------------------
Managing Partner
/s/ Deborah Stevens
- --------------------------
Witnesses as to Lessee: CRC PRESS, INC., a Florida
Corporation
/s/ Glenna F. Orsbin BY:/s/ B.J. Starkoff
- -------------------------- ------------------------------------
President
/s/ Deborah Stevens
- --------------------------
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Exhibit 10.11
MODIFICATION AND EXTENSION OF LEASES
THIS AGREEMENT is made as of the 1st day of January, 1994, with an
effective date as of January 1, 1994, by and between STARKOFF ASSOCIATES
("Lessor"), a Florida general partnership with its principal place of business
at 1900 Corporate Boulevard, N.W., Suite 200, East Building, Boca Raton, Florida
33431, and CRC PRESS, INC. ("Lessee"), a Florida corporation with a mailing
address of 2000 Corporate Boulevard, N.W., Boca Raton, Florida 33431.
R-E-C-I-T-A-L-S
WHEREAS, Lessor and Lessee entered into a lease agreement ("Lease 1")
dated as of January 1, 1989, with respect to the space at suite 210, 1900
Corporate Boulevard, N.W., West Building, Boca Raton, Florida, as subsequently
modified by Addendum to Lease dated as of January 13, 1992, effective September
1, 1991, adding suite 201 and suite 205 (now collectively known as suite 205),
and suite 305, 1900 Corporate Boulevard, N.W., West Building, as further
modified by Amendment to Lease dated December 11, 1992, effective January 1,
1993, adding suite 310 and deleting suite 305, 1900 Corporate Boulevard, N.W.,
West Building; and
WHEREAS, Lessor and Lessee entered into a lease agreement ("Lease 2")
dated February 14, 1990, effective January 1, 1990 with respect to space at
suite 300, 1900 Corporate Boulevard, West Building (Lease 1 and Lease 2 with
their amendments are hereinafter referred to individually, or may be
collectively referred to as "the Leases"; and
<PAGE>
WHEREAS, Lessor and Lessee now wish to modify the Leases and to extend the
terms thereof, according to the provisions set forth below:
NOW THEREFORE, is it agreed as follows:
(1.) TERM. The term of the Leases (the "Extended Lease Term") shall be
five (5) years, commencing January 1, 1994 and ending December 31, 1998.
(2.) NO ALLOWANCES. Lessor will provide no funds for any improvements to
the Premises during the Extended Lease Term.
(3.) PREMISES. The suites subject to the Leases and this Agreement (the
"Premises") are as follows:
Suite No. Rentable Area
--------- -------------
205 3,046.35 sq. ft.
210 6,265.40 sq. ft.
300 4,521.80 sq. ft.
310 2,520.80 sq. ft.
----------------
16,354.35 sq. ft. TOTAL
(4.) RENT (a) Effective January 1, 1994, the Basic or Fixed Rent for the
Premises shall be $6.00 per rentable square foot, or $98,126.10 on an annual
basis, plus applicable Florida sales tax, payable in equal monthly installments
on the first (1st) day of each month, and subject to adjustment as set forth in
(b) below.
(b) On the first (1st) day of January of each year of the Extended Lease
Term, Basic Rent shall increase by three (3%) percent over the Basic Rent
payable for the previous calendar year ("Lease Year"), such that the annual
Basic Rent for the Extended Lease Term shall be as follows:
-3-
<PAGE>
Lease Year Annual Basic Rent
---------- -----------------
1/1/94 to 12/31/94 $ 98,126.10
1/1/95 to 12/31/95 101,069.88
1/1/96 to 12/31/96 104,101.98
1/1/97 to 12/31/97 107,225.04
1/1/98 to 12/31/98 110,441.79,
plus applicable Florida sales tax.
(5.) GENERAL OPERATING EXPENSES (G.O.E.): (a) Effective January 1, 1994
and continuing until December 31, 1995, annual G.O.E. shall be $7.41 per
rentable square foot, or $121,185.73 on an annual basis, plus applicable Florida
sales tax, payable in equal monthly installments on the first (1st) day of each
month, and subject to adjustment as set forth in (b) below.
(b) On the first day of January, 1996, G.O.E. (except the portion of
G.O.E. attributable to taxes, insurance and utilities) shall increase by the
lesser of (i) Lessee's share of the actual increase in G.O.E. other than taxes,
insurance and utilities, or (ii) Three (3%) percent; and Lessee's share of the
taxes, insurance and utilities components of G.O.E. shall increase by the actual
increase in such items. G.O.E. adjustments shall be made on January 1, 1997 and
January 1, 1998, according to the same formula. December 31, 1993 shall be the
base date for purposes of measuring increases in G.O.E.
(6.) OPTION TO RENEW. Provided Lessee is not in default, Lessee is hereby
granted an option to extend the Extended Lease Term for a single additional
period of seven (7) years seven (7) months ("Option Period"), on the same terms
and conditions in effect under the Leases immediately prior to the Option
Period, except that Lessee shall have no further right to extend, G.O.E. shall
increase to its then current rate, and Basic Rent shall be
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<PAGE>
increased to the Prevailing Rental Rate. The option to extend may be exercised
only by Lessee giving Lessor irrevocable and unconditional written notice
thereof no earlier than one (1) year and no later than six (6) months prior to
the commencement of the Option Period. Said exercise shall, at Lessor's
election, be null and void if Lessee is in default under the Leases at the date
of said notice or at any time thereafter and prior to commencement of the Option
Period, provided that Lessee has been notified of such default and that such
default continues beyond any period to cure such default set forth in the
Leases.
"Prevailing Rental Rate" means the average per square foot rental rate for
all renewal leases for renewal periods approximately as long as the Option
Period, executed by tenants for similar uses and lengths of time for comparable
space in the 1900 Corporate Boulevard, East and West Buildings during the six
(6) months immediately prior to the date upon which such Prevailing Rental Rate
is to become effective, where such renewal rates were not set by the terms of
such leases. If no such comparable space has been renewed during such six (6)
month period, the rental rates used for purposes of this provision shall be
adjusted to the amounts Lessor would have used had leases for such comparable
space been renewed. In all cases, such Prevailing Rental Rates shall be net of
any free rent periods and improvements allowances.
If the parties are unable to agree on the Prevailing Rental Rate prior to
the commencement of the Option Period, either party may request that the
Prevailing Rental Rate be determined by
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<PAGE>
arbitration and such determination shall be binding upon the parties.
Provided however that notwithstanding anything to the contrary, in no
event shall the Basic Rent during the Option Period ever be less than 100% of
the Basic Rent during the final year of the Extended Lease Term (i.e. Lease Year
1998), regardless of the Prevailing Rental Rate.
If Lessee shall fail to exercise the option herein provided, said option
shall terminate, and shall be null and void and of no further force and effect.
Lessee's exercise of said option shall not operate to cure any default by Lessee
of any of the terms or provisions in the Leases, nor to extinguish or impair any
rights or remedies of Lessor arising by virtue of such default. If the Leases or
Lessee's right to possession of the Premises shall terminate in any manner
whatsoever before Lessee shall exercise the option herein provided, or if Lessee
shall have subleased or assigned all or any portion of the Premises, then
immediately upon such termination, sublease or assignment, the option herein
granted to extend the Term, shall simultaneously terminate and become null and
void. Such option is personal to Lessee. Under no circumstances whatsoever shall
the assignee under a complete or partial assignment of the Leases, or a
subtenant under a sublease of the Premises, have any right to exercise the
option to extend granted herein, except that a corporation affiliated with
Lessee may do so with notice to Lessor, provided however that, in such event,
the obligations of Lessee under the Leases
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<PAGE>
shall not be affected or reduced thereby. Time is of the essence of this
provision.
(7.) Any provisions of the Leases that are contrary to the terms of this
Agreement, including without limitation:
The monetary figures set forth in Sections 1.2, 2.4, 4.1 and 4.3 of Lease
1 and the rent adjustment formula set forth in Section 2.5 of Lease 1, and
the monetary figures set forth in the Addendum to Lease 1 dated January
13, 1992 and in the Amendment to Lease 1 dated December 11, 1992, and the
monetary figures set forth in Sections 1.2, 2.4, and 2.5 of Lease 2, and
the provisions defining Lease Term in Lease 1, its Addendum and Amendment
and Lease 2, and the provisions for renewal options set forth on Addenda
attached to Lease 1 and Lease 2,
are hereby superseded, and the terms of this Agreement shall prevail, effective
January 1, 1994.
(8.) All terms and provisions of the Leases that are not contrary to the
terms of this Agreement are hereby ratified and confirmed and incorporated
herein by this reference.
IN WITNESS WHEREOF, the Lessor and Lessee have signed this Modification
and Extension of Leases by and through their duly authorized representatives, to
be effective January 1, 1994.
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<PAGE>
WITNESSES: LESSOR:
STARKOFF ASSOCIATES
/s/ Ingrid A. Fulmer BY: /s/ Florence F. Starkoff
- --------------------------- -----------------------------
Florence F. Starkoff,
/s/ Joann J. Bennett Managing Partner
- ---------------------------
LESSEE:
CRC PRESS, INC.
/s/ B. E. Vance BY: /s/ Robert T. Grant
- --------------------------- -----------------------------
Its President & CEO
/s/ Dianne N. Eel -----------------------------
- ---------------------------
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<PAGE>
LEASE
THIS INSTRUMENT IS A LEASE, dated February 14, 1990 but effective as of
January 1, 1990, in which the Landlord and the Tenant are the parties
hereinafter named, and which relates to space on the THIRD FLOOR in 1900
Corporate Boulevard, N.W., West C/O Building, Boca Raton, Florida 33431, an
office building (the "Building") owned by Landlord as part of Landlord's
development known as Starkoff Associates Executive Centre (sometimes herein the
"Centre").
ARTICLE I
BASIC LEASE PROVISIONS
1.1 INTRODUCTION. The following sets forth basic data and identifying Exhibits
elsewhere hereinafter referred to in this Lease, and, where appropriate,
constitute definitions of the terms hereinafter listed.
1.2 BASIC DATA.
Landlord: Starkoff Associates, a Florida
Partnership
Landlord's Address: 1900 Corporate Boulevard, N.W.
East Building, Suite 200
Boca Raton, Florida 33431
Tenant: CRC Press, Inc., a Florida Corporation
Tenant's Address: 2000 Corporate Blvd. N.W.
Boca Raton, Florida 33431
Guarantor: N/A
Landlord's Construction
Representative: N/A
Tenant's Construction
Representative: N/A
Tenant's Plan Delivery
Date: N/A
Scheduled Term Commencement
Date: January 1, 1990
Commencement Date: As defined in Section 2.3 hereof.
<PAGE>
Lease Term: Sixty (60) calendar months unless
extended (if this Lease provides
for any extension of the original
Lease Term) or sooner terminated
as hereinafter provided.
Lease Year: A period of twelve (12)
consecutive calendar months,
commencing on the first day of
January in each year, except that
the first Lease Year of the Lease
Term hereof shall be the period
commencing on the Commencement
Date and ending on the succeeding
December 31, and the last Lease
Year of the Lease Term hereof
shall be the period commencing on
January 1 of the calendar year in
which the Lease Term ends, and
ending with the date on which the
Lease Term ends.
Premises Rentable (a) 2,969.3 feet, as measured in
Area: accordance with the Measurement
Method, for the period January 1,
1990 through June 30, 1990 (See
Exhibit A).
(b) 4,521.8 feet, as measured in
accordance with the Measurement
Method, beginning July 1, 1990 and
continuing for balance of Lease
Term, and as extended (See Exhibit A-1).
Building Rentable Area: Approximately 48,072 square feet,
as measured in accordance with the
Measurement Method.
Total Rentable Floor Area in Approximately 96,144 square feet,
the Centre: as measured in accordance with the
Measurement Method.
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<PAGE>
Premises: The Premises Rentable Floor Area
on the Third Floor of the
Building, as shown on Exhibits A
and A-1 annexed hereto.
Property: The Building and the land
parcel(s) on which the Building is
located (including adjacent
sidewalks).
Measurement Method: "Standard Method of Floor
Measurement for Office Buildings,"
effective April 16, 1968,
recommended by the Real Estate
Board of New York, Inc. Without
limitation, such computation
includes a 15% factor for common
areas of the Building
notwithstanding the fact that such
common areas are not contained
within the Premises.
Common Areas of the Centre: As defined in Section 4.1(d)
hereof.
Basic Rent:
(a) For period 1/1/90 through $28,208.35 per annum, or $2,350.70
6/30/90 per month ($9.50 per square foot
of the Premises Rentable Area), as
the same may be adjusted pursuant
to Section 2.5 hereof.
(b) For period beginning $42,957.10 per annum, or $3,579.76
7/1/90 and continuing per month ($9.50 per square foot
for balance of Lease of the Premises Rentable Area), as
Term the same may be adjusted pursuant
to Section 2.5 hereof.
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<PAGE>
General Operating Expenses
(G.O.E.):
(a) For period 1/1/90 $16,331.15 per annum, or $1,360.93
through 6/30/90 per month ($5.50 per square foot
of the Premises Rentable Area), as
the same may be adjusted pursuant
to Section 2.5 hereof.
(b) For period beginning $24,869.90 per annum, or $2,072.49
7/1/90 and continuing for per month ($5.50 per square foot
balance of Lease Term of the Premises Rentable Area), as
the same may be adjusted pursuant
to Section 2.5 hereof.
Florida Sales Tax (calculated
at the current rate of 6%
on Basic Rent and G.O.E.):
(a) For period 1/1/90 $2,672.37 per annum or $222.70 per
through 6/30/90 month (but subject to change if,
as and when the sales tax is
adjusted by any taxing authority).
