TRANSITION AGREEMENT
September 13, 1996
The parties to this agreement are American Passage
Media Corporation, a Washington corporation ("AP"), and American
Passage Media, Inc., a Delaware corporation ("Buyer").
Pursuant to an Asset Purchase Agreement dated September
13, 1996, AP has today sold to Buyer substantially all of the
business and assets relating to sales and marketing activities
involving the high school and college student markets (the
"Business"), excluding the business of publishing and
distributing Directory of Classes.
This agreement sets forth the terms upon which AP shall
provide to Buyer certain services required by Buyer to effect the
transition to Buyer of the operation of the Business.
Accordingly, it is agreed as follows:
1. Office Space; Office Services.
(a) AP shall provide Buyer with the office space
currently used by the Business and its employees at 401 Second
Avenue West, Seattle, Washington (the "Seattle Site"), 529 Fifth
Avenue, New York, New York (the "New York Site"), and Columbia
Center II, Suite 290, Rosemont, Illinois (the "Chicago Site")
(together, the Seattle Site, the New York Site, and the Chicago
Site are the "Sites"). Any common areas (e.g., bathrooms and
kitchens) shared with other businesses shall continue to be
shared in the same manner.
(i) As consideration for the office space
to be provided under this section 1(a), Buyer shall make payments
to AP at the rate of $0.67 per square foot per month multiplied
by the square foot usage as set forth in the Allocation, as
defined below, for the Seattle Site, at the rate of $1.67 per
square foot per month multiplied by the square foot usage as set
forth in the Allocation for the New York Site, and at the rate of
$1.34 per square foot per month multiplied by the square foot
usage as set forth in the Allocation for the Chicago Site.
(ii) All Common Area Maintenance charges
for the New York Site and Chicago Site shall be allocated and
payable based on each party's square feet occupancy of the
applicable Site as set forth on schedule 1 ("Allocation").
(iii) All utilities, janitorial services and
real estate-related taxes shall be allocated and payable
according to the Allocation, provided however, the taxes for the
Chicago Site shall be included in the payments set forth in
section 1(a)(i).
(b) AP shall provide the Business and its
employees at each Site with office services substantially similar
to the office services currently provided to the Business and its
employees. Those services shall include, but not be limited to,
mailroom, security, storage, supply, photocopying, messenger,
reception and cafeteria services (including coffee, tea and
Friday assortments as previously provided). All costs for the
office services shall be allocated and payable according to the
Allocation. Additionally, and for the costs set forth herein:
(i) AP shall provide Buyer with the
telephone services (including local, long distance, voice mail
and data link services) at each Site as currently used by the
Business and its employees, provided such services are available
to AP. AP shall use its reasonable efforts to cause the
providers of such telephone services to separately bill to the
appropriate party any dedicated line services. In the event such
separate billing is not possible, all costs of such telephone
services, including basic charges, shall be allocated to the
parties based on the Allocation. Without limiting the foregoing,
Buyer shall be responsible for the cost of all telephone calls
made by its employees (and for the cost of any additional lines
added exclusively to provide for Buyer's needs).
(ii) All telephone and facsimile maintenance
costs shall be allocated and payable according to the Allocation.
(iii) AP shall use its reasonable efforts to
cause all office supplies ordered by Buyer's employees to be
billed separately and directly to Buyer and Buyer shall be
responsible for paying those bills and any associated costs. In
the event such separate billing is not possible, all costs of
such office supplies shall be allocated to the parties based on
the Allocation.
(iv) AP shall provide Buyer with the copier
services at each Site as currently used by the Business and its
employees, provided such services are available to AP. All
copier costs, including lease and maintenance costs, shall be
allocated and payable according to the Allocation.
(c) If Buyer is unable to use the office space at
any Site during the respective periods set forth in section 1(d)
due to the failure of AP to receive the consent of the applicable
landlord, AP shall reimburse Buyer for any reasonable costs
incurred by Buyer in moving to another site and for any amounts
Buyer is required to pay for another site in excess of the
amounts provided for in section 1(a)(i).
(d) AP shall provide the office space and office
services provided for in this section 1 until (i) December 15,
1996, with respect to the Seattle Site, (ii) May 31, 1997, with
respect to the New York Site, and (iii) July 14, 1997, with
respect to the Chicago Site.
