ASSET PURCHASE AGREEMENT
AGREEMENT, dated as of the 18th day of March 1999, by and between Doubleday
Direct, Inc. ("Seller"), a New York corporation, and ABD Acquisition Corp.
("Buyer"), a Delaware corporation.
W I T N E S S E T H :
WHEREAS, Buyer is a wholly-owned subsidiary of Audio Book Club, Inc.
("Audio"); and
WHEREAS, Seller is engaged in the business of direct marketing and
distribution, by mail order and internet, of audiobooks and related products
through "AUDIOBOOKS DIRECT Club" ("ABD"), a membership club (the "Business") and
owns or has rights to use, among other assets, certain data bases, licenses,
inventory, tradenames and goodwill relating thereto, all as more particularly
set forth in this Agreement; and
WHEREAS, Seller wishes to sell to Buyer, and Buyer wishes to purchase from
Seller, as a going concern, the Business and all of the assets and rights
relating thereto, subject to the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of and in reliance upon the covenants,
conditions, representations and warranties herein contained, the parties hereto
hereby agree as follows:
1. Purchase and Sale Agreement.
1.1 Agreement of Purchase and Sale. Subject to the terms and conditions set
forth in this Agreement and in reliance upon the representations, warranties,
covenants and conditions herein contained, on the Closing Date (as defined in
Section 2.1 hereof) Seller shall sell, convey, assign, transfer and deliver to
Buyer, and Buyer shall purchase from Seller, the Purchased Assets (as defined in
Section 1.2 hereof), free and clear of any and all liens, pledges, security
interests, claims, charges or encumbrances of any nature whatsoever.
1.2 Purchased Assets. As used in this Agreement, the term "Purchased
Assets" means all rights, interest and title to the properties and assets owned
by Seller and otherwise employed, predominantly used or available for use in the
Business, real and personal, tangible and intangible, of every kind and nature,
wherever located, as the same shall exist on the Closing Date, including,
without limitation:
(i) the Masterfile Database (as defined in Section 4.5 hereof);
(ii) except for any rights with respect to the "Doubleday" trademark
and tradenames, the Intellectual Property Rights (as defined in Section 4.8
hereof), including without limitation the "AUDIOBOOKS DIRECT" name, and all
goodwill associated therewith and with the Business;
(iii) the Inventory (as defined in Section 4.6 hereof);
(iv) all contracts, agreements or commitments, written or oral, set
forth on Schedule 1.2(iv) (the "Assumed Contracts");
(v) to the extent Seller has rights to the creative material, all
brochures, sales literature, advertising materials, art work and copy files
(for all media), promotional and other selling materials used in the
Business, and masters thereof, wherever situated, in hard copy and
electronic format, including, but not limited to, book cover images and
title copy descriptions (all such items being hereinafter collectively
referred to as the "Promotional Materials");
(vi) all papers, documents (including information stored in electronic
forms such as computer disks, CD Rom, computer tape, computer hard drive
and the like), instruments, books and records, files, books of account and
other records by which any of the Purchased Assets might be identified or
rights with respect thereto enforced, or otherwise pertaining to the
Purchased Assets or the Business that are located at the Seller's offices
or other locations used in connection with the Business (including, without
limitation, customer invoices, vendor and supplier lists, drafts and other
documents and materials relating to customer transactions);
(vii) all analytical and testing reports and files, as set forth on
Schedule 1.2(vii), relating to the Business, including, but not limited to,
all media performance (i.e., list performance/history, in house and outside
lists, radio, print, package inserts performance, and telemarketing) in
hard copy and electronic format;
(viii) all back order files and collections files relating to the
Business as set forth on Schedule 1.2(viii);
-2-
(ix) all prepaid items, deposits and advances (including royalty
advances as set forth in Schedule 4.8) relating to the Business;
(x) all income derived, in any manner, from the exploitation of the
Masterfile Database, including without limitation lists rental, package
inserts (PIP) and ridealong (RAL) revenue becoming due after the Closing
Date (collectively "List Revenues"); and
(xi) other assets predominantly used in or available for use in the
Business.
1.3 Additional Purchased Assets. In the event that Buyer shall establish
and notify Seller at any time or from time to time following the Closing Date
that any of the Schedules describing the Purchased Assets failed to include
assets or properties of Seller used by Seller in the Business (other than
Excluded Assets), then: (a) with respect to any such assets or properties used
in the Business, Seller shall, at its own expense, promptly convey, transfer,
assign and deliver to Buyer or other such person as may be designated by Buyer,
and Buyer or such designee shall acquire from Seller, without additional
consideration, all such assets and properties, which shall be deemed for all
purposes to be included in the definition of Purchased Assets hereunder as
provided in Section 1.2 hereof and (b) with respect to any such assets or
properties used primarily, but not exclusively, in the Business, Seller shall
grant to Buyer an irrevocable, royalty-free license or otherwise convey to Buyer
the unlimited right to use any such assets or property, without additional
consideration. Excluded Assets shall mean (a) accounts receivable and other
receivables related to merchandise shipped prior to the Closing Date and list
rentals due prior to the Closing Date, (b) contracts, agreements or commitments
which are not Assumed Contracts, (c) the trademark "Doubleday" and rights
related thereto, (d) Seller's cash and cash equivalents and (e) all properties
and assets owned by Seller but excluded from Purchased Assets under Section 1.2
as not "predominantly used" in the Business, as listed on Schedule 1.3.
1.4 Assumed Liabilities.
(a) Subject to the terms and conditions set forth in this Agreement and in
reliance upon the representations, warranties, covenants and conditions herein
contained, on the Closing Date Buyer shall assume, and shall only assume:
(i) Seller's obligations under the Assumed Contracts, including
without limitation Advertising Commitments (as defined in Section 4.16
hereof);
-3-
(ii) Seller's obligations to fulfill outstanding orders to ABD
customers at the Closing Date;
(iii) subject to the provisions of Section 1.6, Seller's obligations
to process ABD returns;
(iv) the Simon & ▇▇▇▇▇▇▇▇ Commitment (as defined in Section 3.22
hereof);
(v) Seller's obligation to satisfy the unpaid advances with respect to
commitments negotiated by Seller with publishers for audiobook titles
("Unpaid Publisher Advance Commitments"), as set forth on Schedule
1.4(a)(v) (which Schedule shall identify the amount of each advance, the
scheduled payment date(s) of such advance and the recipient thereof), as
such Schedule shall be updated from time to time pursuant to Section 3.7
hereof;
(vi) subject to the provisions of Section 3.20, Seller's obligations
to make refunds to ABD customers in accordance with Buyer's return policy;
and
(vii) Unfulfilled Purchase Orders (as defined in Section 1.6 below);
in each and every case only to the extent that the foregoing represent
obligations which are by their stated terms to be performed, in the ordinary
course, subsequent to the Closing Date ("Assumed Liabilities"); provided,
however, that the Buyer shall satisfy the Simon & ▇▇▇▇▇▇▇▇ Commitment regardless
of the date on which it is by its stated terms required to be performed.
(b) Anything herein contained to the contrary notwithstanding, the
following liabilities of Seller are specifically excluded from the Assumed
Liabilities and shall constitute "Retained Liabilities":
(i) any and all income, franchise, sales, use, property, payroll,
employment, transfer and any other taxes, charges, fees, levies, imports,
duties, licenses or other assessments, together with interest, penalties
and any other additions to tax or additional amount imposed by any
governmental or taxing authority, or liability for such amounts as a result
of Seller being a member of an affiliated, consolidated, combined or
unitary group or being a party to any agreement or arrangement whereby
Seller may be liable for taxes or any other person for any period prior to
(or up to and including) the close of business on the day prior to the
Closing Date;
-4-
(ii) any and all employment or consulting arrangements, executive
compensation plans, collective bargaining agreements, bonus plans,
guaranteed bonus agreements, deferred compensation agreements, employee
pension plans or retirement plans, employee profit sharing plans, employee
stock purchase and stock option plans, group life insurance,
hospitalization insurance or other plans or arrangements providing for
benefits to employees of Seller;
(iii) any liabilities and obligations of Seller, the existence of
which constitutes a breach of any of the representations, warranties or
covenants made by Seller in this Agreement or in any document delivered by
it pursuant hereto;
(iv) any liabilities and obligations arising out of or in connection
with any litigation, investigation or proceeding to which Seller is a
party, or which are based upon events occurring or circumstances existing
prior to the Closing Date;
(v) any liabilities and obligations of Seller for any breach or
violation, prior to the Closing Date, of any of the Assumed Contracts;
(vi) except for the Simon & ▇▇▇▇▇▇▇▇ Commitment (which shall be
Buyer's obligation), any liabilities and obligations with respect to Unpaid
Publisher Advance Commitments becoming due and payable prior to the Closing
Date;
(vii) any liabilities and obligations with respect to the Advertising
Commitments becoming due and payable prior to the Closing Date (except for
Buyer's obligations to partially reimburse Seller in respect of the
March/April 1999 Mailing (as defined in Section 3.23 hereof)); and
(viii) any other liability or obligation which is not an Assumed
Liability.
(c) For purposes of clarification, notwithstanding the assignment of any
contract or other rights included in the Purchased Assets, except as otherwise
provided herein, Seller has not assigned and Buyer has not assumed and Seller
retains its rights and its obligations, including all rights and remedies of
enforcement, with respect to receivables or other amounts owed or obligations to
or from Seller on sales of ABD merchandise or other transactions prior to the
Closing Date.