(b) For period beginning $4,069.62 per annum or $339.14 per
7/1/90 and continuing month (but subject to change if,
for balance of Lease as and when the sales tax is
Term adjusted by any taxing authority
and as Basic Rent and G.O.E.
increases).
Annual Fixed Rent:
(a) For period 1/1/90 through $47,211.87 (annualized), being the
6/30/90 sum total of the Basic Rent,
G.O.E. and the Florida Sales Tax
which is a monthly rent of
$3,934.32.
(b) For period beginning $71,896.62, being the sum total of
7/1/90 and continuing the Basic Rent, G.O.E. and the
for balance of Lease Florida Sales Tax which is a
Term monthly rent of $5,991.39.
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<PAGE>
Security Deposit: None
Permitted Uses: Office purposes only.
Broker: None
1.3 ENUMERATION OF EXHIBITS. The following Exhibits are a part of the Lease,
are incorporated herein by reference, attached hereto, and to be treated
as a part of this Lease for all purposes. Undertakings contained in such
Exhibits are agreements on the part of Landlord and tenant, respectively,
to perform the obligation stated therein to be performed by Landlord and
Tenants, as and where stipulated therein.
Exhibit A -- Floor Plan of the Premises for period
1/1/90 through 6/30/90.
Exhibit A-1 -- Floor Plan of the Premises for period
7/1/90 through balance of Lease Term.
Exhibit B -- General Cleaning Specifications Task and
Frequency.
ARTICLE II
PREMISES, TERM AND RENT
2.1 LEASE OF PREMISES. Landlord hereby demises and leases to Tenant, and
Tenant hereby hires and accepts from Landlord, for the Lease Term, the
Premises, excluding exterior faces of exterior walls, the common stairways
and stairwells, elevators and elevator walls, fan rooms, electric and
telephone closets, janitor closets, freight elevator vestibules, and
pipes, ducts, conduits, wires and appurtenant fixtures serving exclusively
or in common other parts of the Building, and if the Premises include less
than the entire rentable area of any floor, excluding the common
corridors, elevator lobby and lavatories located on such floor.
2.2 APPURTENANT RIGHTS AND RESERVATIONS. Tenant shall have, as appurtenant to
the Premises, the non-exclusive right to use in common with others (a) the
common lobbies, corridors, stairways, elevators and loading platform of
the Building, and the pipes, ducts, conduits, wires and appurtenant meters
and equipment serving the Premises in common with others, (b) common
walkways and driveways necessary for access to the Building, (c) if the
Premises include less than the entire rentable floor area of any floor,
the common toilets, corridors, stairways and elevator lobby of such floor,
and (d) parking areas and other Common
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<PAGE>
Areas of the Centre; but such rights shall always be subject to reasonable
rules and regulations from time to time established by Landlord by
suitable notice, and to the right of Landlord to designate and change from
time to time parking areas and other Common Areas of the Centre also to be
used.
Landlord reserves the right from time to time, without unreasonable
interference with Tenant's use: (a) to install, use, maintain, repair,
replace and relocate for service to the Premises and other parts of the
Building, or either, pipes, ducts, conduits, wires and appurtenant
fixtures, whether located in the Premises or the Building, and (b) to
alter or relocate any other common facility, provided that substitutions
are substantially equivalent or better. Installations, replacements and
relocations referred to in clause (a) above shall be located so far as
practicable in the central core area of the Building, above ceiling
surfaces, below floor surfaces or within perimeter walls of the Premises.
2.3 TERM. The term of this Lease shall be the period specified in Section 1.2
hereof as the "Lease Term" unless sooner terminated or extended (if the
provisions of this Lease so provide for any extension), all as hereinafter
provided. The Lease Term hereof shall commence on, and the Commencement
Date shall be January 1, 1990.
2.4 FIXED RENT. Tenant agrees to pay to Landlord, or as directed by Landlord,
commencing on the Commencement Date, and thereafter monthly, in advance,
on the first day of each and every calendar month during the Lease Term, a
sum equal to one-twelfth (1/12th) of the Annual Fixed Rent specified in
Section 1.2 hereof, at Landlord's Address or at such other place as
Landlord shall from time to time designate by notice. Until notice of some
other designation is given, Annual Fixed Rent and all other charges for
which provision is herein made shall be paid by remittance payable to
Landlord, and all remittances so received as aforesaid, or by any
subsequently designated recipient, shall be treated as a payment to
Landlord, subject to clearance of funds.
Annual Fixed Rent for any partial month shall be prorated on a daily
basis, and if the Lease Term commences on a day other than the first day
of a calendar month, the first payment which Tenant makes a Landlord shall
be payable on the Commencement Date and shall be equal to a proportionate
part of the monthly installment of Annual Fixed Rent for the partial month
from the Commencement Date to the last day of the month
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<PAGE>
in which such Commencement Date occurs, plus the installment of Annual
Fixed Rent for the succeeding calendar month.
Other charges payable by Tenant on a monthly basis, as hereinafter
provided, likewise shall be prorated, and the first payment on account
thereof shall be determined in similar fashion; and other provisions of
this Lease calling for monthly payments shall be read as incorporating
this undertaking by Tenant.
The Annual Fixed Rent and all other charges for which provision is herein
made shall be paid by Tenant to Landlord, without set-off, deduction of
abatement.
2.5 RENT AND G.O.E. ADJUSTMENTS. From and after the commencement of the
thirteenth calendar month of the Lease Term, the Basic Rent and G.O.E.
shall be increased five (5.0%) percent annually, compounded, according to
the following schedule:
<TABLE>
<CAPTION>
Period Basic Rent G.O.E. Sales Tax Annual Fixed Rent Monthly
------ ---------- ------ --------- ----------------- -------
<S> <C> <C> <C> <C> <C>
1/01/91 to
12/31/91 $45,104.96 $26,113.40 $4,273.10 $75,491.46 $6,290.96
1/01/92 to
12/31/92 $47,360.21 $27,419.07 $4,486.76 $79,266.04 $6,605.50
1/01/93 to
12/31/93 $49,728.22 $28,790.02 $4,711.09 $83,229.33 $6,935.78
1/01/94 to
12/31/94 $52,214.63 $30,229.52 $4,946.65 $87,390.80 $7,282.57
</TABLE>
Any change in the amount of the Basic Rent and G.O.E. payable during the
Lease Term shall carry with it a corresponding recomputation of the
Florida Sales Tax (whether as a result of an increase in the Basic Rent or
G.O.E., determined as aforesaid or a change in the applicable tax rate)
and the Annual Fixed Rent payable during each relevant Lease Year of the
Lease Term.
ARTICLE III
CONSTRUCTION
3.1 Intentionally Omitted.
3.2 Intentionally Omitted.
3.3 TENANT'S ALTERATIONS. Tenant shall not make alterations and additions to
the Premises, whether before or during the Lease Term, except in
accordance with plans and specifications therefor first approved by
Landlord, which approval shall not be withheld unreasonably. Landlord
shall not be deemed unreasonable for withholding approval of any
alterations or additions which (a) involve or might
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<PAGE>
affect any structural or exterior element of the Building, any area or
element outside of the Premises, or any facility serving any area of the
Building outside of the Premises, or (b) will require unusual expense to
readapt the Premises to normal office use on Lease termination or increase
the cost of construction or of insurance or taxes on the Building or the
Centre or of the services called for by Section 5.3 unless Tenant first
gives assurance acceptable to Landlord for payment of such increased cost
and that such readaptation will be made prior to such termination without
expense to Landlord. [All alterations and additions shall be part of the
Building unless and until Landlord shall specify the same for removal
pursuant to Section 5.2] All of Tenant's alterations and additions and
installation of furnishings shall be coordinated with any work being
performed by Landlord and in such manner as to maintain harmonious labor
relations and not damage the Property or interfere with construction or
operation of the Property and the Centre, and except for installation of
furnishings, shall be performed by Landlord's general contractor or by
contractors or workmen first approved by Landlord. Except for work by
Landlord's general contractor, Tenant, before its work is started, shall
secure all licenses and permits necessary therefor; deliver to Landlord a
statement of the names of all its contractors and subcontractors and the
estimated cost of all labor and material to be furnished by them and
security satisfactory to Landlord protecting Landlord against liens
arising out of the furnishing of such labor and material; and cause each
contractor to carry workmen's compensation insurance in statutory amounts
covering all the contractors' and subcontractors' employees and
comprehensive general liability insurance in such limits as Landlord may
require reasonably, but in no event less than $500,000/$1,000,000 and
property damage insurance with limits of not less than $250,000. (all such
insurance to be written in companies approved reasonably by Landlord and
insuring Landlord and Tenant as well as the contractors); and to deliver
to Landlord certificates of all such insurance. Tenant agrees to pay
promptly when due the entire cost of any work done on the Premises by
Tenant, its agents, employees or independent contractors, and not to cause
or permit any liens for labor or materials performed or furnished in
connection therewith to attach to the Premises or the Property or the
Centre and immediately to discharge any such liens which may so attach.
Tenant shall pay, as additional rent, one hundred percent (100%) of any
tax increase which shall at any time after the Commencement Date result
from the alteration, addition or improvement to the Premises made by
Tenant.
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<PAGE>
3.4 QUALITY AND PERFORMANCE OF WORK. All construction work required or
permitted by this Lease shall be done in a good and workmanlike manner and
in compliance with all applicable laws and all lawful ordinances,
regulations and orders of Governmental authority and insurers of the
Building. Each party may inspect the work of the other at reasonable times
and shall promptly give notice of observed defects. Each party authorizes
the other to rely in connection with design and construction upon approval
and other actions on the parties named in Section 1.2 or any person
hereafter designated in substitution or addition by notice to the party
relying thereon.
ARTICLE IV
OPERATING EXPENSES
4.1 Terms used herein are defined as follows:
(a) "Common Areas of the Centre" shall be deemed to include all
those facilities designated by Landlord within the Centre
(including approaches, exits, entrances, roadways and the like
outside thereof provided and designated by Landlord) for the
non-exclusive use of Tenant in Common with other authorized
users, including, but without limitation, vehicular parking
areas, service areas, driveways, areas of ingress and egress,
sidewalks and pedestrian ways, areas containing buildings or
structures used in connection with the maintenance of said
Common Areas of the Centre together with any buildings or
structures constructed thereon, and areas containing signs,
pylons or structures constructed thereon.
4.2 TENANT'S SHARE OF OPERATING COSTS. Tenant's share of operating costs
(G.O.E.) shall be as set forth in Section 1.2 and 2.5.
ARTICLE V
RESPONSIBILITY FOR REPAIRS AND CONDITION OF PREMISES; SERVICES
TO BE FURNISHED BY LANDLORD
5.1 LANDLORD REPAIRS. Except as otherwise provided in this Lease, Landlord
agrees to make such repairs to the roof, floor slabs, exterior walls
(including glass), Building systems equipment servicing the Premises,
common areas and facilities of the Building and Common Areas of the
Centre, as may be necessary to keep them in serviceable condition, except
that Landlord shall in
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<PAGE>
no event be responsible to Tenant for the condition of glass in and about
the Premises or for the doors leading to the Premises, or for any
condition in the Premises, the Building or the Centre caused by any act or
neglect of Tenant, its employees, invitees or contractors. Without
limitation, Landlord shall not be responsible to make any improvements or
repairs to the Building, the Premises or the Centre other than as
expressly stated in this Section 5.1 provided, unless expressly provided
otherwise in this Lease.
Further, Landlord shall never be liable for any failure to make repairs
which, under the provisions of this Section 5.1 or elsewhere in the Lease,
Landlord has undertaken to make unless Tenant has given notice to Landlord
of the need to make such repairs, and Landlord has failed to commence to
make such repairs within a reasonable time after receipt of such notice,
or fails to proceed with reasonable diligence to complete such repairs.
5.2 TENANT'S AGREEMENT. Tenant covenants during the Lease Term and such
further time as Tenant occupies any part of the Premises that it will keep
the Premises neat and clean and in good order, condition and repair,
excepting only reasonable wear and tear and those repairs for which
Landlord is responsible under the terms of this Lease, and all glass and
windows (except glass in exterior walls unless the damage thereto is
attributable to Tenant's negligence or misuse) and doors of the Premises
whole and in good condition with glass of the same quality as that injured
or broken, damage by fire only excepted, and at the expiration or
termination of this Lease peaceably to yield up the Premises and all
alterations and additions thereto in good order, repair and condition,
reasonable wear and tear excepted, first moving all goods and effects of
Tenant and, to the extent specified by Landlord by notice to Tenant given
at least ten (10) days before such expiration or termination, all
alterations and additions made by Tenant and all partitions (provided,
however that Tenant shall have no obligation to remove any of the initial
alterations, additions or partitions constructed at the commencement of
the term of this Lease) and repairing any damage caused by such removal
and restoring the Premises and leaving them clean and neat. Tenant shall
be responsible for the cost of repairs which may be made necessary by
reason of damage to public areas in the Building or to Common Areas of the
Centre by Tenant, its employees, invitees or contractors.
If repairs are required to be made by Tenant pursuant to the terms hereof,
Landlord may demand that Tenant
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<PAGE>
make the same forthwith, and if Tenant refuses or neglects to commence
such repairs and complete the same with reasonable dispatch, after such
demand, Landlord may (but shall not be required to do so) make or cause
such repairs to be made and shall not be responsible to Tenant for any
loss or damage that may accrue to Tenant. If Landlord makes or causes such
repairs to be made, Tenant agrees that Tenant shall forthwith, on demand,
pay to Landlord the cost thereof as an additional charge and if Tenant
shall default in such payment, Landlord shall have the remedies provided
for the nonpayment of rent or other charges payable hereunder.
