UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) October 4, 2000
(September 19, 2000)
Alternate Marketing Networks, Inc.
(Exact name of registration as specified in its charter)
Michigan 0-26624 38-2841197
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
One Ionia, S.W., Suite 300, Grand Rapids, MI 49503
(Address of principal executive offices)
Registrant's telephone number, including area code 616-235-0698
Not applicable
(Former name or former address, if changed since last report)
Item 1. Not Applicable
Item 2. Disposition of Assets.
1. On September 19, 2000, Alternate Marketing Networks, Inc., sold
certain assets, subject to the assumption of certain liabilities, of its
offline sampling business to Valassis Private Delivery, Inc., a wholly-owned
subsidiary of Valassis Communications, Inc. Neither the Company, its
affiliates nor its directors and officers had any material relationship with the
Purchaser prior to this transaction, except as a customer in the ordinary
course of business.
2. Assets sold consisted of Purchased Contracts; furniture, fixtures
and equipment; intellectual property rights; and operations. Liabilities
consisted of certain capital and operating leases, liabilities pertaining to
Purchased Contracts, and certain employment agreements. Purchaser assumed all
liabilities arising from and after the closing date.
3. Amount of consideration was $4,000,000 in cash paid at the closing.
Item 3. Not Applicable.
Item 4. Not Applicable.
Item 5. Not Applicable.
Item 6. Not Applicable.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
b. Pro Forma Financial Information.
1. Alternate Marketing Networks, Inc. and Subsidiaries Pro
Forma Condensed Consolidated Balance Sheet (Unaudited) as of
June 30, 2000.
2. Alternate Marketing Networks, Inc. and Subsidiaries Pro
Forma Condensed Consolidated Statement of Income (Unaudited)
for the year ended December 31, 1999.
3. Alternate Marketing Networks, Inc. and Subsidiaries Pro
Forma Condensed Consolidated Statement of Income (Unaudited)
for the six months ended June 30, 2000.
4. Notes to Pro Forma Condensed Consolidated Financial
Statements (Unaudited).
c. Exhibits
1. Press Release
2. Asset Purchase Agreement (schedules omitted will be provided
to the Commission upon request).
3. Noncompetition and Nonsolicitation Agreement
Item 8. Not Applicable
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
ALTERNATE MARKETING NETWORKS, INC.
Date: October 4, 2000 By /s/Sandra J. Smith
Sandra J. Smith
Chief Financial Officer
ALTERNATE MARKETING NETWORKS, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
The following unaudited pro forma consolidated financial statements give effect
to the sale by Alternate Marketing Networks, Inc. (the "Company") of its
offline sampling business. Pro forma adjustments related to the pro forma
consolidated balance sheet as of June 30, 2000 have been determined assuming
the sale was consummated on June 30, 2000. The pro forma consolidated
statements of income for the year ended December 31, 1999 and six months ended
June 30, 2000 assumes the sale of the Company's offline sampling business had
occurred on January 1, 1999. The pro forma consolidated statement of income is
not necessarily indicative of operating results that would have been achieved
had the combination been consummated as of the beginning of the period
presented and should not be construed as representative of future operations.
These pro forma consolidated financial statements should be read in conjunction
with the historical consolidated financial statements and the related notes
thereto of Alternate Marketing Networks, Inc. and Subsidiaries, which are
included in the Company's Annual Report on Form 10-KSB.
Alternate Marketing Networks, Inc and Subsidiaries
Pro Forma Condensed Consolidated Balance Sheet (Unaudited)
June 30, 2000
<TABLE>
<CAPTION>
Alternate Pro Forma Pro Forma
Marketing Networks Adjustments Consolidated
Assets
Current Assets:
<S> <C> <C> <C>
Cash and cash equivalents $ 81,440 $ 3,975,000 (a) $4,056,440
Accounts receivable 3,308,074 3,308,074
Prepaid expenses 300,955 ( 113,564)(c) 187,391
__________ __________ __________
Total current assets 3,690,469 3,861,436 7,551,905
Notes receivable 13,883 13,883
Property and equipment, net 262,298 ( 140,978)(b) 121,320
Computer software, net 213,129 ( 147,433)(b) 65,696
Intangible assets, net 2,229,295 2,229,295
__________ __________ __________
Total Assets $ 6,409,074 $ 3,573,025 $9,982,099
========== ========== ==========
Liabilities and Shareholders' Equity
Current Liability
Accounts payable $ 705,261 $ 118,252 (c) $ 823,513
Accrued liabilities 179,151 179,151
Capitalized lease obligation 5,511 ( 5,511)(b)
Deferred revenue 181,816 ( 181,816)(c)
__________ __________ _________
Total current liabilities 1,071,739 ( 69,075) 1,002,664
Shareholders Equity
Common stock 11,814,517 11,814,517
Accumulated losses
(through 9/30/93) (1,291,039) (1,291,039)
__________ __________ _________
Total Common Stock 10,523,478 10,523,478
Accumulated losses
(since 10/1/93) (5,186,143) 3,642,100(d) (1,544,043)
__________ __________ _________
Total Shareholders Equity 5,337,335 3,642,100 8,979,435
__________ __________ _________
Total Liabilities and $ 6,409,074 $ 3,573,025 $9,982,099
Shareholders Equity ========== ========== =========
</TABLE>
Alternate Marketing Networks, Inc and Subsidiaries
Pro Forma Condensed Consolidated Statement of Income (Unaudited)
For the six months ended June 30, 2000
<TABLE>
<CAPTION>
Alternate Pro Forma Pro Forma
Marketing Networks Adjustments Consolidated
<S> <C> <C> <C>
Net sales $10,770,515 ($2,603,627)(e) $ 8,166,888
Cost of sales 8,032,429 ( 1,825,075)(e) 6,207,354
__________ __________ __________
Gross profit 2,738,086 ( 778,552) 1,959,534
Selling, general and
administrative expenses 3,167,610 ( 1,447,087)(e) 1,720,523
__________ __________ __________
Income (loss) from ( 429,524) 668,535 239,011
operations
Other income, net 21,111 21,111
__________ __________ __________
Income (loss) before income
taxes ( 408,413) 668,535 260,122
Income tax expense (Note 4) 22,733 7,956 30,689
__________ __________ __________
Net income (loss) ($ 431,146) $ 660,579 $ 229,433
========== ========== ==========
Basic earnings per ($ 0.10) $ 0.06
share ========== ==========
Diluted earnings per ($ 0.10) $ 0.05
share ========== ==========
Basic weighted average
shares outstanding 4,155,344 4,155,344
========== ==========
Diluted weighted average
shares outstanding 4,210,625 4,210,625
========== ==========
</TABLE>
Alternate Marketing Networks, Inc and Subsidiaries
Pro Forma Condensed Consolidated Statement of Income (Unaudited)
For the year ended December 31, 1999
<TABLE>
<CAPTION>
Alternate Pro Forma Pro Forma
Marketing Networks Adjustments Consolidated
<S> <C> <C> <C>
Net sales $28,576,334 ($13,057,391)(e) $15,518,943
Cost of sales 21,707,261 ( 9,392,893)(e) 12,314,368
__________ __________ __________
Gross profit 6,869,073 ( 3,664,498) 3,204,575
Selling, general and
administrative expenses 5,860,692 ( 2,771,414)(e) 3,089,278
__________ __________ __________
Income from operations 1,008,381 ( 893,084) 115,297
Other income, net 40,794 40,794
__________ __________ __________
Income before income taxes 1,049,175 ( 893,084) 156,091
Income tax expense (Note 4) 1,404 53,071 54,475
__________ __________ __________
Net income $ 1,047,771 ($ 946,155) $ 101,616
========== ========== ==========
Basic earnings per share $ 0.27 $ 0.03
========== ==========
Diluted earnings per $ 0.27 $ 0.03
share ========== ==========
Basic weighted average
shares outstanding 3,910,162 3,910,162
========== ==========
Diluted weighted average
shares outstanding 3,934,586 3,934,586
========== ==========
</TABLE>
ALTERNATE MARKETING NETWORKS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
1. General
The pro forma consolidated balance sheet reflects the sale by Alternate
Marketing Networks, Inc. (the "Company") on September 19, 2000 of certain
assets and operations of its offline sampling operations for $4,000,000.
The Company also entered into a nonsolicitation and noncompetition agreement
for $50,000 to be received over four years.
2. Computation of Earnings Per Share
Basic income per share is determined by dividing the net income by the weighted
average number of shares of common stock outstanding. Diluted income per share
is determined by dividing the net income by the weighted average number of
shares of common stock outstanding while giving effect to all dilutive
potential common shares.
3. Pro Forma Combined Financial Data Compared to Historical Data
The accompanying pro forma condensed consolidated balance sheet has been
prepared by applying certain pro forma adjustments to historical financial
information, assuming the sale occurred on June 30, 2000. The pro forma
condensed consolidated statements of income for the year ended December 31,
1999 and the six months ended June 30, 2000 have been prepared based upon
certain pro forma adjustments to historical financial information, assuming the
sale occurred on January 1, 1999.
Pro forma adjustments reflect the operating results of the Company's offline
sampling operations previously operated and conveyed to the Purchaser as a
readily identifiable, discrete business. Pro forma adjustments serve to
identify offline sampling sales, related costs of sales and selling, general
and administrative expenses, including employee compensation, depreciation,
amortization and other expenses specific to the offline sampling business.
Further, pro forma adjustments for selling, general and administrative expenses
do not include any allocation of fixed charges.
The pro forma data is not necessarily indicative of the operating results or
financial position that would have occurred had the transaction described
above been consummated at the date indicated, nor necessarily indicative of the
future operating results or financial position.
ALTERNATE MARKETING NETWORKS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
Continued,
3. Pro Forma Combined Financial Data Compared to Historical Data, continued
The pro forma adjustments give effect to the sale as follows:
(a) Increase in cash of $3,975,000, net of closing expenses, to reflect the
purchase price of $4,000,000 received at closing.
(b) Decrease in assets and liabilities sold as part of the transaction.
(c) Net prepaid expenses and deferred revenue of $68,252 pertaining to
operations after the closing date, payable to Purchaser. Also includes
$50,000 payable in additional closing costs.
(d) Gain on the sale of the offline sampling business.
(e) Reflects the effect on operations of the offline sampling business,
including amounts applicable to depreciation and amortization of assets
sold.
4. Income Taxes
The difference between the statutory tax rate and the effective tax rate of the
pro forma combined statement of income is due to the utilization of net
operating loss carryforwards which had previously been fully reserved based on
management's assessment of the realizability of deferred tax assets in future
periods. While the gain on the sale of the Company's off line sampling
business and related tax effect is not included in these pro forma statements
of income, the utilization of net operating losses by the gain on the sale of
the offline sampling business is assumed to have an impact on income tax
expense in subsequent periods.
FOR IMMEDIATE RELEASE
CONTACT: Phil Miller, Chairman and CEO
(616) 235-0698 ext. 131 ([email protected])
or
Jeff Lambert, Mary Ann Sabo ([email protected])
Lambert, Edwards & Associates, Inc. (616) 233-0500
Alternate Marketing Networks Sells Offline Sampling Business to Valassis
GRAND RAPIDS, Michigan, September 19, 2000 Alternate Marketing Networks, Inc.
(NASDAQ: ALTM) announced today that it has sold its offline sampling business
to Valassis Communications, Inc. (NYSE: VCI).
The Grand Rapids, Mich.-based marketing services company said the deal includes
its in-home sampling programs that provide door-to-door delivery of targeted
consumer goods, as well as proprietary delivery products such as its Media
Optimizer national database. The Company will retain its recently developed
online sampling site. Terms of the deal were not disclosed.
"We are pleased that we have been able to find such a good fit for our sampling
programs in Valassis," said Phillip Miller, chairman and chief executive
officer of Alternate Marketing Networks. "Valassis is the nation's leader in
newspaper sampling, and our door-to-door operation will be a great complement
to their current initiatives.
"This decision will allow Alternate Marketing Networks to focus attention and
resources on our new online products and services, as well as on our newspaper
advertising network."
Alternate Marketing Networks operates its in-home sampling programs from
offices in Grand Rapids, Mich. and Norwalk, Conn. that handle the sales,
marketing and distribution for its door-to-door delivery services, which
includes the branded La Canasta ethnic in-home sampling program.
Valassis Communications is a leading marketing services company that offers
consumer package goods companies and franchise retailers a variety of products
and services, including: Sunday newspaper coupons, targeted specialty
promotions, newspaper-delivered product samples and online promotions.
Valassis, which reported revenues of $795 million in 1999, allows advertisers
to reach more than 50 million households through its stable of targeted
marketing services.
"We look forward to adding the strengths of door-to-door delivery to our
current in-home sampling program," said Alan Schultz, chairman, president and
CEO of Valassis. "We have been impressed with the scope of its offerings and
its client base, and feel the in-home sampling division of Alternate Marketing
Networks will be able to immediately contribute to meeting our clients' needs."
