Exhibit 2.1
ASSET PURCHASE AGREEMENT
for the purchase by
CROSS MEDIA MARKETING CORPORATION
of certain assets
of
JWE ENTERPRISES, INC.
and
JWE HOLDINGS, INC.
As of May 27, 2002
TABLE OF CONTENTS
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1. Certain Defined Terms.................................................................................... 1
2. Purchase of Assets....................................................................................... 2
2.1 Assets.......................................................................................... 2
2.2 Excluded Assets................................................................................. 3
2.3 Assumption of Certain Liabilities............................................................... 4
2.4 Liabilities Not Assumed by Buyer................................................................ 4
2.5 Right of Enforcement and Settlement............................................................. 4
2.6 JXM Membership Interest......................................................................... 5
3. Closing and Effective Time............................................................................... 5
3.1 Closing Date and Place.......................................................................... 5
3.2 Purchase Price.................................................................................. 5
3.3 Prorations...................................................................................... 8
3.4 Allocation of Purchase Price.................................................................... 8
4. Representations, Warranties and Covenants of Seller Group................................................ 8
4.1 Authority....................................................................................... 8
4.2 Compliance with Laws............................................................................ 9
4.3 No Conflict..................................................................................... 9
4.4 Consents........................................................................................ 9
4.5 Title to Assets; Encumbrances................................................................... 9
4.6 Software and Intellectual Property.............................................................. 9
4.7 Condition and Sufficiency of Assets............................................................ 11
4.8 Proceedings.................................................................................... 11
4.9 Undisclosed Liabilities........................................................................ 11
4.10 Taxes.......................................................................................... 11
4.11 No Material Adverse Change..................................................................... 11
4.12 No Broker...................................................................................... 12
4.13 Contracts...................................................................................... 12
4.14 Inventory...................................................................................... 13
4.15 Employees...................................................................................... 13
4.16 Employee Benefit Plans......................................................................... 15
4.17 Suppliers...................................................................................... 16
4.18 Insurance...................................................................................... 16
4.19 Related Party Transactions..................................................................... 17
4.20 Environmental Matters.......................................................................... 17
4.21 Books and Records.............................................................................. 18
4.22 Securities Laws Compliance Procedures.......................................................... 18
4.23 Statements True and Correct.................................................................... 20
5. Representations and Warranties of Buyer................................................................. 20
5.1 Organization................................................................................... 20
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TABLE OF CONTENTS
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5.2 Authorized Capital Stock; XMM Shares........................................................... 20
5.3 Authority...................................................................................... 20
5.4 No Violation................................................................................... 21
5.5 Consents....................................................................................... 21
5.6 Proceedings.................................................................................... 21
5.7 No Broker...................................................................................... 21
5.8 SEC Filings; Financial Statements.............................................................. 21
5.9 Absence of Certain Changes or Events........................................................... 22
5.10 Permits; No Violation of Law................................................................... 22
5.11 Statements True and Correct.................................................................... 22
6. Covenants and Other Agreements.......................................................................... 22
6.1 Access and Investigation....................................................................... 22
6.2 Refunds and Reimbursement...................................................................... 23
6.3 Renewal Orders................................................................................. 23
6.4 Audit Right.................................................................................... 23
6.5 Retained Receivables........................................................................... 23
6.6 Conduct of Business............................................................................ 24
6.7 Notification................................................................................... 26
6.8 Expenses....................................................................................... 26
6.9 Consents....................................................................................... 26
6.10 Transfer of Contracts and Permits.............................................................. 26
6.11 Bulk Sales Notices............................................................................. 26
6.12 Seller's Employees............................................................................. 26
6.13 Exercise of Put................................................................................ 27
7. Conditions Precedent to the Obligations of Buyer........................................................ 27
7.1 Representations and Warranties; Agreements..................................................... 27
7.2 Delivery of Documents.......................................................................... 27
7.3 Proceedings.................................................................................... 28
7.4 Termination Statements......................................................................... 28
7.5 Termination of Agreements...................................................................... 28
7.6 Non-Competition Agreement...................................................................... 28
7.7 ▇▇▇▇▇▇▇▇▇ Employment Agreement................................................................. 28
7.8 Due Diligence.................................................................................. 29
7.9 Approval....................................................................................... 29
7.10 Consents....................................................................................... 29
7.11 Subordination Agreement........................................................................ 29
8. Conditions Precedent to the Obligations of Seller Group................................................. 29
8.1 Agreements, Representations and Warranties..................................................... 29
8.2 Purchase Price................................................................................. 29
8.3 Proceedings.................................................................................... 29
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TABLE OF CONTENTS
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8.4 Registration Rights Agreement.................................................................. 29
8.5 Delivery of Documents.......................................................................... 29
8.6 Consents....................................................................................... 30
8.7 ▇▇▇▇▇▇▇▇▇ Employment Agreement................................................................. 30
9. Indemnification......................................................................................... 30
9.1 Obligation of Seller Group to Indemnify........................................................ 30
9.2 Obligation of Buyer to Indemnity............................................................... 31
9.3 Limitations on Indemnification................................................................. 31
9.4 Claim Notice................................................................................... 31
9.5 Procedures..................................................................................... 32
9.6 Right of Set-Off............................................................................... 32
9.7 Other Remedies................................................................................. 32
10. Notices................................................................................................. 33
11. Miscellaneous........................................................................................... 33
11.1 Disclosure..................................................................................... 33
11.2 Confidentiality................................................................................ 33
11.3 Notices........................................................................................ 33
11.4 Entire Agreement............................................................................... 34
11.5 Waivers and Amendments......................................................................... 34
11.6 Binding Agreement; No Third Party Beneficiaries................................................ 34
11.7 Governing Law.................................................................................. 34
11.8 Jurisdiction; Service of Process............................................................... 34
11.9 Assignment..................................................................................... 34
11.10 Severability................................................................................... 35
11.11 Counterparts................................................................................... 35
11.12 Exhibits and Schedules......................................................................... 35
11.13 Headings....................................................................................... 35
11.14 Neutral Construction........................................................................... 35
11.15 Termination.................................................................................... 35
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ASSET PURCHASE AGREEMENT
Parties: Cross Media Marketing Corporation,
a Delaware corporation ("Buyer" or "Cross Media")
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
JWE Enterprises, Inc.,
a Montana corporation ("Seller")
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇
JWE Holdings, Inc.
a Delaware corporation ("Holdings")
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇▇▇")
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Date: As of May 27, 2002
Background:
▇. ▇▇▇▇▇▇▇▇▇ owns 100% of the issued and outstanding stock of Seller.
Seller is engaged in the Business. Seller is a "Subchapter S" corporation and
cash basis taxpayer.
B. Holdings, a wholly-owned subsidiary of Seller, owns a membership
interest (the "Interest") in J. Cross Marketing, LLC, a Delaware limited
liability company ("JXM").
C. Subject to the provisions of this Asset Purchase Agreement (the
"Agreement"), Seller agrees to sell, and Buyer or its designee agrees to
purchase, certain Assets (as defined herein) used in the operations of Seller's
Business, and Holdings agrees to sell, and Buyer or its designee as set forth
below agrees to purchase, the Interest. Media Outsourcing, Inc., a Delaware
corporation ("MOS") or another subsidiary of Buyer (the "Designee") may be the
purchaser of the Assets and/or the Interest, but if Buyer is not the purchaser
it will guaranty the purchaser's obligations hereunder.
NOW, THEREFORE, in consideration of the mutual agreements and covenants
contained herein, and intending to be legally bound, the parties hereto agree as
follows:
1. Certain Defined Terms. Certain defined capitalized terms (the first
letters of which are capitalized) used in this Agreement and not specifically
defined in context are set forth in Appendix A of this Agreement and are
incorporated herein by reference.
2. Purchase of Assets.
2.1 Assets. At the Closing (as defined in Section 3), subject
to and upon the terms and conditions contained herein, Seller will sell to Buyer
or its Designee, and Buyer or its Designee will purchase and receive from
Seller, all right, title and interest in and under and to all of Seller's
assets, properties and rights of every kind, nature and description, tangible or
intangible, real or personal, and the goodwill of and relating to the Business,
but excluding the Excluded Assets (collectively, the "Assets"), free and clear
of all Encumbrances, including, but not limited to, the following:
2.1.1 All furniture, fixtures, leasehold
improvements, machinery, equipment, office materials and supplies, vehicles,
computer hardware, data processing equipment owned by Seller and all other
tangible personal property of Seller and all related warranties and similar
rights, including, without limitation, all such items listed on Schedule 4.7(a)
(collectively, the "Tangible Personal Property");
2.1.2 All prepaid and deferred expenses and deposits
relating to the Business or the Assets (except for prepaid state income or
franchise taxes, prepaid federal income taxes and prepaid insurance, which will
be prorated as described in Section 3.3), and deposits under Contracts which are
not assigned to and assumed by Buyer pursuant to this Agreement;
2.1.3 All Intellectual Property owned by Seller,
other than the items of Intellectual Property listed in the Excluded Assets
(collectively, the "Seller Intellectual Property");
2.1.4 All computer databases and software owned by,
or licensed to, Seller (collectively, "Seller Software");
2.1.5 All marketing materials including, but not
limited to, printed materials, brochures and trade booths;
2.1.6 All Contracts identified on Schedule 4.13,
which may be required by Buyer to be modified or extended (the "Assumed
Contracts"); provided, however, that Buyer shall have the right to assume (but
may reject) any Contract of Seller which should have been, but was not,
identified on such Schedule 4.13 as an Assumed Contract;
2.1.7 All lists, records, files, books and documents
(including, without limitation, credit information) in whatever form or medium
(electronic, paper or otherwise) relating to past, current or prospective
customers, suppliers, subscribers, agents, publishers, clearing houses and other
Persons relating to the Business or the Assets, and other business and financial
records, files, books and documents in whatever form or medium (electronic,
paper or otherwise) held by Seller relating to the Business or the Assets, but
excluding all of the above relating to Excluded Liabilities or minute books,
capital records and other documents of Seller that are not reasonably of use to
Buyer in the conduct of the Business;
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2.1.8 All governmental franchises, licenses,
approvals, authorizations and permits (collectively, "Permits") which are
assignable that are held or used by Seller in connection with the Business or
the Assets;
2.1.9 All claims, causes of action, rights of
recovery and rights of set-off of any kind of Seller relating to the Business or
the Assets, including, without limitation, any Encumbrance for the benefit of or
any rights to payment or to enforce payment in connection with the Business or
the Assets;
2.1.10 All rights to and under any noncompetition,
confidentiality, trade secret or other similar agreements or arrangements of
Seller and relating to the Business or the Assets, including, without
limitation, all causes of action or rights to ▇▇▇ for past infringement or
breaches thereunder possessed by Seller;
2.1.11 All Inventory of Seller on hand at the Closing
Date;
2.1.12 All telephone numbers and similar assets used
in or relating to the Business; and
2.1.13 All other assets of the Business (except the
Excluded Assets), wherever located, tangible or intangible, including without
limitation, all goodwill.
2.2 Excluded Assets. Notwithstanding anything to the contrary
contained herein, the following assets of Seller are excluded from the sale and
purchase contemplated by this Agreement (the "Excluded Assets"):
2.2.1 All cash and cash equivalents, including but
not limited to cashiers' checks, money orders and travelers' checks (on hand, in
the bank or invested) on the Closing Date;
2.2.2 Corporate minute books, stock books, and
original financial and legal books and records of Seller;
2.2.3 All accounts, notes, and other receivables of
Seller outstanding on the Closing Date (collectively, the "Retained
Receivables");
2.2.4 Prepaid state income or franchise taxes,
prepaid federal income taxes and prepaid insurance;
2.2.5 Any right, title or interest of Seller in any
refunds or credits of income taxes receivable after the Closing to the extent
relating to periods ending on or prior to the Closing Date;
2.2.6 All rights of the Seller under any Contracts
which are identified on Schedule 2.2.6 or relate to Indebtedness of Seller
(collectively, "Excluded Contracts");
2.2.7 The assets identified on Schedule 2.2.7; and
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2.2.8 The name "JWE Enterprises" and any other
fictitious name of Seller and any trademark, trademark application, service
▇▇▇▇, service ▇▇▇▇ application, trade name, brand name, product name, slogan,
logo of Seller.
2.3 Assumption of Certain Liabilities. From and after the
Closing Date, subject to the provisions of this Agreement, Buyer shall assume
only the following Liabilities of Seller (the "Assumed Liabilities"), and none
other: the executory obligations of Seller to be performed on or after the
Closing Date under the Assumed Contracts, excluding any Liabilities arising from
any breach or default thereunder or noncompliance therewith by Seller prior to
the Closing Date.
2.4 Liabilities Not Assumed by Buyer. Notwithstanding anything
to the contrary contained herein, except for the Assumed Liabilities, Buyer does
not assume and will in no event be liable for any acts or omissions of Seller
(relating to the Business or otherwise) or Holdings, or any Liabilities of
Seller, the Business or Holdings to any Person under any Contracts or otherwise
and arising by operation of law or otherwise. Except for the Assumed
Liabilities, the parties expressly understand and agree that Buyer is not
assuming or agreeing to pay or be responsible for any Liabilities of Seller or
Holdings, fixed or contingent, disclosed or undisclosed, of any nature
whatsoever, including, without limitation, (i) any Liabilities which arise out
of or result from any breach of contract, breach of warranty, negligence or
other tort, or infringement on the rights of others by Seller or Holdings or any
employee or agent of Seller or Holdings, (ii) any Liabilities of Seller or
Holdings for Federal, state or local income or other taxes, governmental charges
or assessments, (iii) any Liabilities which arise out of or result from any
breach of any Federal, state or local law, statute, rule, regulation, order,
ordinance or decree by Seller or Holdings or any employee or agent of Seller or
Holdings, (iv) any sales taxes, including, without limitation, sales and other
transfer taxes (including, without limitation, penalties and interest)
attributable to, arising out of or resulting from the sale of the Assets or the
Interest, which taxes shall be borne solely by the Seller or Holdings; (v) any
regulatory orders and directives applicable to Seller except as specifically
applicable to Seller's successors and assigns as may be provided in such
regulatory orders and directives applicable to Seller; (vi) any Liabilities
under any Excluded Contracts or relating to any Excluded Asset; (vii) any
Liabilities for the payment of bonus, deferred compensation, pension, thrift,
retirement, profit-sharing, disability, health, medical, hospital, insurance or
other benefits to any employees of Seller or Holdings, including, but not
limited to, any Liability to all or any employees for severance pay and other
termination benefits, continuation coverage obligations arising under COBRA and
the Code with respect to employees of Seller not hired by Buyer or under any
Employee Benefit Plan; or (viii) any other Liability arising out of the
ownership or use of the Assets or the operation of the Business prior to the
Closing Date. All Liabilities of Seller that are not assumed by Buyer under this
Section 2.4 will be and remain solely Seller's responsibility, and all
Liabilities of Holdings will be and remain solely Holdings' responsibility.