5.3 BUILDING SERVICES. Landlord covenants:
(a) To furnish services, utilities, facilities and supplies equal
in quality to those customarily provided by landlords in
high-quality Boca Raton, Florida (in accordance with the
General Cleaning Specifications attached hereto as Exhibit B);
(b) To furnish, at Tenant's expense, reasonable additional
Building operation services which are usual and customary in
similar office buildings in Boca Raton upon reasonable and
equitable rates from time to time established by Landlord;
(c) To furnish passenger elevator services from the self-service
passenger elevator system in the Building, in common with the
Landlord and other tenants in the Building, during the hours
of 7:30 a.m. to 7:00 p.m., Monday through Saturday, legal
holidays and Sundays in all cases excepted. A means of access
to the Premises shall be provided at all times, but access to
the Premises shall always be subject to reasonable rules and
regulations therefor from time to time established by Landlord
by suitable notice, having in mind the interests of the
Building in maintaining reasonable security of the Building;
and
(d) To provide a directory board for the listing of all tenants in
the Building, and to provide and install, at Tenant's expense,
letters or numerals on doors in the Premises to identify
Tenant's official name and building address; all such letters
and numerals shall be in the building standard graphics and no
others shall be used or permitted on the Premises.
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<PAGE>
(e) Should a Tenant receive disproportionate benefit or use from
any item included in the common area maintenance charges, such
Tenant shall pay to the Landlord the value of such excess
benefit or use, as determined by Landlord.
5.4 SERVICE INTERRUPTIONS. Landlord shall not be liable to Tenant for any'
compensation or reduction of rent by reason of inconvenience or annoyance
or for loss of business arising from the necessity of Landlord or its
agents entering the Premises for any of the purposes in this Lease
authorized, or for repairing the Premises or any portion of the Building
however the necessity may occur. In case Landlord is prevented or delayed
from making any repairs, alterations or improvements, or furnishing any
services or performing any other covenant or duty to be performed on
Landlord's part, by reason of any cause reasonably beyond Landlord's
control, Landlord shall not be liable to Tenant therefor, nor, except as
expressly otherwise provided in this Lease, shall Tenant be entitled to
any abatement or reduction of rent by reason thereof, nor shall the same
give rise to a claim in Tenant's favor that such failure constitutes
actual or constructive, total or partial, eviction from the Premises.
Landlord reserves the right to stop any service or utility system, when
necessary, by reason of accident or emergency, or until necessary repairs
have been completed; provided, however, that in each instance of stoppage,
Landlord shall exercise reasonable diligence to eliminate the cause
thereof. Except in case of emergency repairs Landlord will give Tenant
reasonable advance notice of any contemplated stoppage and will use
reasonable efforts to avoid unnecessary inconvenience to Tenant by reason
thereof.
ARTICLE VI
TENANT'S COVENANTS
Tenant covenants during the Lease Term and such further time as Tenant
occupies any part of the Premises:
6.1 PAYMENTS BY TENANT. To pay when due the Annual Fixed Rent and additional
rent, and, as further additional rent, all charges for additional services
rendered pursuant to Section 5.3(b);
6.2 UTILITIES. To pay when due all charges for utility services rendered to
the Premises; but not including the cost of installing meters to measure
Tenant's consumption of utilities in the Premises; provided,
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<PAGE>
however, that if any such services or utilities shall be billed to
Landlord and are not separately metered to the Premises, the amount
thereof shall be treated as an Operating Expense of the Property, to be
paid for in the manner hereinbefore provided in Section 4.3 of this Lease;
6.3 USE OF PREMISES. Continuously from the commencement of the Lease Term to
use and occupy the Premises for the Permitted Uses only, and for no other
purpose, and not to injure or deface the Premises, the Building, the
Property or the Common Areas of the Centre, nor to permit in the Premises
any auction sale, vending machine, or inflammable fluids or chemicals, or
nuisance, or the emission from the Premises of any objectionable noise or
odor, nor to use or devote the Premises or any part thereof in a manner
which is inconsistent with the maintenance of the Building as an office
building of the first-class in the quality of its maintenance, use and
occupancy, or which is improper, offensive, contrary to law or ordinance
or liable to invalidate or increase the premiums for any insurance on the
Building or its contents or liable to render necessary any alteration or
addition to the Building;
6.4 NO OBSTRUCTIONS; RULES AND REGULATIONS. Not to obstruct in any manner any
portion of the Building not hereby leased or any portion thereof or of the
Property and Common Areas of the Centre used by Tenant in common with
others; not without prior consent of Landlord to permit the painting or
placing of any signs, curtains, blinds, shades, awnings, aerials or
flagpoles, or the like visible from outside the Premises; and to comply
with all reasonable Rules and Regulations now or hereafter made by
Landlord, of which Tenant has been given notice, for the care and use of
the Building, the Property and their facilities and approaches, and the
Common Areas of the Centre, but Landlord shall not be liable to Tenant for
the failure of other occupants of the Building or of other occupants of
other buildings in the Centre to conform to such Rules and Regulations;
6.5 COMPLIANCE WITH LAWS. To keep the Premises equipped with all safety
appliances required by law or ordinance or any other regulation of any
public authority because of any use made by Tenant other than normal
office use, and to procure all licenses and permits so required because of
such use and, if requested by Landlord, to do any work so required because
of such use, it being understood that the foregoing provisions shall not
be construed to broaden in any way Tenant's Permitted Uses;
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6.6 ASSIGNMENT AND SUBLETTING. Not without prior consent of Landlord, which
consent shall not be unreasonably withheld, to assign, mortgage, pledge or
otherwise transfer this Lease by operation of law or otherwise, or to make
any sublease or to permit occupancy of the Premises or any part thereof by
anyone other than Tenant; any assignment or sublease made without such
consent shall be void; as additional rent, Tenant shall reimburse Landlord
promptly for reasonable legal and other expense (not to exceed $500)
incurred by Landlord in connection with any request by Tenant for consent
to assignment or subletting; no assignment or subletting shall affect the
continuing primary liability of Tenant (which, following assignment, shall
be joint and several with the assignee); and no consent to any of the
foregoing in a specific instance shall operate as a waiver in any
subsequent instance. The term "transfer" shall include any transfer,
whether voluntary or involuntary, other than a transfer by operation of
law upon the death of a stockholder and the devolution of the stock held
by such stockholder to its legal representatives or legatees or a transfer
to an entity which controls, or is under common control, with Tenant;
6.7 INDEMNITY. To defend, to save harmless and indemnify Landlord from any
liability for injury, loss, accident or damage to any person or property,
and from any claims, actions, proceedings and expenses and costs in
connection therewith (including, without limitation reasonable counsel
fees), (i) arising from (a) the omission, fault, willful act, negligence
or other misconduct of Tenant, or Tenant's contractors, licensees, agents,
employees or invitees, or (b) any use made or thing done or occurring on
the Premises, not due to the omission, fault, willful act, negligence or
other misconduct of Landlord, or (ii) resulting from the failure of Tenant
to perform or discharge its covenants and obligations under this Lease;
6.8 GENERAL LIABILITY INSURANCE. To maintain in responsible companies
qualified to do business, and in good standing, in Florida, general
liability and property damage insurance covering the Premises and naming
Landlord as an additional insured (and such other persons as are in
privity of estate with Landlord as may be set out in a notice from time to
time) as well as Tenant, with limits which shall, at the commencement of
the Lease Term, be not less than $500,000 for bodily injury (or death) to
any one person, and $1,000,000 for bodily injury (or death) to more than
one person, and $250,000 with respect to damage to property, and from time
to time during the Lease Term for such higher limits, if any, as are
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carried customarily in Boca Raton with respect to similar properties, and
workmen's compensation insurance with statutory limits covering all of
Tenant's employees working in the Premises, and to deposit promptly with
Landlord certificates for such insurance, and all renewals thereof,
bearing the endorsement that the policies will not be cancelled and will
not be amended with respect to Landlord and Landlord's said designees
until after twenty (20) days' written notice to Landlord;
6.9 TENANT'S RISK. That all of the furnishings, fixtures, equipment, effects
and property of every kind, nature and description of Tenant and of all
persons claiming by, through or under Tenant which, during the continuance
of this Lease or any occupancy of the Premises by Tenant or anyone
claiming under Tenant, may be in the Premises or elsewhere in the Building
or on the Property and Tenant's use of the Premises and such other
portions of the Building and the Centre as Tenant is herein given the
right to use, shall be at the sole risk and hazard of Tenant, and if the
whole or any part of such property shall be destroyed or damaged by fire,
water or otherwise, or by the leakage, stoppage or bursting of pipes,
steam pipes or other pipes, by theft or from any other cause, no part of
said loss or damage is to be charged to or be borne by Landlord, except
that Landlord shall in no event be indemnified or held harmless or
exonerated from any liability to Tenant or to any other person, for any
injury, loss, damage or liability to the extent such indemnity, hold
harmless or exoneration is prohibited by law or to the extent such injury,
loss, damage or liability is due to the omission, willful act, or
negligence of Landlord;
6.10 LANDLORD'S ACTS. To permit Landlord and its agents to enter the Premises
at all reasonable hours, and upon reasonable notice, for the purpose of
inspecting or of making repairs or replacements to the Premises as
Landlord may deem necessary; to remove, at Tenant's expense, any
alterations, additions, signs, curtains, blinds, shades, awnings, aerials,
flagpoles, or the like not consented to in writing; and to show the
Premises to prospective tenants during the twelve (12) months preceding
the expiration of the Lease Term and to prospective purchasers and
mortgagees at all reasonable times;
6.11 FLOOR LOADS. Not to place a load upon any floor in the premises exceeding
the floor load per square foot of area which such floor was designated to
carry and which is allowed by law; and not to move any safe, vault or
other heavy equipment in, about or out of the Premises except in such
manner and at such time as Landlord
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shall in each instance authorize, which authorization may include a
requirement to provide insurance in such amounts as Landlord may deem
reasonable; and Tenant's business machines and mechanical equipment shall
be placed and maintained by Tenant at Tenant's expense in settings
sufficient, in Landlord's judgment, to absorb and prevent vibration or
noise that may be transmitted to the Building structure or to any other
space in the Building;
6.12 PERSONAL PROPERTY TAXES. To pay promptly when due all taxes which may be
imposed upon personal property (including, without limitation, fixtures
and equipment) in the Premises to whomever assessed; and
6.13 FEES AND EXPENSES. As additional rent, to pay all reasonable costs,
counsel and other fees incurred by Landlord in connection with the
successful enforcement by Landlord of any obligations of Tenant under this
Lease.
ARTICLE VII
CASUALTY AND TAKING
7.1 DAMAGE FROM CASUALTY. If, during the Lease Term, the Building or the
Premises shall be partially damaged (as distinguished from "substantially
damaged," as that term is hereinafter defined) by fire or casualty,
Landlord shall proceed promptly to restore the Building or the Premises
(consistent, however, with governmental laws and codes then in existence)
to substantially the condition thereof at the time of such damage, but
Landlord shall not be responsible for delays which may result from any
cause beyond the reasonable control of Landlord.
If, during the Lease Term, the Premises or the Building shall be
substantially damaged by fire or casualty, the risk of which is covered by
Landlord's insurance, and the holder of any mortgage which includes the
Building as part of the mortgaged premises or any ground lessor of any
ground lease which includes the property as part of the demised premises,
allows the insurance proceeds to be applied to the restoration of the
Building, Landlord shall, promptly after such damage and the determination
of the net amount of insurance proceeds available to Landlord, expend so
much as may be necessary of such net amount to restore (consistent,
however, with governmental laws and codes then in existence) the Building
and the Premises to substantially the condition thereof at the time of
such damage, but Landlord shall not be responsible for delay which may
result from any cause beyond the reasonable
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control of Landlord. Should the net amount of insurance proceeds available
to Landlord be insufficient to cover the cost of restoring the Building
and the Premises, in the reasonable estimate of Landlord, Landlord may,
but shall have no obligation to, supply the amount of such insufficiency
and restore the Building and the Premises with all reasonable diligence,
or Landlord may terminate this Lease by giving notice to Tenant not later
than a reasonable time after Landlord has determined the net amount of
insurance proceeds available to Landlord and the estimated cost of such
restoration.
In any event, Landlord agrees, not later than forty-five (45) days after
the casualty, to advise Tenant of the status of Landlord's obligations in
respect to reconstruction, i.e., whether the net amount of proceeds is
available to cover the cost of restoration, whether Landlord intends to
restore, regardless of the sufficiency of proceeds, or whether Landlord
intends to terminate this Lease pursuant to any right which Landlord may
have to do so, failing which, at any time after the expiration of such
45-day period and unless and until Landlord shall have noticed Tenant of
Landlord's, Tenant shall have the right to terminate this Lease, such
termination to take effect as of the date of such casualty, with the same
force and effect as if such date were the date originally established as
the expiration date hereof.
7.2 UNINSURED CASUALTY. If the Building or the Premises shall be substantially
damaged or destroyed by fire or casualty as the result of a risk not
covered by the forms of casualty insurance at the time maintained by
Landlord, Landlord shall promptly restore (consistent, however, with
governmental laws and codes then in existence) the Building or the
Premises to substantially the condition thereof at the time of such
damage, unless Landlord, within sixty (60) days after such loss, gives
notice to Tenant of Landlord's election to terminate this Lease. If
Landlord shall give such notice, then this Lease shall terminate as of the
date of such notice with the same force and effect as if such date were
the date originally established as the expiration date thereof.
7.3 DAMAGE DURING THE LAST YEAR OF THE LEASE TERM. If the Premises shall be
substantially damaged by fire or casualty within the last two (2) Lease
years of the Lease Term, either party shall have the right, by giving
notice to the other not later than thirty (30) days after such damage, to
terminate this Lease, whereupon this Lease shall terminate as of the date
of such fire or casualty with the same force and effect as
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if such date were the date originally established as the expiration date
thereof.