-5-
1.5 Purchase Price. Subject to any adjustment pursuant to Section 1.6
hereof, the purchase price for the Purchased Assets shall be $21 million payable
in cash (the "Purchase Price") at the Closing. As a further inducement to Buyer
to enter into this Agreement, the Seller has agreed to enter into the
Non-Compete Agreement, Mailing Agreement and the Transitional Services Agreement
(as such terms are defined in Article 3). The Purchase Price shall be allocated
as set forth on Schedule 1.5 hereto (Buyer and Seller each hereby agreeing to
report the transaction for tax purposes on a basis consistent therewith). Any
adjustment to the Purchase Price shall be allocated to the various categories of
Purchased Assets by adjusting them accordingly.
1.6 Purchase Price Adjustments. The Buyer and the Seller shall in good
faith calculate any adjustments to the Purchase Price in accordance herewith.
(a) In the event the Closing Inventory Price (as defined herein) is
determined to be less than $2,400,000, then the Purchase Price shall be
reduced by the difference between the Closing Inventory Price and
$2,400,000. In the event the Closing Inventory Price is determined to be
greater than $2,400,000, then the Purchase Price shall be increased by the
difference between the Closing Inventory Price and $2,400,000; provided
that, notwithstanding the foregoing, in no event shall the Purchase Price
be increased pursuant hereto in excess of $500,000. For purposes hereof,
"Closing Inventory Price" shall mean the aggregate dollar value of the
Inventory transferred hereunder as calculated by multiplying (1) the Cost
of Merchandise (as defined herein) for a particular item by (2) the
Inventory Count (as defined herein) in respect of such item, each to be
determined as follows:
(i) The "Cost of Merchandise" shall mean the Seller's cost, based
solely on expenditures to third parties per item of Inventory, as set
forth on Schedule 1.6(a) ("Cost of Merchandise Schedule"); provided,
however, that for purposes hereof, costs relating to any purchase
orders for which Seller has not received the underlying merchandise as
of the Closing Date (the "Unfulfilled Purchase Orders") shall be
excluded from such schedule. The Cost of Merchandise Schedule shall be
delivered by Seller to Buyer no later than 20 days prior to the
scheduled Closing Date. Upon the delivery of the Cost of Merchandise
Schedule to Buyer, the Buyer shall have ten (10) business days in
which to review the calculations contained therein and to propose such
adjustments (if any) as shall in its judgment be appropriate to
properly reflect applicable costs. In connection with such review the
Buyer
-6-
and Buyer's accountants, if requested by Buyer, will have reasonable
access to all requisite accounting and other records of Seller and
may, at its expense, employ such tests and auditing procedures as the
Buyer deems to be appropriate under the circumstances. If the parties'
representatives cannot agree within three (3) business days of Buyer's
response that the Cost of Merchandise Schedule correctly reflects the
cost of the items of Inventory, the cost calculations in question
shall be submitted to a mutually acceptable third-party for review and
resolution, with the fees and expenses thereof to be shared equally by
the parties; and any determination by such third-party shall be final
and binding upon the parties hereto.
(ii) The Inventory Count shall be a physical count of the
Inventory conducted by representatives of the Buyer and Seller, to be
supervised or observed, if requested, by either Buyer or Seller (and
at the requesting party's sole expense), by Buyer's accountants, as
brought forward and adjusted through the close of business on the day
before the Closing (the "Inventory Date") to reflect all interim sales
and acquisitions by the Seller. The parties will commence taking the
Inventory Count no later than seven (7) days prior to the scheduled
Closing Date and will use their best efforts to complete said count no
later than 48 hours prior to Closing. In any event, the actual
Inventory Count shall be completed prior to the Closing. During the
taking of the Inventory Count, the parties shall exclude any damaged
or defective merchandise as well as any inventory acquired by Seller
prior to Closing without the prior written consent of Buyer as
provided in Section 3.6(vii) hereof ("Excluded Inventory"), and such
damaged and defective merchandise and the Excluded Inventory shall not
be included in the Inventory Count for purposes of calculating the
Closing Inventory Price. During the period after the commencement of
the Inventory Count and ending on the Closing Date, the parties'
representatives shall endeavor to agree upon which merchandise is
damaged, defective or Excluded Inventory, if such representatives
cannot agree on whether particular merchandise is damaged, defective
or Excluded Inventory, the merchandise in question shall be submitted
to a mutually acceptable third-party for review and resolution, with
the fees and expenses thereof to be shared equally by the parties; and
any determination by such third-party shall be final and binding upon
the parties hereto.
(b) (i) In the event that the number of Active Members (as defined
herein) is less than 152,000 as of the Closing (the "Active Member
Threshold Amount"), then the Purchase
-7-
Price shall be reduced by the product of (1) the difference between the
actual number of Active Members, as set forth on Schedule 1.6(b)(i), and
the Active Member Threshold Amount multiplied by (2) $50. For purposes
hereof, an "Active Member" shall mean (A) all members enrolled in ABD that
have been mailed the Seller's ABD regular member catalog mailings during
the most recently completed regular promotion period who do not have a past
due balance greater than 26 weeks and (B) all new members that were
enrolled and were shipped an enrollment package during the specified
promotion period who do not have a past due balance greater than 14 weeks,
as set forth on Schedule 1.6(b)(i).
(ii) In the event that the number of Inactive Members (as defined
herein) is less than 268,850 as of the Closing (the "Inactive Member
Threshold Amount"), then the Purchase Price shall be reduced by the product
of (1) the difference between the actual number of Inactive Members, as set
forth on Schedule 1.6(b)(ii), and the Inactive Member Threshold Amount
multiplied by (2) $25. For purposes hereof, "Inactive Member" shall mean
all members enrolled in ABD at one time or another, but who are not deemed
"Active Members" as of the date hereof, as set forth on Schedule
1.6(b)(ii).
(iii) The Buyer shall have ten (10) business days in which to review
the membership lists contained on Schedules 1.6(b)(i) and (ii) and to
propose such adjustments (if any) as shall in its judgment be required to
properly reflect actual membership. In connection with such review, the
Buyer and Buyer's accountants, if requested by Buyer, will have reasonable
access to all requisite accounting and other records of Seller and may, at
its expense, employ such tests and auditing procedures as the Buyer deems
to be appropriate under the circumstances. If the parties' representatives
cannot agree within three (3) business days of Buyer's responses that the
membership lists correctly reflect the number of Active and Inactive
Members, the lists shall be submitted to a mutually acceptable third-party
for review and resolution, with the fees and expenses thereof to be shared
equally by the parties; and any determination by such third-party shall be
final and binding upon the parties hereto.
2. Closing.
2.1 Closing Date. The closing of the sale and purchase provided for herein
(the "Closing") shall take place at 10 A.M., New York time, at the offices of
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, within
five (5) business days after the Buyer consummates a debt funding (the
"Financing"), resulting in net proceeds of not less than $70,000,000 to Audio to
be used first to repay $49,000,000 of indebtedness and other obligations under
existing loans or credit
-8-
facilities of Audio, and then to the payment of the Purchase Price (such time
and date of Closing being hereinafter called the "Closing Date").
Notwithstanding anything to the contrary contained herein, if the Financing has
not been consummated by May 31, 1999, then either party may terminate this
Agreement without liability other than as may be set forth in Section 10.1
hereof, unless the parties shall otherwise mutually agree to extend this
Agreement.
2.2 Action by Buyer. Subject to the terms and conditions herein contained,
on the Closing Date Buyer shall deliver to Seller (in addition to the documents
and instruments to be delivered by it pursuant to Article 3 and Section 8.2
hereof), on account of the Purchase Price for the Purchased Assets, $21 million
(subject to adjustment as set forth in Section 1.6 above) by wire transfer of
immediately available funds. Seller shall designate the account and provide
Buyer with wiring instructions no later than two (2) business days prior to the
Closing Date. Buyer shall also enter into the Non-Compete Agreement, the Mailing
Agreement and the Transitional Services Agreement, together with the other
agreements contemplated hereby, at the Closing.
2.3 Action by Seller. Subject to the terms and conditions herein contained,
on the Closing Date Seller shall deliver to Buyer (in addition to the documents
and instruments to be delivered by it pursuant to Article 3 and Section 8.1
hereof) the following:
(a) a duly executed ▇▇▇▇ of Sale and Assignment in substantially the form
of Exhibit 1 attached hereto and made a part hereof; and
(b) assignments with respect to the Intellectual Property Rights (in forms
suitable for recording in the United States Patent and Trademark Office and in
the comparable offices of all relevant foreign jurisdiction) other instruments
of transfer, including without limitation any assignments with respect to all
Assumed Contracts (including License Agreements);
(c) all third party consents and governmental and administrative approvals,
as shall be, in the opinion of Buyer, reasonably necessary or appropriate in
order to convey, transfer and assign to and vest in Buyer good and marketable
right, title and interest in and to the Purchased Assets, free and clear of all
liens, pledges, security interests, claims, charges and encumbrances of any
nature whatsoever;
(d) an updated schedule containing a true and complete list of all Unearned
Publisher Advance Commitments as of the Closing Date, in form consistent with
Schedule 1.4(a)(v);
-9-
(e) an updated schedule containing a true and complete list of the amount
and scheduled payment date of all the unrecouped prepaid advances to audiobook
publishers for audiobook titles as of the Closing Date, in form consistent with
Schedule 4.8;
(f) an updated schedule containing a true and complete list of all back
order files and collections files relating to the Business as of the Closing
Date, in form consistent with Schedule 1.2(viii);
(g) an updated schedule containing a true and complete list of the
Advertising Commitments as of the Closing Date, in a form consistent with
Schedule 4.16;
(h) an updated schedule containing a true and complete list of the
Inventory as of the Closing Date, in a form consistent with Schedule 4.6A; and
(i) Seller shall also enter into the Non- Compete Agreement, the Mailing
Agreement and the Transitional Services Agreement, together with the other
agreements contemplated hereby, at the Closing.
