Exhibit 10.23
TRANSFER AND SHAREHOLDERS AGREEMENT
BY AND AMONG
BASELINE ACQUISITIONS CORP.
BASELINE, INC.
HOLLYWOOD MEDIA CORP.
AND
FOUNTAINHEAD MEDIA SERVICES, INC.
Dated as of January 14, 2002
TABLE OF CONTENTS
Page
Article I CONTRIBUTION AND TRANSFER OF ASSETS.....................1
Section 1.1. FMS Assets to be Contributed.....................1
Section 1.2. FMS Excluded Assets..............................2
Section 1.3. FMS Assumed and Excluded Liabilities.............3
Section 1.4 XXXX Property to be Contributed..................3
Article II CONSIDERATION...........................................3
Section 2.1. Amount and Form of Consideration.................3
Section 2.2. Single Transaction...............................4
Article III REPRESENTATIONS AND WARRANTIES OF FMS...................4
Section 3.1. Organization.....................................4
Section 3.2. Authorization of Agreement.......................4
Section 3.3. Consents and Approvals; No Violation.............5
Section 3.4. Title to Assets..................................5
Section 3.5. No Undisclosed Liabilities.......................5
Section 3.6. Results of Operations; Subscriptions.............5
Section 3.7. Litigation, etc..................................6
Section 3.8. Compliance with Law..............................6
Section 3.9. Employment Agreements............................6
Section 3.10. Certain Agreements...............................6
Section 3.11. Real Property....................................7
Section 3.12. Intangible Property..............................7
Section 3.13. Taxes............................................8
Section 3.14. Permits.........................................10
Section 3.15. Related Parties; Related Party Transactions.....10
Section 3.16. Options.........................................10
Section 3.17. Investor Representations........................10
Section 3.18. Exemption From Registration.....................10
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Section 3.19. Knowledge and Information.......................11
Section 3.20. Brokers.........................................11
Article IV REPRESENTATIONS AND WARRANTIES OF XXXX.................11
Section 4.1. Organization....................................11
Section 4.2. Authorization of Agreement......................11
Section 4.3. Consents and Approvals; No Violations...........12
Section 4.4. Litigation......................................12
Section 4.5. Capital Stock...................................12
Section 4.6. Valid Issuance of Securities....................13
Section 4.7 Compliance with Law.............................13
Section 4.8 SEC Documents...................................13
Section 4.9 Financial Statements............................14
Section 4.10 Contracts.......................................14
Section 4.11 Intellectual Property...........................14
Section 4.12 Title To Property and Assets....................14
Section 4.13 Employees.......................................14
Section 4.14 Employee Benefit Plan...........................15
Section 4.15 Taxes...........................................15
Section 4.16 Permits.........................................15
Section 4.17 Related Parties; Related Party Transactions.....15
Section 4.18 Brokers.........................................15
Article V COVENANTS OF FMS.......................................15
Section 5.1. Access to Information...........................15
Section 5.2. Exclusivity.....................................16
Section 5.3. Conduct of Business.............................17
Section 5.4. Public Announcements............................17
Section 5.5. No Breach of Representations and Warranties.....17
Section 5.6. Updating Information............................17
Section 5.7. Consents........................................18
Section 5.8 Further Actions.................................18
Article VI COVENANTS OF XXXX, BASELINE AND NEWCO..................18
Section 6.1. No Breach of Representations and Warranties.....18
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Section 6.2. Consents and Conditions.........................18
Section 6.3. Updating Information............................18
Section 6.4 Further Actions.................................18
Article VII CONDITIONS PRECEDENT TO XXXX'x, BASELINE AND
NEWCO'S OBLIGATIONS..................................18
Section 7.1. Conditions......................................18
Article VIII CONDITIONS PRECEDENT TO FMS'S OBLIGATIONS..............20
Section 8.1. Conditions......................................20
Article IX THE CLOSING............................................21
Section 9.1. Closing Date....................................21
Section 9.2. Proceedings at the Closing......................21
Section 9.3. Deliveries by FMS to Newco......................22