7.4 DEFINITION OF SUBSTANTIAL DAMAGE. For the purpose of defining the words
"substantially damaged," as used in this Article VII, such terminology
shall refer to damage of such a character that the same cannot, in
ordinary course, reasonably be expected to be repaired within one hundred
twenty (120) days from the time that repair work would normally commence.
7.5 RIGHTS OF TERMINATION FOR TAKING. If the Premises, or such a portion
thereof as to render the balance (if reconstructed to the maximum extent
practicable in the circumstances) unsuitable for Tenant's purposes, shall
be taken by condemnation or right of eminent domain, or other parts of the
Centre are so taken, reducing parking within the Common Areas of the
Centre to such an extent that adequate parking facilities to serve the
Building are unavailable, Landlord or Tenant shall have the right to
terminate this Lease by notice to the other of its desire to do so,
provided that such notice is given not later than thirty (30) days after
Tenant has been deprived of possession.
Further, if so much of the Building shall be so taken that continued
operation of the Building would be uneconomic, Landlord shall have the
right to terminate this Lease by giving notice to Tenant of Landlord's
desire to do so not later than thirty (30) days after the effective date
of such taking.
Should any part of the Premises be so taken or condemned during the Lease
Term hereof, and should this Lease not be terminated in accordance with
the foregoing provisions, Landlord agrees to use due diligence to put what
may remain of the Premises (consistent, however, with governmental laws
and codes then in existence) into proper condition for use and occupation
as nearly like the condition of the Premises prior to such taking as shall
be practicable.
7.6 ABATEMENT OF RENT. If the Premises shall be damaged by fire or other
casualty, the Annual Fixed Rent shall abate or be reduced proportionately
for the period in which, by reason of such damage, there is substantial
interference with the operation of Tenant's use of the Premises, having
regard to the extent to which Tenant may be required to discontinue
Tenant's use of the Premises, but such abatement or reduction shall end if
and when Landlord shall have substantially restored the Premises to the
condition in which they were prior to such damage.
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If the Premises shall be affected by any exercise of the power of
condemnation or eminent domain, then the Annual Fixed Rent shall be justly
and equitably abated and reduced according to the nature and extent of the
loss of use thereof suffered by Tenant; and in case of a taking which
permanently reduces the area of the Premises, a just proportion of the
Annual Fixed Rent shall be abated for the remainder of the Lease Term.
7.7 Intentionally Omitted.
7.8 AWARD. Landlord shall have and hereby reserves and excepts, and Tenant
hereby grants and assigns to Landlord, all rights to recover for damages
to the Centre, to the Premises, the Building in which the same are
located, and the leasehold interest hereby created, and to compensation
accrued or hereafter to accrue by reason of such taking, damage or
destruction, and by way of confirming the foregoing, Tenant hereby grants
and assigns, and covenants with Landlord to grant and assign, to Landlord
all rights to such damages or compensation.
Nothing contained herein shall be construed to prevent Tenant from
prosecuting in any condemnation proceeding a claim for the value of any of
Tenant's property installed in the Premises by Tenant at Tenant's expense
and for relocation expenses, provided, however, that such action shall not
affect the amount of compensation otherwise recoverable by Landlord from
the taking authority pursuant to the preceding paragraph hereof.
7.9 COMPLETION DATE FOR RESTORATION. Where Landlord is obligated to effect
restoration of the Premises, or where Landlord has notified Tenant of its
election to effect restoration of the premises, unless such restoration is
completed within six (6) months from the date of the casualty or taking,
such period to be subject, however, to extension where the delay in
completion of such work is due to causes beyond Landlord's control (but in
no event beyond nine (9) months from the date of the casualty or taking),
Tenant shall have the right to terminate this Lease at any time after the
expiration of such six-month (as extended) period until the restoration is
substantially completed, such termination to take effect thirty (30) days
following the date of Tenant's notice, with the same force and effect as
if such date were the date originally established as the expiration date
hereof.
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ARTICLE VIII
DEFAULT
8.1 TENANT'S DEFAULT.
(a) If at any time subsequent to date of this Lease any one or
more of the following events (herein referred to as "Default
of Tenant") shall happen:
(i) Tenant shall fail to pay the Annual Fixed Rent,
additional rent or other charges hereunder when due and
such failure shall continue for seven (7) full business
days after notice to Tenant from Landlord specifying
such failure; or
(ii) Landlord rightfully having given the notice specified in
subdivision (i) above twice in any Lease Year, Tenant
shall thereafter in the same Lease year fail to pay the
Annual Fixed Rent, additional rent of other charges on
or before the date on which the same becomes due and
payable; or
(iii) Tenant shall default under that certain lease with
Landlord dated as of January 1, 1989, with respect to
premises on the second floor of the Building; or
(iv) Tenant shall neglect or fail to perform or observe any
other covenant herein contained on Tenant's part to be
performed or observed and Tenant shall fail to remedy
the same within thirty (30) days after notice to Tenant
specifying such neglect or failure, or if such failure
is of such a nature that Tenant cannot reasonably remedy
the same within such thirty (30) day period, Tenant
shall fail to commence promptly to remedy the same and
to prosecute such remedy to completion with diligence
and continuity; or
(v) Tenant's leasehold interest in the Premises shall be
taken on execution or by other process of law directed
against Tenant; or
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(vi) The Premises shall remain vacant for a period of thirty
(30) consecutive days (other than for events resulting
from damage or destruction by fire or other casualty or
taking by eminent domain), or Tenant vacates or abandons
the Premises; or
(vii) Tenant shall make an assignment of the property of
Tenant for the benefit of creditors or shall file a
voluntary petition in bankruptcy or shall file any
petition or answer seeking any reorganization,
arrangement, composition, readjustment, liquidation,
dissolution nor similar relief for itself under any
present or future Federal, State or other statute, law
or regulation for the relief of debtors, or shall seek
or consent to or acquiesce in the appointment of any
trustee, receiver or liquidator of Tenant or of all or
any substantial part of its properties, or shall admit
in writing its inability to pay its debts generally as
they become due; or
(viii) A petition shall be filed against Tenant in bankruptcy
or under any other law seeking any reorganization,
arrangement, composition, readjustment, liquidation,
dissolution, or similar relief under any present or
future Federal, State or other statute, law or
regulation and shall remain undismissed or unstayed for
an aggregate of sixty (60) days (whether or not
consecutive), or if any debtor in possession (whether or
not Tenant) trustee, receiver or liquidator of Tenant or
of all or any substantial part of its properties or of
the Premises shall be appointed without the consent or
acquiescence of Tenant and such appointment shall remain
unvacated or unstayed for an aggregated of sixty (60)
days (whether or not consecutive);
then in any such case (1) if such Default of Tenant shall
occur prior to the Commencement Date, this Lease shall ipso
facto, and
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without further act on the part of Landlord, terminate, and
(2) if such Default of Tenant shall occur after the
Commencement Date, Landlord may terminate this Lease by notice
to Tenant, specifying a date not less than ten (10) days after
the giving of such notice on which this Lease shall terminate
and this Lease shall come to an end on the date specified
therein as fully and completely as if such date were the date
herein originally fixed for the expiration of the Lease Term
of this Lease (Tenant hereby waiving any rights of redemption
under applicable law) and Tenant will then quit and surrender
the Premises to Landlord, but Tenant shall remain liable as
hereinafter provided.
(b) If this Lease shall have been terminated as provided in this
Article, or if any execution or attachment shall be issued
against Tenant or any of Tenant's property whereupon the
Premises shall be taken or occupied by someone other than
Tenant, then Landlord may, without notice, re-enter the
Premises, as permitted by law, and remove and dispossess
Tenant and all other persons and any and all property from the
same, as if this Lease had not been made.
(c) In the event of any termination, Tenant shall pay the Annual
Fixed Rent, additional rent and other sums payable hereunder
up to the time of such termination, and thereafter Tenant,
until the end of what would have been the Lease Term in the
absence of such termination, and whether or not the Premises
shall have been relet, shall be liable to Landlord for, and
shall pay to Landlord, as liquidated current damages, the
Annual Fixed Rent, additional rent and other sums which would
be payable hereunder if such termination had not occurred,
less the net proceeds, if any, of any reletting of the
Premises, after deducting all expenses in connection with such
reletting, including, without limitation, all repossession
costs, brokerage commissions, legal expenses, attorneys' fees,
advertising, expenses of employees, alteration costs and
expenses of preparation for such reletting. Tenant shall pay
such current damages to Landlord monthly on the days which the
Annual Fixed Rent would have been payable hereunder if this
Lease had not been terminated.
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(d) At any time after such termination, whether or not Landlord
shall have collected any such current damages, as liquidated
final damages and in lieu of all such current damages beyond
the date of such demand, Tenant shall pay to Landlord an
amount equal to the present value of the excess, if any, of
the Annual Fixed Rent, additional rent and other sums as
hereinbefore provided which would be payable hereunder from
the date of such demand (assuming that, for the purposes of
this paragraph annual payments by Tenant on account of Taxes
and Operating Expenses would be the same as the payments
required for the immediately preceding calendar or Tax Year)
for what would be the then unexpired Lease Term of this Lease
if the same remained in effect, over the then fair net rental
value of the Premises for the same period.
(e) In case of any Default by Tenant, re-entry, expiration and
dispossession by summary proceedings or otherwise, Landlord
may (i) relet the Premises or any part or parts thereof,
either in the name of Landlord or otherwise, for a term or
terms which may at Landlord's option be equal to or less than
or exceed the period which would otherwise have constituted
the balance of the Lease Term and may grant concessions or
free rent to the extent that Landlord considers advisable and
necessary to relet the same and (ii) may make such reasonable
alterations, repairs and decorations in the Premises as
Landlord in its sole judgment considers advisable and
necessary for the purpose of reletting the Premises; and the
making of such alterations, repairs and decorations shall not
operate or be construed to release Tenant from liability
hereunder as aforesaid. Landlord shall in no event be liable
in any way whatsoever for failure to re-let the Premises, or,
in the event that the Premises are re-let, for failure to
collect the rent under such re-letting. Tenant hereby
expressly waives any and all rights of redemption granted by
or under any present or future laws in the event of Tenant
being evicted or dispossessed, or in the event of Landlord
obtaining possession of the Premises, by reason of the
violation by Tenant of any of the covenants and conditions of
this Lease.
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(f) The specified remedies to which Landlord may resort hereunder
are not intended to be exclusive of any remedies or means of
redress to which Landlord may at any time be entitled
lawfully, and Landlord may invoke any remedy (including the
remedy of specific performance) allowed at law or in equity as
if specific remedies were not herein provided for.
(g) All costs and expenses incurred by or on behalf of Landlord
(including, without limitation, attorneys' fees and expenses)
in enforcing its rights hereunder or occasioned by any Default
of Tenant shall be paid by Tenant.
8.2 LANDLORD'S DEFAULT. Landlord shall in no event be in default in the
performance of any of Landlord's obligations hereunder unless and until
Landlord shall have failed to perform such obligations within thirty (30)
days, or such additional time as is reasonably required to correct any
such default, after notice by Tenant to Landlord specifying wherein
Landlord has failed to perform any such obligations.
ARTICLE IX
MISCELLANEOUS PROVISIONS
9.1 HAZARDOUS USE. Tenant covenants and agrees that Tenant will not do or
permit anything to be done in or upon the Premises, or bring in anything
or keep anything therein, which shall increase the rate of insurance on
the Premises or on the Building above the standard rate applicable to
premises being occupied for Permitted Uses; and Tenant further agrees
that, in the event that Tenant shall do any of the foregoing, Tenant will
promptly pay to Landlord, on demand, any such increase resulting
therefrom, which shall be due and payable as an additional charge
hereunder.
9.2 Waiver.
(a) Failure on the part of Landlord or Tenant to complain of any
action or non-action on the part of the other, no matter how
long the same may continue, shall never be a waiver by Tenant
or Landlord, respectively, of any of the other's rights
hereunder. Further, no waiver at any time of any of the
provisions hereof by Landlord or Tenant shall be construed as
a waiver of any of the other provisions hereof, and a waiver
at any time
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of any of the provisions hereof shall not be construed as a
waiver at any subsequent time of the same provisions. The
consent or approval of Landlord or Tenant to or of any action
by the other requiring such consent or approval shall not be
construed to waive or render unnecessary Landlord's or
Tenant's consent or approval to or of any subsequent similar
act by the other.
(b) No payment by Tenant, or acceptance by Landlord, of a lesser
amount than shall be due from Tenant to Landlord shall be
treated otherwise than as a payment on account. The acceptance
by Landlord of a check for a lesser amount with an endorsement
or statement thereon, or upon any letter accompanying such
check, that such lesser amount is payment in full, shall be
given no effect, and Landlord may accept such check without
prejudice to any other rights or remedies which Landlord may
have against Tenant.
9.3 COVENANT OF QUIET ENJOYMENT. Tenant, subject to the terms and provisions
of this Lease, on payment of the Annual Fixed Rent, additional rent and
other charges and observing, keeping and performing all of the other terms
and provisions of this Lease on Tenant's part to be observed, kept and
performed, shall lawfully, peaceably and quietly have, hold, occupy and
enjoy the Premises during the term hereof, without hindrance or ejection
by any person lawfully claiming under Landlord to have title to the
Premises superior to Tenant; the foregoing covenant of quiet enjoyment is
in lieu of any other covenant, express or implied; and it is understood
and agreed that this covenant and any and all other covenants of Landlord
contained in this Lease shall be binding upon Landlord and Landlord's
successors only with respect to breaches occurring during Landlord's and
Landlord's successors' respective ownership of Landlord's interest
hereunder.