3. Additional Covenants.
3.1 Further Assurances/Cooperation.
(a) Each party hereto shall from time to time after the Closing Date, at
such party's sole cost and expense, take any and all actions and execute,
acknowledge, deliver, file and/or record any and all documents and instruments,
as the other party may reasonably request in order to more fully perfect the
rights and obligations which are intended to be transferred hereunder.
(b) Each of the parties hereto hereby agrees to fully cooperate with the
other parties hereto in preparing and filing any notices, applications, reports
and other instruments and documents which are required by, or which are
commercially reasonable in the opinion of any of the parties hereto in respect
of, any statute, rule, regulation or order of any governmental or administrative
body in connection with the transactions contemplated hereby.
3.2 Investigation.
(a) Between the date hereof and the Closing Date Buyer may, directly and
through its representatives, make such investigation of Seller related to the
Business and the Purchased Assets as Buyer deems necessary or advisable, but
such investigation shall not affect any of the representations and warranties of
Seller contained herein or in any instrument or
-10-
document delivered pursuant hereto. In furtherance of the foregoing, Buyer and
Buyer's representatives shall have, upon prior reasonable notice to Seller and
during Seller's normal business hours after the date hereof, full access to the
premises and to the books and records of Seller to the extent applicable to the
Business, and the officers of Seller shall furnish, and cause KPMG Peat Marwick
LLP ("KPMG") to furnish, to Buyer and its representatives such financial and
operating data and other information with respect to the Business and the
Purchased Assets and permit Buyer to perform financial analyses and procedures
thereon, all as Buyer may from time to time reasonably request. The information
obtained by Buyer during such investigation shall be subject to the
Confidentiality Agreement (as defined in Section 7.1).
(b) Buyer and Seller acknowledge that anything in this Agreement contained
to the contrary notwithstanding, Seller has not yet delivered any of the
Schedules referred to in Articles 1, 3 and 4 of this Agreement. Seller shall
deliver such Schedules to Buyer as soon as practicable hereafter, but in no
event later than March 30, 1999. Buyer shall have twenty (20) business days
after delivery of such Schedules to review and approve them. Buyer may, in its
sole discretion, reject any of such Schedules within such twenty day period and
terminate this Agreement. If Buyer has not rejected such Schedules within such
period, then the Schedule(s) shall be deemed to have been accepted by the Buyer
as the Schedule(s) referred to in such Articles.
3.3 Consummation of Transaction. Each party shall use its best efforts to
cause all conditions precedent to its obligations and to the obligations of the
other party hereto to consummate the transactions contemplated hereby to be
satisfied, including, but not limited to, using its best efforts to obtain all
required consents, waivers, amendments, modifications, approvals,
authorizations, novations and licenses; provided, however, that nothing herein
contained shall be deemed to modify any of the obligations imposed upon any of
the parties hereto under this Agreement or any agreement executed and delivered
pursuant hereto.
3.4 Accuracy of Representations. Each party hereto agrees that prior to the
Closing Date it will enter into no transaction and take no action, and will use
its best efforts to prevent the occurrence of any event, which would result in
any of its representations, warranties or covenants contained in this Agreement
or in any agreement, document or instrument delivered pursuant hereto not to be
true and correct, or not to be performed as contemplated, at and as of the time
immediately after the occurrence of such transaction or event.
3.5 Non-Assignable Contracts. Anything in this Agreement contained to the
contrary notwithstanding, nothing in
-11-
this Agreement shall be construed as an attempt to assign (a) any contract or
agreement that is at law non-assignable without the consent of the other party
thereto and as to which such consent shall not have been given, or (b) any
contract or agreement as to which all the remedies for the enforcement thereof
and the rights thereunder enjoyed by Seller would not, as a matter of law, pass
to Buyer as an incident of the assignments provided for by this Agreement.
Attached hereto as Schedule 3.5 is a list of all such non-assignable contracts.
In order, however, that the full value of every contract and agreement of the
character described in clauses (a) and (b) of the immediately preceding sentence
and all claims and demands relating to such contracts and agreements may be
realized, Seller hereby agrees with Buyer that it will, at its sole cost and
expense, at the reasonable request and under the direction of Buyer, in the name
of Seller or otherwise, as Buyer shall specify and as shall be permitted by law,
take all such action and do or cause to be done all such things as shall be, in
the opinion of Buyer, necessary or desirable (1) in order that the rights and
benefits of Seller under such contracts and agreements shall be preserved and
(2) for, and to facilitate, the collection of the monies due and payable, and to
become due and payable, to Seller in and under every such contract and
agreement, and Seller will hold the same for the benefit of and will pay the
same, when received, to Buyer.
3.6 Conduct of Business. The Seller shall conduct the Business during the
period from the date hereof to the Closing Date, and during the transition
period contemplated by the Transitional Services Agreement, only in the ordinary
course of business and in a manner consistent with existing policies and
practices, and in compliance with applicable laws, except pursuant to the terms
hereof or unless Buyer shall otherwise agree in writing; and Seller shall use
its best efforts to preserve intact the Business, to maintain and preserve the
Purchased Assets, to continue new member recruitment and enrollment activities
at levels consistent with past practices to maintain/increase its membership
base, to keep available the services of key management personnel of the Business
and to preserve the present goodwill of Seller and its relationships with
customers, suppliers and other persons with whom it has Business relations. By
way of illustration and not limitation, Seller shall not, between the date
hereof and the Closing Date, directly or indirectly do, or propose or commit to
do, any of the following without the prior written consent of Buyer:
(i) sell, lease, license, mortgage or otherwise encumber or subject to
any lien or otherwise dispose of any of the Purchased Assets, except the
sale of the Inventory in the ordinary course of business (and any
associated reduction in unearned royalties); provided, however, that Seller
shall not make any wholesale, remainder or other bulk sale of any portion
of the Inventory to a third-party purchaser, and shall not factor, sell,
encumber
-12-
or otherwise dispose of any accounts receivable relating to list rentals or
offer on a widespread basis discounts or similar incentives to accelerate
the collection of accounts receivable relating to list rentals;
(ii) sell, assign or transfer any patents, trademarks, trade names,
copyrights, licenses or other intangible assets related to the Business or
the Purchased Assets;
(iii) cause Seller to suffer any event or condition of any character
materially and adversely affecting the Business or the Purchased Assets;
(iv) alter the Masterfile Database or price lists relating to the
Business, other than in the ordinary course of business; provided, however,
that Seller may be permitted to increase prices with respect to audiobook
titles in a commercially reasonable manner and if market conditions permit;
(v) waive or accelerate any rights of value or enter into any
transactions with respect to the Business not in the ordinary course of
business;
(vi) enter into, renegotiate or modify any license agreements with
publishers for audiobook titles, which agreements provide for payment in
excess of $20,000, individually;
(vii) purchase, or enter into an agreement to purchase, inventory
having a Cost of Merchandise in excess of $10,000 and not subject to or
otherwise covered by any License Agreement; provided, however, that in the
event that Buyer does not respond within 24 hours after Seller's notice
requesting approval in respect of any such purchase or agreement, then
Buyer shall be deemed to have consented to such purchase or agreement;
(viii) authorize or permit its officers, directors or employees or any
investment banker, financial advisor, attorney, accountant or other
representative to sell, agree to sell or enter into any arrangements or
negotiations or authorize any third party to enter into negotiations or
solicit offers of any type or provide information, cooperate in any way or
assist, facilitate or encourage discussions, relating to the sale, transfer
or other disposition of the Business (including any merger or consolidation
involving the Seller or any other similar transaction);
(ix) fail to maintain the books of account and records exclusively
relating to the Purchased Assets in
-13-
the usual, regular and ordinary manner, on a basis consistent with past
practice, or fail to comply with all material laws applicable to the
conduct of the Business with respect to the Purchased Assets and perform
its obligations relating to the Business with respect to the Purchased
Assets without default;
(x) make or institute any material changes to the Advertising
Commitments (for purposes hereof, a "material" change shall be any change
in the Advertising Commitments having an economic value in excess of
$20,000); or
(xi) authorize any of, or commit or agree to take, any of the
foregoing actions.
3.7 Schedule Updates. Every two (2) weeks from the date hereof until the
Closing, the Seller will notify the Buyer by written update to Schedules
1.2(vii) (analytical and testing reports and files), 1.4(a)(v) (Unpaid Publisher
Advance Commitments), 4.6A (Inventory), 4.8 (License Agreements) and 4.16
(Advertising Commitments) of any matter occurring after the date hereof which,
if existing or occurring on the date hereof would have been required to be set
forth on such Schedules or which would render inaccurate any of the statements
contained in such Schedules (each a "Supplement"). Upon Buyer's receipt of such
Supplement, such representations and warranties will be deemed to be
automatically updated as set forth therein; provided, however, that no
Supplement provided pursuant to this Section shall be deemed to cure any breach
of any representation, warranty or covenant in this Agreement existing as of the
date hereof.