Buyer is not adopting, sponsoring, maintaining or assuming, or becoming
obligated to contribute to, any of the Seller Group's Employee Benefit Plans.
2.5 Right of Enforcement and Settlement. From and after the
Closing Date, Buyer shall have complete control over the payment, settlement or
other disposition of the Assumed Liabilities and the right to commence, conduct
and control all negotiations and
4
proceedings with respect thereto. Seller shall notify Buyer promptly of any
claim made with respect to any Assumed Liability, and Seller shall not, except
with Buyer's prior written consent, which consent may be withheld by Buyer in
its absolute discretion, voluntarily make any payment of, settle or offer to
settle, or consent to any compromise or admit liability with respect to, any
Assumed Liability. Seller shall cooperate with Buyer in any reasonable manner
requested by Buyer in connection with any negotiations or proceedings involving
any Assumed Liabilities.
2.6 JXM Membership Interest. At the Closing, subject to and
upon the conditions set forth herein, Holdings will sell to Buyer, and Buyer
will purchase and receive from Holdings, all right, title and interest in and to
the Interest, free and clear of all Encumbrances.
3. Closing and Effective Time.
3.1 Closing Date and Place. Consummation of the transactions
contemplated by this Agreement (the "Closing") shall take place within 15 days
following the satisfaction or waiver of all conditions set forth in Sections 7
and 8 (the "Closing Date"); provided, however, in no event shall the Closing
occur later than June 30, 2002. The Closing shall take place at the offices of
Blank Rome ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP, New York City, New York, provided that the
parties may agree to effect the Closing by facsimile transmission of all
executed documents required by this Agreement to be delivered at Closing
("Closing Documents"), payment of the Purchase Price as provided in Sections 3.2
and 3.3, and delivery of original copies of Closing Documents by reputable
overnight delivery service, postage or delivery charges prepaid, to the parties
at their respective addresses stated on the first page of this Agreement on the
first business day following the Closing Date.
3.2 Purchase Price. In consideration of the sale, transfer,
conveyance, assignment and delivery of the Assets and the Interest, the
restrictive covenants set forth in the Non-Competition Agreement, and in
reliance upon the representations, warranties, covenants and indemnifications
made herein by Seller, ▇▇▇▇▇▇▇▇▇ and Holdings, Buyer will pay the following
consideration (the "Purchase Price") to Seller and Holdings (the "Sellers"):
3.2.1 Payment at Closing. At the Closing, Buyer will
pay Sellers $1.50 million by wire transfer (the "Cash Payment") and will deliver
to Sellers (i) certificates evidencing 390,442 shares of unregistered Common
Stock and (ii) certificates evidencing 2,000 shares of unregistered Series B
preferred stock, having the designation, preferences, rights and other terms as
set forth in Exhibit 3.2 hereto. Within 5 business days after the Closing, Buyer
will deliver to Sellers certificates evidencing an additional 26,538 shares of
unregistered XMM Common Stock. The Cash Payment and XMM Shares will be allocated
as follows: $1,200,000 of the Cash Payment, 1,600 shares of XMM Preferred Shares
and 333,584 shares of the XMM Common Shares will be paid to Seller, and $300,000
of the Cash Payment, 400 shares of the XMM Preferred Shares and 83,396 shares of
the XMM Common Shares will be paid to Holdings.
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3.2.2 Cash Payment Post-Closing. As additional
consideration for the Assets, Buyer will pay to Seller in immediately available
funds, payments equal to the additional federal and state income taxes actually
paid by ▇▇▇▇▇▇▇▇▇ (the "Additional Taxes") as a result of (i) Seller's
collection during 2002 and 2003 of the Retained Receivables (after all expenses
of collection) being treated as ordinary income rather than capital gains and
(ii) Seller's actual receipt of the payments to be made pursuant to this Section
3.2.2, up to a maximum aggregate of such payments to Seller of $1,500,000 (the
"Maximum"). On or before April 15 of 2003 and 2004, Seller and ▇▇▇▇▇▇▇▇▇ shall
provide to Buyer a report (the "Report") detailing (i) Seller's net collections
(after all expenses of collection) of the Retained Receivables during the prior
calendar year and (ii) their calculation of the Additional Taxes, which Report
shall include a true and correct copy of the Seller's and ▇▇▇▇▇▇▇▇▇'▇ tax
returns for the year just completed (the "Tax Returns"). Buyer shall have until
the later of (i) forty-five(45) days after its receipt of the Report and (ii)
May 30 of such year (the "Review Period") to dispute the Report by notifying
Seller in writing thereof. The Seller and ▇▇▇▇▇▇▇▇▇ (collectively, the
"▇▇▇▇▇▇▇▇▇ Group") shall give Buyer and its representatives full access during
the Review Period, during normal business hours and upon notice to Seller that
Buyer wishes to review such records, to all books and records, work papers,
schedules and calculations relating to the Retained Receivables, the expenses of
collection, the Tax Returns and the Additional Taxes. If Buyer does not dispute
the Report within said Review Period, then Buyer shall be deemed to agree to the
payment amount set forth in the Report and shall make the required payment
within five days after the end of the Review Period; if Buyer does dispute the
Report before the end of the Review Period, then the required payment shall be
delayed until the dispute is resolved. If Buyer disputes the amount of the
proposed Additional Taxes ("▇▇▇▇▇▇▇▇▇ Group's Proposed Additional Taxes"), then
Buyer and ▇▇▇▇▇▇▇▇▇ shall meet to negotiate any outstanding differences. If
Buyer, after such meeting, still disagrees with the ▇▇▇▇▇▇▇▇▇ Group's Proposed
Additional Taxes, and the ▇▇▇▇▇▇▇▇▇ Group does not accept Buyer's proposed
amount of Additional Taxes (the "Buyer's Proposed Additional Taxes"), then the
dispute shall be submitted to the Accountants, and the Accountants shall review
the Report and the Buyer's and ▇▇▇▇▇▇▇▇▇ Group's respective Proposed Additional
Taxes. The ▇▇▇▇▇▇▇▇▇ Group shall give the Accountants full access, during normal
business hours and upon notice to Seller, to all books and records, work papers,
schedules and calculations relating to the Retained Receivables, the expenses of
collection, the Tax Returns and the Additional Taxes. After such review, the
Accountants shall select, on or before ninety (90) days after they began such
review, as the final amount of Additional Taxes (the "Final Amount"), the
Buyer's Proposed Additional Taxes, the ▇▇▇▇▇▇▇▇▇ Group's proposed Additional
Taxes, or an amount that falls between the two, and shall promptly give written
notice to Buyer and the ▇▇▇▇▇▇▇▇▇ Group of such determination. Each of Buyer and
▇▇▇▇▇▇▇▇▇ Group shall be bound by such determination, and within five days after
its receipt of such notice Buyer shall pay to Seller, subject to the Maximum, an
amount equal to the Final Amount, except that if such payment relates to
Additional Taxes paid by ▇▇▇▇▇▇▇▇▇ for 2003 (which shall include the Additional
Taxes paid by ▇▇▇▇▇▇▇▇▇ with respect to receipt during 2003 of the payment under
this Section 3.2.2), the amount to be paid by Buyer to Seller in 2004 (which
shall not take into account any taxes to be paid by ▇▇▇▇▇▇▇▇▇ in 2005 with
respect to receipt during 2004 of the payment under this Section 3.2.2) shall be
1.25 times the Final Amount (subject to the Maximum). The fees and expenses of
such Accountants shall be paid one-half by the ▇▇▇▇▇▇▇▇▇ Group and one-half by
Buyer.
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3.2.3 Reimbursement for JXM Start-Up Expenses. In
connection with its purchase of the Interest, on the Closing Date (or thereafter
within ten (10) days after appropriate documentation is submitted to Buyer),
Buyer will reimburse Holdings for its documented unreimbursed out-of-pocket
expenses related to the initial start-up of JXM up to $200,000 in the aggregate.
The types of expenses to be reimbursed are set forth on Schedule 3.2.3 hereto.
3.2.4 Conditional Payments
(a) As additional consideration for the
Assets, Buyer will make the following quarterly payments to Seller with respect
to the three year period commencing on July 1, 2002 and ending on June 30, 2005
(the "Earn Out Period"), based on Buyer's net collections during the Earn Out
Period of payments for new orders for magazines only from new customers
generated post-Closing by the two Montana call centers acquired from Seller (the
"Seller Earn Out"). Such net collections will not include any collections of
payments for orders of magazines (whether new or renewals) from purchasers who
were already Seller's customers on the Closing Date ("Existing Customers"). The
Seller Earn Out will be based on the following schedule:
Quarterly Collections ($M) Quarterly Earn Out
Under 3.0 $225,000
3.0 to 3.99 275,000
4.0 to 4.99 525,000
5.0 to 5.99 625,000
Over 6.0 775,000
A payment of two hundred seventy-five thousand dollars ($275,000) will
be guaranteed for each of the first two quarters. To the extent such guaranteed
payments exceed the amount which would have been paid under the schedule above
based on Buyer's actual collections during the first two quarters, Buyer will
receive a credit against its remaining payments under the Seller Earn Out in
order of maturity.
(b) As additional consideration for the
Interest, Buyer will make the following quarterly payments to Holdings with
respect to the Earn Out Period based on JXM's net collections during the Earn
Out Period (the "JXM Earn Out"). The JXM Earn Out will be based on the following
schedule:
Quarterly Collections ($M) Quarterly Earn Out
Under 1.5 $ 50,000
1.5 to 1.99 75,000
2.0 to 2.49 125,000
2.5 to 2.99 200,000
Over 3.0 250,000
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(c) All quarterly payments under (a) and (b)
above will be made by Buyer within thirty (30) days after the end of each such
quarter, and will be accompanied by Buyer's calculation of the amount being
paid.
(d) If the ▇▇▇▇▇▇▇▇▇ Employment Agreement
terminates during the Earn Out Period other than due to Buyer's breach, then
notwithstanding the actual amount of quarterly net collections, each quarterly
payment under (a) and (b) above shall be in the applicable minimum amount
($225,000 or $50,000) specified above.
3.3 Prorations. All matters involving prorations or
adjustments to be made in connection with Closing and not specifically provided
for in some other provision of this Agreement shall be adjusted as follows. All
items to be prorated pursuant to this Section 3.3 shall be prorated as of the
Closing Date, with Buyer to be treated as the lessee under all real estate
leases and equipment or other leases included in the Assumed Contracts, on and
after the Closing Date. Base rent, additional rent, utility expenses and all
other rent paid by Seller under the real estate leases shall be prorated on a
per diem basis using the actual number of days in the month in which Closing
occurs, or in the lease or calendar year in which Closing occurs, as applicable.
If the amount of real estate and ad valorem taxes is not known on the Closing
Date, proration of such taxes will be made based upon the most recently
ascertainable tax ▇▇▇▇. Any prepaid state income or franchise taxes or prepaid
federal income taxes will be prorated as of the Closing Date. Any lease payments
or other payments made by Seller under any other Assumed Contracts shall be
prorated on a per diem basis using the actual number of days in the month in
which the Closing occurs, or in the lease or calendar year in which the Closing
occurs, as applicable. Any other or further proration shall be done in a
commercially reasonable manner.
3.4 Allocation of Purchase Price. Buyer, Seller and Holdings
have agreed on an allocation of the Purchase Price among the Assets and the
Interest consistent with Section 3.2 and in accordance with the provisions of
Section 1060 of the Internal Revenue Code of 1986, as amended (the "Code"), and
under the applicable Treasury Regulations thereunder, which allocation is
$225,000 to the fixed Assets and the balance to goodwill. Buyer and Seller shall
file an IRS Form 8594 (Asset Acquisition Statement under Code Section 1060) on a
timely basis reporting the allocation of the Purchase Price consistent herewith.
Buyer and Seller shall not take any position on their respective income tax
returns that is inconsistent with the allocation of Purchase Price described
above unless both Buyer and Seller agree to such position in writing.
4. Representations, Warranties and Covenants of Seller Group. Knowing
that Buyer relies thereon, the Seller Group jointly and severally represents,
warrants and covenants to Buyer on the date hereof and on the Closing Date as
follows:
4.1 Authority. The execution, delivery and performance of this
Agreement and all other Documents required to effect the transactions
contemplated hereby and the consummation of the transactions contemplated herein
have been duly authorized by Seller's and Holdings' boards of directors and
shareholders. This Agreement and each Document contemplated hereby are and will
be the valid and legally binding obligations of Seller Group, enforceable in
accordance with their respective terms, except that such enforcement may be
subject to limitations imposed by general principles of equity (regardless of
whether such
8
enforceability is considered in a proceeding at law or in equity) and to the
effect of applicable bankruptcy, reorganization, insolvency, moratorium or other
similar laws of general application relating to or affecting creditors' rights.
4.2 Compliance with Laws. Seller has complied in all material
respects with all material Laws relating to the Assets and Seller's operation of
the Business, and JXM has complied in all material respects with all material
Laws relating to its assets and the operation of its business. Neither Seller
nor JXM has received written notice of any alleged violation of or claim under
any such Laws, and Seller Group knows of no reasonable basis for a violation
thereof which may occur in the future (either upon notice, lapse of time, or
both) and no investigation, charge, claim or other action under any such Laws is
pending or, to the knowledge of Seller Group, threatened, which would materially
adversely affect the Business or the Assets or the business or assets of JXM.
4.3 No Conflict. The consummation of the transactions herein
contemplated including, without limitation, the execution, delivery and
performance of this Agreement and the Documents required to effect the
transactions herein contemplated, will not (1) constitute a violation of or
default under (either immediately or upon notice, lapse of time or both),
conflict with or result in a breach of (a) the Articles of Incorporation or
Bylaws of Seller or Holdings or the Certificate of Formation or Limited
Liability Company Agreement of JXM, or (b) any Judgment; (c) any of the Assumed
Contracts, or (d) any applicable Law; or (2) result in the creation or
imposition of any Encumbrance on any of the Assets or the Interest or give to
any Person (other than Buyer or its Designee) any interest or right in any of
the Assets or the Interest.
4.4 Consents. Except as set forth on Schedule 4.4, no Consent
is required to be obtained by Seller Group in connection with the execution,
delivery and performance by Seller Group of this Agreement or the consummation
of the transactions contemplated hereby.