9.4 LANDLORD'S LIABILITY. Tenant specifically agrees to look solely to
Landlord's then equity interest in the Property at the time owned, for
recovery of any judgment from Landlord; it being specifically agreed that
neither Landlord nor any partner of Landlord (original or successor) shall
ever be personally liable for any such judgment, or for the payment of any
monetary obligation to Tenant. The provision contained in the foregoing
sentence is not intended to, and shall not, limit any right that Tenant
might otherwise have to obtain injunctive relief against Landlord or
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Landlord's successors in interest, or to take any action not involving the
personal liability of Landlord (original or successor) to respond in
monetary damages from Landlord's assets other than Landlord's equity
interest in the Property.
In no event shall Landlord ever be liable to Tenant for any indirect or
consequential damages suffered by Tenant from whatever cause.
9.5 NOTICE TO MORTGAGEE. After receiving notice from any person, firm or other
entity that it holds a mortgage which includes the Premises as part of the
mortgaged premises, no notice from Tenant to Landlord shall be effective
unless and until a copy of the same is given to such holder (provided
Tenant shall have been furnished with the name and address of such
holder), and the curing of any of Landlord's defaults by such holder shall
be treated as performance by Landlord.
9.6 ASSIGNMENT OF RENTS AND TRANSFER OF TITLE. With reference to any
assignment by Landlord of Landlord's interest in this Lease, or the rents
payable hereunder, conditional in nature or otherwise, which assignment is
made to the holder of a mortgage on property which includes the Premises,
Tenant agrees that the execution thereof by Landlord, and the acceptance
thereof by the holder of such mortgage shall never be treated as an
assumption by such holder of any of the obligations of Landlord hereunder
unless such holder shall, by notice sent to Tenant, specifically otherwise
elect and that, except as aforesaid, such holder shall be treated as
having assumed Landlord's obligations hereunder only upon foreclosure of
such holder's mortgage and the taking of possession of the Premises.
In no event shall the acquisition of title to the Property by a purchaser
which, simultaneously therewith, leases the entire Property back to the
seller thereof be treated as an assumption by operation of law or
otherwise, of Landlord's obligations hereunder, but Tenant shall look
solely to such seller-lessee, and its successors from time to time in
title, for performance of Landlord's obligation hereunder. In any such
event, this Lease shall be subject and subordinate to the lease to such
purchaser. For all purposes, such seller-lessee, and its successors in
title, shall be the Landlord hereunder unless and until Landlord's
position shall have been assumed by such purchaser-lessor.
9.7 SURRENDER. No act or thing done by Landlord during the Lease Term shall be
deemed an acceptance of a surrender of the Premises, and no agreement to
accept such
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surrender shall be valid, unless in writing signed by Landlord. No
employee of Landlord or of Landlord's agents shall have any power to
accept the keys of the Premises prior to the termination of this Lease.
The delivery of keys to any employee of Landlord or of Landlord's agents
shall not operate as a termination of the Lease or a surrender of the
Premises. In the event that Tenant at any time desires to have Landlord
underlet the Premises for Tenant's account, Landlord or Landlord's agents
are authorized to receive the keys for such purposes without releasing
Tenant from any of the obligations under this Lease, and Tenant hereby
relieves Landlord of any liability for loss of or damage to any of
Tenant's effects in connection with such underletting.
9.8 INVALIDITY OF PARTICULAR PROVISIONS. If any term or provision of this
Lease, or the application thereof to any person or circumstance shall, to
any extent, be invalid or unenforceable, the remainder of this Lease. or
the application of such term or provision to persons or circumstances
other than those as to which it is held invalid or unenforceable, shall
not be affected thereby, and each term and provision of this Lease shall
be valid and be enforced to the fullest extent permitted by law.
9.9 PROVISIONS BINDING, ETC. Except as herein otherwise provided, the terms
hereof shall be binding upon and shall inure to the benefit of the
successors and assigns, respectively, of Landlord and Tenant and, if
Tenant shall be an individual, upon and to his heirs, executors,
administrators, successors and assigns. Each term and each provision of
this Lease to be performed by Tenant shall be construed to be both a
covenant and a condition. The reference contained to successors and
assigns of Tenant is not intended to constitute a consent to assignment by
Tenant, but has reference only to those instances in which Landlord may
later give consent to a particular assignment by Tenant of this Lease.
9.10 RECORDING. Tenant agrees not to record this Lease, but each party hereto
agrees, on the request of the other, to execute a so-called memorandum or
notice of lease in form recordable and complying with applicable law and
reasonably satisfactory to Landlord's attorneys. In no event shall such
document set forth the rent or other charges payable by Tenant under this
Lease; and any such document shall expressly state that it is executed
pursuant to the provisions contained in this Lease, and is not intended to
vary the terms and conditions of this Lease.
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9.11 NOTICES. Whenever, by the terms of this Lease, notices shall or may be
given either to Landlord or to Tenant, such notice shall be in writing and
shall be sent by registered or certified mail, postage prepaid:
If intended for Landlord, addressed to Landlord at Landlord's
Original Address (or to such other address or addresses as may from
time to time hereafter be designated by Landlord by like notice).
If intended for Tenant, addressed to Tenant at Tenant's Original
Address until the Commencement Date and thereafter at the Premises
(or to such other address or addresses as may from time to time
hereafter be designated by Tenant by like notice).
All such notices shall be effective when deposited in the United
States Mail within the Continental United States, provided that the
same are received in ordinary course at the address to which the
same were sent.
9.12 WHEN LEASE BECOMES BINDING. The submission of this document for
examination and negotiation does not constitute an offer to lease, or a
reservation of, or option for, the Premises, and this document shall
become effective and binding only upon the execution and delivery hereof
by both Landlord and Tenant. All negotiations, considerations,
representations and understandings between Landlord and Tenant are
incorporated herein and this Lease expressly supercedes any proposals or
other written documents relating hereto. This Lease may be modified or
altered only by written agreement between Landlord and Tenant, and no act
or omission of any employee or agent of Landlord shall alter, change or
modify any of the provisions hereof.
9.13 PARAGRAPH HEADINGS. The paragraph headings throughout this instrument are
for convenience and reference only, and the words contained therein shall
in no way be held to explain, modify, amplify or aid in the
interpretation, construction or meaning of the provisions of this Lease.
9.14 RIGHTS OF MORTGAGEE. This Lease shall be subordinate to any mortgage from
time to time encumbering the Premises, whether executed and delivered
prior to or subsequent to the date of this Lease, if the holder of such
mortgage shall so elect. Tenant agrees to execute such instruments of
subordination in confirmation of the foregoing agreement as such holder
may request, and
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Tenant hereby appoints such holder as Tenant's attorney-in-fact to execute
such subordination agreement upon default of Tenant in complying with such
holder's request.
9.15 STATUS REPORT. Recognizing that both parties may find it necessary to
establish to third parties, such as accountants, banks, mortgages or the
like, the then current status of performance hereunder, either party, on
the request of the other made from time to time, will promptly furnish to
Landlord, or the holder of any mortgage encumbering the Premises, or to
Tenant, as the case may be, a statement of the status of any matter
pertaining to this Lease, including, without limitation, acknowledgments
that (or the extent to which) each party is in compliance with its
obligations under the terms of this Lease. Any such statement delivered by
Tenant pursuant to this Section 9.15 may be relied upon by any prospective
purchaser or mortgagee of the Premises or any prospective assignee of any
mortgages of the Premises.
9.16 SECURITY DEPOSIT. If, in Section 1.2 hereof, a security deposit is
specified, Tenant agrees that the same will be paid upon execution and
delivery of this Lease, and that Landlord shall hold the same throughout
the terms of this Lease as security for the performance by Tenant of all
obligations on the part of Tenant hereunder. Landlord shall have the right
from time to time without prejudice to any other remedy Landlord may have
on account thereof, to apply such deposit, or any part thereof, to
Landlord's damages arising from and default on the part of Tenant,
provided however, Landlord shall have first given Tenant written notice of
its intention to so apply Tenant's security deposit. There then existing
no Default of Tenant, Landlord shall return the deposit, or so much
thereof as shall have theretofor not been applied in accordance with the
terms of this Section 9.16, to Tenant on the expiration or earlier
termination of the Lease Term of this Lease and surrender of possession of
the Premises by Tenant to Landlord at such time. While Landlord holds such
deposit, Landlord shall have no obligation to pay interest on the same and
shall have the right to commingle the same with Landlord's other funds. If
Landlord conveys Landlord's interest under this Lease, the Deposit or any
part thereof not previously applied, may be turned over by Landlord to
Landlord's grantee, and, if so turned over, Tenant agrees to look solely
to such grantee for proper application of the deposit in accordance with
the terms of this Section 9.16, and the return thereof in accordance
herewith. The holder of a mortgage shall not be responsible to Tenant for
the return or application of any such deposit, whether or
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not it succeeds to the position of Landlord hereunder, unless such deposit
shall have been received in hand by such holder.
9.17 SELF-HELP. If Tenant shall at any time default in the performance of any
obligation under this Lease, Landlord shall have the right, but shall not
be obligated; upon reasonable notice, to enter upon the Premises and to
perform such obligation notwithstanding the fact that this specific
provision for such substituted performance by Landlord is made in this
Lease with respect to such Default of Tenant. In performing such
obligation, Landlord may make any payment of money or perform any act. All
sums so paid by Landlord (together with interest at the rate of the lesser
of (i) the maximum lawful rate applicable in the State of Florida, or (ii)
three percentage points over the then prevailing prime rate in Boca Raton,
Florida, and all necessary incidental costs and expenses in connection
with the performance of any such act by Landlord, shall be deemed to be
additional rent under this Lease and shall be payable to Landlord
immediately, on demand. Landlord may exercise the foregoing rights without
waiving any other of its rights or releasing Tenant from any of its
obligations under this Lease.
Any payment on account of Annual Fixed Rent, taxes, or other sums payable
hereunder, not paid within fifteen (15) days of the date when due shall,
at the option of Landlord bear interest at a rate equal to (i) the maximum
lawful rate permitted under applicable law, or (ii) 3% over the prime rate
in effect from time to time at the Chase Manhattan Bank, from the due date
thereof, and shall be payable forthwith on demand by Landlord as
additional rent.
9.18 HOLDING OVER. Any holding over by Tenant after the expiration of the term
of this Lease shall be treated as a daily tenancy at sufferance at a rate
equal to one and one-half (1 1/2) times the Annual Fixed Rent last in
effect, plus additional rent and other charges herein provided (prorated
on a daily basis) and shall otherwise be on the terms and conditions set
forth in this Lease as far as applicable.
9.19 WAIVER OF SUBROGATION. Insofar as, and to the extent that, the following
provisions may be effective without invalidating or making it impossible
to secure insurance coverage obtainable from responsible insurance
companies doing business in the locality in which the Property is located
(even though extra premium may result therefrom) Landlord and Tenant
mutually agree that, with respect to any hazard, the
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loss from which is covered by insurance then being carried by them,
respectively, the one carrying such insurance and suffering such loss
releases the other of and from any and all claims with respect to such
loss to the extent of the insurance proceeds paid with respect thereto;
and they further mutually agree that their respective insurance companies
shall have no right of subrogation against the other on account thereof.
9.20 BROKERAGE. Tenant warrants and represents the Tenant has dealt with no
broker in connection with the consummation of this Lease other than the
broker person or firm, if any, designated in Section 1.2 hereof; and, in
the event of any brokerage claims against Landlord predicated upon prior
dealings with Tenant, Tenant agrees to defend the same with counsel of
Landlord's selection and save harmless and indemnify Landlord on account
of loss, cost or damage which may arise by reason of such claim. Landlord
agrees that it shall be solely responsible for the payment of brokerage
commissions to the broker, person or firm, if any, designated in Section
1.2 hereof.
9.21 GOVERNING LAW. This Lease shall be governed exclusively by the provisions
hereof and by the law of the State of Florida, as the same may from time
to time exist.
9.22 ADDENDA PROVISIONS. (See Addenda attached hereto and made a part hereof)
IN WITNESS WHEREOF, Landlord and Tenant have caused this Lease to be duly
executed, under seal, by persons hereunto duly authorized, in multiple copies
each to be considered an original hereof, as of the date first above written.
LANDLORD: STARKOFF ASSOCIATES, a
Florida Partnership
/s/ Joanne Bennett BY: /s/ Earl Starkoff
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General Partner
/s/ Alma Blair
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TENANT: CRC PRESS, INC.,
a Florida Corporation
/s/ Joanne Bennett BY:/s/ Terrence Patterson
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Its Vice President
----------------------------
/s/ Alma Blair
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ADDENDUM TO LEASE
This Addendum to that certain Lease dated as of January 1, 1990, between
STARKOFF ASSOCIATES, as Landlord, and CRC PRESS, INC., as Tenant, provides as
follows:
Landlord and Tenant agree that provided this Lease is not then in Default,
Tenant shall have the option to renew this Lease for two (2) successive periods
to be three (3) years each, ending on December 31, 2000, with said options to be
exercisable by Tenant by providing Landlord with written notice of its intention
to renew this Lease at least ninety (90) days prior to the expiration of the
original term, or in the case of a subsequent extension, at least ninety (90)
days prior to the expiration of the prior extension period. Said renewal shall
be upon the same terms, covenants, and conditions provided in this Lease, except
that the economic terms for the renewal shall be at least as favorable as those
being offered to any third party for comparable office space in the Building at
the expiration date of this Lease.
WITNESSES: LANDLORD:
STARKOFF ASSOCIATES, a Florida
Partnership
/s/ Joann J. Bennett BY: /s/ B. J. Starkoff
- --------------------------- --------------------------------
General Partner
/s/ Florence T. Starkoff
- ---------------------------s
TENANT:
CRC PRESS, INC.