3.8 Payment of Taxes Upon Transfer of Purchased Assets. Seller shall
responsible for, and shall pay, any and all sales, use, purchase, transfer and
similar taxes and any and all filing, recording, registration and similar fees,
arising out of the transactions contemplated by this Agreement.
3.9 Discharge of Liens. Buyer shall cause all liens, pledges, security
interests, claims, charges and encumbrances upon any of the Purchased Assets, to
be terminated or otherwise discharged at or prior to the Closing.
3.10 Retained Liabilities. Subsequent to the Closing Date, Seller shall
pay, discharge and perform the Retained Liabilities. All such Retained
Liabilities in excess of $5,000 shall be performed in due course, except for any
Retained Liabilities which are the subject of a good faith dispute, in which
event Seller shall provide Buyer written notice within five (5) days of the
initiation of such dispute.
3.11 Books and Records. Seller shall, for a period of at least seven years
following the Closing Date,
-14-
maintain and make available to Buyer and its representatives for inspection and
reproduction, during regular business hours, all books and records relating to
the Purchased Assets, the Business or the Assumed Liabilities which are not
included among the Purchased Assets. Buyer shall, for a period of at least seven
years following the Closing Date, maintain and make available to Seller and its
representatives for inspection and reproduction, during regular business hours,
all books and records relating to the Purchased Assets, the Business or the
Assumed Liabilities which are included among the Purchased Assets, but only
insofar as said books and records relate to periods ending on or prior to the
Closing Date.
3.12 Preparation of Financial Information.
(a) Seller shall cause KPMG, the independent accountants of Seller, to
prepare audited financial statements for the Business for the years ended June
30, 1998 and June 30, 1997 and unaudited interim financial statements with
respect to the Business for the six months and twelve months ended December 31,
1997 and December 31, 1998 and for the three months ending March 31, 1999 and
March 31, 1998, (collectively, the "Financial Statements"), and to provide all
necessary assistance with respect thereto, it being understood and agreed by
Seller that such assistance shall include, without limitation, (i) providing the
independent accountants of Seller, Buyer and Buyer's representatives with all
necessary financial information and data relating to the Business for such
periods, (ii) making available to the independent accountants of Seller and to
Buyer all employees of Seller deemed necessary by Buyer to assist in the
preparation of such financial statements, and (iii) if requested by the
independent accountants of Seller, delivering a management representation
letter.
(b) The fees and expenses of KPMG in preparing Financial Statements for the
Business as provided in this Section in an amount estimated by Seller's
independent accountants to be $110,000 to $140,000 shall be borne equally by
Buyer and Seller. Additional expenses estimated to be in the amount of $25,000
for a review of the quarters ended March 31, 1999 and March 31, 1998 shall be
borne equally by Buyer and Seller.
(c) Additional accounting fees charged by Seller's independent accountants
for "Comfort Letters" or other costs associated with any financing by Buyer
shall be borne by Buyer.
3.13 Mailing Agreement. At the Closing, Buyer and Seller shall enter into a
strategic partnership and cross marketing relationship for internet advertising
and marketing, in the form attached hereto as Exhibit 2 (the "Mailing
Agreement").
-15-
3.14 Transitional Services Agreement.
(a) At the Closing, Buyer shall enter into a transitional services
agreement, in the form attached hereto as Exhibit 3 (the "Transitional Services
Agreement").
(b) Except as may otherwise be agreed to by the parties hereto, Seller
shall as soon as practicable after the expiration of the Transitional Services
Agreement (the "Services Termination Date") delete or destroy all copies of the
Masterfile Database in Seller's possession or control; provided, however, that
Seller shall, for a period of 120 days following the Services Termination Date,
retain limited use of the relevant portion of the Masterfile Database pertaining
only to member accounts having past due account balances still outstanding at
the Closing Date for the sole purpose of collecting such receivables. Every
thirty (30) days thereafter, Seller shall purge such member account information
for such accounts as have been paid. Buyer shall also make available to the
Seller that member account information for which Seller becomes legally
compelled to produce with respect to claims arising out of events occurring
prior to the Closing Date.
3.15 Notice to Club Members. At the Closing, Seller shall issue a notice in
a form reasonably approved by both parties, to all Active and Inactive Members
advising them of the purchase by Buyer.
3.16 ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act. Each of the parties shall promptly file, or
shall cause its "ultimate parent entity", as defined in the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), to file, and
shall assist the other party in filing, any Notification and Report forms and
related material that it may be required to file under the Act; will use its
best efforts to obtain an early termination of the applicable waiting period;
and will make any further filings pursuant thereto that may be necessary, proper
or advisable in connection therewith. Buyer and Seller will be equally
responsible for payment of any applicable filing fees.
3.17 Employees. Buyer shall have no obligation to employ any employees or
Seller.
3.18 Waiver of Compliance with Bulk Transfer Laws. Subject to the
provisions of Section 6.1, with respect to the transactions contemplated by this
Agreement, Buyer hereby waives compliance with any applicable provisions of the
bulk transfer laws (Article 6 of the Uniform Commercial Code).
3.19 Non-Compete Agreement. At the Closing, the Seller shall enter into a
non-compete agreement, in the form attached hereto as Exhibit 4 (the
"Non-Compete Agreement").
-16-
3.20 Reimbursement of Buyer. Seller shall within ten (10) days of written
itemized request reimburse Buyer for any refunds, credits, returns,
replacements, repairs and warranty costs and expenses with respect to sales of
merchandise by Seller through ABD prior to the Closing, provided such costs and
expenses are made or incurred by Buyer within the six (6) month period after the
Closing Date; further provided, however, that the Seller shall not be obligated
to Buyer for any refunds, credits, returns, replacements, repairs or warranty
costs and expenses with respect to merchandise for which payment has not been
made to Seller, in which event Seller shall assign to Buyer, and Buyer shall be
entitled to collect for its own account, the applicable accounts receivable.
3.21 Notice of Certain Matters. Each of the parties hereto shall give
written notice to the other party, promptly upon becoming aware of (i) the
occurrence of a material adverse change in the condition of the Purchased Assets
or the Business, (ii) any occurrence, or failure to occur, of any event, which
occurrence or failure to occur has caused or could reasonably be expected to
cause any representation or warranty in this Agreement to be untrue or
inaccurate in any material respect at any time after the date hereof and prior
to the Closing Date or (iii) any material failure on the part of either party to
comply with of satisfy any covenant, condition or agreement to be complied with
or satisfied by such party hereunder; provided that the delivery of any notice
pursuant to this Section 3.21 shall not limit or otherwise affect the remedies
available hereunder to the party receiving such notice.
3.22 Payment of Simon & ▇▇▇▇▇▇▇▇ Commitment. When and if the Closing shall
occur, Buyer shall be responsible for payment (and shall pay when due on or
about May 1, 1999) the unpaid advance commitment to Simon & ▇▇▇▇▇▇▇▇ in the
aggregate amount of $500,000 (the "Simon & ▇▇▇▇▇▇▇▇ Commitment").
3.23 March/April Mailing. When and if the Closing shall occur, Buyer shall
reimburse Seller an aggregate amount of $200,000 toward the costs and expenses
incurred by Seller in connection with the production of the ABD direct mail
campaign of not less than 2.6 million pieces scheduled for mailing in
March/April 1999 (the "March/April 1999 Mailing").
4. Representations and Warranties as to Seller. Seller hereby, represents
and warrants to Buyer as follows:
4.1 Organization, Standing and Power. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
New York, with full corporate power and authority to own, lease and operate its
properties and to carry on the Business as presently conducted by it. Except for
the states of Pennsylvania, Indiana and Virginia, there are no states or
jurisdictions in which the character and
-17-
location of any of the properties owned or leased by Seller, or the conduct of
its business, makes it necessary for it to qualify to do business as a foreign
corporation.
4.2 Interests in Other Entities. Seller does not (i) own, directly or
indirectly, of record or beneficially, any shares of voting stock or other
equity securities of any other corporation engaged in the same or similar
business to the Business; (ii) have any ownership interest, direct or indirect,
of record or beneficially, in any unincorporated entity engaged in the same or
similar business to the Business; or (iii) have any obligation, direct or
indirect, present or contingent, (A) to purchase or subscribe for any interest
in, advance or loan monies to, or in any way make investments in, any other
person or entity engaged in the same or similar business to the Business, or (B)
to share any profits or capital investments or both from a entity engaged in the
same or similar business to the Business.
4.3 Authority. The execution and delivery by Seller of this Agreement and
of all of the agreements to be executed and delivered by it pursuant hereto, the
performance by it of its obligations hereunder and thereunder, 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
(including, but not limited to, the unanimous consent of Bertelsmann AG Book
Board of Directors and Seller has all necessary power with respect thereto. This
Agreement is, and when executed and delivered by Seller each of the other
agreements to be delivered by it pursuant hereto will be, the valid and binding
obligation of Seller, except as the same may be limited by bankruptcy,
insolvency, reorganization, moratorium or other laws affecting the rights of
creditors generally and subject to the rules of law governing (and all
limitations on) specific performance, injunctive relief, and other equitable
remedies.