4.5 Title to Assets; Encumbrances. Except as set forth on
Schedule 4.5, Seller owns outright and has good and valid title, as applicable,
to all of the Assets, free and clear of all Encumbrances, and Holdings owns
outright and has good and valid title, as applicable, to the Interest, free and
clear of all Encumbrances. No Person, other than Buyer, has any Contract to
acquire any of the Assets or the Business or the Interest. Upon consummation of
the transactions contemplated by this Agreement, Buyer shall acquire good and
valid title to all of the Assets and the Interest, free and clear of all
Encumbrances. Holdings owns no assets other than the Interest, cash and cash
equivalents. JXM has good and valid title to its assets, free and clear of all
Encumbrances.
4.6 Software and Intellectual Property.
4.6.1 Schedule 4.6 contains an accurate and complete
description of the Seller Software and all computer databases and software owned
by, or licensed to, JXM (the "JXM Software"), including the language in which it
is written and the type of hardware platform(s) on which it runs, as well as the
brand names and product names used to describe and market the Seller Software
and JXM Software (collectively, "Companies' Software"). Schedule
9
4.6 contains a complete and accurate description of the Seller Intellectual
Property and the JXM Intellectual Property (collectively, "Companies'
Intellectual Property").
4.6.2 Except as set forth on Schedule 4.5, Seller and
JXM, respectively, have good and marketable title to, and have the full right to
use all of their respective portions of the Companies' Software and Companies'
Intellectual Property, free and clear of any Encumbrance other than Encumbrances
of which the Seller Group has no knowledge and that were created or suffered by
the Person from whom the Seller Group purchased any such Software or
Intellectual Property. Except as set forth on Schedule 4.6, no license from any
third party is necessary for Seller or JXM to market, license, sell, modify,
update, and/or create derivative works for the Companies' Software, nor does any
third party or Person have the right to receive royalty payments from Seller or
JXM.
4.6.3 Except as set forth on Schedule 4.6, all of the
Companies' Software and Companies' Intellectual Property were created as work
for hire (as defined under U.S. copyright law). To the extent that any author or
developer of the Companies' Software and the Companies' Intellectual Property
was not a regular full-time employee of the appropriate Company at the time such
person created to such Companies' Software and Companies' Intellectual Property,
such author or developer has irrevocably assigned to the appropriate Company in
writing all copyrights and other proprietary rights in such person's work with
respect to such Companies' Software and Companies' Intellectual Property.
4.6.4 With respect to the Companies' Software (i) the
Companies maintain machine-readable master-reproducible copies, source code
listings, technical documentation and user manuals for the most current releases
or versions thereof; (ii) in each case, the machine-readable copy substantially
conforms to the corresponding source code listing; and (iii) it is written in
the language set forth on Schedule 4.6, for use on the hardware set forth on
Schedule 4.6 with standard operating systems; (iv) it can be maintained and
modified by reasonably competent programmers familiar with such language,
hardware and operating systems; and (v) in each case, it operates in accordance
with the user manual therefor without material operating defects.
4.6.5 None of the Companies' Intellectual Property or
Companies' Software, or their past or current uses, including the preparation,
distribution, marketing or licensing thereof, has violated or infringed upon, or
is violating or infringing upon, any software, technology, patent, copyright,
trade secret, trademark, service ▇▇▇▇ or other Intangible Property of any
Person. None of the Companies' Software or Companies' Intellectual Property is
subject to any Judgment. No Proceeding is pending or is threatened, nor has any
claim or demand been made, which challenges or challenged the legality,
validity, enforceability, use or exclusive ownership by the Companies of any of
the Companies' Software or Companies' Intellectual Property. To the knowledge of
the Seller Group, no Person is violating or infringing upon, or has violated or
infringed upon at any time, any of the Companies' Software or Companies'
Intellectual Property.
4.6.6 No portion of the Companies' Software contains
any "back door," "time bomb," "Trojan horse," "worm," "drop dead device,"
"virus" or other software routines or
10
hardware components designed to permit unauthorized access or to disable or
erase software, hardware, or data without the consent of the user.
4.7 Condition and Sufficiency of Assets. Set forth on Schedule
4.7(a) is a complete and accurate list of all items of Tangible Personal
Property. The parties intend that Schedule 4.7(a) contains each and every
tangible asset to be transferred. In the event an item of Tangible Personal
Property is omitted from said schedule and later discovered, the item shall be
presumed to be included in the Assets of Seller purchased hereunder. All
Tangible Personal Property is in good operating condition, ordinary wear and
tear excepted and is sufficient for the continued conduct of Seller's Business
after the Closing in substantially the same manner as conducted prior to the
Closing for the reasonable, useful life of the asset. Set forth on Schedule
4.7(b) is a complete and accurate list of JXM Tangible Personal Property. All
JXM Tangible Personal Property is in good operating condition, ordinary wear and
tear excepted.
4.8 Proceedings. There are no Proceedings existing, and Seller
Group has no knowledge after reasonable inquiry of any such Proceedings pending
or threatened, against or affecting Seller Group or JXM, which would prevent the
consummation of the transactions contemplated herein. To the best of Seller
Group's knowledge after reasonable inquiry, there is no pending Proceeding
commenced by or against Seller Group or JXM except as set forth on Schedule 4.8.
4.9 Undisclosed Liabilities. Seller, Holdings and JXM do not
have any Liabilities except as disclosed on Schedule 4.9 attached hereto.
4.10 Taxes. The Companies have timely filed all Tax returns
and reports required to be filed by them, all of which were accurately prepared
and accurately reflect all items of revenue and expense, and the Companies have
timely paid all Taxes or withholdings required to be paid by them with respect
to such returns and reports. Seller has properly made all necessary filings to
be treated as a "Subchapter S" corporation, and such status is currently
effective. Seller and JXM have properly withheld from payments to their
respective employees, contractors, agents, representatives, vendors and other
Persons engaged in the Seller's Business and JXM's business all amounts required
by Law to be withheld, and Seller and JXM have timely filed all informational
returns and reports required to be filed by them with respect to such
withholdings. No audit or other Proceeding is pending or threatened against the
Companies, and no notice of deficiency or adjustment has been received by either
Company, by or from any governmental taxing authority, with respect to sales,
use, excise, real property, payroll, withholding or similar Taxes, and there are
no agreements or waivers in effect which provide for an extension of time for
the assessment of any such Tax against Seller or JXM. There are no Encumbrances
on any of the Assets or the assets of JXM that arose in connection with any
failure (or alleged failure) to pay any Tax.
4.11 No Material Adverse Change. Except as set forth in
Schedule 4.11, there has not been any material adverse change in the Assets or
Business since December 31, 2001. Except as set forth in Schedule 4.11, there
has not been any material adverse change in the assets or business of JXM since
December 31, 2001. Neither Seller nor JXM nor Holdings has, with respect to
itself, (i) applied for, consented to or suffered the appointment of, or the
taking of
11
possession by, a receiver, custodian, trustee, liquidator or similar fiduciary
of itself or of all or a substantial part of its property or the making of an
administration order, (ii) made a general assignment for the benefit of
creditors, or composition or arrangement with its creditors generally (iii)
commenced a voluntary case under any state or federal bankruptcy laws or
equivalent foreign bankruptcy or insolvency laws (as now or hereafter in
effect), (iv) been adjudicated a bankrupt or insolvent, (v) filed a petition
seeking to take advantage of any other law providing for the relief of debtors,
(vi) acquiesced to, or failed to have dismissed any petition filed against it in
any involuntary case under such bankruptcy laws or equivalent foreign bankruptcy
or insolvency laws, or (vii) taken any action for the purpose of effecting any
of the foregoing.
4.12 No Broker. Except as disclosed in Schedule 4.12, no
broker, finder, agent or similar intermediary has acted for or on behalf of
Seller Group in connection with this Agreement or the transactions contemplated
hereby, and no broker, finder, agent or similar intermediary is entitled to any
broker's fee, finder's fee, or similar fee or commission in connection therewith
based on any agreement, arrangement or understanding with Seller Group or any
action taken by Seller Group. Seller Group shall be solely responsible for the
payment of any such fee or commission.
4.13 Contracts.
4.13.1 Schedule 4.13 sets forth a true and correct
list of all of the Assumed Contracts, grouped into the following categories: (a)
Contracts with customers; (b)Contracts for the purchase or lease of Real
Property or otherwise concerning Real Property used by Seller including a
description of the Real Property; (c) Contracts for the purchase, lease or
maintenance of computer equipment and other equipment; (d) Contracts for the
purchase, license, lease or maintenance of software under which Seller is the
purchaser, licensee, lessee or user; (e) other supplier Contracts; (f)
employment, consulting and sales representative Contracts (excluding oral
Contracts with employees for "at will" employment); and (g) other Contracts
acceptable to Buyer (excluding Contracts which constitute Insurance Policies,
this Agreement and all other Contracts entered into between Seller and Buyer, or
among Seller, Buyer and other parties in connection herewith). A description of
each material oral Assumed Contract is included on Schedule 4.13, and, except as
otherwise indicated on Schedule 4.13, copies of each written Assumed Contract
have been delivered to Buyer.
4.13.2 Except as set forth in Schedule 4.13, all of
the Assumed Contracts set forth on Schedule 4.13 are in full force and effect
and Seller is not in default under any of them nor to Seller's knowledge is any
other party to any such Assumed Contract in default thereunder, nor, to Seller's
knowledge, is there any condition or basis for any claim of a default by any
party thereto or event which, with notice, lapse of time or both, would
constitute a default thereunder. Except as disclosed in Schedule 4.13, all
rights of Seller under the Assumed Contracts extending beyond the Closing are
assignable to Buyer without the Consent of any Person. Assuming the satisfaction
of all required consent or notification provisions of each Assumed Contract, no
assignment or transfer under or pursuant to this Agreement of any right, power
or privilege under or with respect to any Assumed Contract shall constitute a
condition or basis for any claim of a default by any party thereto or event
which, with notice, lapse of time or
12
both, would constitute or give rise to a default, or a right of any party other
than Seller or Buyer to assert or enforce any remedy or any right to terminate
or accelerate the termination or any obligation, under such Assumed Contract.
4.13.3 Schedule 4.13.3 sets forth a true and correct
list of all of the Contracts of JXM, grouped into the following categories: (a)
Contracts with customers; (b)Contracts for the purchase or lease of Real
Property or otherwise concerning Real Property used by Seller including a
description of the Real Property; (c) loan agreements, mortgages, notes,
guarantees and other financing Contracts; (d) Contracts for the purchase, lease
or maintenance of computer equipment and other equipment; (e) Contracts for the
purchase, license, lease or maintenance of software under which Seller is the
purchaser, licensee, lessee or user; (f) other supplier Contracts; (g)
employment, consulting and sales representative Contracts (excluding oral
Contracts with employees for "at will" employment); and (h) other Contracts
(collectively, "JXM Contracts"). A description of each material oral JXM
Contract is included on Schedule 4.13.3, and, except as otherwise indicated on
Schedule 4.13.3, copies of each written JXM Contract have been delivered to
Buyer.
4.13.4 Except as set forth in Schedule 4.13.3, all of
the JXM Contracts set forth on Schedule 4.13.3 are in full force and effect and
JXM is not in default under any of them nor to Seller Group's knowledge is any
other party to any such JXM Contract in default thereunder, nor, to Seller
Group's knowledge, is there any condition or basis for any claim of a default by
any party thereto or event which, with notice, lapse of time or both, would
constitute a default thereunder.
4.14 Inventory. All Inventory of the Companies consists of a
quality and quantity usable and salable in the ordinary course of business,
except for obsolete items and items of below-standard quality, all of which have
been written off or written down to net realizable value on the accounting
records of the Companies as of the Closing Date, as the case may be, consistent
with their customary historical method of valuing inventory. All Inventories not
written off have been priced at the lower of cost or market on a first in, first
out basis. The quantities of each item of Inventory (whether raw materials,
work-in-process, or finished goods) are not excessive, but are reasonable in the
present circumstances of the Companies. The Companies do not hold any Inventory
as consignee on consignment from a third party, nor have they consigned any of
its Inventory to a third party.
4.15 Employees.
4.15.1 The Companies are in full compliance with all
Laws respecting employment practices. Neither Company has ever been a party to
or bound by any union or collective bargaining Contract, nor is any such
Contract currently in effect or being negotiated by or on behalf of either
Company nor does either Company have any current duty to bargain with any labor
union. Neither Company has experienced any labor problem that was or is material
to its respective Business. Each Company's relations with each of its key
employees, and each Company's relations with substantially all of its other
employees, are currently on a good and normal basis. Since January 1, 2002 no
employee of either Company engaged in the Seller's Business, or the business of
JXM, respectively, has indicated an intention to terminate his or her
13
employment with Seller or JXM. Neither Company has any knowledge or belief that
the transactions contemplated by this Agreement will adversely affect relations
with such Company's employees.
4.15.2 Employees and Independent Contractors.
Schedule 4.15 is a list of all of Sellers' employees engaged in Seller's
Business and (a) their titles or responsibilities; (b) their social security
numbers and principal residence address; (c) their dates of hire; (d) their
current salaries or wages; (e) their last compensation changes and the dates on
which such changes were made; (f) any specific bonus, commission or incentive
plans or agreements for or with them; and (g) any outstanding loans or advances
made to them. Seller has delivered to Buyer an accurate and complete list of all
bonuses, commissions and incentives paid to the employees listed on Schedule
4.15 at any time during the past twelve months. Schedule 4.15 is a list of all
independent contractors engaged in Seller's Business, their tax identification
numbers and states of residence, their payment arrangements (if not set forth in
a Contract listed or described on Schedule 4.13, and a brief description of
their jobs or projects currently in progress. Except as limited by any
employment Contracts listed on Schedule 4.13 and except for any limitations of
general application which may be imposed under applicable employment Laws,
Seller has the right to terminate the employment of each of its employees
engaged in the Seller's Business at will and to terminate the engagement of any
of its independent contractors engaged in the Seller's Business without payment
to such employee or independent contractor other than for Services Rendered
Through Termination and without incurring any penalty or liability. For purposes
of this section, "Services Rendered Through Termination" shall include, but not
be limited to, sales pursuant to which a commission will be owed said employee
or independent contractor. Seller has no severance pay policy.
4.15.3 JXM Employees. Schedule 4.15.3 is a list of
all of JXM's employees and (a) their titles or responsibilities; (b) their
social security numbers and principal residence addresses; (c) their date of
hire; (d) their current salaries or wages; (e) their last compensation changes
and the dates on which such changes were made; (f) any specific bonus,
commission or incentive plans or agreements for or with them; and (g) any
outstanding loans or advances made to them. Schedule 4.15.3 also includes a list
of all independent contractors engaged in the business of JXM, their tax
identification numbers and states of residence, their payment arrangements (if
not set forth in a contract described or listed on Schedule 4.13.3), and a brief
description of their jobs or projects currently in progress. Except as limited
by any employment Contracts listed on Schedule 4.13.3 and except for any
limitations of general application which may be imposed under applicable
employment Laws, JXM has the right to terminate the employment of each of its
employees at will and to terminate the engagement of any of its independent
contractors without payment to such employee or independent contractor other
than for Services Rendered Through Termination and without incurring any penalty
or liability. For purposes of this section, "Services Rendered Through
Termination" shall include, but not be limited to, sales pursuant to which a
commission will be owed said employee or independent contractor. JXM has no
severance pay policy.