/s/ Joann J. Bennett BY: /s/ Terrence O. Patterson
- --------------------------- --------------------------------
Its V.P. Operations
---------------
/s/ Florence T. Starkoff
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<PAGE>
Exhibit 10.12
THIS LEASE AGREEMENT dated as of March 1, 1998 by and between R. P. REALTY
COMPANY, a Connecticut General Partnership with a principal place of business in
the Town of East Haven and County of New Haven, and State of Connecticut,
hereinafter referred to as "Landlord" and MICROPATENT LLC, a Delaware Limited
Liability Company, with a principal place of business in the Town of East Haven,
County of New Haven and State of Connecticut, hereinafter referred to as
"Tenant."
W I T N E S S E T H:
Article I. Demise
In consideration of the rents, covenants, and agreements hereinafter
mentioned, reserved and contained, Landlord does hereby demise and lease unto
Tenant, and Tenant does hire and take, in "as is, where is" condition, without
any warranties and/or representations whatsoever by Landlord, approximately Ten
Thousand Five Hundred Seventy Four and 88/100 (10,574.88) square feet
representing a portion of the property identified as 250 Dodge Avenue located in
East Haven, Connecticut, more particularly described as portions of Building #2
and Building #3 in the floor plan available at the Landlord's Office (the
"premises").
Article II. Use and Subletting
1. The premises shall be used for general office operations only.
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2. The Tenant shall not assign, mortgage or encumber this Lease, nor
sublet nor permit the leased property or any part thereof to be used by others,
except an affiliated party, without the prior written consent of the Landlord in
each instance, which consent shall not be unreasonably withheld. "Affiliated
Party" as used herein shall mean any person that directly or indirectly through
one or more intermediaries, controls, is controlled by or is under common
control with the specified person or any entity which merges or consolidates
with Tenant or which acquires substantially all of Tenant's assets.
3. If this Lease is assigned, or if the leased property or any part
thereof is sublet, or occupied by anyone other than the Tenant, the Landlord
may, after default by the Tenant, collect rent directly from the assignee,
subtenant or occupant and apply the net amount collected to the rent herein
reserved. No such assignment, subletting, occupancy or collection shall be
deemed a waiver of this covenant, or the acceptance of the assignee, subtenant
or occupant as tenant, or a release of the Tenant from the further performance
by the Tenant of the terms, covenants and conditions of this Lease. The consent
by the Landlord to and assignment or subletting shall not be construed to
relieve the Tenant from obtaining the consent in writing of the Landlord to any
further assignment or subletting.
Article III. Term, Rental and Option
1. This Lease shall be for an initial term of Three (3) years and nine (9)
months to begin March 1, 1998 and to end
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November 30, 2001 for the annual base rent of Forty Two Thousand Three Hundred
and 54/100 ($42,300.54) Dollars; Tenant shall pay common area maintenance
charges as provided for below.
The annual base rent shall be payable in twelve equal monthly installments
of Three Thousand Five Hundred Twenty Five and 05/100 ($3,525.05) Dollars each
on the first day of each month during said term, in advance, in lawful money of
the United States, payable to Landlord, at 41 Washington Street, P.O. Box
120323, East Haven, Connecticut 06512 or to such other persons or places as may,
from time to time be otherwise directed by Landlord to Tenant, in writing.
2. Tenant has deposited with Landlord Five Thousand Three Hundred
Fifty-Seven ($5,357.00) Dollars as security for Tenant's full and faithful
performance of all of the terms, covenant and conditions of this Lease. Landlord
shall pay Tenant interest on said security deposit of three percent (3%) per
annum until said security deposit is applied or returned as provided for herein.
Such interest shall be payable to the Tenant for the prior calendar year on or
about January 31st of each year during the term of this Lease. Tenant can not
apply said security deposit to rental payments due hereunder. Landlord shall
return said sum, including interest as provided for herein, within ten (10) days
after the expiration of this Lease, so long as Tenant has fully and faithfully
carried out all of the terms, covenants and conditions of the Lease. Landlord
may apply any part of such deposit to cure any of Tenant's defaults. In such
event, Tenant
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shall, upon demand, deposit with Landlord the amount so applied so that Landlord
shall have the full deposit on hand at all times during the term of this Lease.
3. This Lease shall be renewable for one (1) five (5) year term following
the expiration of the initial term, provided that Tenant has in all respects
fully complied with the terms, covenants and conditions of this Lease. This
option shall be exercised only if Landlord receives written notice thereof from
Tenant by certified or registered mail addressed to the Landlord at the address
provided herein on or before one hundred eighty (180) days prior to the
expiration of the initial term granted herein.
4. The extended period beginning the first day of December, 2001 and
terminating the thirtieth day of November, 2006 shall be upon the same terms,
covenants and conditions herein contained, except, the annual base rent for said
option period, shall be increased by an amount which is the result of
multiplying the minimum annual rent for the first five year period of this Lease
by a fraction, the denominator of which is the Base Index (hereinafter defined),
and the numerator which is the Increase Index (hereinafter defined), so long as
greater than zero. The annual base rent, so adjusted, shall be due and payable
in twelve equal monthly installments to Landlord in advance commencing on the
first day of December, 2001. Landlord, as promptly as practical, shall compute
the increase for the extended period and notify the Tenant thereof in writing.
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"Base Index" for the first year through and including the fifth year of
the extended option term shall be the average of the Revised Consumer Price
Index - Cities (1967 = 100) published by the Bureau of Labor Statistics of the
United States Department of Labor for the calendar year next preceding the
commencement date of this Lease.
"Increase Index" for the first year through and including the fifth year
of the extended option term shall be the difference between the Base Index as
defined above and the average of the Revised Consumers Price Index Cities (1967
= 100) published by the Bureau of Labor Statistics of the United States
Department of Labor for the calendar year next preceding the commencement date
of the extended five year option period.
If publication of said Consumer Price Index shall be discontinued, the
parties hereto shall thereafter accept comparable statistics on the cost of
living as they shall be computed and published by an agency of the United States
or by a reasonable financial periodical of recognized authority, then to be
selected by the parties thereto, or if the parties cannot agree upon selection,
by arbitration in accordance with the terms set forth below. In the event
comparable statistics are used in place of the Revised Consumer Price Index -
Cities (1967 = 100) as mentioned above, there shall be made in the method of
computation herein provided for such revisions as the circumstances may require
to carry out the intent of this provision.
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Article IV. Common Area Maintenance Charges
1. The demised premises constitute approximately Ten Thousand Five Hundred
Seventy Four and 88/100 (10,574.88) square feet of buildings whose total area is
approximately 120,000 square feet. The Tenant shall pay, as additional rent, its
proportionate share of all property taxes, sewer assessments and/or insurance
premiums currently in force on the property, as well as its proportionate share
of any increase in said property taxes, sewer assessments and/or insurance
premiums during the term of this Lease. Its proportionate share shall mean the
square footage of the demised premises divided by the total square footage of
the buildings. The foregoing shall not apply to any increase due to any acts or
omissions on the part of Landlord or other tenants of the building. All payments
required of Tenant by reason of municipal taxes, sewer assessment and/or
insurance premiums shall be paid by Tenant to Landlord as additional rent in
twelve (12) equal monthly installments in advance on the first day of each month
beginning thirty (30) days after notice of the amount due.
2. Tenant agrees it shall reimburse Landlord, without limitation, for its
proportionate share, as defined above, of Landlord's actual costs of parking lot
maintenance and restriping, snow clearance, water and sewer use charges, water
sprinkler system, water reporting (alarm) system, grass and shrub care,
liability and property insurance, management fees not to exceed five percent
(5%) of gross rents, as all those charges relate to the maintenance and upkeep
of the common areas. In
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addition, heating and air conditioning charges for the entire 120,000 square
foot premises shall be included in Common Area Maintenance Charges.
3. Tenant agrees that its share of said common area maintenance expenses
shall equal Eight and Sixty-Three one hundredths (8.81%) percent of said
expenses.
4. The parties agree that the Tenant's Common Area Maintenance Charges as
of the commencement date of this Lease are $0.96 cents per square foot or Ten
Thousand One Hundred Fifty-One and 88/100 ($10,151.88) Dollars annually payable
as additional rent in advance on the first day of each month in equal monthly
installments of Eight Hundred Forty Five and 99/100 ($845.99) Dollars each.
Tenant shall pay Common Area Maintenance charges monthly as provided above
beginning with the commencement date of this Lease.
Article V. Utilities
1. Landlord will furnish such water, at its sole expense, and such heat
and air conditioning, the expense of which shall be included in Common Area
Maintenance Charges as provided above, as is reasonably necessary for the use
and occupancy of the leased premises. It is agreed that the interruption or
failure of any such services shall not constitute an eviction or disturbance of
Tenant's use and possession of the Lease Premises or a breach by Landlord of any
of its obligations hereunder, that Landlord shall not by reason thereof be
liable for damages, and Tenant shall not thereby by relieved of any of its
obligations hereunder.
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Landlord agrees that it shall in all instances exercise reasonable diligence to
restore any service which shall be interrupted.
2. Tenant shall be solely responsible for and pay for its own electric
service.
3. In the event that any utility service is interrupted or suspended for
more than three business days, then Tenant shall be entitled to rent abatement
on a daily basis until such time as the interrupted service is restored. Any
such rent abatement will be at the rate of 1/365 of the annual rent and Common
Area Maintenance Charges. Tenant shall not be entitled to any rent abatement if
the service interruption is for a reason which is not attributable to the
Landlord, including but not limited to fire, storm, flood, wind, explosion,
force majeure, acts of God or the public enemy, riots, interferences by civil or
military authorities in compliance with the laws of the State of Connecticut
and/or the United States of America or with any governmental laws, orders, rules
and regulations, or by reason of any other cause beyond Landlord's control.
Article VI. Tenant's Work & Liabilities
1. The Tenant shall pay for all permit fees relating to any construction
to be performed by Tenant.
2. Tenant shall perform any and all alterations as it shall require in
accordance with plans and specifications to be submitted to and approved by the
Landlord and the Landlord agrees
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not to unreasonably withhold consent to such improvements and alterations as the
Tenant elects to make.
3. Tenant may, at its sole expense, place appropriate signage on the
exterior facade of the demised premises subject to the Landlord's consent.
Before commencing any work under this provision, Tenant shall submit the plans
and specifications for any such signage to the Landlord for the Landlord's
approval. Tenant shall properly maintain all such signage during the term of
this Lease. Upon the termination of this Lease, Tenant shall remove all such
signage and repair any damage resulting from the installation, maintenance and
removal of the signage.
4. Any approval or permission required of Landlord pursuant to this
Article shall be deemed to be granted, unless Landlord, within fifteen (15) days
after receipt of written notice, by certified mail from Tenant describing any
items for which Landlord's approval is required, shall formally deny said
approval or permission, in writing delivered by certified mail to Tenant. Such
approvals shall not be unreasonably withheld.
5. Tenant agrees to comply promptly with all present and future Federal
and State statutes, municipal ordinances and any orders, rules, regulations,
recommendations or requirements made, issued or enacted by Federal, State or
municipal authorities, or any subdivision thereof, or of the New England Board
of Fire Underwriters, or any Board or body exercising functions similar to those
now discharged by said Board, relating to the demised premises or the use made
thereof.
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6. The Landlord and the Tenant acknowledged that the demised premises is
part of a larger building complex and Tenant agrees that in the event fire and
extended coverage insurance maintained by Landlord on the building complex or
any fire contents insurance maintained by the Landlord or by other Tenants on
contents of the Landlord or other Tenants located in any portion of building are
increased as a result of Tenant's occupancy, use of the demised premises or
storage of goods or materials, Tenant shall pay such increase upon demand to the
Landlord and/or other Tenants as the case may be. The Landlord shall obtain the
agreement of all Tenants in the building to this provision.
7. The Landlord hereby grants permission to the Tenant to install or
modify and renovate its floor area at the Tenant's sole cost and expense,
subject to the Landlord's approval as provided above. Such work shall be done in
accordance with all governmental and insurance underwriting rules, orders and
requirements as are above set forth; provided further that the cost thereof
shall promptly be paid solely by Tenant and the building of which the demised
premises are a part shall be kept free and clear of lien by reason thereof; and
that building and structure of which the demised premises are a part shall not
be damaged or injured thereby.
8. The Tenant covenants and agrees to keep the demised premises and all
parts thereof, in a clean and sanitary condition, and free from rubbish, trash,
any material
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constituting a fire hazard and to keep the sidewalk in front of and adjacent to
the demised premises free from snow, ice, slush, dirt, encumbrances of any kind
whatsoever.
9. Tenant shall at all times during the term of the Lease, make repairs
and replacements in and to the interior of the demised premises, not including
air conditioning, electrical, plumbing, which shall be the sole responsibility
of the Landlord. Landlord shall be solely responsible for structural repairs and
exterior maintenance of the structure, excepting any renovation to the Tenant's
present floor space, but including exterior electrical, plumbing and sewer
connections, the roof and exterior walls.
Article VII. Environmental Matters.
Tenant represents and covenants as follows:
1. Tenant shall allow no use or activity on the premises which could cause
(i) the premises or property to become a hazardous waste treatment, storage or
disposal facility within the meaning of, or otherwise bring the premises within
the ambit of the Resource Conservation and Recovery Act of 1976, as the same may
be amended from time to time ("RCRA") or any similar state laws, regulations or
local ordinances, as they may be amended (ii) a release or threaten release of
hazardous waste from the property within the ambit of Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as the same may
be amended from time to time ("CERCLA"), or the Toxic Substances Control Act, as
the same may be amended from time to time
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("TSCA"), or any other similar state laws, regulations or local ordinances, as
they may be amended (iii) the discharge of pollutants or effluents into any
water source or systems or the discharge into the air of any emissions which
would require a permit under the Federal Water Pollution Act ("FWPA"), or the
Clean Air Act, ("CAA"), as they may be amended from time to time, (iv) any claim
to arise under the Superfund Amendments and Reauthorization Act, as amended from
time to time ("SARA"), or any similar environmental federal or state laws,
regulations or local ordinances, as they may be amended.