4.4 Noncontravention. Neither the execution and delivery by Seller of this
Agreement or of any agreement to be executed and delivered by any or all of them
pursuant hereto, nor the consummation of any of the transactions contemplated
hereby or thereby, nor the performance it of its obligations hereunder or
thereunder, will (nor with the giving of notice or the lapse of time or both
would) (A) conflict with or result in a breach of any provision of the
Certificate of Incorporation or By-laws of Seller or (B) give rise to a default,
or any right of termination, cancellation or acceleration, or otherwise be in
conflict with or result in a loss of contractual benefits to Seller, under any
of the material terms, conditions or provisions of any note, bond, mortgage,
indenture, license, agreement or other instrument or obligation to which it is a
party or by which Seller or any of the Purchased Assets may be bound, or require
any consent, approval or notice under the terms of any such document or
instrument, or (C) violate any order, writ,
-18-
injunction, decree, law, statute, rule or regulation of any court or
governmental authority which is applicable to, and which violation has a
material adverse affect on, Seller or any of the Purchased Assets, or (D) result
in the creation or imposition of any lien, claim, restriction, charge or
encumbrance upon any of the Purchased Assets, or (E) interfere with or otherwise
materially adversely affect the ability of Buyer to carry on the Business after
the Closing Date on substantially the same basis as is now conducted by Seller.
4.5 Properties. Except for the Excluded Assets, the Purchased Assets
comprise all of the properties and assets which are necessary in order for Buyer
to carry on the Business after the Closing Date on substantially the same basis
as is now conducted by Seller. Seller has good and valid title to all of the
Purchased Assets, free and clear of all liens, pledges, security interests,
claims, charges or encumbrances of any nature whatsoever. Schedule 4.5 is a
complete list of all property owned by Seller or leased by or to Seller, or
which is otherwise used or available for use in connection with the Business.
The Seller's ABD masterfile database includes, without limitation, all active
and inactive customer (member) data, sales/returns transaction history, payment
history, promotional marketing data and history, and collections history (such
data being hereinafter collectively referred to as the "Masterfile Database").
The Masterfile Database is able to be copied to a magnetic tape form in readable
format or other format requested by Buyer. The Masterfile Database contains the
name, address, marketing and transaction history for each Active and Inactive
Member. The Masterfile Database contains no less than 160,000 Active Members and
no less than 283,000 Inactive Members. The Business has no other Active Members
or Inactive Members (since inception) other than as disclosed on Schedules
1.6(b)(i) and (ii). Seller has not sold or granted any other party rights or
access to the Masterfile Database except as set forth in Schedule 4.5. Schedule
4.5 is a complete list of all rentals of the Masterfile Database in the five (5)
years preceding the date hereof, including the names of the renter (and if an
agency, the client of the agency, if known), the amount received or to be
received from such rental and, to the extent unpaid as of the date hereof, the
due date for payment thereof. Attached as Schedule 4.5 is a list of all
audiobook titles distributed by ABD in the last six (6) months (the "Current
Titles").
4.6 Inventory. The inventory of the Seller consists of all audiobooks and
premium merchandise (e.g., audio cassette players and audio-video merchandise),
wherever located, related to the Business as set forth on Schedule 4.6A hereto
(all such items being hereinafter collectively referred to as the "Inventory"),
other than those audiobooks set forth on Schedule 4.6B and not offered through
the Business, all of which Inventory is merchantable and fit for the purpose for
which it was procured or manufactured, and none of which is damaged or
defective. The
-19-
Inventory consists of no less than 675,000 units of audiobook products and no
less than 55,000 units of premium merchandise, with a Cost of Merchandise of no
less than $2.4 million.
4.7 Book Clubs. Schedule 4.7 is a complete list of each of the book clubs
operated by Seller and its subsidiaries for which Seller or such subsidiaries
offers such club's membership lists or database for rental, including without
limitation CROSSINGS, CROSSINGS FOR KIDS, DOUBLEDAY BOOK CLUB, DOUBLEDAY LARGE
PRINT HOME LIBRARY, LITERARY GUILD, MILITARY BOOK CLUB, MYSTERY GUILD, SCIENCE
FICTION BOOK CLUB, STAGE & SCREEN and Continuity Programs operated by LITERARY
EXPRESS, INC., and any new book clubs formed or acquired by Seller and/or its
subsidiaries after the date hereof.
4.8 Intellectual Property.
(a) Schedule 4.8 is a complete and correct list of all (i) United States
and foreign patents, trademark and trade name registrations, trademarks and
trade names, brandmarks and brand name registrations, servicemarks and
servicemark registrations, assumed names and copyrights and copyright
registrations, owned in whole or in part and used by Seller with respect to the
Business, and all applications therefor, including without limitation the
"AUDIOBOOKS DIRECT" name, (ii) inventions, discoveries, improvements, processes,
formulae, proprietary rights and trade secrets relating to the Business
(including customer and supplier lists, pricing and cost information, and
business and marketing plans and proposals), (iii) domain name, fictitious and
d.b.a. name, proprietary "800" and "888" prefix phone numbers, Internet URL's
and other identifier and proprietary rights owned or used by Seller in
connection with the Business (and with respect to such "800" and "888" prefix
phone numbers, Seller will use commercially reasonable efforts to obtain from
its long distance carrier consent to the assignment and transfer of all such
phone numbers and related rights), and (iv) licenses, sublicenses and similar
agreements (including pending) between Seller or ABD and the respective
copyright owners of all labels currently distributed by the Business (the
"License Agreements") (all such items listed in (i) through (iv) above being
hereinafter referred to as "Intellectual Property Rights"). Schedule 4.8 also
identifies, with respect to the License Agreements, the copyright owners, the
advance and the amount and scheduled payment date of the advance, if any, which
has not been recouped (including without limitation the Simon & ▇▇▇▇▇▇▇▇
Commitment). Except as set forth on Schedule 4.8, the License Agreements permit
distribution of audiobooks to club members located in the United States and
Canada and are the Business's standard form of License Agreement, a copy of
which is annexed to Schedule 4.8. Except for finished goods purchased directly
from publisher's inventory, all Current Titles are subject to effective License
Agreements.
-20-
(b) Except as expressly set forth in said Schedule 4.8, (i) Seller owns or
has the right to use all of the Intellectual Property Rights; (ii) no
proceedings are pending or, to the best of the knowledge of Seller are
threatened, which challenge the rights of Seller in respect thereto or the
validity thereof and, to the best knowledge of Seller, there is no valid basis
for any such proceedings; (iii) none of the aforesaid violates any laws,
statutes, ordinances or regulations, or has at any time infringed upon or
violated any rights of others, or is being infringed by others; and (iv) none of
the aforesaid is subject to any outstanding order, decree, judgment, stipulation
or charge.
4.9 Absence of Changes. Since December 31, 1998, there has not been (a) any
material adverse change in the condition (financial or otherwise), assets,
liabilities, business, prospects, or results of operations of the Business
(including, without limitation, any such material adverse change resulting from
damage, destruction or other casualty, loss, whether or not covered by
insurance), (b) any waiver by Seller of any material right, or cancellation of
any debt or claim, related to the Business, or (c) any change in the accounting
principles or methods which are utilized by Seller.
4.10 Litigation. Except as set forth in Schedule 4.10 there are no claims,
suits, actions, arbitrations, investigations, inquiries or other proceedings
before any governmental agency, court or tribunal, domestic or foreign, or
before any private arbitration tribunal, pending or, to the best of the
knowledge of Seller, threatened, against or relating to Seller, the Business or
any of the Purchased Assets; nor, is there any basis for any such claim, suit,
action, arbitration, investigation, inquiry or other proceeding. There are no
judgments, orders, stipulations, injunctions, decrees or awards in effect which
relate to Seller, the Business or any of the Purchased Assets, the effect of
which is (a) to limit, restrict, regulate, enjoin or prohibit any business
practice in any area, or the acquisition of any properties, assets or
businesses, or (b) otherwise materially adverse to the Business or any of the
Purchased Assets.
4.11 No Violation of Law. Seller is not engaging in any activity or
omitting to take any action as a result of which (a) it is in violation of any
law, rule, regulation, zoning or other ordinance, statute, order, injunction or
decree, or any other requirement of any court or governmental or administrative
body or agency, applicable to Seller, the Business or any of the Purchased
Assets in any material respect, including, but not limited to, those relating to
truth-in-advertising, occupational safety and health; environmental and
ecological protection; business practices and operations; labor practices; and
employee benefits, and (b) Seller, the Business and/or any of the
-21-
Purchased Assets have been or may be materially and adversely affected.
4.12 Government and Third-Party Consents /Approvals. Except for the
clearance required under the HSR Act, no approval, authorization, consent or
order or action of, or filing with, any third party or court, administrative
agency or governmental authority (a) is required for the execution and delivery
by Seller of this Agreement and of all of the agreements to be executed and
delivered by Seller pursuant hereto, or the consummation by Seller of the
transactions contemplated hereby or thereby or (b) is necessary in order that
the Business may be conducted immediately following the Closing Date
substantially in the same manner as heretofore conducted.
4.13 Products Liability. Schedule 4.13 lists all product liability claims
made or to the knowledge of Seller threatened in Seller's last three (3) fiscal
years with respect to the Business.