14
4.16 Employee Benefit Plans.
4.16.1 Except as described in Schedule 4.16, Seller
has not established, maintained or contributed to any Employee Benefit Plans and
Seller has not proposed any Employee Benefit Plans which Seller will establish,
maintain, or to which any Seller will contribute, and Seller has not proposed
any changes to any Employee Benefit Plans now in effect (all of the preceding
referred to collectively hereinafter as "Seller's Employee Benefit Plans"). True
and correct copies and descriptions of all of Seller's Employee Benefit Plans,
all employees affected or covered by Seller's Employee Benefit Plans and all
Liabilities thereunder are attached to Schedule 4.16, which Schedule will be
updated on the Closing Date. If permitted or required by applicable Law, Seller
has properly submitted all of Seller's Employee Benefit Plans in good faith to
meet the applicable requirements of ERISA or the Code to the IRS for its
approval within the time prescribed therefor under applicable federal
regulations. Favorable letters of determination of such tax-qualified status
from the IRS are attached to Schedule 4.16. With respect to Seller's Employee
Benefit Plans, Seller will have made, on or prior to the Closing Date, all
payments required to be made by it on or prior to the Closing Date and will have
accrued (in accordance with generally accepted accounting principles
consistently applied) as of the Closing Date all payments due but not yet
payable as of the Closing Date, so there will not have been, nor will there be,
any Accumulated Funding Deficiencies (as defined in ERISA or the Code) or
waivers of such deficiencies.
4.16.2 Seller has furnished Buyer with a true and
correct copy of the most current Form 5500 and any other form or filing required
to be submitted to any governmental agency with regard to any of Seller's
Employee Benefit Plans and the most current actuarial report with regard to any
of Seller's Employee Benefit Plans. All of Seller's Employee Benefit Plans are,
and have been, operated in full compliance with their provisions and with all
applicable Laws including, without limitation, ERISA and the Code and the
regulations and rulings thereunder. Seller and all fiduciaries of Seller's
Employee Benefit Plans have complied with the provisions of Seller's Employee
Benefit Plans and with all applicable Laws including, without limitation, ERISA
and the Code and the regulations and rulings thereunder. There have been no
Reportable Events (as defined in ERISA), no events described in Sections 4062,
4063 or 4064 of ERISA, and no termination or partial termination (including any
termination or partial termination attributable to this sale) of any of Seller's
Employee Benefit Plans. There would be no Liability of Seller under Title IV of
ERISA if any of Sellers' Employee Benefit Plans were terminated as of the
Closing Date.
4.16.3 Seller has not incurred, and will not incur,
any withdrawal liability, nor does Seller have any contingent withdrawal
liability, under ERISA to any Multiemployer Plan (as defined in ERISA or the
Code). Seller has not incurred and will not incur, any Liability to the Pension
Benefit Guaranty Corporation (or any successor thereto). Neither the execution
and delivery of this Agreement nor the consummation of the transactions
contemplated hereby will (i) result in any payment (including, without
limitation, severance, unemployment compensation, golden parachute or otherwise)
becoming due from any Seller under any of Seller's Employee Benefit Plans, (ii)
increase any benefits otherwise payable under any of Seller's Employee Benefit
Plans, or (iii) result in the acceleration of the time of payment or vesting of
any such benefits to any extent.
15
4.16.4 There are no pending actions, claims or
lawsuits which have been asserted or instituted against any of Seller's Employee
Benefit Plans, the assets of any of the trusts under such plans, the plan
sponsor, the plan administrator or against any fiduciary of any of Seller's
Employee Benefit Plans (other than routine benefit claims) nor does Seller have
knowledge of facts which could form the basis for any such action, claim or
lawsuit. There are no investigations or audits of Seller's Employee Benefit
Plans, any trusts under such plans, the plan sponsor, the plan administrator or
any fiduciary of any of Seller's Employee Benefit Plans which have been
threatened or instituted nor does Seller have knowledge of facts which could
form the basis for any such investigation or audit. No event has occurred or
will occur which will result in Liability to Seller in connection with any
Employee Benefit Plan established, maintained, or contributed to (currently or
previously) by Seller or by any other entity which, together with Seller,
constitute elements of either (i) a controlled group of corporations (within the
meaning of Section 414(b) of the Code), (ii) a group of trades or businesses
under common control (within the meaning of Sections 414(c) of the Code or 4001
of ERISA), (iii) an affiliated service group (within the meaning of Section
414(m) of the Code, or (iv) another arrangement covered by Section 414(o) of the
Code.
4.16.5 There are no unfunded liabilities with respect
to any non-qualified deferred compensation plan or supplemental pension benefit
program sponsored by either Company. There are no self-insured medical,
hospitalization or dental plans or programs for either Company. Other than: (i)
retirement income benefits paid from pension and retirement plans, and (ii)
benefits required by the Consolidated Omnibus Budget Reconciliation Act
("COBRA"), former employees of the Seller receive no benefits under any of
Seller's Employee Benefit Plans.
4.16.6 JXM has no Employee Benefit Plans.
4.17 Suppliers. Schedule 4.17 is a complete list of all of the
Companies' suppliers. Except as described in Schedule 4.17, since January 1,
2002, none of the suppliers of Seller's Business or the business of JXM has
given notice or otherwise indicated to Seller or JXM that it will or intends to
terminate or not renew its Contract (to the extent one exists) with Seller or
JXM before the scheduled expiration date or otherwise terminate its relationship
with Seller or JXM or reduce the quantity of products to be supplied in the
future, and no event has occurred which could reasonably lead Seller or JXM to
believe that any of the foregoing may occur in the future. Except as described
in Schedule 4.17, each of the Companies enjoys good and normal relationships
with suppliers of its respective business, and neither Company has experienced
any significant problems with suppliers during the three years prior to the date
of this Agreement. Seller Group has no knowledge or belief that the transactions
contemplated by this Agreement will adversely affect relations with any of the
suppliers of Seller's Business or the business of JXM.
4.18 Insurance. Schedule 4.18 is an accurate and complete list
and description of all Insurance Policies currently owned or maintained by each
Company (excluding Insurance Policies that constitute Employee Benefit Plans
described on Schedule 4.16) in connection with or for the benefit of Seller's
Business and JXM's business, respectively, and all liability Insurance Policies
owned or maintained by Seller or JXM or any of their respective predecessors
16
at any time during the five (5) years prior to the date of this Agreement in
connection with or for the benefit of Sellers' Business or JXM's business,
respectively. Except as described in Schedule 4.18, all such Insurance Policies
are or were on an "occurrence" rather than a "claims made" basis. Neither
Company has received any notice of cancellation with respect to any such current
Insurance Policy, and there is no basis for the insurer thereunder to terminate
any such current Insurance Policy. Each such Insurance Policy is or was in full
force and effect during the period(s) of coverage indicated on Schedule 4.18.
Except as described on Schedule 4.18, there are no claims that are pending under
any of the Insurance Policies described on Schedule 4.18.
4.19 Related Party Transactions. Except as described on
Schedule 4.19 and except for any employment Contracts listed on Schedule 4.13 or
Schedule 4.13.3, there are no real estate leases, personal property leases,
Contracts, transactions, understandings or other arrangements of any nature
between Seller Group or JXM and any current or former partners, shareholder,
director, executive, officer or controlling Person of Seller Group or JXM (or
any of their respective predecessors) or any other Person affiliated with Seller
Group or JXM (or any of its predecessors) with respect to the Seller's Business
or Assets, the business or assets of JXM, or Holdings or the Interest. Except
for (i) Seller and Holdings, (ii) ▇▇▇▇▇▇▇▇▇'▇ 50% ownership interest in the
Permitted Venture and (iii) as described in Schedule 4.19, ▇▇▇▇▇▇▇▇▇ does not
own, directly or indirectly, any interest in any Person that conducts any
business similar to the business conducted by Seller.
4.20 Environmental Matters.
(a) Except as described in Schedule 4.20, Seller has
not received any notice relating to the Business or the real property leased by
Seller (the "Leased Real Property") alleging any violation of any Environmental
Law or any written request for information from any governmental agency or other
Person pursuant to any Environmental Law, and each Seller is, with respect to
the Business and the Leased Real Property, in compliance in all material
respects with all applicable Environmental Laws;
(b) Except as described in Schedule 4.20 or as
authorized by any valid permit issued pursuant to an Environmental Law, there
are no Hazardous Substances or Regulated Substances released by Seller or any
other Person on or beneath the Leased Real Property in quantities or
concentrations that could give rise to Liabilities of Seller or Buyer under any
Environmental Law;
(c) Seller has not received any notice or order from
any governmental agency or private or public entity in connection with the
Business advising it that Seller is responsible for or potentially responsible
for remediation or paying for the cost of investigation or remediation of any
Hazardous Substance or Regulated Substance, and Seller has not entered into any
agreements pertaining thereto; and
(d) The Leased Real Property does not contain any:
(i) underground storage tanks, (ii) underground injection ▇▇▇▇▇; (iii) septic
tanks in which process wastewater or any Regulated Substances have been
disposed; (iv) asbestos; (v) equipment using PCBs; or (vi) drums buried in the
ground.
17
4.21 Books and Records. The books of account, minute books,
stock record books, and other records of the Seller, all of which have been made
available to Buyer, are true, complete and correct and have been maintained in
accordance with sound business and accounting practices and the requirements of
Section 13(b)(2) of the Securities Exchange Act of 1934, as amended (regardless
of whether or not the Seller is subject to that Section), including the
maintenance of an adequate system of internal controls. The minute books of the
Seller contain accurate and complete records of all meetings held of, and
corporate actions taken by, the stockholders, the Board of Directors, and
committees of the Boards of Directors of the Seller, and no meeting of any such
stockholders, Board of Directors, or committee has been held for which minutes
have not been prepared and are not contained in such minute books. At the
Closing, all of those books and records of Seller will be in the possession of
the Seller.
4.22 Securities Laws Compliance Procedures
4.22.1 Accredited Investor. Each member of Seller
Group hereby represents and warrants to Buyer that it is an "accredited
investor" as that term is defined in Rule 501 of Regulation D promulgated by the
Securities and Exchange Commission under the Securities Act of 1933, as amended
("▇▇▇ ▇▇▇▇ ▇▇▇").
4.22.2 Knowledge Respecting Buyer. Each member of
Seller Group represents to Buyer and acknowledges that it is a sophisticated
investor with knowledge and experience in business and financial matters, knows,
or has had the opportunity to acquire, all information concerning the business,
affairs, financial condition and prospects of Buyer which it deems relevant to
make a fully informed decision regarding the consummation of the transactions
contemplated hereby and is able to bear the economic risk and lack of liquidity
inherent in holding the XMM Shares. Without limiting the foregoing, each member
of Seller Group understands and acknowledges that neither Buyer nor anyone
acting on its behalf has made any representations or warranties other than those
contained herein respecting Buyer or the future conduct of Buyer's business or
of Seller's business, and no member of Seller Group has relied upon any
representations or warranties other than those contained herein in the belief
that they were made on behalf of Buyer.
4.22.3 Status of Shares to be Issued. Each member of
Seller Group agrees, acknowledges and confirms that it has been advised and
understands as follows:
(a) Seller Group is acquiring the XMM Shares
to be issued to it for its own account and without a view to any distribution or
resale thereof, other than a distribution or resale which, in the opinion of
counsel for Seller Group (which opinion shall be satisfactory in form and
substance to Buyer), may be made without violating the registration provisions
of the 1933 Act or any applicable blue sky laws. Seller Group acknowledges that
the XMM Shares are "restricted securities" within the meaning of Rule 144 under
the 1933 Act and have not been registered under the 1933 Act or any state
securities laws and thereafter must be held indefinitely unless they are
subsequently registered under the 1933 Act or an exemption from such
registration is available. Except as set forth in the Registration Rights
Agreement to be delivered at Closing, Buyer is under no obligation to register
the XMM Shares under the 1933
18
Act or any state securities law or to take any action which would make available
an exemption from such registration.
(b) There shall be endorsed on the
certificates evidencing the XMM Shares and Conversion Shares legends
substantially similar to the following, as well as any appropriate legend
relating to applicable blue sky laws:
"THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT") OR THE SECURITIES LAWS OF
ANY OTHER JURISDICTION AND ARE "RESTRICTED SECURITIES" AS DEFINED BY RULE 144
UNDER THE 1933 ACT. THE SHARES MAY NOT BE SOLD, TRANSFERRED, PLEDGED OR
DISTRIBUTED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT REGISTERING
THE SHARES UNDER THE 1933 ACT AND THE SECURITIES LAWS OF ANY STATE REQUIRING
SUCH REGISTRATION, OR IN LIEU THEREOF, AN OPINION OF COUNSEL, WHICH OPINION IS
SATISFACTORY TO THE ISSUER OF THE SHARES, TO THE EFFECT THAT REGISTRATION IS NOT
REQUIRED UNDER SAID ACTS."
(c) There shall also be endorsed on the
certificates evidencing the XMM Shares (other than shares of XMM Common Stock
issued upon conversion of the XMM Preferred Shares) legends substantially
similar to the following:
"THE SHARES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS ON
TRANSFER AS SET FORTH IN A REGISTRATION RIGHTS AGREEMENT BY AND AMONG CROSS
MEDIA MARKETING CORPORATION, JWE ENTERPRISES, INC., JWE HOLDINGS, INC. AND ▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇▇, A COPY OF WHICH IS AVAILABLE FROM CROSS MEDIA MARKETING
CORPORATION."
(d) There shall also be endorsed on the
certificates evidencing the XMM Preferred Shares (but not the Conversion Shares)
legends substantially similar to the following:
"THE RIGHT OR OBLIGATION OF THE ISSUER TO PURCHASE, REDEEM OR OTHERWISE ACQUIRE
ALL OR ANY PORTION OF SHARES REPRESENTED BY THIS CERTIFICATE IS SUBORDINATED TO
THE PRIOR PAYMENT IN FULL OF THE SENIOR OBLIGATIONS (AS DEFINED IN THE
SUBORDINATION AGREEMENT HEREINAFTER REFERRED TO) PURSUANT TO, AND TO THE EXTENT
PROVIDED IN, THE SUBORDINATION AGREEMENT, DATED AS OF MAY 27, 2002, AMONG THE
ENTITIES THERETO, WHICH INCLUDE THE ISSUER, THE HOLDER OF THIS CERTIFICATE, AND
FLEET NATIONAL BANK, AS AGENT."