2. Tenant shall not cause or suffer to occur a discharge, spillage,
uncontrolled loss, seepage or filtration of oil or petroleum or chemicals
liquids or solids, liquid or gaseous products or toxic or hazardous wastes (a
"spill"), as those terms are used in Chapter 446k of the Connecticut General
Statutes revision of 1958, as the same may be amended from time to time (the
"Environmental Act"), upon, under or within the premises or the property or any
contiguous real estate and Tenant shall not be involved in any activities or
operations at or near the premises or property nor shall Tenant allow any
substances or conditions in or on the premises or property which could support a
claim or cause of action or lead to the imposition on Landlord or any other
owner of the premises of liability or the creation of a lien on the premises
under RCRA, CERCLA, TSCA, FWPA, CAA, SARA, the Environmental Act or any other
federal, state or local environmental laws, regulations or ordinances
(collectively, the "Environmental Laws").
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3. Tenant shall comply strictly and in all respects with the requirements
of the Environmental Laws and shall notify Landlord promptly in the event of any
spill upon the premises or property, and shall promptly forward to the Landlord
copies of all orders, notices, permits, applications or other communications and
reports in connection with any such spill or in connection with any other
matters relating to the Environmental Laws as they may effect the premises or
property.
4. Tenant does and shall indemnify and hold harmless Landlord, and its
successors and assigns forever, from and against all loss, liability, damage and
expense, including attorneys' fees, suffered or incurred by Landlord, and its
successors and assigns, in connection with, but not limited to (i) the
Environmental Laws, including without limitation the assertion of any lien
thereunder, and (ii) any spill effecting the premises whether or not the
originates or emanates from the premises or, to the extent Tenant is liable,
from any such contiguous real estate, including without limitation any loss of
value of the property as a result of each such spill.
5. In the event of any spill affecting the premises or property, to the
extent the Tenant is liable, and/or if Tenant shall fail to comply with any of
the requirements of the Environmental Laws, Landlord may, at its election, but
without the obligation to do so, give such notices and/or cause such work to be
performed at the premises or property and/or take any and all other actions as
Landlord shall deem necessary or advisable
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in order to remedy said spill or cure said failure of compliance, and Tenant
shall pay Landlord for any and all amounts paid as the result thereof within
thirty (30) days after receiving written notice thereof, and if all such amounts
are not paid within thirty (30) days, then Tenant shall also pay Landlord
interest at the highest rate permitted by law until all such amounts are paid.
6. The provisions of this article shall survive the termination of this
Lease.
Article VIII. Destruction of Premises.
In the event of damage to the premises by fire or other casualty which
does not render the premises substantially unusable for the conduct of Tenant's
normal business, Landlord shall utilize its best efforts to repair such damage
with reasonable dispatch (in no event later than forty-five (45) days from the
date of damage) and the payment by Tenant of rent or other payments required to
be paid by tenant by the terms of this Lease shall be pro-rated in accordance
with the extent of the damage caused by such fire and other casualty and the
consequent restriction on Tenant's occupancy and normal business.
In the event of damage to the premises by fire or other casualty which
renders the premises substantially unusable for the conduct of Tenant's normal
business and beyond reasonable repair, Landlord may, by written notice sent to
Tenant within thirty (30) days after the date of such damage, elect to forego
restoration and/or repair of the damage to the premises, at which
14
<PAGE>
time Tenant's obligations under the terms of this Lease shall cease effective on
the date of the fire or other casualty. In the event Landlord does not elect to
forego restoration and/or repair of the damage to the premises, Landlord, will
then promptly commence efforts to complete restoration and/or repair of the
damage to the premises at the earliest opportunity. In the event that
restoration and/or repair of the damage to the premises is not commenced within
seventy five (75) days after the date of such damage, or Landlord does not
utilize reasonable efforts to complete the restoration and repair of such
damage, Tenant may, by written notice sent to Landlord, elect to terminate this
Lease, in which event all obligations of Tenant under this Lease shall terminate
effective on the date of the damage. In no event shall Tenant be required to pay
rent or any other payment required of it under the terms of this Lease during
the period the premises are substantially unusable for the conduct of Tenant's
normal business.
Any dispute between the parties as to whether damage to the premises by
fire or other casualty renders the premises substantially unusable and beyond
reasonable repair for the conduct of Tenant's normal business shall be rendered
by a Board of Arbitrators, in accordance with the terms set forth below.
Article IX. Limitation of Landlord's Liability.
1. The Landlord shall not be liable for any damage or injury to the
demised premises, or to any property of the Tenant or any other person or
corporation therein, from water, rain,
15
<PAGE>
snow, ice, sewage, steam, gas or electricity which may leak into or issue or
flow from any part of the building of which the premises hereby demised are a
part, or from the bursting, breaking, obstruction, leaking or any defect of any
of the pipes or plumbing, appliances or from electric wiring or other fixtures
in said building, or from the condition of said premises or building or any part
thereof, including said boiler and furnace, or from the street or subsurface,
unless occasioned by Landlord's negligence or failure to perform any obligation
hereunder.
2. Landlord shall be excused for the period of any delay in the
performance of any obligations hereunder, when prevented from so doing by cause
or causes beyond Landlord's control which shall include, without limitation, all
labor disputes, civil commotion, war, war-like operations, invasion, rebellion,
hostilities, military or usurped power, sabotage, governmental regulations or
controls, fire or other casualty, inability to obtain any material, services or
financing or through acts of God.
Article X. Fixtures
All permanent partitions, additions or improvements to the structure of
the demised premises which shall be made or placed in or upon the demised
premises by the Tenant (except movable furniture or movable trade fixtures, put
in at the expense of the Tenant), shall be the property of the Landlord and
shall remain upon and be surrendered with the premises as a part thereof at the
termination of this Lease, without disturbance, molestation
16
<PAGE>
or injury, and free from cost or expense to the Landlord and free of liens. The
Tenant shall have latitude to remove any shelving, rugs, or other fixtures, at
the end of its occupancy, conditioned upon the Tenant restoring the portion of
the premises affected by such removal to its original condition at the inception
of its occupancy, reasonable wear and tear expected.
Article XI. Landlord's Right of Entry
1. The Landlord, or his agents, shall have the right to enter into or upon
said premises, or any part thereof at all times for the purpose of examining the
same and for the purpose of making repairs necessary for the safety or
preservation thereof, or of the building of which the demised premises are a
part. The Tenant shall not be entitled to any damages or any abatement in the
rent on account of the making of any repairs or alterations to the building or
any part thereof, except as hereinbefore provided, nor shall the Tenant be
relieved from liability under the terms of this Lease in consequence thereof,
except as hereinbefore provided. In the event of fire, the provisions relating
to the subject matter of fire shall control, as it relates to this paragraph.
2. The Tenant shall permit the Landlord, or his agents, to enter the
demised premises at any reasonable time to show the premises to persons wishing
to rent or purchase same after Tenant's default as set forth in Article XVI
hereof or during the last six months of the initial term of any renewal term
hereof.
17
<PAGE>
3. The Landlord shall give the Tenant reasonable notice of the need to
enter the premises, except in emergency situations, and the Tenant's permission
to enter shall not be unreasonably withheld.
Article XII. Insurance
1. The Tenant shall carry public liability insurance covering the demised
premises and the appurtenances thereof, in an amount of not less than $1,000,000
combined single limit liability covering both bodily injury and property damage
with an insurance company, or companies, authorized to do business in the State
of Connecticut, covering the interest of the Landlord, his agents and the
Tenant. A certificate of Evidence of Insurance showing said coverage to be in
effect during the entire term of this Lease shall be furnished to the Landlord
by said insurance company and the Tenant. Said insurance policies and said
certificate of Evidence of Insurance shall contain a provision requiring the
insurance carrier to give to the Landlord at least ten (10) days' notice before
any cancellation or revision of such insurance policy shall become effective and
binding on the Landlord.
2. Landlord and Tenant hereby release the other from any and all
responsibility or liability to the other or anyone claiming through or under
them by way of subordination or otherwise for any loss or damage to property
caused by fire or any of the extended coverage or supplementary contract
casualties, even if such fire or other casualty was caused by or
18
<PAGE>
resulting from the act or omission of the other party, or anyone for whom such
other party may be responsible, provided, however, that this release shall be
applicable and in force and effect only with respect to loss or damage occurring
during such time as the releasor's policies shall contain a clause or
endorsement to the effect that any such release shall not adversely affect or
impair said policies or prejudice the right of the releasor to recover
thereunder.
3. Landlord and Tenant each agrees that it will request its insurance
carriers to include in its policies such a clause or endorsement.
Article XIII. Indemnity.
Tenant shall indemnify and hold harmless Landlord from and against any and
all claims arising from Tenant's use of the premises, or from the conduct of
Tenant's business or from any activity, work or things done, permitted or
suffered by Tenant in or about the premises or elsewhere and shall further
indemnify and hold harmless Landlord from and against any and all claims arising
from any breach or default in the performance of any obligation on Tenant's part
be performed under the terms of this Lease, or arising from any negligence of
the Tenant, or any of the Tenant's agents, contractors, or employees and from
and against all costs, reasonable attorneys' fees, expenses and liabilities
incurred in the defense of any such claim or any action or proceeding brought
thereon; and in the event any action or proceeding is brought against Landlord
by reason of any such
19
<PAGE>
claim, Tenant, upon notice from Landlord shall defend the same at the Tenant's
expense by counsel satisfactory to Landlord. Tenant, as a material part of the
consideration to Landlord, hereby assumes all risk of damage to property or
injury to persons, in, upon or about the premises arising from any cause and
Tenant hereby waives all claims in respect thereof against Landlord. This
Indemnity provision shall include but not be limited to any claims made by any
succeeding tenant based upon delay by the Tenant in vacating the premises upon
the termination of this Lease. This Indemnity provision, shall be interpreted in
the broadest and most liberal sense and shall survive the termination of this
Lease.
Article XIV. Surrender of Premises
The Tenant covenants and agrees that it will, on the last day of the term,
or any renewal term, or the sooner termination hereof, quietly and peaceable
quiet, surrender and yield up the premises hereby demised, together with all
improvements, alterations and additions made therein and thereon; in good order
and repair, ordinary wear and tear and responsibilities of Landlord excepted,
into the possession of the Landlord without delay.
Article XV. Compliance with Laws, Ordinances, Etc.
In respect to the operation of its business on the demised premises, the
Tenant covenants to comply with, and conform to, all of the laws of the United
States, and the State of Connecticut, and the By-Laws, rules and regulations of
the Town
20
<PAGE>
of East Haven, or any subdivision or department of any of them relating to
health, nuisance, fire and sidewalks so far as the premises hereby leased are or
may be concerned, and to save the Landlord from all fines, penalties or costs
for violation or non-compliance with the same.
Article XVI. Tenant's Default
1. It is expressly agreed that if default shall be made in the payment of
rent or any part thereof, or additional rents enumerated in this Lease at the
time due, or if any material default of the Tenant hereunder in the performance
or commencement of performance of any other covenant or condition hereto to be
performed by the Tenant, shall continue for ten (10) days after written notice
thereof from the Landlord, the Landlord may terminate the Lease and re-enter the
said premises, by Summary Process or otherwise and the same have again,
repossess and enjoy as of Landlord's former estate and interest, or without such
re-entry, may recover possession thereof in the manner prescribed by the Statute
relating to Summary Process it being understood that no demand for the rent and
no re-entry for condition broken as at common law, shall be necessary to enable
the Landlord to recover such possession, pursuant to the Statute relating to
Summary Process, but that all right to enter such demised premises or any such
reentry , is hereby expressly waived by the Tenant.
2. Upon recovering possession of the promises, Landlord shall attempt to
relet the premises and receive the rent
21
<PAGE>
therefrom, but the Tenant shall continue to remain liable for the equivalent of
the amount of all rent reserved herein, less the avails of re-letting, if any.
3. If the demised premises, or any part thereof at any time is vacated or
abandoned, or if a Receiver shall be appointed by a Court of competent
jurisdiction to take possession of the property of the Tenant, or if a petition
under the Bankruptcy Act shall be filed against the Tenant and be not dismissed
within sixty (60) days after the filing thereof, or if the Tenant shall be
adjudicated bankrupt or insolvent, or if the Tenant shall make an assignment for
the benefit of creditors or take advantage of any act or law of bankruptcy or
any acts, Federal or State, dealing with or relating to bankruptcy or
insolvency, or under which the Tenant may effect a compromise, composition,
extension, or reorganization of its debts or affairs, or if there is any change
in the stock ownership of the Lessee, or if this Lease or any right, title or
interest therein of the Tenant or the possession of the demised premises shall
pass to any other than the person consented to in writing by the Landlord, in
each and every case, the Landlord shall have the right to terminate this Lease
by written notice (which shall not be less than fifteen (15) days after the
mailing thereof) by certified mail, addressed to the Tenant at the demised
premises, and this Lease and the term and estate hereby granted shall expire as
if that date were the date herein fixed as the expiration of the terms of this
Lease, and the Tenant shall thereafter be deemed to be holding over in
possession of the premises without the permission of the
22
<PAGE>
Landlord and thereupon the Landlord shall have all rights, remedies, powers and
privileges granted to the Landlord under this Lease.
Article XVII. Subordination
Tenant agrees that upon the request of Landlord, in writing, it shall
subordinate this Lease and the lien thereof to the lien of any present or future
bona fide mortgage or mortgages upon the demised premises or any property of
which the demised premises are a part, irrespective of the time of execution or
time of recording of any such mortgage or mortgages. Tenant agrees that it will,
upon the request of Landlord, execute, acknowledge and deliver any and all
instruments necessary or desirable to give effect to or notice of such
subordination. The word "mortgage" as used herein includes mortgages, deeds of
trust, or other similar instruments and modifications, consolidations,
extension, renewals, replacements, and substitutes thereof with banks, insurance
companies and/or others and includes the mortgage now existing on said premises,
if any. Tenant, upon request of the Landlord, or any holder of a mortgage
against the fee, shall, from time to time, deliver to cause to be delivered to
Landlord, or such mortgagee, within ten (10) days from the demand date, without
charge, certifying, if true that this Lease is valid and existing and in full
force and effect, and that Landlord is not in default under any of the terms of
this Lease.