Alternate Marketing Networks said it expects the gain from the sale of its
in-home sampling business would allow it to utilize a significant amount of
its accumulated tax-loss carryforwards.
Alternate Marketing Networks / page 2 of 2
"We believe this divestiture, which was unanimously approved by our board of
directors, will allow us a better opportunity to provide increased returns to
our shareholders," Miller said.
About Valassis Communications:
Valassis connects people to brands by offering a wide range of specialty media
programs to manufacturers, retailers, and Internet/e-commerce companies. From
mass to one-to-one communications, Valassis leads the alternative media
industry in comprehensive marketing solutions, including newspaper-delivered
co-op and specialty inserts, advertising, product sampling, direct mail,
on-line promotions, loyalty marketing programs, and consulting services.
Established in 1970, Valassis is headquartered in Livonia, Michigan, with
printing and manufacturing facilities in Michigan, North Carolina, Kansas, and
Mexico. Valassis affiliates and subsidiaries include Independent Delivery
Service, Save.com, Coupons.com, Valassis Relationship Marketing Systems (VRMS),
PreVision Marketing, and Valassis of Canada. For additional information, visit
the company website at www.valassis.com.
About Alternate Marketing Networks:
Alternate Marketing Networks (www.altmarknet.com) is a single-source provider
of marketing services, offering a broad range of offline and online products
and services. Building on its entrepreneurial heritage, the Company has
developed and launched several online initiatives that provide complementary
products to its offline marketing programs. Alternate Marketing Networks
delivers comprehensive services in three primary areas: Online marketing
products; offline advertising and marketing; and directory marketing. The
Company serves the newspaper, consumer package goods, telecommunications,
automotive, tourism and e-commerce industries.
Some of the statements included in this news release are not historical facts
but are forward-looking statements within the meaning of Section 21E of the
Securities Exchange Act of 1934, as amended, and are subject to the safe harbor
created by that statute. Such statements are subject to certain risks and
uncertainties that could cause actual results to differ materially from those
described in the forward-looking statements. Some of these risks and
uncertainties are discussed in Alternate Marketing Networks' filings with the
Securities Exchange Commission, which are publicly available. Readers are
cautioned not to place undue reliance on the forward-looking statements.
Alternate Marketing Networks does not undertake to publicly release the results
of any revisions to these forward-looking statements that may be made to
reflect events or circumstances after the date hereof or to reflect the
occurrence of unanticipated events.
# # #
ASSET PURCHASE AGREEMENT
DATED September 19, 2000
by and among
ALTERNATE MARKETING NETWORKS, INC.
and
VALASSIS PRIVATE DELIVERY, INC.
TABLE OF CONTENTS
ARTICLE 1: PURCHASE OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Agreement to Purchase and Sell Assets . . . . . . . . . . . . . . . . . . 1
1.2 Procedures for Assets not Transferable. . . . . . . . . . . . . . . . . . 3
1.3 Excluded Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
ARTICLE 2:PURCHASE PRICE AND PRORATION OF EXPENSES AND REVENUES . . . . . . . 3
2.1 Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
2.2 Allocation of Purchase Price . . . . . . . . . . . . . . . . . . . . . . .3
2.3 Payment of Purchase Price . . . . . . . . . . . . . . . . . . . . . . . .4
2.4 Proration of Expenses and Revenues . . . . . . . . . . . . . . . . . . . 4
2.5 Non-Competition and Non-Solicitation Agreement . . . . . . . . . . . . . .5
2.6 Transfer Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE 3: ASSUMPTION OF LIABILITIES . . . . . . . . . . . . . . . . . . . . .5
3.1 Limitation on Assumption of Liabilities . . . . . . . . . . . . . . . . .5
3.2 Assumption of Certain Liabilities . . . . . . . . . . . . . . . . . . . .5
ARTICLE 4: REPRESENTATIONS AND WARRANTIES OF SELLER . . . . . . . . . . . . . 6
4.1 Due Incorporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
4.2 Due Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
4.3 No Breach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
4.4 Clear Title . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.5 Condition and Sufficiency of Assets. . . . . . . . . . . . . . . . . . . .7
4.6 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.7 Labor Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.8 Employee Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.9 Absence of Certain Developments . . . . . . . . . . . . . . . . . . . . . 8
4.10 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . .8
4.11 Compliance with Laws; Taxes. . . . . . . . . . . . . . . . . . . . . . . .9
4.12 Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.13 Real Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
4.14 Books and Records. . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.15 Employees and Sales Agents . . . . . . . . . . . . . . . . . . . . . . . 10
4.16 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
4.17 Material Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . .11
4.18 Sale of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.19 Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
4.20 Customer and Supplier Relationships. . . . . . . . . . . . . . . . . . . 11
ARTICLE 5: REPRESENTATIONS AND WARRANTIES OF PURCHASER . . . . . . . . . . .12
5.1 Due Incorporation . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.2 Due Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
5.3 No Breach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.4 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.5 Material Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE 6: PERFORMANCE BY SELLER PENDING CLOSING . . . . . . . . . . . . . . 13
6.1 Access to Information . . . . . . . . . . . . . . . . . . . . . . . . . .13
6.2 Business As Usual . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
6.3 Pay Increases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
6.4 Certain Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . .14
6.5 Preservation of Business . . . . . . . . . . . . . . . . . . . . . . . .14
6.6 Payment and Performance of Obligations . . . . . . . . . . . . . . . . .14
6.7 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
6.8 COBRA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE 7: MUTUAL COVENANTS AND CONDITIONS PRECEDENT TO
OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . . . .15
ARTICLE 8: CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATIONS . . . . . . . . . 15
8.1 Accuracy of Representations and Warranties . . . . . . . . . . . . . . . 15
8.2 Compliance with Covenants and Agreements . . . . . . . . . . . . . . . . 15
8.3 Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . 15
8.4 Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . .15
8.5 Closing Deliveries by Seller . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE 9: CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS . . . . . . . . . . .16
9.1 Accuracy of Representations and Warranties . . . . . . . . . . . . . . . 16
9.2 Compliance with Covenants and Agreements . . . . . . . . . . . . . . . . 16
9.3 Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
9.4 Closing Deliveries by Purchaser . . . . . . . . . . . . . . . . . . . . .16
ARTICLE 10: INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . .16
10.1 Indemnification by Seller . . . . . . . . . . . . . . . . . . . . . . . .16
10.2 Indemnification by Purchaser . . . . . . . . . . . . . . . . . . . . . . 17
10.3 Procedure for Indemnification . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE 11: CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
11.1 Date of Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
11.2 Documents to be Delivered by Seller . . . . . . . . . . . . . . . . . . .20
11.3 Documents to be Delivered by Purchaser . . . . . . . . . . . . . . . . . 21
ARTICLE 12: PERFORMANCE FOLLOWING THE DATE OF CLOSING . . . . . . . . . . . .22
12.1 Further Acts and Assurances . . . . . . . . . . . . . . . . . . . . . . .22
12.2 FSI Discount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
12.3 Adminstration of Accounts . . . . . . . . . . . . . . . . . . . . . . . .22
12.4 Use of Purchased Intellectual Property . . . . . . . . . . . . . . . . . 23
12.5 itrackdirectories . . . . . . . . . . . . . . . . . . . . . . . . . . . .23
12.6 Certain Purchased Contracts and Arrangements . . . . . . . . . . . . . . 23
ARTICLE 14: TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . .23
13.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23
13.2 Return of Documents and Nondisclosure . . . . . . . . . . . . . . . . . .24
ARTICLE 14: DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . .24
ARTICLE 15: MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . .28
15.1 Survival of Representations and Warranties . . . . . . . . . . . . . . . 28
15.2 Preservation of and Access to Records . . . . . . . . . . . . . . . . . .29
15.3 Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29
15.4 Disclaimer of Warranties . . . . . . . . . . . . . . . . . . . . . . . . 29
15.4 Public Announcements . . . . . . . . . . . . . . . . . . . . . . . . . . 29
15.5 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29
15.6 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
15.7 Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . .30
15.8 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
15.9 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . 30
15.10Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31
15.11Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31
15.12Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
15.13Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
15.14Number and Gender . . . . . . . . . . . . . . . . . . . . . . . . . . . .31
15.15Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
15.16Parties in Interest . . . . . . . . . . . . . . . . . . . . . . . . . . .31
15.17Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
15.18Forum and Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . 32
15.19Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT ("Agreement") is made and entered into as of
the 19th day of September, 2000, by and among Valassis Private Delivery, Inc.,
a Delaware corporation (the "Purchaser") and Alternate Marketing Networks,
Inc., a Michigan corporation (the "Seller").
RECITALS
A. Seller is engaged in the business of providing consumer product
sampling services throughout the United States utilizing direct-to-door and
newspaper delivery of samples, and targeting, packaging, tracking and other
services in connection with such delivery (collectively, the "Business"), as
well as other businesses. The term "Business" does not include online
sampling or sampling in connection with and incidental to Seller's other
businesses (for example, the Telephone Directory Distribution Business).
B. Seller desires to sell and assign and Purchaser desires to purchase
and assume substantially all of the assets and rights and certain of the
Liabilities (as hereinafter defined) used by Seller or useful in the operations
of the Business on the terms and conditions set forth in this Agreement.
C. Capitalized terms that are not defined in context are defined in
Article 14 of this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing premises, the mutual
covenants contained herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE 1: PURCHASE OF ASSETS
1.1 Agreement to Purchase and Sell Assets. On the terms and subject to
the conditions set forth in this Agreement, at the Closing, Purchaser agrees to
purchase from Seller and Seller agrees to sell, assign, transfer, convey and
deliver to Purchaser, all of Seller's right, title and interest in and to all
of the assets, properties, rights, Contracts, operations and business of Seller
that relate to, arise from or are used or useful in connection with the
operation of the Business other than the Excluded Assets (collectively the
"Assets"), including the following:
a. All of Seller's right, title and interest in and to the
Intellectual Property used in the operation of the Business, including those
items described on Schedule 1.1(a) hereto (the "Purchased Intellectual
Property");
b. Seller's proprietary delivery systems network, as described on
Schedule 1.1(b);
c. All of Seller's right, title and interest in and to the name and
marketing program known as "La Canasta";
d. All of Seller's business records relating to the Business,
including customer lists, lists of suppliers, correspondence, files, research
data, advertising data and other records and information necessary or desirable
for Purchaser to carry on the Business in the ordinary course after the Date of
Closing;
e. All of Seller's rights and benefits in and to the Contracts that
relate to, arise from or are used or useful in connection with the operation of
the Business, and any amendments thereto, including all newspaper and private
delivery sampling contracts, and all other contracts relating to non-sampling
private delivery programs (but specifically excluding telephone directory
delivery contracts) as described in Schedule 1.1(e) hereto (the "Purchased
Contracts");
f. All pre-payments received by Seller for services rendered by
Seller in connection with the Business pursuant to a Purchased Contract or an
arrangement in which 50% or less of the aggregate number of samples to be
delivered under such arrangement have been delivered by Seller as of the Date
of Closing, including those described in Schedule 1.1(e) hereto;
g. All pre-payments received by Seller for services to be rendered
by Purchaser after the Closing;
h. All of Seller's supply of brochures, displays, models and other
marketing materials on hand as of the Date of Closing, as well as the camera
ready art, negatives, proofs and other reproduction materials for the same
relating to the Business;
i. All saleable goodwill as a going concern and other intangible
personal property of Seller that comprise a part of the Business;
j. All of Seller's furniture, personal property, office equipment,
computer hardware, tools and other tangible personal property owned or leased
by Seller in connection with the business, including that which is described in
Schedule 1.1(j) hereto, together with any assignable manufacturer, vendor or
installer warranties thereon; but excluding such property located at the
Connecticut premises described in Section 1(k) below other than the laptops of
Ruth Ann Carroll and Scott Bierfeldt;
k. All of Seller's right, title and interest in and to any and all
real property leased by Seller that relates to, arises from or is used or
useful in connection with the operation of the Business other than the Seller's
Connecticut premises located at 301 Merritt 7, Norwalk, Connecticut 06851,
including the real property leased by Seller pursuant to the lease described on
Schedule 1.1(k) hereto, together with the improvements, fixtures, hereditaments
and appurtenances thereto (the "Leased Premises"); and
l. All accretions and additions to the Assets that occur prior to
the Date of Closing.
1.2 Procedures for Assets not Transferable. Other than the Purchased
Intellectual Property which the Seller represents and warrants in Section 4.10
is fully assignable or transferable, if any property or rights included in the
other Assets are not assignable or transferable either by virtue of the
provisions thereof or under applicable law without the consent of one or more
third Persons, Seller shall use its best efforts to obtain such consents prior
to the Date of Closing. If any such consent cannot be obtained prior to the
Date of Closing, and the Closing occurs, this Agreement and the related
instruments of transfer shall not constitute an assignment or transfer thereof
and Purchaser shall not assume Seller's obligations with respect thereto, but
Seller shall use its best efforts to obtain such consent as soon as possible
after the Date of Closing or otherwise obtain for Purchaser the practical
benefit of such property or rights.