2. Accounting Services.
For a period of up to six months after the date of
this agreement, AP shall provide to Buyer the following services:
(a) AP shall provide to Buyer accounting
services necessary to perform the billing, collection and
accounting functions of the Business in a manner consistent with
the manner in which those functions have been performed in the
past. In that connection, AP shall provide to Buyer the services
of the accounts receivable clerk, the accounts payable clerk and
the accounting manager who previously provided accounting
services to the Business. Dan Brillon shall provide limited
oversight responsibilities in connection with the accounting
operations, subject to Buyer's direction and control.
Notwithstanding anything to the contrary contained herein, Buyer
shall bear full responsibility for the accounting functions
associated with the Business. In the event such personnel are not
available to provide such services, AP shall use its reasonable
efforts to substitute such personnel with personnel of comparable
experience, provided, however, AP shall not be required to hire
any personnel. The scope, timing and provision of such services
shall be sufficient to carry on the accounting functions of the
Business consistent with past practices.
(b) Dan Brillon and each of the other accounting
personnel referred to in section 2(a) shall assist Buyer in the
training of its accounting personnel and the establishment of its
accounting systems for the Business.
(c) AP shall continue to perform for the Business
their accounting procedures with respect to the general ledger,
including, but not limited to, posting monthly recurring journal
entries and month end close.
(d) AP shall prepare on a timely basis consistent
with past practices daily, weekly and month-end reports and shall
mail the daily and weekly reports to Buyer not later than seven
days after preparation thereof and shall mail the month-end
reports to Buyer not later than ten days after preparation
thereof. AP shall provide to Buyer's representatives full access
at all times during normal business hours to all accounting
records of the Business, provided, however, in no event shall
such access unduly affect the business of AP.
(e) As consideration for the accounting services
to be provided under this section 2, Buyer shall make payments to
AP at the rate of $6,854 per month ("Accounting Services
Consideration") (which is equal to the sum of the monthly
salaries and benefits of the required number of accounting
personnel as agreed upon by the parties and as set forth by
individual personnel in schedule 2). As Buyer hires the
accounting personnel set forth in section 2(a), the Accounting
Services Consideration shall be payable as follows: for the first
full month following each such hire, AP shall be paid the entire
Accounting Services Consideration; for the second full month
following each such hire, AP shall be paid the Accounting
Services Consideration less one-half (1/2) the amount allocated
in schedule 2 to such hired personnel; and for the third full
month following each such hire and thereafter with respect to
each such hire, AP shall be paid the Accounting Services
Consideration less the amount allocated in schedule 2 to such
hired personnel. Buyer shall also reimburse AP for all out-of-
pocket expenses incurred by it with Buyer's prior approval in
connection with the performance of its accounting services
pursuant to this agreement, including, but not limited to, Dan
Brillon's travel expense to New York for training, if required.
3. Printing Services.
(a) For a period of one year after the date of
this agreement, AP shall provide Buyer with such graphic art and
printing services as Buyer may require as are consistent with
past practices of the Business, provided that AP has the
capability to provide such services. AP shall be under no
obligation to directly or indirectly maintain any such printing
capabilities or capacities. Subject to the foregoing, such
services may include, but not be limited to, art production,
layout, pre-press, and printing services. All film and other
materials provided by Buyer to AP shall be returned to Buyer upon
completion of a job.
(b) For each printing job submitted by Buyer to
AP, AP shall charge Buyer its "in-house" rate, consisting of its
direct labor, materials, and equipment and overhead costs as set
forth on schedule 3, plus a mark-up of 25% (except that the mark-
up for gymboards shall be 13%).
(c) For each art production and/or layout job
submitted by Buyer to AP, AP shall charge Buyer $60 per hour for
the services of an assistant art director and $75 per hour for
the services of a senior art director. Additionally, Buyer shall
pay all costs for materials related to such jobs. For each pre-
press job submitted by Buyer to AP, AP shall charge Buyer $75 per
hour plus the costs of any materials related to such job.
4. Fulfillment Services.
(a) Until June 30, 1997, AP shall provide Buyer
with such fulfillment, warehousing, shipping and related services
at its Seattle warehouse as Buyer may require for the Campus
Postering and Gymboards businesses. The services to be provided
under this section 4 shall be substantially the same as have been
provided to the Business since July 1, 1995.
(b) As consideration for the services to be
provided by AP under this section 4, Buyer shall pay AP a monthly
fee at AP's base rate for all direct costs incurred by AP on
behalf of Buyer, including, without limitation, labor, shipping
materials, freight charges and equipment depreciation, overhead
costs and warehouse space of 4,000 square feet.
(c) Buyer shall be responsible for maintaining
its own post office boxes and permits and for paying its own
postage expenses.