23
<PAGE>
Article XVIII. Quiet Enjoyment
The Landlord for itself and its successors and assigns in interest, agrees
that so long as the Tenant fully complies with all the terms, covenants, and
conditions herein contained on the Tenant's part to be kept and performed, the
Tenant shall and may peaceably and quietly have, hold and enjoy the said demised
premises for the term aforesaid, subject, however, to the terms of this Lease
and to the mortgages herein mentioned and provided for.
Article XIX. Waiver
The consent of the Landlord, in any instance, to any variation of the
terms of this Lease, or of the receipt of rent with knowledge of any breach,
shall not be deemed to be a waiver as to any breach of any covenant or condition
herein contained, nor shall any waiver be claimed as to any provision of this
Lease, unless the same be in writing, signed by the Landlord, or his authorized
agents, and then only to the extent specifically provided by such consent or
waiver, it being expressly agreed and understood that a waiver or consent as to
any breach of any covenant shall not affect the validity of any covenant, and
shall not be a consent to or waiver of any prior or subsequent breach of any
covenant except as to the specific occasion set forth in such consent or waiver.
Failure of Landlord to insist upon the strict performance of any provision
of this Lease, or to exercise any option or any rules and regulations herein
contained shall not be construed as
24
<PAGE>
a waiver for the future of any such provision, rule or option. The receipt by
Landlord of rent with knowledge of the breach of any provision of this Lease
shall not be deemed to have been waived unless such waiver be in writing signed
by Landlord. No payment by Tenant or receipt by Landlord of a lesser amount than
the monthly rent shall be deemed to be other than on account of the earliest
rent then unpaid nor shall any endorsement or statement on any check or any
letter accompanying any check or payment as rent be deemed an accord and
satisfaction and Landlord may accept such check or payment without prejudice to
Landlord's right to recover the balance of such rent or pursue any other remedy
in this Lease provided.
Article XX. Liens & Encumbrances
Tenant will not permit any mechanic's lien or liens to be placed upon said
premises or any building or improvement thereon during the term hereof, and in
case of the filing of any such lien, Tenant will promptly pay same. If default
in payment thereof shall continue for thirty (30) days after written notice,
thereof from Landlord to Tenant, the Landlord shall have the right and privilege
at Landlord's option of paying the same or any portion thereof without inquiry
as to the validity thereof, and any amounts so paid, including expenses and
interest, shall be so much additional indebtedness hereunder due from the Tenant
to Landlord, and shall be repaid to Landlord immediately on rendition of the
bill therefor.
25
<PAGE>
Article XXI. Condemnation
If the property or any part thereof wherein the demised premises are
located shall be taken by public or quasi-public authority under any power of
eminent domain or condemnation this Lease, at the option of the Landlord shall
forthwith terminate and the Tenant shall have no claim or interest in or to any
award of damages for such taking.
Article XXII. Arbitration
1. Any dispute arising under this Lease shall be settled by arbitration.
Where the terms of this lease require reference of a matter to a Board of
Arbitrators, the composition, selection and operating rules of the Board shall
be as follows:
The Board of Arbitrators shall be made up of three arbitrators, and each
party to this Lease shall choose one arbitrator within ten (10) days of a
written request by either party to the other for the convening of such Board,
and the two arbitrators so chosen shall, within ten (10) days thereafter, choose
the third arbitrator. The arbitration shall be carried out in accordance with
the rules of the American Arbitration Association, Hartford Branch, with a
hearing scheduled in New Haven, Connecticut, except insofar as such rules may be
modified by agreement of the parties. The decision of the majority of the Board
of Arbitration shall be binding upon the parties hereto.
2. Without hereby limiting the effect or applicability of any specific
provision of this Lease of like or similar import, whenever under any provision
of this Lease expressly providing or
26
<PAGE>
requiring that a consent or approval shall be not be unreasonably withheld, or
that an act, forbearance, quantity, amount, sum of money, value, time limit or
any other matter or thing shall be reasonable (or shall not be unreasonable) a
dispute or disagreement shall arise between Landlord and Tenant as to whether or
not the withholding of the consent or approval in question is unreasonable or as
to whether or not the act, forbearance, quantity, amount, sum of money, value,
time limit or other matter or thing in question is reasonable (or not
unreasonable) such dispute or disagreement shall be settled by arbitration as
provided in this Article.
Article XXIII. Parking
The Tenant shall be entitled to a total of thirty (30) parking spaces. It
is anticipated, however, by the parties that the Tenant will have more than
ample parking availability due to the number of spaces located at the demised
premises.
Article XXIV. Benefit
It is further covenant and agreed that the covenants, conditions, and
agreements contained in this Lease are binding, and shall inure to the benefit
of the Landlord and Tenant and the successors and assigns, and representatives
of the Landlord and Tenant.
Article XXV. Notices
Any notice, request, demand, approval, consent or other communication
which lessor or lessee may be required or permitted to give to the other party,
shall be in writing and shall be
27
<PAGE>
mailed to the other party at the address specified below by certified mail,
return receipt requested or to such other address as either party shall have
designated by notice to the other, and the time of the rendition of such shall
be when same is deposited in an official United States Post Office, postage
prepaid:
For Landlord: Roger Levine, General Manager, R.P. Realty Company, P.O. Box
120323, East Haven, CT 06512
For Tenant: Steven Wolfson, President, MicroPatent, LLC, 250 Dodge Avenue,
East Haven, Connecticut 06512.
Article XXVI. Miscellaneous
1. No remedy or election given by any provision in this Lease shall be
deemed exclusive but each shall, wherever possible, be cumulative with the
others and with all other remedies at law or in equity. Each provision of this
Lease shall be deemed both a covenant and a condition and shall run with the
land.
2. In the event the Landlord shall be required to enforce any of the
provisions of this Lease and the Landlord prevails, the Tenant shall pay all
costs and expenses, including reasonable attorneys' fees, incurred by the
Landlord.
3. No rights are to be conferred upon the Tenant until this Lease has been
signed by the Landlord, and an executed copy of this Lease has been delivered to
the Tenant.
4. The Landlord and Tenant Agree that this Lease Agreement shall not be
recorded in the Land Records. However, either party, at its option, may record a
Notice of Lease pursuant to
28
<PAGE>
Section 47-19 of the Connecticut General Statutes and each party hereby agrees
to execute the same upon the request of the other.
5. The captions of this Lease are for convenience and reference only and
in no way define, limit or describe the scope or intent of this Lease.
6. It is the intention of the parties hereto that the estate acquired
hereunder by the Tenant shall not merge with or into any other estate, whether
lesser or greater, in the demised premises now held or hereafter acquired by
tenant or by any disclosed or undisclosed principal of Tenant.
7. This Lease shall be construed and enforced in accordance with the laws
of the State of Connecticut.
8. Any holding over after the expiration of this term or any renewal term
shall be construed to be a tenancy at will at the rents herein specified (on a
monthly basis) and shall otherwise be on the terms herein specified so far as
applicable.
9. If there should be more than one Landlord or Tenant, the covenants of
the Landlord or of the Tenant shall be joint and several obligations of each of
them, and if the Landlord or Tenant are partners, the covenants of the Landlord
or the Tenant shall be the joint and several obligation of each of the partners
and the obligation of the partnership. In construing this indenture, feminine or
neuter pronouns shall be substituted for those of masculine form and vice versa,
and the plural for
29
<PAGE>
singular, and the singular for plural in any place in which the context may
require.
Article XXVII. Real Estate Commission.
Landlord and Tenant represent that there is no real estate agent entitled
to a commission in the procuring of this Lease and each party agrees to
indemnify and hold the other harmless in the event that any claim for a
commission is claimed by any party of the other.
Article XXVIII. Integration Clause
1. This Lease and the exhibits, riders and/or addenda, if any attached,
set forth the entire agreement between the parties. Any prior conversations or
writing are merged herein and extinguished. No subsequent amendment to this
Lease shall be binding upon Landlord or Tenant unless reduced to writing and
signed. If any provision contained in a rider or addendum is inconsistent with
any provision of this Lease, the provision contained in said rider or addendum
shall supersede said other provision, unless otherwise provided in said rider or
addendum. It is herewith agreed that this Lease contains no restrictive
covenants in favor of Tenant.
2. Any prior written and/or oral Lease of the premises described herein
between the parties hereto is hereby revoked and shall be void and of no effect
beginning on the effective date of this Lease.
30
<PAGE>
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands and
seals, and said corporation has caused this Lease to be executed and its
corporate seal hereto affixed by its corporate officer duly authorized, as of
the date and year written below.
Signed, sealed and delivered LANDLORD:
in the presence of: R.P. REALTY COMPANY
/s/ Robyn K. Knapp By /s/ Roger Levine
- ---------------------------- -----------------------------------
Robyn K. Knapp Roger Levine
- ---------------------------- Its General Manager
Duly Authorized
/s/ L. Theresa Yarkosky TENANT:
- ---------------------------- MICROPATENT LLC
/s/ C.A. Matthew
- ----------------------------
By /s/ Steven Wolfson
-----------------------------------
Steven Wolfson
Its President
Duly Authorized
31
<PAGE>
STATE OF CONNECTICUT )
) ss: Woodbridge March 17, 1998
COUNTY OF NEW HAVEN )
Personally appeared Roger Levine, General Manager of R.P. Realty Company, signer
and sealer of the foregoing Lease, and acknowledged the same to be his free act
and deed and as such General Manager and the free act and deed of R.P. Realty
Company, before me.
/s/ Howard E. Kantrovitz
-----------------------------------
Howard E. Kantrovitz
Commissioner of Superior Court
STATE OF CONNECTICUT )
) ss: East Haven March 17, 1998
COUNTY OF NEW HAVEN )
Personally appeared Steven Wolfson, President of MicroPatent LLC a Delaware
Limited Liability Company, signer and sealer of the foregoing Lease, and
acknowledged the same to be his free act and deed as such President and the free
act and deed of MicroPatent LLC, before me.
/s/ L. Theresa Yarkosky
-----------------------------------
L. Theresa Yarkosky
Notary Public
My Commission Expires: 3/31/98
32
<PAGE>
Exhibit 21.1
SUBSIDIARIES OF INFORMATION HOLDINGS INC.
<TABLE>
<CAPTION>
NAME STATE OF INCORPORATION
- ---- OR ORGANIZATION
----------------------
<S> <C>
CRC Press LLC Delaware
MicroPatent LLC Delaware
</TABLE>
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated June 8, 1998, with respect to the financial
statements of MicroPatent for the years ended June 30, 1996 and 1997, in
Amendment No. 1 to the Registration Statement (Form S-1 No. 333-56665) and
related Prospectus of Information Holdings Inc. for the registration of its
Common Stock.
/s/ Ernst & Young LLP
New York, New York
July 15, 1998
<PAGE>
CONSENT OF CERTIFIED PUBLIC ACCOUNTANTS
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated May 29, 1998, with respect to the consolidated
financial statements of CRC Press, Inc. for the years ended December 31, 1995
and 1996, in Amendment No. 1 to the Registration Statement (Form S-1 No.
333-56665) and related Prospectus of Information Holdings Inc. for the
registration of its Common Stock.
/s/ Ernst & Young LLP
West Palm Beach, Florida
July 15, 1998
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to
the use of our reports dated April 20, 1998 and June 8, 1998, with respect to
the consolidated financial statements of Information Ventures LLC, in Amendment
No. 1 to the Registration Statement (Form S-1 No. 333-56665) and related
Prospectus of Information Holdings Inc. for the registration of its Common
Stock.
/s/ Ernst & Young LLP
New York, New York
July 15, 1998
<PAGE>
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
I consent to the use of my report dated June 5, 1998, related to the financial
statements of St. Lucie Press Corporation, Inc., as of December 31, 1996 and for
the year then ended, included in Amendment No. 1 to the Registration Statement
(Form S-1, No. 333-56665) to be filed by Information Holdings Inc. on or about
July 15, 1998, and to the reference to my firm under the heading "Experts" in
the prospectus.
/s/ Robert A. Young, CPA
West Palm Beach, Florida
July 15, 1998
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1997
<PERIOD-START> JAN-01-1998 JAN-01-1997
<PERIOD-END> MAR-31-1998 DEC-31-1997
<CASH> 9,803 10,280
<SECURITIES> 0 0
<RECEIVABLES> 4,273 5,771
<ALLOWANCES> 776 803
<INVENTORY> 3,624 3,803
<CURRENT-ASSETS> 18,958 20,517
<PP&E> 5,012 4,877
<DEPRECIATION> 1,106 836
<TOTAL-ASSETS> 47,592 50,219
<CURRENT-LIABILITIES> 14,863 16,025
<BONDS> 0 0
0 0
33,467 33,467
<COMMON> 0 0
<OTHER-SE> 0 0
<TOTAL-LIABILITY-AND-EQUITY> 47,592 50,219
<SALES> 10,728 34,869
<TOTAL-REVENUES> 10,728 34,869
<CGS> 2,858 11,492
<TOTAL-COSTS> 2,858 11,492
<OTHER-EXPENSES> 7,250 28,040
<LOSS-PROVISION> 69 587
<INTEREST-EXPENSE> 103 282
<INCOME-PRETAX> 657 (4,908)
<INCOME-TAX> 56 3
<INCOME-CONTINUING> 601 (4,911)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 601 (4,911)
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