1.3 Excluded Assets. The following assets and properties shall be
excluded from the Assets and shall be retained by Seller.
a. All assets, whether tangible or intangible, related to online
sampling, USSPI (as defined in the Transition Agreement), the Telephone
Directory Distribution Business or any other business of Seller not included
within the definition of the Business, including, without limitation. the
assets listed on Schedule 1.3 hereto.
b. All equipment, computers and other assets associated with
Seller's Connecticut location other than the laptops of Ruth Ann Carroll and
Scott Bierfeldt.
ARTICLE 2: PURCHASE PRICE AND PRORATION OF EXPENSES AND REVENUES
2.1 Purchase Price. The Purchase Price for the Assets shall be the sum
of Four Million and 00/100 Dollars ($4,000,000.00) (the "Purchase Price").
2.2 Allocation of Purchase Price. Purchaser and Seller shall, in a
reasonable manner, determine the fair market value of the Assets and shall
allocate the Purchase Price among the Assets in accordance with said
determination, but in any event in accordance with Section 1060 of the Code
(as hereinafter defined). Said allocation shall be made as soon as practical
after the Closing. The Purchaser and Seller shall each file, in accordance
with Section 1060 of the Code, an Asset Acquisition Statement on IRS Form 8594
that conforms with such allocation with its federal income tax return for the
tax year in which the Date of Closing occurs, shall cooperate with the other
party in the preparation of such forms, and shall contemporaneously provide the
other party with a copy of the IRS Form 8594 being filed. Each party agrees
not to assert, in connection with any tax return, audit or other similar
proceeding, any allocation of the Purchase Price that differs from the
allocation to which the parties have agreed to herein.
2.3 Payment of Purchase Price. The Purchase Price shall be paid by
Purchaser to Seller at the Closing by certified or bank cashier's check (or by
wire transfer of immediately available funds to Seller's designated account
designated at least three business days prior to the Date of Closing).
2.4 Proration of Expenses and Revenues. The following items shall be
adjusted and prorated as of the opening of business on the day immediately
following the Date of Closing (such that Seller shall be responsible for
amounts allocable with respect to periods prior to and including the Date of
Closing, and Purchaser shall be responsible for amounts allocable with
respect to periods after the Date of Closing):
a. All amounts due or to become due and payable under the Purchased
Contracts;
b. All amounts accrued for wages, salaries, bonuses, commissions and
benefits payable to Seller's employees and independent contractors, including
vacation and sick leave;
c. Prepaid insurance premiums, other prepaid expenses, credit memos,
and Seller deposits that relate to the Business, unless Seller elects to secure
a refund of such amounts;
d. All utility charges, including sewer, water, gas, electricity,
telephone and rent related to the Leased Premises. Seller shall use its best
efforts to obtain final bills on all such charges and expenses as of the Date
of Closing for the Business and shall pay the cost of such charges and expenses
as computed from such final bills. In the event it shall not be possible to
obtain a final bill as of the Date of Closing, the cost of such charges and
expenses for the period prior to the Date of Closing shall be estimated based
upon the last available bills and Seller shall pay such estimated amount to
Purchaser on the Date of Closing and any discrepancy between such estimated
amount based on the actual bills that are obtained after the Date of Closing,
in an aggregate amount in excess of $500, shall be promptly paid by Seller to
Purchaser, or by Purchaser to Seller, as the case may be; and
e. Contract pre-payments for services to be rendered on and after
the Date of Closing, as described in Section 1.1(f) and on Schedule 1.1(e).
2.5 Non-Competition and Non-Solicitation Agreement. On the Date of
Closing, as a necessary incident of the sale and purchase of the Assets, the
parties shall execute and deliver a Non-Competition and Non-Solicitation
Agreement by and among Purchaser, Seller and Phillip D. Miller, in the form of
the attached Exhibit A.
2.6 Transfer Taxes. Any and all sales, transfer, documentary, use,
stamp, registration and other such taxes and fees (including any penalties,
interest, additions to tax and costs and expenses relating to such taxes and
fees) incurred in connection with this Agreement shall be borne by the Seller.
The Seller at its own expense shall file all necessary tax returns and other
documentation with respect to all such taxes and fees. The Purchaser shall
cooperate with the Seller in the preparation of such returns.
ARTICLE 3: ASSUMPTION OF LIABILITIES
3.1 Limitation on Assumption of Liabilities. Except as specifically set
forth in Section 3.2 hereof, Seller shall transfer the Assets to Purchaser at
the Closing free and clear of all Encumbrances (as hereinafter defined).
Except as specifically set forth in Section 3.2 hereof, Purchaser shall not,
by virtue of its purchase of the Assets, assume or become responsible for any
Liabilities of Seller and Seller shall pay, perform and discharge all
Liabilities which are not so assumed by Purchaser, including, without
limitation, all Liabilities of Seller prior to the Date of Closing and relating
to or arising from (i) its Benefit Plans, (ii) Taxes (as defined in Section
4.11), (iii) the termination of the employees listed on Schedule 4.15 or (iv)
the Seller's Connecticut location.
3.2 Assumption of Certain Liabilities. Purchaser covenants and agrees
that at the Closing, it shall execute and deliver to Seller an Assignment and
Assumption Agreement in substantially the form of Exhibit B hereto (the
"Assumption Agreement") pursuant to which it will assume and agree to perform
and discharge only the following Liabilities of Seller:
a. All Liabilities of Seller arising under the Purchased Contracts
that accrue and become performable after the Date of Closing, except that
Purchaser does not assume any Liabilities for products sold or services
rendered by the Business under such Assumed Contracts prior to the Date of
Closing;
b. Seller's employment agreements with David Kroeger, Bruce Doll,
James Hammer and Ruth Ann Carroll for Liabilities that accrue and become
performable thereunder after the Date of Closing; and
c. All Liabilities of Seller identified on Schedule 3.2 hereto for
Liabilities of the Business that accrue and become performable thereunder after
the Date of Closing.
ARTICLE 4: REPRESENTATIONS AND WARRANTIES OF SELLER
As an inducement for Purchaser to enter into this Agreement and consummate
the transactions contemplated hereby, intending that Purchaser rely thereon in
entering into and performing this Agreement, Seller represents and warrants to
Purchaser that each and all of the following are true and correct as of the
date of this Agreement and will be true and correct at and as of the Closing:
4.1 Due Incorporation. Seller is a corporation duly organized, validly
existing and in good standing under the laws of the State of Michigan, and has
all requisite power and authority, corporate and otherwise, to own, operate and
lease its properties and assets and to conduct the Business as it is now being
conducted. Seller is duly qualified to transact business as a foreign
corporation and is in good standing under the laws of every state or
jurisdiction in which the nature of its activities or of its properties owned,
leased or operated makes such qualification necessary and in which the failure
to be so qualified could reasonably be expected to have a Material Adverse
Effect on Seller or the Business. Seller is not subject to any Contract which
restricts or may restrict the conduct of any portion of the Business in any
jurisdiction or location.
4.2 Due Authorization. The execution, delivery and performance of this
Agreement, including the documents, instruments and agreements to be executed
and/or delivered by Seller pursuant to this Agreement, and the consummation of
the transactions contemplated hereby and thereby have been duly and validly
authorized by all necessary corporate action on the part of Seller. This
Agreement and the documents, instruments and agreements to be executed and/or
delivered by Seller pursuant to this Agreement have been or will be on or
before the Date of Closing duly and validly authorized, executed and delivered
by Seller and the obligations of Seller hereunder and thereunder are or will
be upon such execution or delivery valid and legally binding, and this
Agreement and the documents, instruments and agreements to be executed and/or
delivered by Seller pursuant to this Agreement are or will be upon such
execution and delivery enforceable against Seller in accordance with their
respective terms, except as such enforcement may be limited by applicable
bankruptcy, reorganization, insolvency, moratorium or other similar laws
currently or hereafter in effect affecting the enforcement of creditors' rights
generally and by general principles of equity (regardless of whether such
enforceability is considered in a proceeding at law or in equity), including,
among others, limitations on the availability of equitable remedies.
4.3 No Breach. Seller has full power and authority, corporate and
otherwise, to sell, assign, transfer, convey and deliver to Purchaser the
Assets to be sold hereunder and to otherwise perform its obligations under this
Agreement and the documents, instruments and agreements to be executed and/or
delivered by the Seller pursuant hereto. The execution and delivery of this
Agreement, including the documents, instruments and agreements to be executed
and/or delivered by the Seller pursuant to this Agreement, and the consummation
of the transactions contemplated hereby and thereby will not: (i)violate any
provision of the Articles of Incorporation or Bylaws (or comparable governing
documents or instruments) of Seller;(ii)violate any Applicable Laws or
Injunction; (iii)except as provided in Schedule 4.3 hereto, require any filing
with, permit from, authorization, consent or approval of, or the giving of any
notice to, any Person, including the stockholders of the Purchaser; (iv)result
in a violation or breach of, or constitute (with or without due notice or lapse
of time or both) a default (or give another party any rights of termination,
cancellation or acceleration) under any of the terms, conditions or provisions
of any note, bond, mortgage, indenture, license, franchise, permit, lease
or other Contract to which Seller is a party, or by which it or any of its
properties or assets may be bound; or (v)result in the creation or imposition
of any Encumbrance on any of the Assets, excluding from the foregoing clause
(ii) violations which, individually or in the aggregate, would not reasonably
be expected to have a Material Adverse Effect on the Seller or the Business and
would not prevent or delay the consummation of the transactions contemplated
hereby.
4.4 Clear Title. At the Closing, Seller will convey to Purchaser free
and clear of any and all Encumbrances of any kind, nature or description
whatsoever, good, valid and marketable title to, or a valid leaseholder
interest in, all of the Assets (whether real, personal or mixed, and whether
tangible or intangible), except for personal property sold since June 30, 2000,
in the Ordinary Course of Business.
4.5 Condition and Sufficiency of Assets. All of the Assets have been
properly maintained and are in good operating condition and repair, subject
only to ordinary wear and tear. Seller shall use its best efforts and shall
cooperate with Purchaser with respect to the transfer to Purchaser of all
existing manufacturers', vendors', installers' and other warranties for the
Assets that are in effect as of the Date of Closing. The Assets are all of the
assets utilized by Seller in the operation of the Business immediately prior to
the Closing.
4.6 Litigation. There is no pending claim or Proceeding:
a. that has been commenced by or against Seller or that otherwise
relates to or may affect the Business or any of the Assets owned or used by
Seller in the conduct of the Business; or
b. that challenges, or that may have the effect of preventing,
delaying, making illegal, or otherwise interfering with, any of the
transactions contemplated hereby.
To the Knowledge of the Seller, (1) no such Proceeding has been Threatened, and
(2) no event has occurred or circumstance exists that may give rise to, or
serve as a basis for, any such claim or the commencement of any such Proceeding.
4.7 Labor Matters. Seller has never been a party to any collective
bargaining agreement or other labor contract. To the Seller's Knowledge, no
event has occurred or circumstance exists that could provide the basis for any
work stoppage or other labor dispute.
4.8 Employee Benefits. Except as described in Schedule 4.8 hereto,
Seller does not maintain or contribute to any Benefit Plans. Without limiting
the generality of the foregoing provision of this Section, except as described
in Schedule 4.8 hereto, there are no pension plans, welfare plans or employee
benefit plans qualified under Section 401(a) of the Code to which Seller is
required to contribute. Except as described in Schedule 4.8 hereto, Seller
does not and will not have any unfunded Liability for services rendered prior
to the Date of Closing under any Benefit Plans and the Purchaser will not incur
any Liability under any such plans as a result of the consummation of the
transactions contemplated hereby. Neither Seller nor any of its "subsidiaries"
contributes to or has any Liability (including withdrawal Liability) with
respect to any multi-employer plan. For purposes of this Section,
"subsidiaries" shall include all corporations, partnerships, limited liability
companies and other business entities and all trades or businesses (whether or
not incorporated) which may be liable for any income tax, loss of tax
deduction, excise taxes, penalties or other similar consequences under ERISA or
under the Code by reason of its ownership affiliation with Seller.
4.9 Absence of Certain Developments. Except for the transactions
contemplated by this Agreement, since June 30, 2000, Seller has conducted the
Business only in the Ordinary Course of Business and there has been no material
adverse change in the condition, financial or otherwise, of the Business or the
Assets. Seller has not received notice of the cancellation of any Assigned
Contract or the loss of, or reduction in business levels by, any customer of the
Business.