4.14 Material and Other Contracts.
(a) Schedule 4.14(a) lists all pending or executory contracts, agreements
or commitments relating to the Business, including, without limitation, license
agreements, product supplier agreements, distribution agreements, marketing
agreements (including, without limitation, agreements relating to rights to list
rentals, audio file, package inserts and ride alongs), non-competition
agreements, confidentiality agreements and vendor agreements, and other
agreements relating to the Intellectual Property Rights (all such items being
hereinafter collectively referred to as the "Material Agreements"). True and
complete copies of all such documents and complete descriptions of all oral
contracts (if any) referred to in Schedule 4.14(a) have been provided or made
available to Buyer and its counsel. Each of the Assumed Contracts is (i) in full
force and effect, no person or entity which is a party thereto or otherwise
bound thereby is in default thereunder, and, to the best of the knowledge of
Seller, no event, occurrence, condition or act exists which does (or which with
the giving of notice or the lapse of time or both would) give rise to a default
or right of cancellation, acceleration or loss of material contractual benefits
thereunder; and (ii) there has been no threatened cancellations thereof, and
there are no outstanding disputes thereunder.
(b) Schedule 4.14(b) contains a complete and correct list of all contracts,
commitments, obligations and understandings which are not set forth in any other
Schedule delivered hereunder and to which Seller is a party or otherwise bound,
and which relate to the Business, except for each of those which (i) was made in
the ordinary course of business, and (ii) either (A) is terminable by
-22-
Seller (and will be terminable by Buyer) without liability, expense or other
obligation on 30 days' notice or less, or (B) may be anticipated to involve
aggregate payments to or by Seller of $5,000 (or the equivalent) or less
calculated over the full term thereof, and (iii) is not otherwise material to
the Business or any of the Purchased Assets. Complete and correct copies of all
contracts, commitments, obligations and undertakings set forth on any of the
Schedules delivered pursuant to this Agreement have been furnished by Seller to
Buyer, and except as expressly stated on the Schedule on which they are set
forth, (y) each of them is in full force and effect, no person or entity which
is a party thereto or otherwise bound thereby is in default thereunder, and, to
the best of the knowledge of Seller, no event, occurrence, condition or act
exists which does (or which with the giving of notice or the lapse of time or
both would) give rise to a default or right of cancellation, acceleration or
loss of material contractual benefits thereunder; and (z) there has been no
threatened cancellations thereof, and there are no outstanding disputes
thereunder.
4.15 Business Financial Statements;1998 Revenues. Schedule 4.15 is a true
and correct copy of the unaudited balance sheet with respect to the Business as
at December 31, 1997 and December 31, 1998 and the related statement of
operations for the years ended December 31, 1997 and December 31, 1998 and the
latest interim financial statements (collectively, the "Business Financials").
The Business Financials have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the periods
involved (except as may otherwise be indicated therein) and each presents
fairly, in all material respects, the financial position of the Business as at
the date thereof and the results of its operations and cash flow position for
the period indicated. Seller represents and warrants that the revenues of Seller
(net of refunds, credits, returns, replacements, repairs, warranty costs and
expenses and bad debt expenses) for the year ended December 31, 1998 is no less
than $17.6 million.
4.16 Advertising. Schedule 4.16 hereto sets forth (to the extent each has
been determined as of the date hereof and to the extent each relates solely to
the Business) Seller's advertising plans, commitments and arrangements for
fiscal year 1999 (the "Advertising Commitments"), identifying all merchandise
(identified by SKU number) to be advertised by Seller for such period, together
with all associated processing charges, postage, material costs and other
advertising expenses. Schedule 4.16 shall also set forth a calendar of all
scheduled campaigns (whether inserts, direct mailing, or otherwise) and the
forecasted quantities and "response rates" with respect thereto.
4.17 Books and Records. The books and records of Seller are complete and
correct in all material respects, have been maintained in accordance with good
business practices, and
-23-
accurately reflect the basis for the financial condition, results of operations
and cash flow of Seller as set forth in the Business Financials.
4.18 Taxes. Seller has filed all tax returns that it was required to file
and/or is the beneficiary of an applicable extension of time within which to
file any tax return to be filed by or in respect of Seller. All tax returns
filed by or in respect of Seller were correct and complete in all material
respects. All taxes owed by or for Seller (whether or not shown on any tax
return) have been paid or adequate provision for the payment thereof has been
made. Seller has reported and duly paid state and local sales and use taxes in
all states in which it is required to report and pay such taxes, including sales
and/or use taxes on sales of merchandise and on promotional materials. There is
no material dispute or claim concerning any tax liability of Seller either
formally asserted or raised, or, to the knowledge of Seller, threatened by any
governmental or administrative entity.
4.19 Brokers. No agent, broker, person, or firm acting on behalf of Seller,
or under its authority, is or will be entitled to a financial advisory fee,
brokerage commission or other like payment in connection with any of the
transactions contemplated hereby.
4.20 Information as to Seller. None of the representations or warranties
made by Seller in this Agreement or in any agreement executed and delivered by
it pursuant hereto are false or misleading with respect to any material fact, or
omit to state any material fact necessary in order to make the statements
therein contained not misleading.
5. Representations and Warranties as to Buyer. Buyer hereby represents and
warrants to Seller as follows:
5.1 Organization, Standing and Power. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, with full corporate power and authority to own, lease and operate its
properties and to carry on its business as presently conducted by it.
5.2 Authority. The execution and delivery by Buyer of this Agreement and of
each agreement to be executed and delivered by it pursuant hereto, the
compliance by Buyer with the provisions hereof and thereof, 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 Buyer, and Buyer has
all necessary corporate power with respect thereto. This Agreement is, and when
executed and delivered by Buyer each other agreement to be executed and
delivered by it pursuant hereto will be, the valid and binding obligation of
Buyer in accordance with its terms, except as the
-24-
same may be limited by bankruptcy, insolvency, reorganization, moratorium or
other laws affecting the rights of creditors generally and subject to the rules
of law governing (and all limitations on) specific performance, injunctive
relief, and other equitable remedies.
5.3 Noncontravention. Neither the execution and delivery by Buyer of this
Agreement or of any of the aforementioned other agreements, nor the consummation
of the transactions contemplated hereby or thereby, nor the compliance by Buyer
with the provisions hereof and thereof, will (nor with the giving of notice or
the lapse of time or both, would) conflict with or result in a violation of any
provision of the Certificate of Incorporation or By-laws of Buyer, or in the
breach of any material agreement to which Buyer is a party or otherwise bound.
5.4 Brokers. No agent, broker, person, or firm acting on behalf of Buyer,
or under its authority, is or will be entitled to a financial advisory fee,
brokerage commission or other like payment in connection with any of the
transactions contemplated hereby.
5.5 Information as to Buyer. None of the representations or warranties made
by Buyer in this Agreement or in any agreement executed and delivered by or on
behalf of any of them pursuant hereto are false or misleading with respect to
any material fact, or omit to state any material fact necessary in order to make
the statements therein contained not misleading.
6. Indemnification.
6.1 Indemnification by Seller. Seller shall indemnify and hold Buyer and
Audio harmless from and against any and all losses, obligations, deficiencies,
liabilities, claims, damages, costs and expenses including, without limitation,
the amount of any settlement entered into pursuant hereto, and all reasonable
legal and other expenses incurred in connection with the investigation,
prosecution or defense of any matter indemnified pursuant hereto (a "Loss")
which Loss Buyer or Audio may sustain, suffer or incur and which arise out of,
are caused by, relate to, or result or occur from or in connection with (a)
liabilities other than the Assumed Liabilities, (b) the noncompliance with any
applicable bulk transfer laws of any jurisdiction, (c) the breach by Seller of
any representation, warranty or covenant made by it in this Agreement or in any
agreement or instrument executed and delivered pursuant hereto, (d) the
operation of the Business by Seller prior to the Closing Date (regardless of
whether any claim is brought prior to or subsequent to the Closing), (e) any
wilful misconduct or negligence by Seller which interferes with the transactions
contemplated by this Agreement, or (f) any refunds, credits or replacement
issued after the Closing Date relating to sales made
-25-
by ABD prior to the Closing Date. Furthermore, Seller will indemnify and hold
Buyer harmless against all liabilities, loss, expense, cost or obligations of
any nature, known or unknown, fixed or contingent, matured or unmatured, to any
party which Buyer might incur relating to the transaction contemplated hereunder
and the transfer of the Business to Buyer regardless of whether said claim is
instituted prior to or subsequent to the Closing and regardless of whether the
transaction contemplated hereby is consummated. Seller will indemnify Buyer for
any willful or negligent act by Seller interfering with the intent and/or terms
of this Agreement and the transaction contemplated hereunder. This
indemnification obligation shall also apply to claims directly by Buyer or Audio
against the Seller as well as to third party claims.
6.2 Indemnification by Buyer. Buyer and Audio indemnifies and holds Seller
harmless from and against any Loss, which Loss Seller may sustain, suffer or
incur and which arise out of, are caused by, relate to, or result or occur from
or in connection with (a) the Assumed Liabilities, (b) the breach by Buyer of
any representation, warranty or covenant made by it in this Agreement or in any
agreement or instrument executed and delivered pursuant hereto, or (c)
liabilities relating to the ABD merchandise sold (other than claims caused by a
breach of a representation or warranty by Seller or negligent acts or omissions
of Seller), or the operation of the Business by Buyer after the Closing Date.