(d) Upon termination of the services provided for
in this section 4, Buyer shall provide AP with detailed
instructions as to the shipping or other disposal of its
warehoused materials. All of Buyer's materials shall be shipped
or otherwise disposed of, at Buyer's expense, within 30 days
after the date of termination.
5. Payment.
(a) AP shall bill Buyer at the end of each
calendar month for the amounts payable by Buyer to AP under this
agreement. Each bill shall include reasonable documentation of
the charges incurred. Buyer shall have the right to audit the
charges and, if it is established that the charges should be more
or less than the bill submitted by AP, the charges shall be
adjusted accordingly and payment made promptly of any amount
owed.
(b) Each bill submitted to Buyer under section
5(a) for office space and accounting services shall be payable in
full within ten days after receipt of the bill and all other
bills submitted to Buyer under section 5(a) shall be paid as soon
as practicable but not later than 30 days after receipt of the
bill, except that Buyer may withhold payment of any disputed
amount until the dispute is resolved.
(c) If any service for which Buyer pays a fixed
monthly fee is commenced or terminated during the month, Buyer
shall only pay a fee for the portion of the month in which it
received that service.
6. Termination of Services. Buyer may elect to
discontinue any of the services provided by AP under this
agreement at any time prior to the termination date specified in
a particular section upon 30 days prior notice to AP, except for
the provision of fulfillment services pursuant to section 4 which
may be discontinued by Buyer prior to the dates specified therein
upon 90 days prior notice to AP provided that if during the 90
day period after the notice is given to AP, AP does not perform
the fulfillment services in a satisfactory manner, Buyer may
terminate the fulfillment services immediately.
7. Delivery of Information. Upon the termination of
any service provided for in this agreement, AP shall deliver to
Buyer all software, databases, records, files and other
information relating to the Business and that service. AP shall
not retain copies of any of those materials, except AP may retain
copies of all such documents and information as it reasonably
determines necessary for archival purposes, shall not use those
documents and information for any other purpose, shall not
furnish copies to any third party (except as required by law),
and shall use reasonable efforts to limit its employees' access
to those documents and information, and except that AP may,
subject to section 6.7 of the Asset Purchase Agreement, retain
copies of and use such documents, information and software to the
extent used by AP in its other businesses as of the date of this
agreement.
8. Confidentiality. AP shall not at any time or in
any manner, either directly or indirectly, use for its benefit or
divulge, disclose or communicate to anyone any confidential
information relating to the Business obtained by AP in connection
with the furnishing of any services or facilities pursuant to
this agreement. AP shall use its reasonable efforts to protect
such information and treat it as strictly confidential.
9. Representation and Warranty; AP's Performance. AP
represents and warrants to Buyer (subject to the applicable
consent requirements set forth on schedule 9) that it has the
full right to execute and deliver this agreement, to perform its
obligations under this agreement, and to and to grant to Buyer
the rights granted to it in this agreement; that the execution
and performance by AP of its obligations under this agreement
will not violate any contractual or other obligation binding upon
AP; and that this agreement is a valid and binding obligation of
AP. AP shall use its reasonable efforts to provide the services
specified in this agreement in a diligent, competent and timely
manner, and in substantially the same manner as they were
provided prior to the sale of the Business to Buyer. AP shall
have no liability to Buyer resulting from the provision of such
services except for claims directly attributable to AP's gross
negligence or willful misconduct, provided, however, AP shall
have liability to Buyer resulting from the provision of the
printing services provided for in section 3 to the extent that
any vendor of such printing services would have liability to an
unrelated third party to which it rendered services pursuant to
an arrangement negotiated at arms-length. Notwithstanding the
foregoing, in no event shall AP's liability hereunder include any
special, incidental, consequential, indirect or similar damages.
10 Miscellaneous.
(a) This agreement contains a complete statement
of all of the terms of the arrangements between the parties with
respect to the matters provided for, supersedes any previous
agreements and understandings between the parties with respect to
those matters, and cannot be changed or terminated orally.
(b) This agreement shall be governed by and
construed in accordance with the law of the State of Washington
applicable to agreements made and to be performed in Washington.
(c) The section headings of this agreement are
for reference purposes only and are to be given no effect in the
construction or interpretation of this agreement.