4.10 Intellectual Property. The Purchased Intellectual Property
constitutes all of the Intellectual Property used or held for use by Seller in
connection with the Business. Seller owns all right, title and interest in and
to the Purchased Intellectual Property, free and clear of all Encumbrances.
Neither the operation of the Business nor the possession or use in the Business
of any of the Assets, including the Purchased Intellectual Property infringe
the intellectual property rights of any other Person. There is no claim or
proceeding pending or, to Seller's Knowledge, Threatened which challenges the
legality of the use in the Business of any Purchased Intellectual Property or
the validity of enforceability thereof. Seller has not entered into any
Contracts or licenses concerning the Purchased Intellectual Property or that
would impair its right to transfer all of its rights in and to the Purchased
Intellectual Property to Purchaser; Seller has no reason to believe that any of
the Purchased Intellectual Property is, or is claimed to be, invalid; and,
except as provided in Schedule 1.1(a) hereto, Seller is not obligated under any
Contract or otherwise to pay royalties, fees or other payments with respect to
any of the Purchased Intellectual Property. Except as provided in Schedule
1.1(a) hereto, the sale and assignment of the Purchased Intellectual Property
to Purchaser and the right to use the same after the Date of Closing does not
require any filing with, permit from, consent or approval of, or the giving of
any notice to, any Person.
All right, title and interest in and to the Media Optimizer software and
all data that is part of Media Optimizer is owned solely and exclusively by
Seller, free and clear of any Encumbrance, and is provided to Purchaser
hereunder in connection with Media Optimizer with the sole exception of a
single database that Seller represents and warrants relates to and is useful
principally in connection with Seller's USSPI business (as defined in the
Transition Agreement)(which do not comprise a part of the Business).
itracksamples.com consists of approximately 200 mini programs that run
itracksamples.com and 9 small incidental programs in the form of routines that
are shared by itracksamples.com and itrackdirectories.com. These 9 shared
programs are included in the Purchased Intellectual Property and, on and after
the Date of Closing, may be used by Seller solely in accordance with the terms
and conditions of the Transition Agreement.
4.11 Compliance with Laws; Taxes. The operation of the Business by Seller
has not resulted in any material violation of any Applicable Laws respecting
the Seller, the Assets or the Business and no currently existing circumstances
are likely to result in any such violation. The Seller has filed all tax
returns required to be filed. All such tax returns were correct and complete
in all material respects. The Taxes (as hereinafter defined) owed by the
Seller, whether or not shown on any tax return, have been paid. The Seller
is not currently the beneficiary of any extension of time within which to file
any tax return. There is no material dispute or claim concerning any Tax
Liability of the Seller either claimed or raised by any authority in writing or
as to which any of the shareholders, directors and officers of the Seller has
Knowledge. The Seller has not waived any statute of limitation in respect of
Taxes or agreed to an extension of time with respect to a Tax assessment or
deficiency. The Seller is not a party to any Tax allocation or sharing
agreement, nor does the Seller have any liability for the taxes of any other
person under Treasury Regulations Section 1.1502-6 (or any similar provision
of law), as a transferee or successor, by contract or otherwise. For purposes
of this Section 4.11, "Taxes" include any federal, state or local tax,
including any interest, penalty or addition thereto, whether disputed or not,
and tax returns include any return, declaration, report, claim for refund or
information return or statement relating to taxes, including any schedule or
attachment thereto, and including any amendment thereof.
4.12 Contracts. The Purchased Contracts include all Contracts that relate
to, arise from or are used or are necessary for the operation of the Business.
All of the Purchased Contracts were made in the Ordinary Course of Business,
are valid, binding and currently in full force and effect, and the performance
by the parties thereto will not, individually or in the aggregate, have a
Material Adverse Effect upon the Seller or the Business. Seller is not in
default in any material respect under any of the Purchased Contracts, and no
event has occurred which, through the passage of time or the giving of notice,
or both, would constitute a default or give rise to a right of termination or
cancellation under any of the Purchased Contracts, or cause the acceleration of
any Liability of Seller, or result in the creation of any Encumbrance upon any
of the Assets. To the Seller's Knowledge, no other party is in default under
any of the Purchased Contracts, nor has any event occurred which, through the
passage of time or the giving of notice, or both, would constitute a default
or give rise to a right of termination or cancellation under any of the
Purchased Contracts, or cause the acceleration of any obligation owed to
Seller. Except as described on Schedule 1.1(e) hereto, none of the Purchased
Contracts have been canceled, terminated, amended or modified and, to the
Seller's Knowledge, all parties to such Purchased Contracts are in all material
respects in compliance therewith. Except as provided in Schedule 4.3 hereto,
all of the Contracts are assignable by Seller and assumable by Purchaser
without the consent or approval of any Person and any such required consents
and approvals shall be obtained by Seller prior to the Date of Closing.
4.13 Real Property. Seller does not own any real property used in
connection with the Business. Seller has delivered to Purchaser prior to
execution of this Agreement, complete and accurate copies of the leases for the
Leased Premises and all amendments, modifications and renewals thereof.
4.14 Books and Records. All of Seller's books of account and other
financial and corporate records relating to the Business have been made
available to Purchaser (or will be so made available prior to the Date of
Closing). Such books of account and records are current, complete, true and
correct in all material respects and reflect in all material respects all items
of income and expense with respect to the Business and all assets, Liabilities
and accruals with respect to the Business in accordance with generally accepted
accounting principles, consistently applied.
4.15 Employees and Sales Agents. Schedule 4.15 hereto contains a list of
the names, positions, annual salary rates, hourly wage rates, severance
benefits and accrued vacation and sick leave, as of the Date of Closing, of all
current employees of Seller (including those on furlough, leave or layoff of
any kind) who perform services in connection with the Business (the "Employees")
and sales agents. Schedule 4.15 also contains a list of employees who perform
services in connection with the Business and will be terminated by Seller on
the Date of Closing. Schedule 4.15 also sets forth a description of any written
Contract, other than the Benefit Plans described on Schedule 4.8 hereto, with
respect to the terms or conditions of employment of any Employees or sales
agents. All bonuses and commissions earned but not previously paid by
Seller under any employment Contract or sales agent Contract up to the Date of
Closing have been paid or will be paid by Seller prior to the Closing. None of
the Employees indicated on Schedule 4.15 as being terminated as of the Closing
have employment Contracts with Seller or any of Seller's affiliates; all such
Employees are at-will employees under Michigan or Connecticut law (as
applicable); and Seller has the right to terminate the employment of such
Employees without being obligated to pay in excess of than 2-weeks severance
pay to each such Employee.
4.16 Brokers. Seller has not employed or engaged any broker, finder,
agent, investment banker or third party nor has it otherwise dealt with anyone
purporting to act in the capacity of a finder or broker, in connection with the
transactions contemplated hereby. No commissions, finder's fees or like
charges have been or will be incurred by Seller in connection with the
execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby. Seller hereby indemnifies Purchaser and
holds Purchaser harmless against and from any and all Liabilities arising from
such employment, engagement or services rendered to Seller.
4.17 Material Disclosures. No statement, representation or warranty made
by Seller in this Agreement or in any certificate, statement, list, schedule
or other document furnished or to be furnished to Purchaser hereunder contains,
or when so furnished will contain, any untrue statement of a material fact, or
fails to state, or when so furnished will fail to state, a material fact
necessary to make the statements contained herein or therein, in light of the
circumstances in which they are made, not misleading.
4.18 Sale of Assets. The Assets to be sold by Seller to Purchaser
hereunder do not constitute substantially all of the assets of Seller.
4.19 Revenues. The Business to be acquired hereunder by Purchaser
generated gross revenues of approximately $13,000,000 during the year ended
December 31, 1999 and gross revenues of approximately $4,300,000 for the eight
months ended August 31, 2000.
4.20 Customer and Supplier Relationships. Attached as Schedule 4.20 is a
complete and correct list of all current customers of Seller relating to the
Business for the year ended December 31, 1999 and the eight month period ending
August 31, 2000. Seller shall provide Purchaser with the revenues from each
customer listed on Schedule 4.20 for the periods provided for in the
preceding sentence within thirty (30) days after the Closing. With respect to
any customer or group of related customers listed on Schedule 4.20, Seller has
no knowledge that any such customer or group of related customers has terminated
or expects to terminate a material portion of its normal business with Seller.
ARTICLE 5: REPRESENTATIONS AND WARRANTIES OF PURCHASER
As an inducement for Seller to enter into this Agreement and consummate
the transactions contemplated hereby, intending that Seller rely thereon in
entering into and performing this Agreement, Purchaser represents and warrants
to Seller that each and all of the following are true and correct as of the
date of this Agreement and will be true and correct at and as of the Closing:
5.1 Due Incorporation. Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware,
and has all requisite power and authority, corporate and otherwise, to own,
operate and lease its properties and assets and to conduct its business as it
is now being conducted. Purchaser is duly qualified to transact business as a
foreign corporation and is in good standing under the laws of every state or
jurisdiction in which the nature of its activities or of its properties owned,
leased or operated makes such qualification necessary and in which the failure
to be so qualified could reasonably be expected to have a Material Adverse
Effect on the Purchaser.
5.2 Due Authorization. The execution, delivery and performance of this
Agreement, including the documents, instruments and agreements to be executed
and/or delivered by Purchaser pursuant to this Agreement, and the consummation
of the transactions contemplated hereby and thereby have been or will be on or
before the Date of Closing duly and validly authorized by all necessary
corporate action on the part of Purchaser. This Agreement and the documents,
instruments and agreements to be executed by Purchaser pursuant to this
Agreement have been, or will be on or before the Date of Closing, duly and
validly authorized, executed and delivered by Purchaser and the obligations of
Purchaser hereunder and thereunder are or will be valid and legally binding,
and this Agreement and the documents, instruments and agreements to be executed
and delivered by Purchaser pursuant to this Agreement are or will be upon such
execution and delivery enforceable against Purchaser in accordance with their
respective terms, except as such enforcement may be limited by applicable
bankruptcy, reorganization, insolvency, moratorium or other similar laws
currently or hereafter in effect affecting the enforcement of creditors' rights
generally and by general principles of equity (regardless of whether such
enforceability is considered in a proceeding at law or in equity), including,
among others, limitations on the availability of equitable remedies.
5.3 No Breach. Purchaser has full corporate power and authority,
corporate and otherwise, to purchase the Assets being purchased hereunder and
to otherwise perform its obligations under this Agreement and the documents,
instruments and agreements to be executed by the Purchaser pursuant hereto.
The execution and delivery of this Agreement, including the documents,
instruments and agreements to be executed by the Purchaser pursuant to this
Agreement, and the consummation of the transactions contemplated hereby and
thereby will not: (i)violate any provision of the Articles of Incorporation or
Bylaws (or comparable governing documents or instruments) of Purchaser; (ii)
violate any Applicable Laws or Injunction; (iii) require any filing with, or
permit from, authorization, consent or approval of, or the giving of any notice
to, any Person; (iv) result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default (or give another party
any rights or termination, cancellation or acceleration) under, any of the
terms, conditions or provisions of any note, bond, mortgage, indenture, license,
franchise, permit, lease or other Contract to which Purchaser is a party, or by
which it or any of its assets or properties may be bound; or (v) result in the
creation or imposition of any Encumbrance on any of the Purchaser's assets or
properties, excluding from the foregoing clause (ii) violations which,
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect on the Purchaser and would not prevent or delay the
consummation of the transactions contemplated hereby.
5.4 Brokers. Purchaser has not employed or engaged any broker, finder,
agent, investment banker or third party nor has it otherwise dealt with anyone
purporting to act in the capacity of a finder or broker, in connection with the
transactions contemplated hereby. No commissions, finder's fees or like charges
have been or will be incurred by Purchaser in connection with the execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby. Purchaser hereby indemnifies Seller and holds Seller harmless against
and from any and all Liabilities arising from such employment, engagement or
services rendered to Purchaser.
5.5 Material Disclosures. No statement, representation or warranty made
by Purchaser in this Agreement or in any certificate, statement, list, schedule
or other document furnished or to be furnished to Seller hereunder contains, or
when so furnished will contain, any untrue statement of a material fact, or
fails to state, or when so furnished will fail to state, a material fact
necessary to make the statements contained herein or therein, in light of the
circumstances in which they are made, not misleading.