This indemnification obligation shall also apply to claims directly by Seller
against Buyer or Audio as well as to third party claims.
6.3 Third Party Claims. If a claim by a third party is made against any
party or parties hereto and the party or parties against whom said claim is made
intends to seek indemnification with respect thereto under this Article 6, the
party or parties seeking such indemnification shall promptly notify the
indemnifying party or parties, in writing, of such claim; provided, however,
that the failure to give such notice shall not affect the rights of the
indemnified party or parties hereunder unless such failure materially and
adversely affects the indemnifying party or parties. The indemnifying party or
parties shall have ten days after said notice is given to elect, by written
notice given to the indemnified party or parties, to undertake, conduct and
control, through counsel of their own choosing (subject to the consent of the
indemnified party or parties, such consent not to be unreasonably withheld) and
at their sole risk and expense, the good faith settlement or defense of such
claim, and the indemnified party or parties shall cooperate with the
indemnifying parties in connection therewith; provided: (i) in the case of
Seller as the indemnifying party, it shall not thereby permit to exist any lien,
encumbrance or other adverse change upon any of the Purchased Assets, Buyer or
the Business, and (ii) the indemnified party or parties shall be entitled to
participate in such settlement or defense through
-26-
counsel chosen by the indemnified party or parties, provided that the fees and
expenses of such counsel shall be borne by the indemnified party or parties. So
long as the indemnifying party or parties are contesting any such claim in good
faith, the indemnified party or parties shall not pay or settle any such claim;
provided, however, that notwithstanding the foregoing, the indemnified party or
parties shall have the right to pay or settle any such claim at any time,
provided that in such event they shall waive any right of indemnification
therefor by the indemnifying party or parties. If the indemnifying parties do
not make a timely election to undertake the good faith defense or settlement of
the claim as aforesaid, or if the indemnifying parties fail to proceed with the
good faith defense or settlement of the matter after making such election, then,
in either such event, the indemnified party or parties shall have the right to
contest, settle or compromise the claim at their exclusive discretion, at the
risk and expense of the indemnifying parties to the full extent set forth in
Sections 6.1 or 6.2 hereof, as the case may be.
7. Nondisclosure/Announcements.
7.1 "Confidential Information" Defined. The parties hereto hereby agree
that all confidential information of a party to which the other party obtains
access shall be governed by and subject to all of the terms and conditions of
the confidentiality covenants set forth in the Confidentiality Agreement dated
February 10, 1997 (the "Confidentiality Agreement") between Audio and Seller, to
which Confidentiality Agreement Buyer hereby agrees to be bound. The
Confidentiality Agreement is further ratified by the parties hereto.
7.2 Nondisclosure. Prior to receiving ▇▇▇▇-▇▇▇▇▇ ▇▇▇▇▇▇ approval, no party
hereto shall issue any press release or otherwise divulge or disclose the
existence of this Agreement, the terms hereof, or the transactions contemplated
hereby without the prior written approval of the other parties hereto, except as
may be required by applicable law or the applicable rules or regulations of any
stock exchange. Upon receiving ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ approval, the parties shall
mutually agree on and issue a press release regarding the relationship
contemplated in this Agreement, provided that under no circumstances shall the
Purchase Price or any other financial terms of this Agreement be disclosed
except as otherwise required by law.
7.3 No disparagement. At no time during the period commencing on the date
hereof and continuing for five years after the Closing Date shall Seller or any
subsidiary thereof, on the one hand, or Buyer or Audio, on the other hand,
disparage the commercial, business or financial reputation of the other parties
hereto or any of their respective officers, directors, employees, agents or
affiliates.
-27-
7.4 Injunctive Relief, etc. The parties hereto hereby acknowledge and agree
that (i) the parties hereto would be irreparably injured in the event of a
breach by the other party of any of their respective obligations under this
Article 7, (ii) monetary damages would not be an adequate remedy for any such
breach, and (iii) such non-breaching party shall be entitled to injunctive
relief, in addition to any other remedy which it may have, in the event of any
such breach. It is hereby also agreed that the existence of any claims which the
breaching party may have against the non-breaching party, whether under this
Agreement or otherwise, shall not be a defense to the enforcement by the
non-breaching party of any of its rights under this Article 7.
7.5 Scope of Restriction. It is the intent of the parties hereto that the
covenants contained in this Article 7 shall be enforced to the fullest extent
permissible under the laws of and public policies of each jurisdiction in which
enforcement is sought (Seller, Buyer and Audio each hereby acknowledging that
said restrictions are reasonably necessary for the protection of the other
party). Accordingly, it is hereby agreed that if any one or more of the
provisions of this Article 7 shall be adjudicated to be invalid or unenforceable
for any reason whatsoever, said provision shall be (only with respect to the
operation thereof in the particular jurisdiction in which such adjudication is
made) construed by limiting and reducing it so as to be enforceable to the
extent permissible.
7.6 Additional Undertakings. The provisions of this Article 7 shall be in
addition to, and not in lieu of, any other obligations with respect to the
subject matter hereof, whether arising as a matter of contract, by law or
otherwise.
8. Conditions to Closing.
8.1 Buyer's Right. Buyer shall have the right to terminate this Agreement
and abandon the transactions contemplated hereby in the event that any of the
following shall not be true or shall not have occurred, as the case may be, as
of the Closing Date:
(a) Accuracy of Representations and Warranties. The representations
and warranties of Seller contained in this Agreement or in any document,
agreement or instrument delivered by it pursuant hereto shall have been
true when made, and, in addition, shall be true in all material respects on
and as of the Closing Date with the same force and effect as though made on
and as of the Closing Date.
(b) Performance of Agreements. Seller shall have performed all
obligations and agreements, and complied with all covenants and conditions,
in all material respects, contained in this Agreement or in any document,
agreement or instrument
-28-
delivered by it pursuant hereto and required to be performed or complied
with by it, in a commercially reasonable manner, at or prior to the Closing
Date.
(c) Opinion of Counsel for Seller. Buyer shall have received an
opinion of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇., Vice President, Legal, Postal and
Government Affairs for Seller, dated the Closing Date, in form reasonably
satisfactory to the parties at the Closing.
(d) Litigation. No order of any court or administrative agency shall
be in effect which restrains or prohibits the transactions contemplated
hereby, and no suit, action, inquiry, investigation or proceeding before a
court or administrative agency shall have been instituted by any person or
entity in which it will be, or it is, sought to restrain, prohibit or
change the material terms of or obtain material damages or other relief in
connection with this Agreement or any of the transactions contemplated
hereby, and which in the commercially reasonable judgment of Buyer makes it
inadvisable to proceed with the consummation of such transactions.
(e) Consents and Approvals. All consents, waivers, approvals, licenses
and authorizations by third parties and governmental and administrative
authorities (and all amendments or modifications to existing agreements
with third parties) required as a precondition to the performance by Seller
of its obligations hereunder and under any agreement delivered pursuant
hereto, or which in Buyer's judgment are reasonably necessary to continue
unimpaired any rights in and to the Purchased Assets which could be
impaired by the purchase and sale hereunder, shall have been duly obtained
and shall be in full force and effect.
(f) Validity of Transactions. The validity of all transactions
contemplated hereby, as well as the form and substance of all agreements,
instruments, opinions, certificates and other documents delivered by Seller
pursuant hereto, shall be reasonably satisfactory in all material respects
to Buyer and its counsel.
(g) Board Authorization. The approval of this Agreement and all of the
transactions contemplated hereby by the Board of Directors of Buyer no
later than March 15, 1999.
(h) Due Diligence. Buyer being satisfied with the results of its "due
diligence" investigation (as contemplated in Section 3.2 hereof) of
Seller's business, liabilities, properties and assets are materially
consistent with all of the data, statistics, financial statements,
representations, assurances and other information, financial and otherwise
relating to Seller's business liabilities, properties
-29-
and assets provided to Buyer by Seller, either orally or in writing, prior
to the date of this Agreement.
(i) Ancillary Agreements. Buyer and Seller shall have entered into
each of the Mailing Agreement, the Transitional Services Agreement and the
Non-Compete Agreement.
(j) No Material Adverse Changes. There shall not have occurred after
the date hereof, in the reasonable judgment of Buyer, a material adverse
change in the condition of the Purchased Assets or the Business.
(k) ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act. Buyer, Seller and any other person (as
defined in the HSR Act) and the rules and regulations thereunder) which is
required in connection with the transactions contemplated hereby to file a
Notification and Report Form for Certain Mergers and Acquisitions with the
United States Department of Justice and the United States Federal Trade
Commission pursuant to Title II of the HSR Act shall have made such filing,
and the applicable waiting period with respect to each such filing
(including any extension thereof by reason of a request for additional
information) shall have expired or been terminated.
8.2 Seller's Right. Seller shall have the right to terminate this Agreement
and abandon the transactions contemplated hereby in the event that any of the
following shall not be true or shall not have occurred, as the case may be, as
of the Closing Date:
(a) Accuracy of Representations and Warranties. The representations
and warranties of Buyer contained in this Agreement or in any document,
agreement or instrument delivered by it pursuant hereto shall have been
true when made, and, in addition, shall be true in all material respects on
and as of the Closing Date with the same force and effect as though made on
and as of the Closing Date.