Section 9.4. Deliveries by XXXX and Newco to FMS.............21
Section 9.5 Deliveries by XXXX to Newco.....................22
Section 9.6 Deliveries by Newco to Xxxx ....................23
ARTICLE X SHAREHOLDER AND OTHER AGREEMENTS ......................23
Section 10.1 Conversion Rights...............................23
Section 10.2 Distribution of Operating Profits...............24
Section 10.3 Use of Baseline Data............................24
Section 10.4 Change of Control Conversion Rights.............24
Section 10.5 Termination Without Cause Conversion Rights.....25
Section 10.6 FMS's Right to Nominate Director of Baseline....26
Section 10.7 Termination.....................................26
Article XI ADDITIONAL POST-CLOSING COVENANTS......................26
Section 11.1. Further Assurances by FMS.......................26
Section 11.2. Preservation of Corporate Records...............27
Section 11.3. Confidentiality.................................27
Article XIi INDEMNIFICATION........................................27
Section 12.1. Indemnification.................................27
Section 12.2. Procedures for Indemnification..................29
Article XIIi TERMINATION............................................30
Section 13.1. Termination.....................................30
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Section 13.2. Liabilities After Termination...................30
Article XIv MISCELLANEOUS..........................................31
Section 14.1. Survival of Representations and Warranties......31
Section 14.2. Entire Agreement................................31
Section 14.3. Governing Law; Construction.....................31
Section 14.4. Transfer Taxes..................................31
Section 14.5. Expenses........................................31
Section 14.6. Notices.........................................31
Section 14.7. Severability....................................32
Section 14.8. Binding Effect; No Assignment...................33
Section 14.9. Amendments......................................33
Section 14.10. Counterparts....................................33
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SCHEDULES
1.1(a) (i) Assigned Contracts
1.1(a)(iv) Fixed Assets
1.2 Excluded Assets
3.1 Shareholders
3.5 Liabilities
3.7 Litigation, etc.
3.9 Employment Agreements
3.10 Certain Agreements
3.11(b) Real Property
3.12 Intangible Property
3.13 Taxes
3.14 Permits
3.15 Options
4.12 Title to Property and Assets
4.14 Employee Benefit Plans
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EXHIBITS
Exhibit A Stock Purchase Agreement
Exhibit B Form of Secured Promissory Note
Exhibit C Form of Pledge Agreement
Exhibit D Form of Xxxx of Sale and Assignment and Assumption Agreement
Exhibit E Form of Management Services Agreement
Exhibit F Forms of Employment Agreements
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TRANSFER AND SHAREHOLDERS AGREEMENT
This TRANSFER AND SHAREHOLDERS AGREEMENT (this "Agreement"), is dated
as of January 14, 2002, by and among Baseline Acquisitions Corp., a Delaware
corporation ("Newco"), Baseline, Inc., a Delaware corporation ("Baseline"),
Hollywood Media Corp., a Florida corporation ("XXXX") and Fountainhead Media
Services, Inc., a California corporation ("FMS").
W I T N E S S E T H :
WHEREAS, upon the terms and subject to the conditions hereinafter set
forth, XXXX shall contribute, assign and transfer to Newco one hundred percent
of the outstanding capital stock of Baseline (the "Baseline Stock") and Newco
desires to accept and acquire from XXXX, all of XXXX'x right, title and interest
in the Baseline Stock;
WHEREAS, upon the terms and subject to the conditions hereinafter set
forth, FMS desires to contribute, assign and transfer to Newco, and Newco
desires to accept and acquire from FMS, all of FMS' right, title and interest in
the Assets (as defined herein);
WHEREAS, each of the parties intends that the foregoing exchange
collectively constitute a single transaction governed by Section 351 of the Code
(as defined herein); and
WHEREAS, concurrently herewith FMS and XXXX have executed and delivered
a stock purchase agreement in the form attached hereto as Exhibit A (the "Stock
Purchase Agreement") pursuant to which FMS is purchasing 300 shares of common
stock (the "Purchased Stock") constituting ten percent (10%) of the issued and
outstanding capital stock of Newco from XXXX for a promissory note in the
principal amount of $2,000,000 in the form attached hereto as Exhibit B (the
"Promissory Note") secured by certain pledged collateral as set forth in the
Pledge Agreement in the form attached hereto as Exhibit C (the "Pledge
Agreement").
NOW THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants and agreements hereinafter set forth, the
parties hereto hereby agree as follows:
ARTICLE I
CONTRIBUTION AND TRANSFER OF ASSETS
Section 1.1. FMS Assets to be Contributed.