(e) Except under certain limited
circumstances, the above restrictions on the transfer of the XMM Shares will
also apply to any and all shares of capital stock or other securities issued or
otherwise acquired with respect to such Shares, including, without limitation,
shares and securities issued or acquired as a result of any stock dividend,
19
stock split or exchange, conversion or any distribution of shares or securities
pursuant to any corporate reorganization, reclassification or similar event.
(f) Buyer may refuse to effect a transfer of
any of the XMM Shares by Seller or Holdings or any of their respective
successors, personal representatives or assigns otherwise than as contemplated
hereby and other than to ▇▇▇▇▇▇▇▇▇.
4.23 Statements True and Correct. No representation or
warranty made by any member of Seller Group in this Agreement contains any
untrue statement of a material fact or omits to state any material fact
necessary to make the statements contained herein not materially misleading.
5. Representations and Warranties of Buyer. Knowing that the Seller
Group relies thereon, Buyer represents, warrants and covenants to Seller Group
on the date hereof and on the Closing as follows:
5.1 Organization. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Buyer has the full power and authority to own, lease and operate its assets,
properties and business, and to enter into and perform this Agreement and to
consummate the transactions contemplated hereby upon the terms and conditions
herein provided.
5.2 Authorized Capital Stock; XMM Shares.
5.2.1 The authorized capital stock of the Buyer
consists of (i) 40,000,000 shares of XMM Common Stock, par value $0.001 per
share, of which 14,485,631 shares were issued and outstanding on April 30, 2002;
and (ii) 10,000,000 shares of preferred stock, par value $0.001 per share, of
which only the XMM Preferred Shares (2,000 shares) have been designated or
issued by the proper filing of the Certificate of Designation. Cross Media is
engaged in a common stock repurchase program, and has furnished to Seller Group
accurate reports of its purchases thereunder.
5.2.2 The XMM Shares, when issued, sold and delivered
in accordance with the terms of this Agreement, and the Conversion Shares, when
issued in accordance with the Certificate of Designation, will be duly and
validly issued, fully paid, non-assessable and free and clear of all
Encumbrances except any created by or through the Buyer, and will be free of
restrictions on transfer other than restrictions on transfer under the
Registration Rights Agreement and applicable state and Federal securities laws,
and will, subject to the accuracy of the representations and warranties of the
Buyer set forth in Section 4.22, be issued in compliance with applicable state
and Federal securities laws. The XMM Common Stock is listed on the AMEX under
the symbol "XMM," and Cross Media has not received any notice regarding the
termination or discontinuance of the eligibility of the XMM Common Stock for
such listing. The XMM Preferred Shares are not listed on any securities
exchange.
5.3 Authority. The execution, delivery and performance of this
Agreement and all other Documents required to effect the transactions
contemplated hereby and the
20
consummation of the transactions contemplated herein have been duly authorized
by Buyer's board of directors and no shareholder action is required. This
Agreement and each Document contemplated hereby is and will be the valid and
legally binding obligation of Buyer enforceable in accordance with its terms,
except that such enforcement may be subject to limitations imposed by general
principles of equity (regardless of whether such enforceability is considered in
a proceeding at law or in equity) and to the effect of applicable bankruptcy,
reorganization, insolvency, moratorium or other similar laws of general
application relating to or affecting creditors' rights.
5.4 No Violation. The consummation of the transactions herein
contemplated including, without limitation, the execution, delivery and
consummation of this Agreement and the Documents required to effect the
transactions contemplated hereby and thereby, will not (1) constitute a
violation of or default under (either immediately or upon notice, lapse of time
or both), conflict with or result in a breach of (a) the Certificate of
Incorporation or Bylaws of Buyer, (b) the terms of any material Contract to
which Buyer is a party, or (c) any Judgment against Buyer; or (2) violate any
Law applicable to Buyer.
5.5 Consents. No Consent is required to be obtained by Buyer
in connection with the execution, delivery and performance by Buyer of this
Agreement or the consummation of the transactions contemplated hereby except as
set forth on Schedule 5.5.
5.6 Proceedings. Except as disclosed in a Cross Media SEC
Report filed prior to May 17, 2002, there are no Proceedings existing, and Buyer
has no knowledge of any such Proceedings pending or threatened, against or
affecting Buyer, which would (i) prevent the consummation of the transactions
contemplated herein or (ii) if decided adversely, have a material adverse effect
on Cross Media Group.
5.7 No Broker. No broker, finder, agent or similar
intermediary has acted for or on behalf of Buyer in connection with this
Agreement or the transactions contemplated hereby.
5.8 SEC Filings; Financial Statements.
5.8.1 Cross Media has timely filed all forms, reports
and documents required to be filed with the SEC since January 1, 1998, and has
made available to the Seller Group, in the form filed with the SEC, together
with any amendments thereto, its (i) Annual Reports on Form 10-K/SB for the
fiscal years ended December 31, 1999, 2000 and 2001, (ii) proxy statements
relating to each of its meetings of stockholders (whether annual or special)
held since January 1, 1999, (iii) Quarterly Reports on Form 10-Q/SB for the
fiscal quarters ended in 2001, and (iv) other reports or registration statements
filed by Cross Media with the SEC since January 1, 1999 (collectively, the
"Cross Media SEC Reports"). The Cross Media SEC Reports were prepared in
accordance with the requirements of the 1933 Act and the Exchange Act, as the
case may be, and the rules and regulations promulgated under each of such
respective acts. The Cross Media SEC Reports (including all exhibits and
schedules thereto and documents incorporated by reference therein) did not, at
the time they were filed (or, if amended or superseded by filing prior to the
date hereof, then on the date of such filing), contain any untrue
21
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not materially misleading.
5.8.2 All financial statements, including all related
notes and schedules, contained in each of the Cross Media SEC Reports (or
incorporated by reference therein) fairly present the consolidated financial
position and stockholders' equity of Cross Media Group as at the respective
dates thereof and the consolidated results of operations and cash flows of Cross
Media Group for the periods indicated therein in accordance with GAAP applied on
a consistent basis throughout the periods indicated (except for changes in
accounting principles disclosed in the notes thereto) and subject, in the case
of interim financial statements, to normal year-end adjustments.
5.8.3 For the twelve month period preceding the date
hereof, Cross Media has filed with AMEX all reports required to be filed under
its applicable rules and regulations, and such reports comply in all material
respects with such rules and regulations.
5.9 Absence of Certain Changes or Events. Since December 31,
2001, and except as expressly permitted by or disclosed pursuant to this
Agreement, there has not been any change, or any event involving a prospective
change, in the business, assets, liabilities, financial condition or results of
operations of Cross Media Group which has had, or is reasonably likely to have,
a material adverse effect on Cross Media Group.
5.10 Permits; No Violation of Law. The businesses of Cross
Media Group are not being conducted in violation of any Law or in violation of
any Permits, except for violations none of which, individually or in the
aggregate, may reasonably be expected to have a material adverse effect on them.
No investigation or review by any Governmental Entity (including any stock
exchange or other self-regulatory body) with respect to the Cross Media Group in
relation to any alleged violation of law or regulation is pending or, to their
knowledge, threatened, nor has any Governmental Entity (including any stock
exchange or other self-regulatory body) indicated an intention to conduct the
same, except for such investigations which, if they resulted in adverse
findings, would not reasonably be expected to have, a material adverse effect on
the Cross Media Group.
5.11 Statements True and Correct. No representation or
warranty made by Buyer in this Agreement contains any untrue statement of a
material fact or omits to state any material fact necessary to make the
statements contained herein not materially misleading.
6. Covenants and Other Agreements. The parties covenant and agree as
follows (each party being responsible for its own covenants and agreements
contained herein):
6.1 Access and Investigation. Between the date of this
Agreement and the Closing, Seller Group will (a) afford Buyer and its
representatives full and free access to the Companies' and Holdings' personnel,
properties, contracts, books and records, and other documents and data relating
to JXM, the Business and the Assets, (b) furnish such copies of such contracts,
books and records as Buyer may reasonably request at Buyer's expense, and (c)
22
furnish Buyer and its advisors with such additional financial, operating and
other data and information as Buyer may reasonably request.
6.2 Refunds and Reimbursement. In the event that either party
hereto at any time receives any funds from a third party that are properly
payable to the other party hereto, the party receiving such funds shall promptly
remit them to the party entitled to them.
6.3 Renewal Orders. During the five-year period beginning on
the Closing Date, if Seller requests Buyer to handle renewal orders from
Seller's Existing Customers, Buyer will make monthly payments to Seller based on
Buyer's net collections of renewal orders from Seller's Existing Customers, as
follows: from such collections, Buyer will first retain $48.00 (an amount equal
to Buyer's costs) out of each collected renewal sale, and the Seller will be
paid by Buyer an amount equal to 50% of every dollar collected on each such
invoice thereafter. All such monthly payments will be made by Buyer to Seller
within twenty (25) days after the end of each month, and will be accompanied by
Buyer's calculation of the amount being paid. During that time, while Seller so
requests, all such Existing Customers will be contacted by Buyer's renewal
department with Seller's cooperation and assistance as reasonably requested by
Buyer.
6.4 Audit Right. Seller Group will have the right, at
reasonable times and upon reasonable notice to Buyer, to audit Buyer's financial
information upon which the payments to Seller under Sections 3.2.4, 6.3 and 6.5
(each a "Specified Payment") are calculated, subject to the provisions of the
Confidentiality Agreement. Buyer shall give the Seller Group and its
representatives full access during the Audit Period, during normal business
hours and upon notice to Buyer that the Seller Group wishes to review such
financial information. If the Seller Group does not dispute the amount of the
Specified Payment within said Audit Period, then the Seller Group shall be
deemed to agree to the amount of the Specified Payment made by Buyer; if the
Seller Group does dispute the amount of the Specified Payment before the end of
the Audit Period, then Buyer and ▇▇▇▇▇▇▇▇▇ shall meet to negotiate any
outstanding differences. If they cannot agree on the amount of the Specified
Payment, then the dispute shall be submitted to the Accountants, and the
Accountants shall review the amount of the Specified Payment. Buyer shall give
the Accountants full access, during normal business hours and upon notice to
Buyer, to all books and records, work papers, schedules and calculations
relating to the amount of the Specified Payment. After such review, the
Accountants shall determine, on or before ninety (90) days after they began such
review, the final amount of the Specified Payment (the "Final Specified Payment
Amount"), and shall promptly give written notice to Buyer and the Seller Group
of such determination. Each of Buyer and Seller Group shall be bound by such
determination, and Buyer shall pay the Final Specified Payment Amount (less the
amount previously paid, if any) to Seller Group within five days after its
receipt of such notice. The fees and expenses of the Accountants shall be paid
one-half by the Seller Group and one-half by Buyer.
6.5 Retained Receivables. Buyer will, if requested by Seller,
collect the Retained Receivables for Seller (on an oldest account collected
first basis, except if otherwise directed or indicated by the account debtor)
for a fee to be mutually agreed upon by Buyer and Seller. All such collections
shall be remitted by Buyer to Seller (net of the fee) on a monthly
23
basis, within ten (10) days after the end of each month, accompanied by a report
detailing the Retained Receivables collected.
6.6 Conduct of Business. Except as otherwise expressly
contemplated hereby, the Seller Group covenants and agrees that (x) between the
date hereof and the Closing Date, unless Buyer shall otherwise expressly consent
in writing, the Business and the business of JXM shall be conducted only in, and
such entities shall not take any action except in, the ordinary course of
business and in a manner consistent with the business plans disclosed to Buyer;
(y) each of Seller and JXM will use their best efforts to preserve substantially
intact their existing businesses and business organizations, to keep available
the services of those of their present officers, employees and consultants who
are integral to the operation of their businesses as presently conducted and to
preserve their present relationships with suppliers and with other persons with
whom they have significant business relations; and (z) each of JXM, Seller and
Holdings will not, between the date hereof and the Closing Date, directly or
indirectly, do any of the following without the prior written consent of Buyer:
(a) amend its Certificate of Incorporation
or Bylaws;
(b) enter into any contract which commits it
to take any action or omit to take any action which would be inconsistent with
any of the provisions of this Agreement;
(c) take any action which it believes when
taken could reasonably be expected to adversely affect or delay in any material
respect the ability of any of the Parties to obtain any approval of any
Governmental Entity required to consummate the transactions contemplated hereto;
(d) take any action which would cause its
representations and warranties contained herein to become inaccurate in any
material respect;
(e) participate in any sale of all or any
substantial part of its assets, or any merger, consolidation, division or
reorganization;
(f) make a change in the nature of its
business;
(g) acquire the business or any substantial
assets of any Person;
(h) completely or partially liquidate or
dissolve;
(i) issue, sell, transfer, pledge,
hypothecate or otherwise encumber or dispose of any shares of the capital stock
of Seller or Holdings, or of the Interest (or any part thereof);
(j) change in any material respect its
accounting policies, methods or procedures (including, but not limited to,
policies and procedures with respect to reserves and revenue recognition) except
as required by a change in GAAP effective after the date hereof;
24
(k) declare, pay or set aside for payment
any dividend or other distribution other than of Excluded Assets of Seller;
(l) acquire any shares of its capital stock
or any other securities;
(m) incur any material indebtedness;
(n) materially increase the compensation or
benefits paid to its employees;
(o) enter into any new agreement or a term
which either extends beyond May 1, 2002 or is not terminable by them on thirty
(30) calendar days' (or less) notice without any payment;
(p) make or incur any capital or other
expenditures in excess of $25,000 individually, or $75,000 in the aggregate;
(q) enter into or assume any new contractual
obligations that would require them to pay more than $25,000 individually, or
$75,000 in the aggregate, or the terms of which extend beyond May 1, 2002 and
are not terminable on thirty (30) calendar days' (or less) notice;
(r) sell any assets, except excess assets
with a market value not exceeding $25,000 in the aggregate;
(s) hire any additional employees;
(t) make any material changes to the
database structure;
(u) make any new product offerings without
giving Buyer at least ten (10) business days' prior notice;
(v) create, grant or issue any contracts,
options, warrants or other rights with respect to, any of its shares of capital
stock;
(w) lend funds;
(x) adopt a new employee benefits plan or
materially amend an existing employee benefits plan;
(y) create or assume any Encumbrance upon
any of its businesses or assets;
(z) assume, guarantee or otherwise become
liable for any debt, liability, or obligation whether secured, unsecured,
recourse, nonrecourse, liquidated, unliquidated, accrued, absolute, fixed or
contingent, of any Person; and
25
(aa) make any commitment inconsistent with
this Section 6.6
6.7 Notification. The Seller Group shall promptly notify Buyer
of the occurrence of any of the following:
(i) any event which is not permitted under Section
6.6;
(ii) any event or occurrence which causes or
constitutes any of their representations or warranties contained herein to be
inaccurate or incorrect; and
(iii) any material adverse change in the Business or
Assets, or the business assets of JXM.