ARTICLE 6: PERFORMANCE BY SELLER PENDING CLOSING
Seller covenants and agrees that from and after the date of this Agreement
and until the earlier of Date of Closing or the termination of this Agreement
in accordance with Article 13 hereof:
6.1 Access to Information. At the request of Purchaser, Seller shall,
from time to time, give or cause to be given to Purchaser, its officers,
employees, counsel, accountants and other representatives, upon reasonable
notice to Seller, full access during normal business hours to the Business,
the Assets and all of the books, minute books, title papers, records, files,
Contracts, insurance policies, licenses and documents of every character of
Seller relating to the Business and Seller shall furnish or cause to be
furnished to Purchaser, its officers, employees, counsel, accountants and
other representatives all of the information with respect to the Seller, the
Business and/or Assets as any of them may reasonably request. In addition,
Purchaser may, at its sole cost and expense, at any time prior to the Date of
Closing, through its officers, employees, counsel, accountants and other
representatives, conduct such investigations and examinations of the Assets
as it deems necessary or advisable, and Seller will cooperate fully in such
investigations.
6.2 Business As Usual. Seller shall carry on the Business diligently,
only in the Ordinary Course of Business and substantially in the same manner as
heretofore conducted and will keep and maintain the Assets in good and safe
repair and condition consistent with past practices.
6.3 Pay Increases. Except for increases that Seller is contractually
obligated to make, Seller shall not, without the prior written consent of
Purchaser, grant any increase in the salaries or rate of pay to any of its
employees, grant any increase in any benefits or establish, adopt, enter
into, make any new grants or awards under, or amend any employment agreement or
Benefit Plan for the benefit of any of its employees.
6.4 Certain Restrictions. Seller shall not (i) enter into any Contract,
(ii) incur any Liability, (iii) assume, guarantee or otherwise become liable or
responsible for any Liability of any other Person, (iv) make any loans,
advances or capital contributions to any other Person (except for extensions of
credit to its customers in the Ordinary Course of Business), or waive any
right or enter into any other transaction, in each case (except those described
in clauses (iii) and (iv) above) other than in the usual and Ordinary Course of
Business.
6.5 Preservation of Business. Seller shall use its best efforts to keep
available to Purchaser the present employees of Seller and to preserve for
Purchaser the Business and the present goodwill and relationship of Seller
with its vendors, suppliers, customers and others having business
relationships with the Business.
6.6 Payment and Performance of Obligations. Seller will timely pay and
discharge all invoices, bills and other monetary Liabilities and shall not
perform or fail to perform any act which will cause a material breach of any
of the Contracts.
6.7 Insurance. Seller will maintain in full force and effect all
insurance coverages for the Assets substantially comparable to coverages
existing on the date hereof.
6.8 COBRA. Seller shall retain all Liability for any notices and
coverage required to be provided under Part 6 of Title 1 of ERISA with respect
to any former employee of the Business whose employment with Seller terminated
on or prior to the Date of Closing.
ARTICLE 7: MUTUAL COVENANTS AND CONDITIONS PRECEDENT TO OBLIGATIONS
Proceedings. The obligations of Purchaser and Seller under this Agreement
are subject to there being no (i) Proceedings which have been brought,
asserted, commenced or Threatened against the Purchaser and/or the Seller by
any Person involving or affecting in any way the Seller, the Business, the
Assets, this Agreement or the consummation of the transactions contemplated
hereby, or (ii) Applicable Laws restraining or enjoining or which may
reasonably be expected to nullify or render ineffective this Agreement or the
consummation of the transactions contemplated hereby or which otherwise could
reasonably be expected to have a Material Adverse Effect on the Seller or the
Business.
ARTICLE 8: CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATIONS
Unless waived by Purchaser in writing, each and every obligation of
Purchaser to be performed at the Closing shall be subject to the satisfaction
at or prior thereto of each and all of the following conditions precedent:
8.1 Accuracy of Representations and Warranties. The representations and
warranties made by Seller in this Agreement, including the documents,
instruments and agreements to be executed and/or delivered by Seller pursuant
to this Agreement, if and to the extent specifically qualified by materiality,
shall be true and correct, and if not so qualified, shall be true and correct
in all material respects, in each case, at and as of the Closing with the same
force and effect as though such representations and warranties had been made or
given at and as of the Closing.
8.2 Compliance with Covenants and Agreements. Seller shall have
performed and complied with all of its covenants, agreements and obligations
under this Agreement which are to be performed or complied with by it at or
prior to the Closing, including the execution and/or delivery of the documents,
instruments and agreement specified in Section 11.2 hereof or in such
documents, instruments and agreements, all of which shall be reasonably
satisfactory in form and substance to counsel for Purchaser.
8.3 Consents and Approvals. Purchaser shall have received evidence, in
form and substance reasonably satisfactory to counsel for Purchaser, that all
consents, waivers, releases, authorizations, approvals, licenses, certificates,
permits and franchises of all Persons as may be necessary to consummate the
transactions contemplated by this Agreement and for the Purchaser to carry on
and continue the Business as it is now conducted by Seller have been obtained.
8.4 Material Adverse Change. Between the date hereof and the Date of
Closing, no event or condition shall have occurred or arisen which has resulted
in, or would reasonably be expected to result in, a material adverse change in
the assets, properties, business, operation, financial condition or financial
prospects of the Business.
8.5 Closing Deliveries by Seller. Seller shall have delivered to
Purchaser at the Closing all items described in Section 11.2.
ARTICLE 9: CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS
Unless waived by Seller in writing, each and every obligation of Seller to
be performed at the Closing shall be subject to the satisfaction at or prior
thereto of each and all of the following conditions precedent:
9.1 Accuracy of Representations and Warranties. The representations and
warranties made by Purchaser in this Agreement, including the documents,
instruments and agreements to be executed and/or delivered by Purchaser
pursuant to this Agreement, if and to the extent specifically qualified by
materiality, shall be true and correct, and if not so qualified, shall be true
and correct in all material respects, in each case, at and as of the Closing
with the same force and effect as though such representations and warranties
had been made or given at and as of the Closing.
9.2 Compliance with Covenants and Agreements. Purchaser shall have
performed and complied with all of its covenants, agreements and obligations
under this Agreement which are to be performed or complied with by it at or
prior to the Closing, including the execution and/or delivery of the documents,
instruments and agreements specified in Section 11.3 hereof or in such
documents, instruments and agreements, all of which shall be reasonably
satisfactory in form and substance to counsel for Seller.
9.3 Employees. Purchaser shall have offered employment to all of the
Employees (except those specified on Schedule 4.15 as being terminated as of
the Closing) and shall have offered to continue the engagement of the
independent sales agents of Seller listed on Schedule 4.15 on terms and with
benefits consistent with Purchaser's policies for employees of Purchaser in
similar positions and at similar levels as Purchaser's other employees. The
Seller shall use its best efforts to assure the orderly transfer of those
employees and sales agents.
9.4 Closing Deliveries by Purchaser. Purchaser shall have delivered to
Seller at the Closing all items described in Section 11.3.
ARTICLE 10: INDEMNIFICATION
10.1 Indemnification by Seller. Seller covenants and agrees to indemnify
and hold Purchaser, its officers, directors, employees, affiliates,
shareholders and agents, and each of their respective heirs, personal
representatives, successors and assigns, harmless from, against and in
respect of any and all losses, costs, expenses (including reasonable attorneys'
fees and disbursements of counsel), Liabilities, damages, fines, penalties,
charges, assessments, judgments, settlements, claims, causes of action and
other obligations of any nature whatsoever (collectively "Losses") that any of
them may at any time suffer, sustain, incur or become subject to, arising out
of, based upon or resulting from or on account of each and all of the following:
a. The breach or inaccuracy of any representation or warranty made
by Seller in this Agreement, including the documents, instruments and
agreements to be executed and/or delivered by Seller pursuant hereto and
thereto; provided, however, that Seller shall not be required to provide such
indemnification for the breach or inaccuracy of any such representation
or warranty unless and until Purchaser, its officers, directors, employees,
affiliates and shareholders shall have sustained cumulative Losses as a result
of one or more such breaches or inaccuracies of at least One Hundred Thousand
Dollars ($100,000). Once such cumulative Losses equal or exceed the sum of One
Hundred Thousand Dollars ($100,000), Seller shall provide indemnification for
all Losses sustained as a result of such breach(es) or inaccuracy(ies)
in excess of such sum up to Four Million Dollars ($4,000,000).
b. The breach of any covenant or agreement made by Seller in this
Agreement, including the documents, instruments and agreements to be executed
and/or delivered by Seller pursuant hereto and thereto.
c. Any other Liability of or claims against Seller of any kind, to
the extent not specifically assumed by the Purchaser under the provisions of
Section 3.2 of this Agreement.
10.2 Indemnification by Purchaser. Purchaser (including its successors
and assigns) covenants and agrees to indemnify and hold Seller, its officers,
directors, employees, affiliates, shareholders and agents, and each of their
respective heirs, personal representatives, successors and assigns, harmless
from, against and in respect of any and all Losses that any of them may at
any time suffer, sustain, incur or become subject to, arising out of, based
upon or resulting from or on account of each and all of the following:
a. The breach or inaccuracy of any representation or warranty made
by Purchaser in this Agreement, including the documents, instruments and
agreements to be executed and/or delivered by Purchaser pursuant hereto and
thereto; provided, however, that Purchaser shall not be required to provide
such indemnification for the breach or inaccuracy of any such representation
or warranty unless and until Seller, its officers, directors, employees,
affiliates and shareholders shall have sustained cumulative Losses as a result
of one or more such breaches or inaccuracies of at least One Hundred Thousand
Dollars ($100,000). Once such cumulative Losses equal or exceed the sum of One
Hundred Thousand Dollars ($100,000), Purchaser shall provide indemnification
for all Losses sustained as a result of such breach(es) or inaccuracy(ies)
in excess of such sum up to Four Million Dollars ($4,000,000).
b. The breach of any covenant or agreement made by Purchaser in this
Agreement, including the documents, instruments and agreements to be executed
and/or delivered by Purchaser pursuant hereto and thereto.
c. The failure of Purchaser to pay or perform any Liability it
agreed to assume pursuant to Section 3.2 hereof, provided that Purchaser is
legally obligated therefor.
10.3 Procedure for Indemnification. In the event a party intends to seek
indemnification pursuant to the provisions of Sections 10.1 or 10.2 hereof (the
"Indemnified Party"), the Indemnified Party shall promptly give notice
hereunder to the other party (the "Indemnifying Party"). Any such notice shall
set forth in reasonable detail and to the extent then known the basis for such
claim for indemnification. The failure of such Indemnified Party to give
notice of any claim for indemnification promptly shall not adversely affect
such Indemnified Party's right to indemnity hereunder except to the extent that
such failure materially adversely affects the right of the Indemnifying Party
to assert any reasonable defense to such claim. Each such claim for
indemnity shall expressly state that the Indemnifying Party shall have only the
twenty (20)business day period referred to in the next sentence to dispute or
deny such claim. The Indemnifying Party shall have twenty (20) business days
following the delivery of such notice to it either (a) to acquiesce in such
claim by giving such Indemnified Party written notice of such acquiescence or
(b) to object to the claim by giving such Indemnified Party written notice of
the objection. If the Indemnifying Party does not object thereto within such
twenty (20) Business Day period, such Indemnified Party shall be entitled to
be indemnified for all Losses reasonably and proximately incurred by such
Indemnified Party in respect of such claim. If the Indemnifying Party objects
to such claim in a timely manner, and such Indemnified Party and the
Indemnifying Party are unable to resolve their dispute within twenty (20)
business days following such objection (or such additional period of time as
may be mutually agreed to by them), the claim shall be resolved by a final
judgment of a court of competent jurisdiction.
After obtaining written notice of any claim or the service of a summons or
other initial legal process in any action instituted against the Indemnified
Party as to which recovery may be sought against the Indemnifying Party because
of the indemnification provided for in Section 10.1 or 10.2 hereof, and, if
such indemnity shall arise from the claim of a third party, the Indemnified
Party shall permit the Indemnifying Party to assume the defense of any such
claim and any litigation resulting from such claim with counsel reasonably
acceptable to the Indemnified Party; provided, however, that the Indemnified
Party shall not be required to permit such an assumption of the defense of any
claim or litigation which, if not first paid, discharged or otherwise complied
with, would result in an interruption or disruption of the business of the
Indemnified Party or any material part thereof. Notwithstanding the foregoing,
the right to indemnification hereunder shall not be affected by any failure of
the Indemnified Party to give such notice (or by delay by the Indemnified Party
in giving such notice) unless, and then only to the extent that, the rights and
remedies of the Indemnifying Party shall have been prejudiced as a result of
the failure to give, or delay in giving, such notice. Failure by the
Indemnifying Party to notify the Indemnified Party of its election to defend
any such claim or action by a third party within ten (10) days after notice
thereof shall have been given to the Indemnifying Party shall be deemed a
waiver by the Indemnifying Party of its right to defend such claim or action.