----------------------------
(a) Upon the terms and subject to the conditions hereinafter set forth,
FMS shall contribute, assign, transfer, convey and deliver to Newco, and Newco
shall acquire and accept from FMS (the "Transaction"), free and clear of all
Liens (as defined in Section 1.1(b) below), all right, title and interest of FMS
in, to and under all of the assets, properties, rights, contracts, claims,
operations and business of FMS (collectively, the "Assets") (but excluding the
Excluded Assets, as defined in Section 1.2 below), whether or not appearing on
the books of FMS, including, without limitation, the following:
(i) all contracts and agreements to which FMS is a party
related to the submission or licensing of data, all of which contracts
and other agreements referred to in this clause (i) (collectively, the
"Assigned Contracts") are listed on Schedule 1.1(a) (i) hereto;
(ii) the website currently located at xxx.xxxxxxxxxxx.xxx and
all hardware, software, databases and other property related to the
operation of the website;
(iii) all customers and subscribers to the FilmTracker website
and all accounts receivable related to those customers and subscribers;
(iv) all of the furniture, supplies, computers, monitors,
servers, office equipment, fixtures and other fixed assets owned by
FMS, including those listed on Schedule 1.1(a)(iv) and certain assets
leased by FMS as specifically set forth on Schedule 1.1(a)(iv) (the
"Fixed Assets");
(v) the Intangible Property (as defined in Section 3.12 below);
(vi) all papers, databases, computer programs, disks,
software, and other books, records, documents and materials owned by
FMS (the "Books and Records");
(vii) all assets of FMS (other than Excluded Assets) as to
which Newco assumes any liability;
(viii) all rights of FMS under or pursuant to all warranties,
representations and guarantees made by suppliers, manufacturers and
contractors in connection with any of the foregoing Assets; and
(ix) all goodwill relating to the foregoing Assets.
(b) For the purposes of this Agreement, "Lien" shall mean any lien,
pledge, mortgage, deed of trust, security interest, claim, lease, charge,
option, right of first refusal, easement or other real estate declaration,
covenant, condition, restriction or servitude, transfer restriction under any
shareholder or similar agreement, or encumbrance.
Section 1.2. FMS Excluded Assets. Notwithstanding anything in Section
1.1 to the contrary, the parties hereto expressly agree that FMS is not
hereunder contributing, assigning, transferring, conveying or delivering to
Newco, and Newco is not acquiring or accepting, the following assets, rights and
properties (collectively, the "Excluded Assets"):
(i) any cash, bank deposits or similar cash items of FMS;
(ii) any insurance policies, bonds, letters of credit or other
similar items, or any cash surrender value in regard thereto;
(iii) any claim, right or interest in or to any refund for
federal, state or local franchise, income or other taxes or fees of any
nature whatsoever for periods on or
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prior to the Closing Date (as defined in Section 9.1 below) and any
interest (or similar amount) thereon;
(iv) any of FMS' corporate books and records of internal
proceedings or tax records, and any books and records that FMS is
required by law to retain (the "Corporate Records"), but Newco shall
have access to the same to the extent permitted by Section 11.2
below;
(v) any employment, consulting or similar agreement;
(vi) any lease for personal or real property or any
hosting or co-location agreement other than as set forth in Schedule
1.1(a)(iv); and
(vii) the contracts and other agreements listed on
Schedule 1.2.
Section 1.3. FMS Assumed and Excluded Liabilities.
(a) Newco shall not assume or be bound by any obligations,
liabilities (including without limitation, liabilities in respect of Taxes (as
defined in Section 3.13(a) below) and "employee benefit plans" (as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended)
or any other pension plans or employee benefit arrangements) or commitments of
FMS or any of its affiliates of any kind, character or description, whether
absolute, accrued, known, unknown, asserted, unasserted, due or to become due,
contingent or otherwise ("Liabilities"), in connection with the Assets or
otherwise, other than obligations and liabilities arising after the Closing Date
under the Assigned Contracts in respect of the period following such Closing
Date.
(b) Any ad valorem Taxes relating to a period straddling the Closing
Date shall be prorated to the Closing Date, and the portion allocable to the
period prior to the Closing Date shall be promptly paid or reimbursed by FMS,
and the portion allocable to the period after the Closing Date shall be promptly
paid or reimbursed by Newco. All other Liabilities of FMS shall remain the sole
responsibility of FMS.