(d) All notices and other communications under
this agreement shall be in writing and shall be deemed given when
delivered personally, sent by facsimile (with a copy by any other
means permitted for the giving of notices under this agreement)
or mailed by registered mail, return receipt requested, to the
parties at the following addresses (or to such other address as a
party may have specified by notice given to the other party
pursuant to this provision):
If to AP:
American Passage Media Corporation
401 Second Avenue West
Seattle, Washington 98119-4107
Attention: Gilbert Scherer, President
Fax: (206) 281-5993
If to Buyer:
c/o Network Event Theater, Inc.
149 Fifth Avenue
New York, N.Y. 10010
Attention: Harlan D. Peltz, Chairman
Fax: (212) 779-3241
(e) If any provision of this agreement is held to
be invalid or unenforceable, the balance of this agreement shall
remain in effect.
(f) Neither party may assign its rights under
this agreement without the prior written consent of the other
party, which consent may be withheld in the other party's sole
discretion.
(g) In any action brought to enforce or seek
damages under this agreement, the prevailing party shall be
entitled to recover from the losing party the attorneys' fees and
all other costs and expenses reasonably incurred by it.
(h) The failure of a party to insist upon strict
adherence to any term of this agreement on any occasion shall not
be considered a waiver or deprive that party of the right
thereafter to insist upon strict adherence to that term or any
other term of this agreement. Any waiver must be in writing.
(i) Buyer is not a partner or joint venturer of
AP. Nothing in this agreement shall be construed so as to create
either of those relationships or to impose any liability as such
on either party, or to grant either party the right to bind the
other without the other's prior written consent.
AMERICAN PASSAGE MEDIA CORPORATION
By: /s/ Gilbert Scherer
Gilbert Scherer
President and Chief Executive Officer
AMERICAN PASSAGE MEDIA, INC.
By: /s/ Harlan D. Peltz
Harlan D. Peltz
Chairman and Chief Executive Officer
Transition Agreement
Schedule 1
NY Chi Sea
# Personnel 11 2 19
Square Footage Used 3,910 994 4,114
% of Total Office 33% 50% 22%
Annual sq ft rate 20.00 16.11 8.09
Monthly sq ft rate 1.67 1.34 0.67
Monthly base rent 6516.67 1334.45 2773.52
Taxes 417.19 inc. 443.99*
Utilities/Janitorial 733.13 100.00 693.38
10% NY Rent Tax 766.70
Monthly Subtotals 8433.68 1434.45 3910.89 13779.02
+ CAM to be billed
$ per Sq Foot $ 2.16 $ 1.44 $ 0.95
Lease End or Move 5/31/97 7/14/97 12/31/96
Date
(Taxes in Seattle are estimated)
Transition Agreement
Schedule 2
Accounting Personnel
Base Benefits
Salary @ 20% Total % Annual Monthly
Accounts Payable Clerk 20,000 4,000 24,000 80% 19,200 1,600
Accounts Receivable Clerk20,000 4,000 24,000 80% 19,200 1,600
Account Manager 36,542 7,308 43,850 100% 43,850 3,654
82,250 6,854
Transition Agreement
Schedule 3
PRINTING QUOTE GUIDELINE
for STANDARD PRINTING JOB
Update: 7/96
CAMPUS POSTERS
1) Maximum Size: 9 x 12
Make Ready Per/M
Stock 10 Pt C1S $500 4c $95
Plate ready film provided 2c $85
Standard die cut $200 $25/M
ADRAX SIZE
1) Maximum Size: 7 1/2 x 23 $400 4c $60/C
Stock: 10 Pt C1S
Plate ready film provided
No die cut or pocket
Minimum: 100 units
TAKE ONE
1) Flat BRC 3-1/2 x 5-1/2 $500 4c/2c $34/M
Stock: 7 pt. Matte for mailing 2c/2c $30/M
Plate Ready film provided
GYMBOARD SIZE
1) Standard Size: 17 1/2 x 21 3/4 $250 4c $60/C
(per version)
Stock: 10 Pts C1S
Plate ready film provided
Average Run 5500 each of 4 versions
Cost for average run = $1300 per version
Pre-press work required to go from CRA or film that is not plate
ready will be charged at $75 per hour plus materials.
Transition Agreement
Schedule 9
1. Illinois Office Lease
Location: Columbia Center II, Suite 290
9450 West Bryn Mawr
Rosemont, IL 60018
Landlord: American National Bank & Trust Company
Frain Camins & Swartchild, Managers
Lease Expiration: 7/14/97
2. Washington Office Lease
Location: 410 Second Avenue West
Seattle, WA 98119
Landlord: R&A Investments
Lease Expiration: 5/31/98