If the Indemnifying Party assumes the defense of such claim or litigation
resulting therefrom, the obligations of the Indemnifying Party hereunder as to
such claim or litigation shall include taking all steps necessary in the
defense or settlement of such claim or litigation and holding the Indemnified
Party harmless from and against any and all damages caused by or arising out
of any settlement approved by the Indemnifying Party or any judgment entered in
connection with such claim or litigation. The Indemnifying Party shall not, in
the defense of such claim or any litigation resulting therefrom, consent to
entry of any judgment (other than a judgment of dismissal on the merits without
costs) or make any admission of wrongdoing (civil or criminal) except with the
written consent of the Indemnified Party or enter into any settlement
(except with the written consent of the Indemnified Party) which does not
include as an unconditional term thereof the giving by the claimant or the
plaintiff to the Indemnified Party a release from all Liability in respect to
such claim or litigation.
If the Indemnifying Party actively assumes the defense of such claim or
litigation resulting therefrom, the Indemnified Party shall be entitled to
have its own separate counsel participate in its defense at the Indemnified
Party's own cost and expense.
If the Indemnifying Party does not assume the defense of any such claim by
a third party or litigation resulting therefrom after receipt of notice from
the Indemnified Party, the Indemnified Party may defend against such claim or
litigation in such manner as it deems appropriate, and unless the Indemnifying
Party shall deposit with the Indemnified Party a sum equivalent to the total
amount demanded in such claim or litigation plus the Indemnified Party's
estimate of the cost (including attorneys' fees) of defending the same, the
Indemnified Party may settle such claim or litigation on such terms as it may
deem appropriate and the Indemnifying Party shall promptly reimburse the
Indemnified Party for the amount of such settlement and for all costs
(including attorneys' fees), expenses and damages incurred by the Indemnified
Party in connection with the defense against or settlement of such claim or
litigation, or if any such claim or litigation is not so settled, the
Indemnifying Party shall promptly reimburse the Indemnified Party for the
amount of any judgment rendered with respect to any claim by a third party in
such litigation and for all costs (including attorneys' fees), expenses and
damage incurred by the Indemnified Party in connection with the defense against
such claim or litigation, whether or not resulting from, arising out of, or
incurred with respect to, the act of a third party.
ARTICLE 11: CLOSING
11.1 Date of Closing. Subject to the satisfaction or waiver of the
conditions precedent contained in Articles 7, 8 and 9 hereof, the closing of
the transactions contemplated by this Agreement (the "Closing") shall be held
not later than September 19, 2000, at such particular day, time and place as
may be mutually agreed upon in writing by Purchaser and Seller and shall
be as of the opening of business on such day. Such date is referred to in this
Agreement as the "Date of Closing." The Closing shall be deemed effective at
11:59 pm on the Date of Closing.
11.2 Documents to be Delivered by Seller. At the Closing, Seller shall
execute, where necessary or appropriate, and deliver to Purchaser each and all
of the following:
a. A certificate in the form of Exhibit C hereto signed by a duly
authorized officer of Seller, and dated as of the Date of Closing, to the
effect that the representations and warranties made by Seller in this Agreement
and in any document, instrument and/or agreement to be executed and/or delivered
by Seller pursuant to this Agreement are true and correct in all material
respects at and as of the Closing with the same force and effect as though such
representations and warranties had been made on or given at and as of the
Closing and Seller has performed and complied with all of its covenants,
agreements and obligations under this Agreement which are to be performed and
complied with by Seller at or prior to the Closing;
b. A copy certified by the Secretary of Seller of the duly adopted
resolutions of Seller's Board of Directors approving this Agreement and
authorizing the execution and delivery of this Agreement, including the
documents, instruments and agreements to be executed and/or delivered by
Seller pursuant to this Agreement, and the consummation of the transactions
contemplated hereby and thereby;
c. A Bill of Sale to all of the Assets in the form of Exhibit D
hereto duly executed by Seller, and the Assignment and Assumption Agreement;
d. Duly executed assignments by Seller to Purchaser with respect to
the Intellectual Property in a form reasonably satisfactory to counsel for
Purchaser;
e. Releases, satisfactions, or terminations of all financing
statements or other evidences of Encumbrances on any of the Assets;
f. All consents, releases, assignments and permissions of any kind
or nature which reasonably may be required to effectively sell, assign and
transfer the Assets to Purchaser, all in a form reasonably satisfactory to
counsel for Purchaser;
g. The Non-Competition and Non-Solicitation Agreement duly executed
by Seller and Philip D. Miller in the form attached hereto as Exhibit A;
h. Assignments of certain employment agreements duly executed by
Seller and the individuals listed on Schedule 11.2; and
i. Such other documents and items as are reasonably necessary or
appropriate to effect the consummation of the transactions contemplated hereby
or that may be customary under local law.
11.3 Documents to be Delivered by Purchaser. At the Closing, Purchaser
shall execute, where necessary or appropriate, and deliver to Seller each and
all of the following:
a. A certified or bank cashier's check (or wire transfer of
immediately available funds to Seller's designated account) in the amount
provided for in Section 2.1 hereof;
b. A certificate in the form of Exhibit E hereto signed by a duly
authorized officer of Purchaser, and dated as of the Date of Closing, to the
effect that the representations and warranties made by Purchaser in this
Agreement and in any document, instrument and/or agreement to be executed
and/or delivered by Purchaser pursuant to this Agreement are true and
correct in all material respects at and as of the Closing with the same force
and effect as though such representations and warranties had been made on or
given at and as of the Closing and the Purchaser has performed and complied
with all of its covenants, agreements and obligations under this Agreement
which are to be performed and complied with by Purchaser at or prior to
on the Closing;
c. A copy certified by the Secretary of Purchaser of the duly
adopted resolutions of the Board of Directors of Purchaser approving this
Agreement and authorizing the execution and delivery of this Agreement,
including the documents, instruments and agreements to be executed and/or
delivered by the Purchaser pursuant hereto, and the consummation of the
transactions contemplated hereby and thereby;
d. The Assignment and Assumption Agreement hereto duly executed by
Purchaser;
e. The Non-Competition and Non-Solicitation Agreement duly executed
by Purchaser;
f. An agreement (the "Transition Agreement") between Purchaser and
Seller, substantially in the form attached as Exhibit F hereto; and
g. Assumptions of the Seller's employment agreements with the
individuals listed on Schedule 11.2, or amendments to such employment
agreements or new employment agreements in forms satisfactory to such employees.
ARTICLE 12: PERFORMANCE FOLLOWING THE DATE OF CLOSING
The following covenants and agreements are to be performed after the
Closing by the parties and shall continue in effect for the periods
respectively indicated or, where no indication is made, until performed:
12.1 Further Acts and Assurances. Seller agrees that, at any time and
from time to time, on and after the Date of Closing, upon the reasonable
request of Purchaser, it will do or cause to be done all such further acts and
things and execute, acknowledge and deliver, or cause to be executed,
acknowledged and delivered to Purchaser any and all papers, documents,
instruments, agreements, deeds, assignments, transfers, assurances and
conveyances as may be necessary or desirable to vest, perfect and confirm of
record in Purchaser, its successors and assigns, the right, title and interest
in and to any of the Assets or otherwise to carry out and give effect to the
provisions and intent of this Agreement. In addition, from and after the Date
of Closing, Seller will afford to Purchaser and its attorneys, accountants and
other representatives access, during normal business hours, to such personnel,
books and records relating to the Assets as may reasonably be required in
connection with the preparation of financial information or the filing of
tax returns and will cooperate in all reasonable respects with Purchaser in
connection with claims and litigation asserted by or against third parties,
relating to the transactions contemplated hereby. Seller further agrees that,
from and after the Date of Closing, Seller will not disparage Purchaser or any
of its affiliates, with respect to Purchaser's conduct of the Business after the
Date of Closing.
12.2 FSI Discount. Purchaser shall provide Seller with discounts with
respect to Seller's purchase of space in all free standing inserts ("FSIs")
of Valassis Communications, Inc. ("VCI")(excluding any FSIs of any affiliate
of VCI) through December 31, 2001, as set forth in Schedule 12.2 hereto.
12.3 Administration of Accounts. From and after the Date of Closing, all
payments and reimbursements made in the ordinary course by any third party in
the name of or to Seller in connection with or arising out of the Assets or the
Business after the Date of Closing and accruing on or after the Date of Closing
shall be held by Seller in trust for the benefit of Purchaser and, immediately
upon receipt by Seller of any such payment or reimbursement, Seller shall pay,
or cause to be paid, over to Purchaser the amount of such payment or
reimbursement without right of setoff.
12.4 Use of Purchased Intellectual Property. Seller expressly agrees not
to use the Purchased Intellectual Property, including the marks and logos
previously used in the Business.
12.5 itrackdirectories. For a period of four years after the Date of
Closing, Seller agrees not to sell or license or otherwise permit any third
party that derives more than 25% of its gross revenues from consumer product
sampling services access to, directly or indirectly, the software known as
"itrackdirectories" which is used in the Telephone Directory Distribution
Business.
12.6 Certain Purchased Contracts and Arrangements. The parties hereby
agree that for those Purchased Contracts and other arrangements listed on
Schedule 12.6 pursuant to which Seller has delivered 50% or more of the samples
required to be delivered thereunder at the Date of Closing, and under which
Purchaser will be performing services after the Date of Closing, Seller shall
be entitled to the revenues therefrom received by Seller or Purchaser after the
Date of Closing and shall bear all of the costs and expenses thereof and in
connection therewith. Seller shall reimburse Purchaser for all direct costs
incurred by Purchaser in performing the remainder of such Purchased Contracts
or arrangements ten (10) business days after receipt of an invoice by Purchaser
indicating a description of such direct costs other than any related third
party expenses which Seller shall pay directly to the third party, and
provided, further, that Purchaser shall be entitled to withhold any amounts for
which it is entitled to reimbursement pursuant to the immediately preceding
proviso from any amounts received by it from the relevant customer after
the Date of Closing.
ARTICLE 13: TERMINATION
13.1 Termination. This Agreement may be terminated and the transactions
contemplated herein may be abandoned after the date of this Agreement, but not
later than the Closing:
a. By mutual written consent of all parties hereto;
b. By Purchaser or Seller if any of the conditions provided for in
Article 7 of this Agreement have not been met and have not been waived in
writing by the party seeking to terminate on or before the Date of Closing;
c. By Purchaser if any of the conditions provided for in Article 8
of this Agreement have not been met and have not been waived in writing by
Purchaser on or before the Date of Closing;
d. By Seller if any of the conditions provided for in Article 9 of
this Agreement have not been met and have not been waived in writing by Seller
on or before the Date of Closing; and
In the event of termination or abandonment by either party as provided in this
Section 13.1, written notice shall forthwith be given to the other party and
each party shall pay its own expenses incident to preparation for consummation
of this Agreement and the transactions contemplated hereunder and neither party
shall have any Liability to the other hereunder except such Liability as may
arise as a result of a breach hereof.
13.2 Return of Documents and Nondisclosure. If this Agreement is
terminated for any reason pursuant to Section 13.1 hereto, each party shall
return all documents and materials which shall have been furnished by or on
behalf of the other party, and each party hereby covenants that it will not
disclose to any Person any confidential or proprietary information about the
other party or any information about the transactions contemplated hereby,
except insofar as may be necessary to assert its rights hereunder.
ARTICLE 14: DEFINITIONS
For purposes of this Agreement, the following terms have the meanings
specified:
"Agreement" has the meaning set forth in the preface above.
"Applicable Laws" any and all laws, ordinances, constitutions,
regulations, statutes, treaties, rules, codes, licenses, certificates,
franchises, permits, requirements and Injunctions adopted, enacted,
implemented, promulgated, issued, entered or deemed applicable by or under
the authority of any Governmental Body having jurisdiction over Seller or any
of its properties or assets or by the eligible voters of any applicable
jurisdiction.
"Assets" has the meaning set forth in Section 1.1 hereof.
"Assumption Agreement" has the meaning set forth in Section 3.2 hereof.
"Benefit Plan" any and all bonus, stock option, restricted stock, stock
purchase, stock appreciation, phantom stock, profit participation, profit-
sharing, deferred compensation, severance, pension, retirement, disability,
medical, dental, health, life or dental insurance, death benefit, incentive,
welfare and/or other benefit, compensation and/or retirement plan, policy,
arrangement and/or Contract now or at any time heretofore maintained, sponsored
or participated in by Seller or any of its affiliates for the benefit of its
employees.
"Business" has the meaning set forth in the recitals hereto.
"Closing" has the meaning set forth in Section 11.1 hereof.
"Code" the Internal Revenue Code of 1986, as amended, or any successor
law and regulations issued by the IRS pursuant to the Internal Revenue Code or
any successor law.
"Contract" any agreement, lease, license, contract, obligation, promise,
commitment, arrangements, understanding or undertaking, instrument, document
(whether written or oral and whether express or implied) of any type, nature
or description that is legally binding.
"Date of Closing" has the meaning set forth in Section 11.1 hereof.