Section 1.4. XXXX Property to be Contributed. Upon the terms and
subject to the conditions hereinafter set forth, XXXX shall contribute, assign,
transfer, convey and deliver to Newco, and Newco shall acquire and accept from
XXXX, free and clear of all Liens, all right, title and interest of XXXX in, to
and under all of the Baseline Stock.
ARTICLE II
CONSIDERATION
Section 2.1. Amount and Form of Consideration.
---------------------------------
(a) The aggregate consideration to be delivered on the Closing Date
by Newco to FMS for the Assets shall consist of the following:
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(i) Three hundred (300) fully paid and nonassessable
shares of the common stock, $.01 par value per share (the "Newco
Common Stock"), of Newco (the "Stock Consideration"); plus
(ii) the assumption by Newco of certain of the
obligations and liabilities of FMS pursuant to Section 1.3 above.
(b) The aggregate consideration to be delivered on the Closing Date
by Newco to XXXX for the Baseline Stock shall consist of the following:
(i) Two thousand seven hundred (2700) fully paid and
nonassessable shares of Newco Common Stock (the "XXXX Stock
Consideration").
Section 2.2. Single Transaction. The transfer of assets by FMS and the
Baseline Stock by XXXX in exchange for shares of Newco's capital stock as
contemplated by this Agreement, together constitute a single transaction to
which the parties intend that Section 351 of the Internal Revenue Code of 1986,
as amended (the "Code") apply, and subsequent to the Transaction FMS and XXXX
shall own all of the issued and outstanding capital stock of Newco.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF FMS
FMS hereby represents and warrants to Newco as follows:
Section 3.1. Organization. FMS is a corporation duly organized, validly
existing and in good standing under the laws of the State of California, and has
all requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as now being conducted. All of the
outstanding capital stock of FMS is owned beneficially and of record by the
shareholders set forth on Schedule 3.1 (the "Shareholders").
Section 3.2. Authorization of Agreement. FMS has full corporate power
and authority to execute and deliver this Agreement, the Promissory Note, the
Pledge Agreement and each other agreement, document, instrument or certificate
contemplated by this Agreement or to be executed by FMS or the Shareholders in
connection with the consummation of the transactions contemplated by this
Agreement (all such other agreements, documents, instruments and certificates
are hereafter collectively referred to as the "FMS Documents") and to perform
fully its obligations hereunder and thereunder. The execution, delivery and
performance of this Agreement and each of the FMS Documents have been duly and
validly authorized and approved by the Board of Directors and Shareholders of
FMS and by all other necessary corporate action on behalf of FMS. This Agreement
has been, and on or prior to the Closing each of the FMS Documents will be, duly
and validly executed and delivered by FMS and (assuming the due authorization,
execution and delivery by the other parties hereto and thereto) this Agreement
constitutes, and each of the FMS Documents when so executed and delivered will
constitute, the legal, valid and binding obligation of FMS, enforceable against
FMS in accordance with its respective terms, subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and similar laws
affecting creditors' rights and remedies generally
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and subject, as to enforceability, to general principles of equity, including
principles of commercial reasonableness, good faith and fair dealing (regardless
of whether enforcement is sought in a proceeding at law or in equity).
Section 3.3. Consents and Approvals; No Violation. No filing with,
notification to or consent, authorization, waiver, approval, order, license,
certificate or Permit of, any Government Body (as defined in Section 3.14 below)
is necessary for FMS' execution, delivery or performance of this Agreement or
any of the FMS Documents or the consummation by FMS of the transactions
contemplated by this Agreement and the FMS Documents.
(a) Except as set forth on Schedule 3.3(b) hereto, none of the
execution and delivery by FMS of this Agreement and the FMS Documents, the
consummation of the transactions contemplated hereby or thereby or compliance by
FMS with any of the provisions hereof or thereof will (i) conflict with or
result in any breach of any provision of the Certificate of Incorporation or
By-laws of FMS, (ii) violate any order, injunction, judgment, decree, ruling,
writ, assessment or arbitration award (each, an "Order") or statute, rule or
regulation of any Government Body by which FMS or any of its properties or
assets is bound, (iii) conflict with, violate, result in the breach or
termination of, or (with or without due notice or the lapse of time or both)
constitute a default or give rise to any "takeback" right or right of
termination or acceleration or right to increase the obligations under or
otherwise modify any of the terms, conditions or provisions of any note, bond,
mortgage, license, franchise, Permit, indenture, contract, agreement or other
instrument or obligation to which FMS is a party, or by which FMS or any of its
properties or assets is or may be bound, or (iv) result in the creation of any
Lien upon any of the Assets.