6.8 Expenses. Buyer and the Seller Group will be responsible
for and bear all of their own respective costs and expenses (including any
broker's or finder's fees and the expenses of their representatives) incurred at
any time in connection with pursuing or consummating the transactions
contemplated hereby.
6.9 Consents. Seller Group will cooperate with Buyer, and
Buyer will cooperate with Seller Group, and proceed, as promptly as is
reasonably practical, to seek and obtain any Consents required in connection
with the transactions contemplated hereby, and to prepare and file any filings
required in connection with the transactions contemplated hereby.
6.10 Transfer of Contracts and Permits. Buyer and Seller shall
use their commercially reasonable best efforts to cause to be transferred and
assigned to Buyer the Permits and Assumed Contracts. If as of the Closing Seller
is unable to assign to Buyer its rights under any Contract required to be
assigned to Buyer pursuant to the terms of this Agreement because Seller is
unable to obtain a consent required for such assignment, then, with respect to
each Contract required to be but not assigned to Buyer of which Buyer desires to
obtain the benefits, (i) Seller will be required to make available to Buyer all
benefits of such Contract, on a subcontract or sublease basis or in some other
appropriate manner, except and only to the extent that the same is expressly
prohibited by the Contract; (ii) Seller will agree to such amendments,
extensions or other modifications of the Contract as Buyer approves; and (iii)
Seller will use its commercially reasonable efforts to obtain the consent of the
other party to the Contract to the assignment of the Contract to Buyer. If and
when Seller obtains the consent to assignment for any Contract subject to this
Section, this Section will terminate and no longer be applicable to such
Contract. Nothing contained hereunder will by implication be deemed to modify or
impair the conditions to Buyer's obligation to complete the Closing under
Section 7 hereof.
6.11 Bulk Sales Notices. Seller Group shall timely prepare and
file all bulk sales filings and notices as required by Law with respect to the
sale of the Assets to Buyer.
6.12 Seller's Employees. Seller shall terminate or arrange for
the termination of all of Seller's employees, with an effective date of such
termination being the Closing Date. Seller will not terminate, or permit the
termination of, its employees prior to the Closing Date in anticipation of the
Closing (provided, however, that Seller may continue to terminate employees from
time to time in a manner consistent with historical practices and may permit the
termination
26
of employees who voluntarily quit). Buyer intends to re-hire (subject to drug
and alcohol testing) and retain the employees of the Seller identified on
Schedule 6.12 hereto, provided, however, Buyer retains the power to discharge
individual employees who are not performing to the Buyer's satisfaction. Seller
shall be allowed to retain or transfer to the Permitted Venture any employees
not identified on Schedule 6.12. Buyer and Seller will cooperate (including the
making of the offers discussed above) on or before the Closing to coordinate the
termination of and re-hiring of employees in accordance with this Section 6.12.
Immediately after the date of this Agreement, Seller shall provide access to
Buyer the personnel records of Seller's employees engaged in the Business who
are to be offered employment by the Buyer.
6.13 Exercise of Put. The Seller Group shall not exercise the
Put (as defined in the Certificate of Designation), directly or indirectly, in
whole or in part, if such exercise would violate the terms of the Subordination
Agreement.
7. Conditions Precedent to the Obligations of Buyer. Each and every
obligation of Buyer to complete the Closing is subject to the satisfaction of
the following conditions (any one or more of which may be waived in writing by
Buyer:
7.1 Representations and Warranties; Agreements. The
representations and warranties of Seller Group contained in this Agreement shall
be true and correct in all material respects on and as of the Closing with the
same force and effect as though made on and as of the Closing, and Seller Group
shall have performed and complied with all covenants and agreements required by
this Agreement to be performed or complied with by them on or prior to the
Closing.
7.2 Delivery of Documents. Seller Group shall have delivered
to Buyer, on or before the Closing, the following, which shall be in form and
substance reasonably acceptable to Buyer and Buyer's counsel:
7.2.1 A certificate, dated as of the Closing and
signed by the Seller Group, stating that the requirements of Section 7.1 have
been satisfied;
7.2.2 Documents and instruments of transfer for the
Assets in each case in form and substance reasonably satisfactory to Buyer and
Buyer's counsel, duly executed, and legally sufficient to transfer the Assets to
Buyer as contemplated thereby and by this Agreement;
7.2.3 Copies or originals of all material files,
papers, books and records, licenses, permits, approvals, applications,
correspondence, and other documents, if available, related to the Assets;
7.2.4 Copies of the minutes of the meetings of the
board of directors and shareholders of Seller and Holdings authorizing the
execution and performance of this Agreement, certified by Seller's and Holdings'
Secretary;
7.2.5 Receipt acknowledging Buyer's (i) payment of
the Cash Payment and its delivery of certificates for the XMM Shares;
27
7.2.6 Certificates of the Secretaries of Seller and
Holdings as to the incumbency and signatures of the officers of Seller and
Holdings executing this Agreement and including articles of incorporation and
bylaws of Seller and Holdings;
7.2.7 Opinion of Seller Group's counsel in the form
of Exhibit 7.2.7 hereto; and
7.2.8 All such further Documents and Contracts which
Buyer or its counsel reasonably request in order to effectuate and carry out any
provision of this Agreement and the transactions provided herein.
7.3 Proceedings. No Proceeding shall have been instituted or
threatened (i) to restrain or prevent the carrying out of the transactions
contemplated hereby, or (ii) to seek damages in connection with such
transactions, or (iii) which could have a material adverse effect on the
Business, the Assets, the Interest or JXM.
7.4 Termination Statements. UCC-3 termination statements shall
have been filed with respect to all UCC-1 financing statements filed against
Seller relating to the Assets or against Holdings relating to the Interest, and
any other similar filings representing Encumbrances on the Assets or the
Interest shall have been terminated.
7.5 Termination of Agreements. The following agreements shall
have been terminated as of the Closing Date:
(i) Option Agreement dated as of June 8, 2001 among
Seller, MOS, Holdings and ▇▇▇▇▇▇▇▇▇.
(ii) Fulfillment Service Agreement dated as of June
8, 2001 by and between MOS and JXM.
(iii) Management Support Services Agreement dated as
of June 8, 2001 by and among Sellers, Ellsworth, and JXM.
(iv) Guaranty Agreement dated June 8, 2001 by
▇▇▇▇▇▇▇▇▇ for the benefit of MOS and JXM.
(v) Registration Rights Agreement dated as of June 8,
2001 between MOS and Seller.
7.6 Non-Competition Agreement. Seller Group shall execute and
deliver to Buyer at Closing a non-competition agreement in the form attached
hereto as Exhibit 7.6 (the "Non-Competition Agreement").
7.7 ▇▇▇▇▇▇▇▇▇ Employment Agreement. ▇▇▇▇▇▇▇▇▇ shall execute
and deliver to Buyer at Closing an Employment Agreement with Buyer in the form
attached hereto as Exhibit 7.7 ("▇▇▇▇▇▇▇▇▇ Employment Agreement").
28
7.8 Due Diligence. Buyer shall have completed its due
diligence investigation of Seller and JXM, Seller's Business, financial
condition, and results of operations (including, without limitation, Seller's
revenues, profits and cash flow) and shall be fully satisfied, in its sole
discretion, with the results of such investigation.
7.9 Approval. Buyer's Board of Directors shall have approved
this Agreement and the transactions and other agreements contemplated hereby.
7.10 Consents. All Consents required in connection with the
transactions contemplated hereby, including the Consent of Buyer's lenders,
shall have been obtained.
7.11 Subordination Agreement. Seller Group shall execute and
deliver at Closing a subordination agreement with Buyer's lenders in the form
attached hereto as Exhibit 7.11 (the "Subordination Agreement").
8. Conditions Precedent to the Obligations of Seller Group. Each and
every obligation of Seller Group to complete the Closing is subject to the
satisfaction of the following conditions (any one or more of which may be waived
in writing by Seller Group):
8.1 Agreements, Representations and Warranties. The
representations and warranties of Buyer contained in this Agreement shall be
true and correct in all material respects on and as of the Closing with the same
force and effect as though made on and as of the Closing. Buyer shall have
performed and complied with all covenants and agreements required by this
Agreement to be performed or complied with by it on or before the Closing.
8.2 Purchase Price. Buyer shall pay the Cash Payment to Seller
and Holdings by a wire transfer of immediately available funds and deliver to
Seller and Holdings certificates for the XMM Shares.
8.3 Proceedings. No Proceeding will have been instituted or
threatened (i) to restrain or prevent the carrying out of the transactions
contemplated hereby or (ii) to seek damages in connection with such
transactions.
8.4 Registration Rights Agreement. Cross Media and the Seller
Group shall have entered into the Registration Rights Agreement in the form of
Exhibit 8.4 hereto.
8.5 Delivery of Documents. Buyer shall have delivered to
Seller Group, on or before Closing, the following, all of which shall be in form
and substance reasonably acceptable to Seller Group and their counsel:
8.5.1 A certificate, dated as of the Closing, stating
that the requirements of Section 8.1 have been satisfied;
8.5.2 Copies of a resolution of Buyer's Board of
Directors authorizing the execution and performance of this Agreement, certified
by Buyer's Secretary;
29
8.5.3 Certificates of Buyer's Secretary as to
incumbency and signatures of Buyer's officers;
8.5.4 Opinion of Buyer's counsel in the form of
Exhibit 8.5.4 hereto; and
8.5.5 All such further Documents and Contracts which
Seller Group or its counsel reasonably request in order to effectuate and carry
out any provision of this Agreement and the transactions provided herein.
8.6 Consents. All Consents required in connection with the
transactions contemplated hereby have been obtained.
8.7 ▇▇▇▇▇▇▇▇▇ Employment Agreement. Buyer shall execute and
deliver the ▇▇▇▇▇▇▇▇▇ Employment Agreement.
9. Indemnification.
9.1 Obligation of Seller Group to Indemnify. Subject to the
terms of this Section 9, Seller Group shall jointly and severally indemnify,
defend and hold harmless Buyer and its Affiliates, and any of their respective
successors or assigns and their respective officers, directors and employees
(collectively, "Buyer Group"), from and against any and all bona fide Losses
with respect to the following:
9.1.1 Any misrepresentation, breach or failure of any
warranty or representation made by any member of Seller Group in this Agreement
or in any Document delivered pursuant to this Agreement;
9.1.2 Any failure or refusal by Seller, ▇▇▇▇▇▇▇▇▇ or
Holdings to satisfy or perform any covenant, term or condition of this Agreement
required to be satisfied or performed by it or him;
9.1.3 Claims of third parties arising out of any
undertaking, act, omission or transaction of Seller, ▇▇▇▇▇▇▇▇▇ or Holdings or
any of their respective shareholders, directors, officers, employees, agents or
representatives or arising out of any Liabilities of Seller, ▇▇▇▇▇▇▇▇▇ or
Holdings which are not Assumed Liabilities, including but not limited to (a)
Liabilities of Seller, ▇▇▇▇▇▇▇▇▇ or Holdings for any Tax and any penalty or
interest imposed on Seller, ▇▇▇▇▇▇▇▇▇, Holdings or any member of Buyer Group
with respect to any such Tax, or arising out of any products or services sold by
Seller prior to Closing, (b) any Liability that may be imposed upon the Buyer
Group as a result of the failure by Sellers to comply with any bulk sales, bulk
transfer, fraudulent conveyance or similar Law of any jurisdiction that may be
applicable to some or all of the transactions contemplated by this Agreement,
(c) any Liability that may be imposed upon Buyer Group as a result of any Law
under which Buyer Group may have successor liability for any Tax or other
obligations of Sellers; and (d) any and all Liabilities arising out of Seller's
operation of the Business, its ownership or use of the Assets, its breach of any
Contract on or before the Closing Date or Seller's Employee Benefit Plans
(collectively, the "Non-Assumed Obligations"); and
30
9.1.4 Any Proceedings, demands, assessments,
settlements, Judgments, Losses, costs and legal and other expenses incident to
any of the foregoing.
9.2 Obligation of Buyer to Indemnity. Subject to the terms of
this Section 9, Buyer shall indemnify, defend and hold harmless the Seller Group
from and against any and all Losses with respect to the following:
9.2.1 Any misrepresentation, breach or failure of any
warranty or representation made by Buyer in this Agreement or in any Document
delivered pursuant to this Agreement;
9.2.2 Any failure or refusal by Buyer to satisfy or
perform any covenant, term or condition of this Agreement required to be
satisfied or performed by it;
9.2.3 Claims of third parties arising out of any
undertaking, act, omission or transaction of Buyer which either (i) relate to
Assumed Liabilities or (ii) arise out of the operation of the Business or the
ownership and use of the Assets after the Closing Date; and
9.2.4 Any Proceedings, demands, assessments,
settlements, Judgments, Losses, costs and legal and other expenses incident to
any of the foregoing.
9.3 Limitations on Indemnification.
9.3.1 All of the covenants, representations,
warranties and indemnification obligations hereunder shall survive the Closing
and continue in full force through and until the earlier of the applicable
statute of limitations or the fifth anniversary of the Closing Date or, with
respect to particular covenants, until such other date as may be expressly
specified herein for such covenants ("Expiration Date"). No claim for
indemnification under Sections 9.1 or 9.2 of this Agreement shall be brought
after the applicable Expiration Date, provided that the foregoing time
limitations shall not limit indemnification rights with respect to any claim
properly made within such time limitations, and provided further that
notwithstanding any of the foregoing, the limitations of the Expiration Date and
of Section 9.3.2 below shall not apply to any claim for indemnification with
respect to a breach involving (a) recklessness, knowing or reckless
misrepresentation, fraud or criminal matters; (b) Environmental Claims or
Losses; (c) Taxes; or (d) the Non-Assumed Liabilities.
9.3.2 Notwithstanding the provisions of Sections 9.1
or 9.2 of this Agreement, the aggregate amount of (i) Seller Group's liability
under Section 9.1 of this Agreement or (ii) Buyer's liability under Section 9.2
of this Agreement shall not exceed an amount equal to $10,000,000.
9.4 Claim Notice. A party seeking indemnification hereunder
(an "Indemnified Party") will promptly notify the party from whom the
indemnification is sought (the "Indemnifying Party") in writing of such claim
(such notice, a "Claim Notice"), setting forth in reasonable detail the nature
of such claim and will provide the Indemnifying Party such information with
respect to such claim as the Indemnifying Party may reasonably request.
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9.5 Procedures.