(b) Performance of Agreements. Buyer shall have performed all
obligations and agreements, and complied with all covenants and conditions
in all material respects, contained in this Agreement or in any document,
agreement or instrument delivered by it pursuant hereto and required to be
performed or complied with by it at or prior to the Closing Date.
(c) ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act. Buyer, Seller and any other person (as
defined in the HSR Act and the rules and regulations thereunder) required
in connection with the transactions contemplated hereby to file a
Notification and Report Form for Certain Mergers and Acquisitions with the
United States Department of Justice and the United States Federal Trade
Commission pursuant to Title II of the HSR Act shall have made such filing
and the applicable waiting period with respect to each such filing
(including any extension thereof by reason of a
-30-
request for additional information) shall have expired or been terminated.
(d) Validity of Transactions. The validity of all transactions
contemplated hereby, as well as the form and substance of all agreements,
instruments, opinions, certificates and other documents delivered by Buyer
pursuant hereto, shall be reasonably satisfactory in all material respects
to Seller and its counsel.
(e) Board Authorization. The approval of this Agreement and all of the
transactions contemplated hereby by the Boards of Directors of Seller and
Bertelsmann AG Book no later than March 15, 1999.
(f) Consents and Approvals. All consents, waivers, approvals, licenses
and authorizations by third parties and governmental and administrative
authorities (and all amendments or modifications to existing agreements
with third parties) required as a precondition to the performance by Buyer
of its obligations hereunder and under any agreement delivered pursuant
hereto.
(g) Opinion of Counsel for Buyer. Seller shall have received an
opinion of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ LLP, counsel for Buyer, dated the Closing
Date, in form reasonably satisfactory to the parties at the Closing.
(h) Litigation. No order of any court or administrative agency shall
be in effect which restrains or prohibits the transactions contemplated
hereby, and no suit, action, inquiry, investigation or proceeding before a
court or administrative agency shall have been instituted by any person or
entity in which it will be, or it is, sought to restrain, prohibit or
change the material terms of or obtain material damages or other relief in
connection with this Agreement or any of the transactions contemplated
hereby, and which in the commercially reasonable judgment of Seller makes
it inadvisable to proceed with the consummation of such transactions.
(i) Ancillary Agreements. Buyer and Seller shall have entered into
each of the Mailing Agreement, the Transitional Services Agreement and the
Non-Compete Agreement.
8.3 Effect of Abandonment. In the event that this Agreement is terminated
and the transactions contemplated hereby are abandoned pursuant to the terms
hereof, this Agreement shall forthwith become wholly void and of no force and
effect, except as to Sections 10.1, 10.14 and Article 6 hereof and the
obligations set forth in the Confidentiality Agreement; provided, however, that
nothing in this Agreement contained shall be deemed to relieve any party hereto
from liability for any breach of this Agreement prior to termination.
-31-
9. Survival of Representations and Warranties.
Each of the parties hereto hereby agrees that all representations and
warranties made by or on behalf of it in this Agreement or in any document or
instrument delivered pursuant hereto shall survive the Closing Date and the
consummation of the transactions contemplated hereby for a period of two (2)
years, except for the representations and warranties contained in Sections 4.11,
4.13 and 4.18, which shall survive for the applicable statute of limitations
period.
10. Miscellaneous Provisions.
10.1 Expenses. Except as otherwise provided in this Agreement, each of the
parties hereto shall pay his or its own costs and expenses in connection with
this Agreement and the transactions contemplated hereby; provided, however, that
Buyer shall reimburse Seller for all reasonable expenses incurred by Seller with
respect to the audit pursuant to Section 3.12 hereof in the event that all
conditions in Section 8.1 shall have been satisfied and Buyer, in breach of its
obligations under this Agreement, willfully fails to close or consummate the
Financing.
10.2 Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given or
made as of the date delivered, if delivered personally, or one (1) business day
after having been deposited with courier, if sent by overnight courier or having
been sent by telecopy, if sent by telecopy (receipt confirmed), or three (3)
business days after having been mailed, if mailed by registered or certified
mail, postage prepaid, return receipt requested, as follows:
If to Buyer, to: ABD Acquisition Corp.
▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attn.: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, co-CEO
- and -
ABD Acquisition Corp.
Corporate Blvd., N.W.
Suite 222
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn.: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Co-CEO
Copy to: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
-32-
If to Seller, to: Doubleday Direct, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇,
President and CEO
Copy to: Doubleday Direct, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.,
Vice President, Legal,
Postal and Government Affairs
or to such other address as any party shall have designated by like notice to
the other parties hereto (except that a notice of change of address shall only
be effective upon receipt).
10.3 Applicable Law. This Agreement shall be governed by, and construed in
accordance with, the law of the State of New York without regard to its choice
of law principles.
10.4 Waiver, etc. The failure of any of the parties hereto to at any time
enforce any of the provisions of this Agreement shall not be deemed or construed
to be a waiver of any such provision, nor to in any way affect the validity of
this Agreement or any provision hereof or the right of any of the parties hereto
to thereafter enforce each and every provision of this Agreement. No waiver of
any breach of any of the provisions of this Agreement shall be effective unless
set forth in a written instrument executed by the party or parties against whom
or which enforcement of such waiver is sought; and no waiver of any such breach
shall be construed or deemed to be a waiver of any other or subsequent breach.
10.5 Assignment. Prior to the Closing Date, neither this Agreement nor any
rights, interests or obligations hereunder may be assigned (by operation of law
or otherwise) by any party hereto without the prior written consent of all of
the parties hereto, except that Buyer may (a) assign any and all of its rights
and remedies and delegate any and all of its obligations under this Agreement to
any affiliate, subsidiary or any entity owned or controlled by Audio, provided
such affiliate, subsidiary or entity agrees in writing to be bound by the terms
hereof, and (b) grant a security interest in its rights under this Agreement to
Buyer's lender, as administrative agent (the "Agent"), in connection with the
financing of the transactions contemplated by this Agreement.
10.6 Attorneys' Fees. The parties hereto agree that if any party seeks to
resolve any dispute arising under this Agreement pursuant to a legal proceeding,
the prevailing party to such proceeding shall be entitled promptly to receive
from the other party, the fees and expenses (including reasonable
-33-
attorneys' fees and expenses) incurred on the prevailing party's behalf in
connection with such proceedings.
10.7 Binding Effect; Benefits. This Agreement shall inure to the benefit
of, and shall be binding upon, the parties hereto and their respective
successors and permitted assigns. Nothing herein contained, express or implied,
is intended to confer upon any person other than the parties hereto and their
respective successors and permitted assigns, any rights or remedies under or by
reason of this Agreement.
10.8 Amendment. This Agreement may only be amended by a written instrument
executed by each of the parties hereto.
10.9 Severability. Any provision of this Agreement which is held by a court
of competent jurisdiction to be prohibited or unenforceable in any
jurisdiction(s) shall be, as to such jurisdiction(s), ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions of this Agreement or affecting the validity or enforceability of such
provision in any other jurisdiction.
10.10 Entire Agreement. This Agreement (together with the other agreements
and documents being delivered pursuant to or in connection with this Agreement
including without limitation the Ancillary Agreements attached as Exhibits
hereto) and the Confidentiality Agreement constitute the entire agreement of the
parties hereto with respect to the subject matter hereof, and supersede all
prior agreements and understandings of the parties, oral and written, with
respect to the subject matter hereof.
10.11 Schedules. The Schedules delivered pursuant to this Agreement are an
integral part hereof. Each such Schedule shall be in writing, shall indicate the
Section pursuant to which it is being delivered, and shall be initialled by the
delivering party.
10.12 Headings. The headings contained herein are for the sole purpose of
convenience of reference, and shall not in any way limit or affect the meaning
or interpretation of any of the terms or provisions of this Agreement.
10.13 Execution in Counterparts. This Agreement may be executed in one or
more counterparts, and by the different parties hereto in separate counterparts,
each of which shall be deemed to be an original but all of which taken together
shall constitute one and the same agreement, and shall become effective when one
or more counterparts has been signed by each of the parties hereto and delivered
to each of the other parties hereto.
-34-
10.14 Remedies. Seller agrees and acknowledges that the rights and
obligations set forth under this Agreement are of a unique and special nature
and that Buyer may be, therefore, without an adequate legal remedy in the event
of any violation of the covenants set forth in this Agreement by Seller.
Accordingly, if Seller breaches its obligations under this Agreement, Buyer
shall be entitled to seek enforcement of its remedies by an injunction, a
restraining order, or a decree of specific performance requiring Seller to
fulfill its obligations under this Agreement, in addition to all other rights
and remedies, at law or in equity, that may be available to Buyer under this
Agreement. Moreover, to facilitate the foregoing, Seller hereby expressly waives
any requirement for the posting of a bond or similar security in connection with
seeking of equitable remedies.
-35-
IN WITNESS WHEREOF, this Agreement has been executed and delivered by the
parties hereto as of the date first above written.
Attest: ABD ACQUISITION CORP.
________________________ By:/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Secretary --------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Co-CEO
Attest: DOUBLEDAY DIRECT, INC.
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
-------------------------- --------------------------
Secretary Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: President & CEO
With respect to the provisions set forth in Sections 6 and 7 of the foregoing
agreement, the undersigned has executed hereinbelow.
Attest: AUDIO BOOK CLUB, INC.
________________________ By:/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Secretary --------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Co-CEO
-36-