"Encumbrance" any claim, lien, pledge, charge, security interest,
encumbrance, mortgage, lease, license, equitable interest, option, right of
first refusal or preemptive right, condition, or other restriction of any kind,
including any restriction on use, voting (in the case of any security),
transfer, receipt of income, or exercise of any other attribute of ownership.
"Governmental Body" any:
(i) nation, state, county, city, town, village, district or
other jurisdiction of any nature;
(ii) federal, state, local, municipal, foreign or other
government;
(iii) governmental or quasi-governmental authority of any nature
(including any governmental agency, branch, board, commission, department,
instrumentality, office or other entity, and any court or other tribunal);
(iv) multi-national organization or body; and/or
(v) body exercising, or entitled to exercise, any
administrative, executive, judicial, legislative, police, regulatory or taxing
authority or power of any nature.
"Indemnified Party" has the meaning set forth in Section 10.3 hereof.
"Indemnifying Party" has the meaning set forth in Section 10.3 hereof.
"Injunction" any and all writs, rulings, awards, executive orders,
directives, injunctions (whether temporary, preliminary or permanent),
judgments, decrees or other orders adopted, enacted, implemented, promulgated,
issued, entered or deemed applicable by or under the authority of any
Governmental Body.
"Intellectual Property" means (a) all inventions (whether patentable or
unpatentable and whether or not reduced to practice), all improvements thereto,
and all patents, patent applications, and patent disclosures, together with all
reissuances, continuations, continuations-in-part, revisions, extensions, and
reexaminations thereof, (b) all trademarks, service marks, trade dress, logos,
trade names, and corporate names, together with all translations, adaptations,
derivations, and combinations thereof and including all goodwill associated
therewith, (c) all copyrightable works, all copyrights, and all applications,
registrations, and renewals in connection therewith, (d) all mask works and all
applications, registrations, and renewals in connection therewith, (e) all
trade secrets and confidential business information (including ideas, research
and development, know-how, formulas, compositions, manufacturing and production
processes and techniques, technical data, designs, drawings, specifications,
customer and supplier lists, pricing and cost information, and business and
marketing plans and proposals), (f) all computer software (including data and
related documentations), (g) all other proprietary rights, and (h) all copies
an tangible embodiments thereof (in whatever form or medium).
"itracksamples.com" itracksamples.com is a web-based service developed
exclusively by employees of Seller which enables customers and the staff of
the owner/user to track a selected consumer sample at every moment from the
time it leaves the manufacturer through to the time that it arrives at the
premises of the recipient of the sample and to monitor activities associated
with it, including storage and transport, and can be used to monitor variables
(e.g., storage location temperature) as selected by the customer at the time
the order is placed, all through the manual upload of statistical information
by participants onto the web site.
"Knowledge"
(i) an individual will be deemed to have "Knowledge" of a
particular fact or other matter if:
(a) such individual is actually aware of such fact or other
matter; or
(b) a reasonably prudent individual actively involved in a
company of the size and nature of Seller or Purchaser, as applicable, could be
expected to discover or otherwise become aware of such fact or other matter in
the normal course of conducting business.
(ii) A Person (other than an individual) will be deemed to
have "Knowledge" of a particular fact or other matter if any individual who is
serving, or who has at any time served, as a director, governor, officer,
manager, partner, executor, or trustee of such Person (or in any similar
capacity) has, or at any time had, Knowledge of such fact or other matter.
"Leased Premises" has the meaning set forth in Section 1.1(k) hereto.
"Liability" or "Liabilities" any and all debts, liabilities and/or
obligations of any type, nature or description (whether known or unknown,
asserted or unasserted, secured or unsecured, in tort or in contract, at law
or in equity, absolute or contingent, accrued or unaccrued, liquidated
or unliquidated and whether due or to become due).
"Losses" has the meaning set forth in Section 10.1 hereof.
"Material Adverse Effect" in connection with any party, any event,
change or effect that is materially adverse, individually or in the aggregate,
to the condition (financial or otherwise), properties, assets, Liabilities,
revenues, income, business, operations, results of operations or prospects of
such party, taken as a whole.
"Media Optimizer" Media Optimizer is a computer software program and
complete database of related information required to target and analyze
information and to produce reports for sampling proposals and orders in the
Business. Functionality of the Media Optimizer includes sorting, categorizing
and querying an existing database containing relevant information relating to
delivery capabilities of all independent entities located throughout the United
States engaged in "door-to-door" delivery (also known in the industry as
"private" delivery). The database comprising part of Media Optimizer also
contains information, which information has been updated by Seller within the
six (6) months prior to the Date of Closing, for significant variables,
including zip codes, number of households within corresponding zip codes, and
distributors associated with such zip codes (which distributors may overlap for
all or part of the geographic area), and rates associated with the proposed
delivery. The Media Optimizer further provides functionality to enable the
importation of targeting information from third parties, which information can
be run against the Media Optimizer without alteration for the purpose of
refining target marketing services for clients. Media Optimizer further
presents the user with a printed form of delivery order that, once accepted,
loads into the itracksamples.com web-based software.
"Non-Competition and Non-Solicitation Agreement" has the meaning set
forth in Section 2.5 and Exhibit A.
"Ordinary Course of Business" an action taken by a Person will be deemed
to have been taken in the "Ordinary Course of Business" only if:
(i) such action is consistent with the past practices of such
Person and is taken in the ordinary course of the normal day-to-day operations
of such Person; and
(ii) such action is not required to be authorized by the board
of directors of such Person (or by any Person or group of Persons exercising
similar authority) and does not require any other separate or special
authorization of any nature.
"Person" any individual, corporation (including any non-profit
corporation), general, limited or limited liability partnership, limited
liability company, joint venture, estate, trust, association, organization, or
other entity or Governmental Body.
"Proceeding" any suit, litigation, arbitration, hearing, audit,
investigation or other action (whether civil, criminal, administrative or
investigative) commenced, brought, conducted, or heard by or before, or
otherwise involving, any Governmental Body or arbitrator.
"Purchased Contracts" has the meaning set forth in Section 1.1(e).
"Purchased Intellectual Property" has the meaning set forth in Section
1.1(a).
"Purchase Price" has the meaning set forth in Section 2.1 hereof.
"Purchaser" has the meaning set forth in the preface above.
"Seller" has the meaning set forth in the preface above.
"Telephone Directory Distribution Business" Seller's direct-to-door
delivery of telephone directories provided that such business shall not include
the delivery of samples, coupons or other promotional materials (unless such
promotional materials are contained on the inside, wrapped around or otherwise
attached to, or in a polybag with, telephone directories) (for example and,
without limitation, delivery of telephone directories under contract between
Seller and GTE).
"Threatened" a claim, Proceeding, dispute, or other matter will be
deemed to have been "Threatened" if any demand or statement has been made
orally or in writing, or any notice has been given orally or in writing, or if
any other event has occurred, or any other circumstances exist that would lead
a reasonably prudent Person to conclude that such a claim, Proceeding, dispute,
action or other matter is substantially likely to be asserted, commenced, taken
or otherwise pursued in the future.
"Transition Agreement" has the meaning set forth in Section 11.3(f)
hereof.
ARTICLE 15: MISCELLANEOUS
15.1 Survival of Representations and Warranties. Each of the
representations and warranties of the parties contained in this Agreement and
in any Exhibit, Schedule, certificate, instrument or document delivered by or
on behalf of any of the parties hereto pursuant to this Agreement and the
transactions contemplated hereby shall survive the Closing for a period
eighteen (18) months, after which no claim for an incorrect statement or
representation, or for the breach of any warranty under this Agreement may be
brought, and no litigation with respect thereto may be commenced, and no party
shall have any Liability or obligation with respect thereto, unless the
Indemnified Party gave written notice to the Indemnifying Party specifying
with particularity the incorrect statement or representation or breach of
warranty claimed on or before the expiration of such eighteen (18) month-
period; provided, however, that the representations and warranties contained
in Section 4.11 of this Agreement shall survive for the applicable statute of
limitations plus ninety (90) days thereafter.
15.2 Preservation of and Access to Records. All material books and
records of Seller conveyed to Purchaser hereunder shall be preserved by
Purchaser for a period of six (6) years after the Date of Closing; provided,
however, Purchaser may destroy any part or parts of such records upon obtaining
written consent of Seller for such destruction, which consent shall not be
unreasonably withheld. Upon no less than 2 business days' prior notice, such
records shall be made available to Seller and their representatives at all
reasonable times during normal business hours of Purchaser during said six-year
period with the right at their expense to make abstracts from and copies
thereof. Purchaser may return or provide a copy of such records to Seller at
any time and Purchaser's obligation to preserve or make available such records
shall thereupon terminate.
15.3 Cooperation. The parties hereto shall cooperate with each other in
all respects to facilitate the consummation of the transactions contemplated
hereby.
15.4 Disclaimer of Warranties. SELLER HEREBY DISCLAIMS ANY AND ALL EXPRESS
AND IMPLIED REPRESENTATIONS AND WARRANTIES WITH RESPECT TO THE MERCHANTABILITY
OF THE ASSETS OR THEIR FITNESS FOR A PARTICULAR PURPOSE.
15.5 Public Announcements. Subject to any disclosure requirements under
Applicable Laws (including securities laws and regulations), the timing and
content of all public announcements relating to the execution of this Agreement
and the consummation of the transactions contemplated hereby shall be approved
by both Purchaser and Seller prior to the release of such public announcements,
and each party agrees to cooperate with the other party as appropriate to
comply with all Applicable Laws. Subsequent to the Date of Closing, Purchaser
may make such announcements and/or advertisements as Purchaser, in its sole
discretion, deems necessary to all customers and/or potential customers and
suppliers of the Business or otherwise.
15.6 Notices. All notices, demands and other communications provided for
hereunder shall be in writing and shall be given by personal delivery, via
facsimile transmission (receipt electronically confirmed), by nationally
recognized overnight courier (prepaid), or by certified or registered first
class mail, postage prepaid, return receipt requested, sent to each party, at
its/his address as set forth below or at such other address or in such other
manner as may be designated by such party in written notice to each of the
other parties. All such notices, demands and communications shall be effective
when personally delivered, one (1) business day after delivery to the overnight
courier, upon electronic confirmation of facsimile transmission or upon receipt
after dispatch by mail to the party to whom the same is so given or made:
If to Seller: Alternate Marketing Networks, Inc.
One Ionia SW, Suite 300
Grand Rapids, MI 49503
Attn: Phillip D. Miller, Chief Executive Officer
With a copy to: Moss & Barnett, a Professional Association
4800 Wells Fargo Center
90 South Seventh Street
Minneapolis, MN 55402-4129
Attn: Janna R. Severance
If to Purchaser: Valassis Private Delivery, Inc.
c/o Valassis Communications, Inc.
19975 Victor Parkway
Livonia, MI 48152
Attn: General Counsel
With a copy to: McDermott, Will & Emery
50 Rockefeller Plaza
New York, NY 10020
Attn: Mark Thoman
15.7 Entire Agreement. This Agreement, including the documents,
instruments, and agreements to be executed by the parties in connection
herewith (including without limitation, the Transition Agreement and the
Non-Competition/Non-Solicitation Agreement), contains the entire agreement
of the parties hereto, and supersedes all prior or contemporaneous agreements
and understandings, oral or written, between the parties hereto, with respect
to the subject matter hereof.
15.8 Remedies Cumulative. Remedies herein provided are cumulative and
not exclusive of any other remedies provided by law.
15.9 Amendments. No purported amendment, modification or waiver of any
provision of this Agreement or any of the documents, instruments or agreements
to be executed by the parties pursuant hereto shall be effective unless in a
writing specifically referring to this Agreement and signed by both of the
parties hereto.
15.10 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns.
15.11 Costs. Each party hereto shall pay its own costs and expenses
incurred in connection with negotiating and preparing this Agreement and
consummating the transactions contemplated hereby, including fees and
disbursements of their attorneys and accountants.
15.12 Governing Law. This Agreement, including the documents,
instruments and agreements to be executed and/or delivered by the parties
pursuant hereto, shall be construed, governed by and enforced in accordance
with the laws of the State of Michigan, without giving effect to the principles
of conflicts of laws thereof.
15.13 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same Agreement.
15.14 Headings. The headings of the articles, sections and subsections
of this Agreement are intended for the convenience of the parties only and
shall in no way be held to explain, modify, construe, limit, amplify or aid
in the interpretation of the provisions hereof. Unless the context otherwise
requires, the terms "this Agreement," "hereof," "herein," "hereunder," "hereto"
and similar expressions refer to this Agreement as a whole and not to any
particular article, section, subsection or other portion hereof and include
the Schedules and Exhibits hereto and any document, instrument or agreement
executed and/or delivered by the parties pursuant hereto.
15.15 Number and Gender. Unless the context otherwise requires, words
importing the singular number shall include the plural and vice versa and words
importing the use of any gender shall include all genders.