9.5.1 If any Proceeding (including any governmental
investigation) is brought or asserted by any third party against an Indemnified
Party in respect of which indemnity properly may be sought pursuant to Sections
9.1 above ("Claim") from the Indemnifying Party, then the Indemnifying Party
will have the right, exercisable by written notice to the Indemnified Party
within 30 days of receipt of the Claim Notice, to assume the defense thereof,
including employment of counsel reasonably satisfactory to such Indemnified
Party, and will assume the payment of fees and expenses of such counsel. Such
Indemnified Party will have the right to employ separate counsel in any such
action and to participate in the defense thereof, but the fees and expenses of
such counsel will be at the expense of such Indemnified Party unless the
Indemnifying Party has agreed to pay such fees and expenses.
9.5.2 If a Claim is brought and either (i) the
Indemnifying Party does not inform the Indemnified Party in writing within 30
days after receipt of the Claim Notice that it will assume the defense of the
Claim, or (ii) the Indemnifying Party does not assume defense of the Claim
within a reasonable time after notifying the Indemnified Party that it will
assume the defense of the Claim, then the Indemnified Party will have the right
to assume the defense thereof, including the employment of counsel reasonably
satisfactory to such Indemnifying Party, and the Indemnifying Party will assume
the payment of fees and expenses of such counsel. The Indemnifying Party will
not be liable for any settlement of any such action or proceeding effected
without its written consent, but if settled with its written consent, or if
there be a final judgment for the plaintiff in any such action or proceeding,
the Indemnifying Party shall indemnify and hold harmless such Indemnified Party
from and against any loss of liability (to the extent stated above) by reason of
such settlement or judgment.
9.5.3 Subject to Section 9.6 below, all payments owed
by the Indemnitor to the Indemnitee (if any) shall be paid in full within 15
business days after a final Judgment (without further right of appeal)
determining the amount owed is rendered, or after a final settlement or
agreement as to the amount is executed.
9.6 Right of Set-Off. Upon notice to Seller specifying in
reasonable detail the basis for such set-off, Buyer may set off any amounts to
which it may be entitled under this Section 9 against any amounts otherwise
payable to Seller Group hereunder or otherwise. The exercise of such right of
set-off by Buyer in good faith, whether or not ultimately determined to be
justified, will not constitute a breach of Buyer's obligation hereunder or
otherwise to make any payments to Seller Group. Neither the exercise of nor the
failure to exercise such right of set-off will constitute an election of
remedies or limit Buyer in any manner in the enforcement of any other remedies
that may be available to it.
9.7 Other Remedies. The indemnification rights of the Buyer
hereunder are independent of and in addition to such other rights and remedies
as Buyer may have in law or equity.
32
10. Notices. After the Closing, Seller will deliver to Buyer all
notices, correspondence and other items relating to the Assets which are from
time to time received by it or are in its possession.
11. Miscellaneous.
11.1 Disclosure. Without the prior written consent of Buyer,
Seller Group will not (i) issue any publicity release or announcement concerning
this Agreement or the transactions contemplated hereby or (ii) disclose (other
than to their attorneys, accountants, shareholders, creditors and consultants)
the terms set forth in this Agreement.
11.2 Confidentiality. All information furnished by Seller
Group to Buyer or furnished by Buyer to Seller Group pursuant hereto, or in
connection with the transactions contemplated hereby, shall be treated as the
sole property of the party furnishing the information ("Disclosing Party") until
the Closing. If the Closing does not occur or this Agreement is terminated, the
party receiving the information ("Receiving Party") will return to the
Disclosing Party all documents or other materials containing, reflecting or
referring to such information, will use its best efforts to keep confidential
all of such information and will not directly or indirectly use such
information. The foregoing sentence shall not apply to information which is or
becomes generally available to the public other than as a result of a disclosure
by the Receiving Party and other than as a result of the breach of a duty of
confidentiality owed to the Disclosing Party. In the event that a Receiving
Party or its representatives is requested or required (by oral questions,
interrogatories, requests for information, documents subpoena, civil
investigative demand or similar process) to disclose any such confidential
information or the fact that such confidential information has been made
available, the Receiving Party and its representatives will provide the
Disclosing Party with prompt written notice of each such request, so that the
Disclosing Party may seek an appropriate protective order or other appropriate
remedy and/or waive compliance with the provisions of this Agreement. If, in the
absence of a protective order or other appropriate remedy or the receipt of a
waiver hereunder, the Receiving Party is nonetheless, in the opinion of its
counsel, compelled to disclose information concerning the Disclosing Party to
any party or else stand liable for contempt or suffer other censure or penalty,
the Receiving Party may disclose such information to such party without
liability hereunder, provided that it furnishes only that portion of the
confidential information which is legally required and exercises its best
efforts to obtain reliable assurances of confidential treatment of the
confidential information being disclosed. The parties acknowledge and agree that
the Confidentiality Agreement shall remain in full force and effect following
the Closing in accordance with the terms of such letter of intent.
11.3 Notices. All notices and other communications required to
be given hereunder shall be in writing and shall be (a) delivered by hand, (b)
delivered by a reputable commercial overnight delivery service, or (c)
transmitted by facsimile, in each case, sent to the address of the Party set
forth on the first page of this Agreement or the facsimile number of the party
set forth below. Such notices shall be effective: (i) in the case of hand
deliveries, when received; (ii) in the case of an overnight delivery service,
when received; and (iii) in the case of facsimile transmission, when electronic
confirmation of receipt is received by the sender. Any party hereto may change
its address and facsimile number by written notice to the other party in
33
accordance with this provision, provided that such notice shall be effective
only upon receipt. Any facsimile notice provided to Seller Group shall be sent
to (▇▇▇) ▇▇▇-▇▇▇▇. Any facsimile notice provided to Buyer shall be sent to (212)
457-1201. A copy of each notice to Buyer will be simultaneously sent to ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, Esquire, Blank Rome ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
11.4 Entire Agreement. This Agreement (including the Appendix,
Exhibits and Schedules hereto) contains the entire agreement among the parties
with respect to the subject matter hereof and supersedes all prior or
contemporaneous agreements, written or oral, with respect thereto.
11.5 Waivers and Amendments. This Agreement may be amended,
modified, superseded, canceled, renewed or extended, and the terms and
conditions hereof may be waived, only by a written instrument signed by all the
parties or, in the case of a waiver, by the party waiving compliance. Neither
the failure nor any delay by any party in exercising any right, power or
privilege under this Agreement or the Documents referred to in this Agreement or
otherwise will operate as a waiver of such right, power or privilege, and no
single or partial exercise of any such right, power or privilege will preclude
any other or further exercise of such right, power or privilege or the exercise
of any other right, power or privilege.
11.6 Binding Agreement; No Third Party Beneficiaries. All of
the terms and provisions of this Agreement will be binding upon, inure to the
benefit of and be enforceable by each of the parties hereto and their respective
successors and permitted assigns. There are no third party beneficiaries of this
Agreement other than Buyer Group (solely with respect to Section 9).
11.7 Governing Law. This Agreement will be governed and
construed in accordance with the laws of the State of New York, not including
its conflicts of laws provisions.
11.8 Jurisdiction; Service of Process. Any action or
proceeding seeking to enforce any provision of, or based on any right arising
out of, this Agreement may be brought against any of the Parties in the courts
of the State of New York, County of New York, or, if it has jurisdiction
therein, in the United States District Court for the Southern District of New
York, and each of the Parties consents to the jurisdiction of such courts (and
of the appropriate appellate courts) in any such actions or proceeding and
waives any objections to the venue laid therein. Process in any action or
proceeding referred to in the preceding sentence may be served on any Party
anywhere in the world by notice given in accordance with Section 11.3 of this
Agreement.
11.9 Assignment. This Agreement and the rights and obligations
of the parties hereto shall not be transferred, assigned or delegated by either
party to any Person, by operation of law or otherwise, without the prior written
consent of the other party; provided, however, that Buyer may assign its rights
and obligations hereunder to MOS or any other subsidiary of Buyer, in which
event Buyer shall guaranty the performance of the assignee's obligations
hereunder.
34
11.10 Severability. If any provision of this Agreement is
determined by a court of competent jurisdiction to be invalid or unenforceable,
such determination shall not affect the remaining provisions of this Agreement,
all of which will remain in full force and effect.
11.11 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
11.12 Exhibits and Schedules. The Appendix, Exhibits and
Schedules to this Agreement are a part of this Agreement as if set forth in full
herein. Each member of the Seller Group acknowledges and agrees that Buyer's due
diligence and Buyer's cooperation and assistance in the preparation of Schedules
4.4 through 4.22 hereto shall not affect or limit the Seller Group's
responsibility and liability for such Schedules and the related warranties and
representations, and that such Schedules and the related warranties and
representations are the sole responsibility of the Seller Group.
11.13 Headings. The headings in this Agreement are for
reference purposes only and will not in any way affect the meaning or
interpretation of this Agreement.
11.14 Neutral Construction. The parties have negotiated this
Agreement and all of the terms and conditions contained in this Agreement in
good faith and at arms' length, and each party has been represented by counsel
during such negotiations. No term, condition, or provision contained in this
Agreement will be construed against any party or in favor of any party (i)
because such party or such party's counsel drafted, revised, commented upon, or
did not comment upon, such term, condition, or provision; or (ii) because of any
presumption as to any inequality of bargaining power between or among the
parties. Furthermore, all terms, conditions, and provisions contained in this
Agreement will be construed and interpreted in a manner which is consistent with
all other terms, conditions, and provisions contained in this Agreement.
11.15 Termination. This Agreement may, by notice given prior
to or at the Closing, be terminated:
11.15.1 by either Buyer or Seller if a material
breach of any provision of this Agreement has been committed by the other party
and such breach has not been waived;
11.15.2 by Buyer if any of the conditions in Section
7 has not been satisfied as of the Closing Date or if satisfaction of such a
condition is or becomes impossible (other than through the failure of Buyer to
comply with its obligations under this Agreement) and Buyer has not waived such
condition on or before the Closing Date;
11.15.3 by Seller, if any of the conditions in
Section 8 has not been satisfied of the Closing Date or if satisfaction of such
a condition is or becomes impossible (other than through the failure of Seller
to comply with their obligations under this Agreement) and Sellers have not
waived such condition on or before the Closing Date;
35
11.15.4 by the Buyer, if the Closing shall not have
occurred by June 30, 2002; or
11.15.5 by mutual consent of Buyer and Seller.
[BALANCE OF PAGE INTENTIONALLY BLANK]
36
IN WITNESS WHEREOF, the parties have executed this Asset Purchase
Agreement as of the date first above written.
Attest: BUYER:
CROSS MEDIA MARKETING CORPORATION
By:
------------------------------------------------- -----------------------------------------------------------
Name:
----------------------------------------------------
Title:
--------------------------------------------------
Attest: SELLER GROUP:
JWE ENTERPRISES, INC.
By:
------------------------------------------------- -----------------------------------------------------------
Name:
Title:
Attest: JWE HOLDINGS, INC.
By:
------------------------------------------------- -----------------------------------------------------------
Name:
Title:
Witness:
------------------------------------------------- -----------------------------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
APPENDIX A
CERTAIN DEFINED TERMS
"1933 Act" shall have the meaning set forth in Section 4.22.1.
"Accountants" means (i) Ernst & Young, (ii) an independent accounting
firm jointly selected by Buyer and ▇▇▇▇▇▇▇▇▇ within ten (10) days after the need
therefor hereunder, or (iii) if Ernst & Young cannot or refuses to serve and
Buyer and ▇▇▇▇▇▇▇▇▇ fail to timely select a firm pursuant to (ii) above, then a
nationally recognized independent accounting firm selected by Ernst & Young.
"Additional Taxes" shall have the meaning set forth in Section 3.2.2.
"Agreement" shall have the meaning set forth on Page 1, Background
Section "C".
"AMEX" means the American Stock Exchange.
"Assets" shall have the meaning set forth in Section 2.1.
"Assumed Contracts" shall have the meaning set forth in Section 2.1.6.
"Assumed Liabilities" shall have the meaning set forth in Section 2.3.
"Audit Period" means the thirty day period after Buyer makes any
Specified Payment.
"Business" means Seller's business of selling magazine subscriptions
(including "bundles" of four to five magazines) by acting as a clearinghouse,
with the authority on behalf of magazine publishers to accept magazine
subscription orders and to place those orders with fulfillment houses designated
by the publishers.
"Buyer" shall have the meaning set forth on Page 1, Parties.
"Buyer's Proposed Additional Taxes" shall have the meaning set forth in
Section 3.2.2.
"Buyer Group" shall have the meaning set forth in Section 9.1.
"Cash Payment" shall have the meaning set forth in Section 3.2.1.
"Certificate of Designation" shall mean the Certificate of Designation,
in the form of Exhibit 3.2 hereto, creating the XMM Preferred Shares.
"Claim" shall have the meaning set forth in Section 9.5.1.
"Claim Notice" shall have the meaning set forth in Section 9.4.
"Closing" shall have the meaning set forth in Section 3.1.
1
"Closing Date" shall have the meaning set forth in Section 3.1.
"Closing Documents" shall have the meaning set forth in Section 3.1.
"COBRA" means the Consolidated Omnibus Budget Reconciliation Act.
"Code" shall have the meaning set forth in Section 3.4.
"Companies" shall mean Seller and JXM, and "Company" shall mean either
of them individually.
"Companies' Intellectual Property" shall have the meaning set forth in
Section 4.6.1.
"Companies' Software" shall have the meaning set forth in Section
4.6.1.
"Confidentiality Agreement" means the Confidentiality Agreement dated
March 20, 2002 by and between Buyer and Seller relating to the transactions
contemplated by this Agreement.
"Consent" means any consent approval, order or authorization of, or any
declaration, filing or registration with, or any application or report to, or
any waiver by, or any other action (whether similar or dissimilar to any of the
foregoing) of, by or with, any Person, which is necessary in order to take a
specified action or actions in a specified manner and/or to achieve a specified
result or to avoid the occurrence of a default.
"Contract" means any written or oral contract, agreement, instrument,
order, commitment or binding arrangement, express or implied, of any nature
whatsoever, including, without limitation, sales orders, purchase orders,
leases, subleases, license agreements, sublicense agreements, conditional sale
contracts, franchise agreements, loan agreements, professional services
agreements, promissory notes, security agreements, pledge agreements, mortgages,
indentures, bonds, guarantees, indemnities, warranties, management contracts,
employment agreements, consulting agreements, shareholders' agreements, joint
venture agreements, buy-sell agreements, options, warrants, subscriptions, calls
or puts.
"Conversion Shares" means the shares of XMM Common Stock issued to the
Seller Group upon conversion of any XMM Preferred Shares.
"Cross Media" shall have the meaning set forth on Page 1, Parties.
"Cross Media Group" means Cross Media and its Subsidiaries.
"Cross Media SEC Reports" shall have the meaning set forth in Section
5.8.1.
"Designee" shall having the meaning set forth on Page 1, Background
Section "C".
"Disclosing Party" shall have the meaning set forth in Section 11.2.
2
"Documents" means any document, agreement, instrument, certificate,
notice, consent, affidavit, letter, telegram, telex, written statement, schedule
(including any Schedule to this Agreement), exhibit (including any Exhibit to
this Agreement) or any other paper whatsoever.
"Earn Out Period" shall have the meaning set forth in Section 3.2.4(a).
"▇▇▇▇▇▇▇▇▇" shall have the meaning set forth on Page 1, Parties.
"▇▇▇▇▇▇▇▇▇ Employment Agreement" shall have the meaning set forth in
Section 7.7.
"▇▇▇▇▇▇▇▇▇ Group" shall have the meaning set forth in Section 3.2.2.
"▇▇▇▇▇▇▇▇▇ Group's Proposed Additional Taxes" shall have the meaning
set forth in Section 3.2.2.
"Employee Benefit Plan" means (i) any employee benefit plan, as defined
in Section 3(3) of ERISA, and (ii) any other plan, trust agreement or
arrangement for any bonus, severance, hospitalization, vacation, incentive or
deferred compensation, pension or profit-sharing, retirement, payroll savings,
stock option, equity compensation, group insurance, death benefit, fringe
benefit, welfare or any other employee benefit plan or fringe benefit
arrangement of any nature whatsoever, including those benefiting retirees or
former employees.
"Encumbrance" means any lien, security interest, pledge, mortgage,
easement, leasehold, assessment, covenant, restriction, reservation, conditional
sale, prior assignment, or any other encumbrance, claim, burden or charge of any
kind or nature whatsoever (including the filing of any financing statement under
the Uniform Commercial Code or comparable law of any jurisdiction to evidence
any of the foregoing).
"Environmental Laws" shall mean any federal (including but not limited
to the Clean Water Act, 33 U.S.C. Sections 1251 et seq., the Toxic Substances
Control Act, 15 U.S.C. Sections 2601 et seq., the Clean Air Act, 42 U.S.C.
Sections 300f et seq., the Comprehensive Environmental Response, Compensation
and Liability Act, 42 U.S.C. Sections 9601 et seq, the Resource Conservation and
Recovery Act, 42 U.S.C. Section 6901 et seq, the River and Harbor Act, 33 U.S.C.
Section 407, and the Occupational Safety and Health Act, 29 U.S.C. Section 651
et seq.), state or local statute, ordinance or promulgated rule or regulation,
any judicial or administrative order or judgment (whether of not by consent),
any duties imposed by common law and any provision or condition of any permit,
license or other operating authorization relating to (i) the protection of the
environment or the public welfare from actual or potential exposure (or the
effects of exposure) to any actual or potential release, discharge, disposal or
emission (whether past or present) of any Hazardous Substance or Regulated
Substance or (ii) the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of any Hazardous Substance or Regulated
Substance.
"ERISA" means the Employee Retirement Income Security Act of 1974 or
any successor law, and regulations and rules issued pursuant to that Act or any
successor law.
3
"Exchange Act" means the Securities Exchange Act of 1934, as the same
shall be amended from time to time.
"Excluded Assets" shall have the meaning set forth in Section 2.2.
"Excluded Contracts" shall have the meaning set forth in Section 2.2.6.
"Existing Customers" shall have the meaning set forth in Section
3.2.4(a).
"Expiration Date" shall have the meaning set forth in Section 9.3.1.
"Final Amount" shall have the meaning set forth in Section 3.2.2.
"GAAP" means generally accepted accounting principles under United
States accounting rules and regulations, consistently applied, provided that, in
cases where such generally accepted accounting principles permit the use of two
or more accounting policies ("Accepted Policies") yielding different results,
the following Accepted Policy shall be used, regardless of materiality: (a) the
historical Accepted Policy used by Seller, if one is applicable; (b) if none of
the historical Accepted Policies used by Seller is applicable, the historical
Accepted Policy used by Buyer's ultimate parent, if one is applicable; or (c) if
none of the historical Accepted Policies used by Seller or by Buyer's ultimate
parent is applicable, the preferred Accepted Policy under United States
accounting rules and regulations. In no event shall the consistent application
of the historical accounting policies used by Seller have priority over GAAP,
regardless of materiality.
"Governmental Entity" means any federal, state, local or foreign
government, any court, administrative, regulatory or other governmental agency,
commission or authority or any non-governmental U.S. or foreign self-regulatory
agency, commission or authority or any arbitral tribunal.
"Hazardous Substances" means any substance, waste, contaminant,
pollutant or material that has been determined by any United States federal
government authority, or any state or local government authority having
jurisdiction over Sellers' Real Property, to be capable of posing a risk of
injury or damage to health, safety, property or the environment, including, but
not limited to, (a) all substances, wastes, contaminants, pollutants and
materials defined or designated as hazardous, dangerous or toxic pursuant to any
Law of any state in which any of Sellers' leased or owned Real Property is
located or any United States Law, and (b) asbestos, polychlorinated biphenyls
("PCB's") and petroleum.
"Holdings" shall have the meaning set forth on Page 1, Parties.
"Indebtedness" means, with respect to any Person, (i) any liability,
contingent or otherwise, for borrowed money, and (ii) any liability for borrowed
money of Persons other than Seller for which Seller has guaranteed or which
otherwise is such Person's legal liability.
"Indemnified Party" shall have the meaning set forth in Section 9.4.
"Indemnifying Party" shall have the meaning set forth in Section 9.4.
4
"Insurance Policy" means any public liability, product liability,
general liability, comprehensive, property damage, vehicle, life, hospital,
medical, dental, disability, worker's compensation, key man, fidelity bond,
theft, forgery, errors and omissions, directors' and officers' liability, or
other insurance policy of any nature.
"Intangible Property" means any name, corporate name, fictitious name,
trademark, trademark application, service ▇▇▇▇, service ▇▇▇▇ application, trade
name, brand name, slogan, logo, trade secret, know-how, patent, patent
application, copyright, copyright application, design, formula, invention,
blueprint, drawing, architectural plans and specifications relating to any
expansion of the Business, product right, computer program, software right,
license, franchise, authorization, assembled work force, or any other intangible
property of any nature whatsoever, and all goodwill and going concern value,
whether or not related to the foregoing.
"Intellectual Property" shall mean any fictitious name, trademark,
trademark application, service ▇▇▇▇, service ▇▇▇▇ application, trade name, brand
name, product name, domain name, Internet address, slogan, trade secret,
know-how, patent, reissues of and reexamined patent, patent application
(including, but not limited to, continuations, continuations-in-part,
substitutes or divisions of such application and all priority rights resulting
from such application), copyright, copyright application, design, logo, formula,
invention and similar intangible assets, together with all goodwill relating
thereto whether or not perfected, whether in use, under current development or
design, or inactive, arising under statutory or common law.
"Interest" shall have the meaning set forth on Page 1, Background
Section "B".
"Inventory" means any raw materials, supplies, work-in-process,
finished goods, parts, or other inventory of any nature whatsoever.
"Judgment" means any order, writ, injunction, fine, citation, award,
decree or any other judgment of any kind or nature whatsoever of any foreign,
federal, state or local court, governmental body, administrative agency,
regulatory authority or arbitration tribunal.
"JWE Enterprises" shall have the meaning set forth in Section 2.2.8.
"JXM" shall have the meaning set forth on Page 1, Background Section
"B".
"JXM Contracts" shall have the meaning set forth in Section 4.13.3.
"JXM Earn Out" shall have the meaning set forth in Section 3.2.4(b).
"JXM Intellectual Property" means all Intellectual Property owned by
JXM or used by JXM in its business.
"JXM Software" shall have the meaning set forth in Section 4.6.1.
"JXM Tangible Personal Property" means all furniture, fixtures,
leasehold improvements, machinery, equipment, office materials and supplies,
vehicles, computer hardware, data processing
5
equipment and all other tangible personal property of JXM and all related
warranties and similar rights.
"Law" means any provision of any law, statute, ordinance, order,
constitution, charter, treaty, rule or regulation enacted, approved or adopted
by any foreign, federal, state or local governmental, administrative or
regulatory authority, including, without limitation, judicially developed common
law.
"Leased Real Property" shall have the meaning set forth in Section
4.20(a).
"Liabilities" means any direct or indirect indebtedness, liability,
claim, loss, damage, deficiency, or obligation of any nature whatsoever, known
or unknown, fixed or inchoate, liquidated or unliquidated, secured or unsecured,
accrued, absolute, contingent or otherwise, including, without limitation,
liabilities on account of Taxes, whether or not of a kind required by generally
accepted accounting principles to be set forth on financial statements.
"Losses" means any and all claims, losses, Liabilities, damages,
actions, causes of action, arbitration awards, deficiencies, costs and expenses
including, without limitation, actual interest costs, penalties and reasonable
attorneys' fees.
"Maximum" shall have the meaning set forth in Section 3.2.2.
"MOS" shall have the meaning set forth on Page 1, Background Section
"C".
"Non-Assumed Obligations" shall have the meaning set forth in Section
9.1.3.
"Non-Competition Agreement" shall have the meaning set forth in Section
7.6.
"Permits" shall have the meaning set forth in Section 2.1.8.
"Permitted Venture" means Telesales Consultants, Inc., a Florida
corporation, with its principal offices currently located in Spring Hill,
Florida.
"Person" means any individual, sole proprietorship, joint venture,
partnership, corporation, association, joint-stock company, unincorporated
organization, cooperative, trust, estate, government (or any branch, subdivision
or agency thereof), governmental, administrative or regulatory authority, or any
other entity of any kind or nature whatsoever.
"Proceeding" means any demand, claim, suit, action, equitable action,
litigation, investigation, arbitration, administrative hearing or any other
judicial or administrative proceeding of any kind or nature whatsoever.
"Property" means real, personal or mixed property.
"Purchase Price" means the consideration described in Section 3.2.
"Receiving Party" shall have the meaning set forth in Section 11.2.
6
"Regulated Substances" shall mean any substance that is identified (by
listing or characteristic) and regulated (or the clean-up of which can be
required) by any federal, state or local law or regulation intended to protect
the environment or the public health or welfare, including but not limited to
the statutes, ordinances or regulations relating to clean air, clean water,
hazardous and solid waste disposal, safe drinking water, endangered species,
occupational safety and health, oil spill prevention, groundwater protection,
and toxic substances control, among others.
"Report" shall have the meaning set forth in Section 3.2.2.
"Retained Receivables" shall have the meaning set forth in Section
2.2.3.
"Review Period" shall have the meaning set forth in Section 3.2.2.
"Seller" shall have the meaning set forth on Page 1, Parties.
"Seller Earn Out" shall have the meaning set forth in Section 3.2.4(a).
"Seller Group" shall mean Seller, Holdings and ▇▇▇▇▇▇▇▇▇.
"Seller Intellectual Property" shall have the meaning set forth in
Section 2.1.3.
"Seller Software" shall have the meaning set forth in Section 2.1.4.
"Seller's Employee Benefit Plans" shall have the meaning set forth in
Section 4.16.1.
"Sellers" shall have the meaning set forth in Section 3.2.
"Specified Payment" shall have the meaning set forth in Section 6.4.
"Subordination Agreement" shall have the meaning set forth in Section
7.11.
"Subsidiary" of any corporation or other Person (the "Parent") means
any other corporation or Person of which securities or other interests having
the power to elect a majority of that corporation's or other Person's board of
directors or similar governing body, or otherwise having the power to direct the
business and policies of that corporation or other Person (other than securities
or other interests having such power only upon the happening of a contingency
that has not then occurred) are held by the Parent or one or more of its
Subsidiaries.
"Tangible Personal Property" shall have the meaning set forth in
Section 2.1.1.
"Tax" means (1) any foreign, federal, state or local income, earnings,
profits, gross receipts, corporate loan, franchise, capital stock, sales, use,
occupancy, general property, real property, personal property, intangible
property, transfer, fuel, excise, accumulated earnings, personal holding
company, unemployment compensation, social security, self employment tax or
other tax of any kind or nature whatsoever, (2) any foreign, federal, state or
local corporate or other organizational fee, qualification fee, annual report
fee, filing fee, occupation fee, assessment, sewer rent or other fee
7
or charge of any kind or nature whatsoever, or (3) any deficiency, interest or
penalty imposed with respect to any of the foregoing.
"Tax Returns" shall have the meaning set forth in Section 3.2.2.
"XMM Common Shares" shall mean all of the shares of unregistered XMM
Common Stock delivered to the Sellers pursuant to Section 3.2.1 herein.
"XMM Common Stock" shall mean the shares of Cross Media's common stock,
par value $0.001 per share.
"XMM Preferred Shares" shall mean the shares of unregistered Series B
Convertible Preferred Stock of Cross Media created by the Certificate of
Designation and delivered to the Sellers pursuant to Section 3.2.1 herein.
"XMM Shares" shall mean the XMM Common Shares and the XMM Preferred
Shares.
8
INDEX TO SCHEDULES
Schedule 2.2.6 Excluded Contracts
Schedule 2.2.7 Additional Excluded Assets
Schedule 3.2.3 Payment for JXM Start-Up Expenses
Schedule 4.4 Consents of Seller, ▇▇▇▇▇▇▇▇▇ and Holdings
Schedule 4.5 Encumbrances
Schedule 4.6 Software and Intellectual Property
Schedule 4.7(a) Tangible Personal Property
Schedule 4.7(b) JXM Tangible Personal Property
Schedule 4.8 Proceedings
Schedule 4.9 Liabilities relating to the Assets
Schedule 4.11 Material Adverse Changes
Schedule 4.12 Broker of Seller/Holdings
Schedule 4.13 Contracts
Schedule 4.13.3 Contracts of JXM
Schedule 4.15 Employees and Independent Contractors
Schedule 4.15.3 JXM Employees and Independent Contractors
Schedule 4.16 Employee Benefit Plans
Schedule 4.17 Suppliers
Schedule 4.18 Insurance Policies
Schedule 4.19 Related Party Transactions
Schedule 4.20 Environmental Matters
Schedule 4.21 Financial Statements
Schedule 5.5 Consents of Buyer
Schedule 6.12 Seller's Employees Buyer Intends to Hire
Exhibit 3.2 XMM Series B Preferred Stock Designation
Exhibit 7.2.7 Form of Opinions of Seller Group's Counsels
Exhibit 7.6 Non-Competition Agreement
Exhibit 7.7 ▇▇▇▇▇▇▇▇▇ Employment Agreement
Exhibit 7.11 Subordination Agreement
Exhibit 8.4 Registration Rights Agreement
Exhibit 8.5.3 Form of Opinion of Buyer's Counsel