15.16 Severability. In the event that any provision of this Agreement is
declared or held by any court of competent jurisdiction to be invalid or
unenforceable, such provision shall be severable from, and such invalidity or
unenforceability shall not be construed to have any effect on, the remaining
provisions of this Agreement.
15.17 Parties in Interest. Nothing expressed or implied in this
Agreement is intended or shall be construed to confer any rights or remedies
under or by reason of this Agreement upon any Person other than Purchaser and
Seller and their respective successors and permitted assigns. Nothing in this
Agreement is intended to relieve or discharge the Liabilities of any other
Person to Purchaser or Seller.
15.18 Waiver. The terms, conditions, warranties, representations and
indemnities contained in this Agreement, including the documents, instruments
and agreements executed and/or delivered by the parties pursuant hereto, may
be waived only by a written instrument executed by the party waiving
compliance. Any such waiver shall only be effective in the specific instance
and for the specific purpose for which it was given and shall not be deemed a
waiver of any other provision hereof or of the same breach or default upon any
recurrence thereof. No failure on the part of a party hereto to exercise and
no delay in exercising any right hereunder shall operate as a waiver thereof
nor shall any single or partial exercise of any right hereunder preclude any
other or further exercise thereof or the exercise of any other right.
15.19 Forum and Jurisdiction. The parties agree that the forum for any
controversy arising under this Agreement shall be in the federal and state
courts of the State of Michigan, and all parties consent to the personal
jurisdiction of the federal and state courts of the State of Michigan
for such purposes.
15.20 Construction. The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties and no presumption or burden of proof
shall arise favoring or disfavoring any party by virtue of the authorship of
any of the provisions of this Agreement. The word "including" shall mean
including without limitation. The parties intend that each representation,
warranty and covenant contained herein shall have independent significance.
If any party has breached any representation, warranty or covenant contained
herein in any respect, the fact that there exists another representation,
warranty or covenant relating to the same subject matter (regardless of the
relative levels of specificity) which the party has not breached shall not
detract from or mitigate the fact that the party is in breach of the first
representation, warranty or covenant.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by duly authorized representations as of the day, month and year first
above written.
PURCHASER:
VALASSIS PRIVATE DELIVERY, INC.
By /s/ Barry P. Hoffman, Esq.
Name: Barry P. Hoffman, Esq.
Title: Secretary
SELLER:
ALTERNATE MARKETING NETWORKS, INC.
By /s/ Phillip D. Miller
Name: Phillip D. Miller
Title: CEO
LIST OF SCHEDULES AND EXHIBITS
Schedule 1.1(a) List of Intellectual Property
Schedule 1.1(b) Description of Proprietary Delivery Systems Network
Schedule 1.1(e) List of Purchased Contracts and Pre-Payments
Schedule 1.1(j) List of Equipment and Personal Property
Schedule 1.1(k) Real Property Leases
Schedule 1.3 Excluded Assets
Schedule 3.2 List of Liabilities to be Assumed
Schedule 4.3 List of Required Filings, Permits, Consents, Approvals and
Notices
Schedule 4.8 Description of Certain Employee Benefits
Schedule 4.15 List of Key Employees and Employment Agreements
Schedule 4.20 Current Customers
Schedule 12.2 Free Standing Insert Discount
Schedule 12.6 Certain Purchased Contracts
Exhibit A Non-Competition and Non-Solicitation Agreement
Exhibit B Form of Assumption Agreement
Exhibit C Form of Seller's Closing Certificate
Exhibit D Form of Bill of Sale
Exhibit E Form of Purchaser's Closing Certificate
Exhibit F Form of Transition Agreement
NONCOMPETITION AND NONSOLICITATION AGREEMENT
THIS NONCOMPETITION AND NONSOLICITATION AGREEMENT ("Agreement") is made
and entered into as of the 19th day of September, 2000, by and among Valassis
Private Delivery, Inc., a Delaware corporation (the "Purchaser"), Phillip D.
Miller (the "Shareholder"), and Alternate Marketing Networks, Inc., a Michigan
corporation (the "Seller").
RECITALS
A. The Shareholder has been a principal shareholder, officer, director
and employee of the Seller for many years and has developed and received
special, unique and extraordinary knowledge, information and goodwill in
connection therewith.
B. Pursuant to an Asset Purchase Agreement dated September 19, 2000, by
and between the Seller and the Purchaser (the "Asset Purchase Agreement"),
contemporaneously with the execution of this Agreement, the Seller is selling
certain Assets used in the Business to the Purchaser.
C. It is a condition precedent to the consummation of the transactions
contemplated by the Asset Purchase Agreement that the parties hereto execute
and deliver this Agreement.
D. Capitalized terms used in this Agreement and not otherwise defined
shall have the meanings assigned to them in the Asset Purchase Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing premises and for other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1. Noncompetition. For a period of four (4) years from the Date of
Closing (the "Restricted Period"), the Shareholder and the Seller each covenant
and agree that they will not, without the Purchaser's prior written consent,
voluntarily or involuntarily, directly or indirectly, or through any Affiliate
(as hereinafter defined), at any location within the continental United States,
engage in any activity, including but not limited to, as an individual, owner,
associate, promoter, partner, member, joint venturer, shareholder (other than
as a less than five percent (5%) shareholder of a publicly traded corporation),
officer, director, trustee, manager, employer, employee, licensor, licensee,
consultant, advisor, investor or otherwise, for the purpose or with the
effect of establishing, operating, managing, assisting, advising or otherwise
participating in any business or entity that is engaged in activities
competitive with the Business.
2. Confidential Information. The Shareholder and the Seller understand
and agree that the business of the Purchaser is based upon specialized work and
Confidential Information (as hereinafter defined). The Shareholder and the
Seller agree that during the Restricted Period, they shall keep secret all
such Confidential Information and that they will not, directly or indirectly,
or through any Affiliate, "Use" (as hereinafter defined) or "Disclose" (as
hereinafter defined) Confidential Information to any Person without first
obtaining the written consent of the Purchaser. At any time, the Purchaser
may so request, the Shareholder and the Seller shall turn over to the Purchaser,
all books, notes, memoranda, manuals, notebooks, tables, drawings, calculations,
records and other documents made, compiled by, delivered to, or in the
possession or control of the Seller or the Shareholder containing or concerning
any Confidential Information, including all copies thereof, in any form or
format, it being agreed that the same and all information contained therein are
at all times the exclusive property of the Purchaser.
As used in this Agreement, the term "Affiliate" with respect to any
specified Person means a Person that directly, or indirectly through one or
more intermediaries, controls, is controlled by, or is under common control
with such specified Person.
As used in this Agreement, the term "Confidential Information" means any
information or compilation of information not generally known to the public or
the industry, that was proprietary or confidential to the Seller and was
acquired by the Purchaser pursuant to the Asset Purchase Agreement and any
proprietary or confidential information of the Purchaser that was learned by
the Seller before or after Purchaser's acquisition of the Business.
As used in this Agreement, the term "Disclose" means to reveal, deliver,
divulge, disclose, publish, copy, communicate, show, allow access to, or
otherwise make known or available to any other Person, any of the Confidential
Information.
As used in this Agreement, the term "Use" means to appropriate any of the
Confidential Information for the benefit of oneself or any Person other than
the Purchaser.
3. Nonsolicitation of Customers. During the Restricted Period, each of
the Seller and the Shareholder shall not, on its or his own behalf, or for the
benefit of any other Person, solicit, directly or indirectly, any business of
the type conducted by the Business at any time during the three (3) month
period prior to the Date of Closing from, or interfere in any manner with the
Purchaser's business relationship with, any Person who was a customer of the
Business at any time during the three (3) month period prior to the Date of
Closing.
4. Nonsolicitation Period. During the Restricted Period, each of the
Seller and the Shareholder shall refrain from soliciting or inducing, directly
or indirectly, any Person who was an employee or sales agent of Seller on the
Date of Closing to leave the employment of, or cease to render services to,
Purchaser for the purpose of becoming an employee of, or otherwise rendering
services to, Seller or the Shareholder or an Affiliate of Seller or Shareholder
or any Person to which Seller or the Shareholder is rendering consulting or any
other services.
5. Reasonableness of Covenants. Each of the Shareholder and the Seller
acknowledge and agree that the restrictive covenants contained in this
Agreement are a necessary incident of the sale and purchase of the Assets and
the Business pursuant to the Asset Purchase Agreement, and that the scope
(geographic and otherwise) and period of duration of the restrictive covenants
contained in this Agreement are both fair and reasonable and that the interests
sought to be protected by the Purchaser are legitimate business interests
entitled to be protected. Each of the Shareholder and the Seller further
acknowledge and agree that the Purchaser would not have purchased the Assets
pursuant to the Asset Purchase Agreement unless the Shareholder and the
Seller entered into this Agreement.
6. Injunctive Relief. The parties agree that the remedy of damages at
law for the breach by the Shareholder or the Seller of any of the covenants
contained in Paragraphs 1, 2, 3 and 4 of this Agreement is an inadequate
remedy. In recognition of the irreparable harm that a violation by the
Shareholder or the Seller of any of such covenants, agreements or obligations
would cause the Purchaser, the Shareholder and the Seller agree that in
addition to any other remedies or relief afforded by law or in equity, an
injunction against an actual or threatened violation or violations may be
issued against them and every other Person concerned thereby, it being the
understanding of the parties that both damages and an injunction (and any other
legal or equitable remedy) shall be proper modes of relief and are not to be
considered alternative remedies. In the event of any such actual or threatened
violation, the Shareholder or Seller (whoever is found to be in breach of this
Agreement) agrees to pay the costs, expenses and reasonable attorneys' fees
incurred by the Purchaser in pursuing any of its rights and remedies with
respect to such actual or threatened violation, in addition to the actual
damages sustained by the Purchaser as a result thereof.
7. Blue Pencil Doctrine. In the event that the restrictive covenants
contained in Paragraphs 1, 2, 3 or 4 of this Agreement shall be found by a
court of competent jurisdiction to be unreasonable by reason of its extending
for too great a period of time or over too great a geographic area or by reason
of its being too extensive in any other respect, then such restrictive covenant
shall be deemed modified to the minimum extent necessary to make it reasonable
and enforceable under the circumstances.
8. Compensation. The Purchaser hereby agrees to pay (i) $93,750 to the
Shareholder and $31,250 to the Seller on the Date of Closing and (ii) $56,250
to the Shareholder and $18,750 to the Seller on the fourth anniversary of the
Date of Closing. Each of such payments shall be paid by certified or bank
cashier's check (or by wire transfer of immediately available funds) to
Seller's or Shareholder's designated account designated at least three (3)
business days prior to each respective payment date.
9. Entire Agreement. This Agreement together with the Asset Purchase
Agreement, and any other agreements contemplated thereby, contain the entire
agreement of the parties hereto with respect to the subject matter hereof, and
supersede all prior or contemporaneous agreements and understandings, oral or
written, among the parties hereto and thereto with respect to the subject
matter hereof and thereof.
10. Amendment; Waiver. No amendment or waiver of any provision of this
Agreement shall be effective unless the same shall be in writing and signed by
all of the parties and then such waiver shall only be effective in the specific
instance and for the specific purpose for which it was given.
11. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective heirs, personal
representative(s), successors and permitted assigns, but nothing in this
Agreement shall be construed as an authorization or right of the Seller or
the Shareholder to assign their respective rights or delegate their respective
duties under this Agreement without the prior written consent of the Purchaser
(which consent may be withheld by Purchaser at its sole discretion). The
foregoing shall not be construed to limit in any way the right of the
Shareholder and the Seller to assign, transfer, pledge, or otherwise convey
their rights to receive payment under this Agreement.
12. Governing Law. This Agreement shall be construed, governed by and
enforced in accordance with the laws of the State of Michigan, without giving
effect to the principles of conflicts of laws thereof.
13. Headings. The headings to the paragraphs of this Agreement are
intended for the convenience of the parties only and shall in no way be held
to explain, modify, amplify or aid in the interpretation of the provisions
hereof.
14. Severability. The provisions of this Agreement shall be deemed
severable and if any portion hereof shall be held invalid, illegal or
unenforceable for any reason by a court of competent jurisdiction, the
remainder shall not thereby be invalidated but shall remain in full force
and effect.
15. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same agreement.
16. Incorporation of Recitals. The Recitals to this Agreement are hereby
incorporated by reference and made a part of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day, month and year first above written.
PURCHASER:
VALASSIS PRIVATE DELIVERY, INC.
By /s/ Barry P. Hoffman, Esq.
Name: Barry P. Hoffman, Esq.
Title: Secretary
SHAREHOLDER:
/s/ Phillip D. Miller
Phillip D. Miller
SELLER:
ALTERNATE MARKETING NETWORKS, INC.
/s/ Phillip D. Miller, CEO
Phillip D. Miller