Section 3.4. Title to Assets. FMS has good and marketable title to all
of the Assets, free and clear of all Liens. Upon the contribution, assignment,
transfer and conveyance of the Assets to Newco hereunder, there will be vested
in Newco good and marketable title to such Assets, free and clear of all Liens
other than those placed thereon by Newco.
Section 3.5. No Undisclosed Liabilities. Except as set forth on
Schedule 3.5 hereto, FMS has no Liabilities of any kind, and, to FMS' knowledge,
there is no basis for the assertion of any claim or Liability of any nature
against FMS. Except as set forth in Schedule 3.5, FMS has no indebtedness for
borrowed money.
Section 3.6. Results of Operations; Subscriptions. (a) FMS' annual
running revenue and annual running operating cash flow, based on actual figures
for the month of September 2001 determined in accordance with generally accepted
accounting principles (i.e., multiplying September's amounts by twelve), were
$90,000 and $0, respectively. The foregoing revenue and operating cash flow
amounts for the month of September 2001 do not include any extraordinary or
non-recurring sources of revenue or any revenues resulting from contracts that
were not negotiated and entered into by FMS on an arm's length basis.
(b) As of October 31, 2001, FMS had a total of 290 paying
subscribers for the services on the XxxxXxxxxxx.xxx website and 200 subscribers
receiving a free two-week trial subscription to FilmTracker's Info Source. The
average monthly subscription fee being paid by paying subscribers as of October
31, 2001 was as follows: 210 subscribers paying an average
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monthly subscription fee of $14.35 and 80 subscribers paying an average monthly
subscription fee of $50.00.
Section 3.7. Litigation, etc. There is no judicial, administrative or
arbitral action, suit, proceeding (public or private), claim or governmental
proceeding (each, a "Legal Proceeding") pending or, to the knowledge of FMS,
threatened that questions the validity of this Agreement, the FMS Documents or
any action taken or to be taken by FMS in connection with the consummation of
the transactions contemplated hereby or thereby. Except as set forth on Schedule
3.7 hereto, (i) no investigation or review by any Government Body with respect
to FMS is pending or, to the knowledge of FMS, threatened, nor has any
Government Body indicated to FMS an intention to conduct the same, (ii) there is
no Legal Proceeding pending or, to the knowledge of FMS, threatened against or
affecting FMS or its assets at law or in equity, or before any Government Body
(and, to the knowledge of FMS, there is no basis for any such Legal Proceeding
not so set forth which, if adversely determined, could adversely affect FMS or
Newco) and (iii) there is no outstanding or, to the knowledge of FMS, threatened
Order of any Government Body against, affecting or naming FMS or affecting any
of the Assets. Except as set forth on Schedule 3.7 hereto, during the three
years preceding the date of this Agreement, no Legal Proceeding has been
commenced or, to the knowledge of FMS, threatened against or affecting FMS or
its business or assets at law or in equity, or before any Government Body. On
and after the date hereof until the Closing, FMS will notify Newco of the
existence or threat of any investigation, review, Legal Proceeding or Order
which would be required to be disclosed on Schedule 3.7.
Section 3.8. Compliance with Law. FMS has not violated or failed to
comply in any material respect with any statute, law, ordinance, regulation,
rule or Order of any Government Body.
Section 3.9. Employment Agreements. Except as set forth on Schedule 3.9
hereto, FMS is not now and has never been a party to any employment,
compensation, consulting, severance or indemnification agreement or any other
agreement with a present or former employee of FMS that provides for severance
payments, stay bonuses or any other payments contingent upon a change in control
of FMS or a sale of its business or assets.
Section 3.10. Certain Agreements.
(a) Except as set forth on Schedule 1.1(a)(i) hereto or Schedule
3.10 hereto, neither FMS nor any of its properties or assets is a party to or
bound by any (i) license agreement, (ii) hosting or co-location agreement, (iii)
lease or rental agreement, (iv) contract granting a right of first refusal or
for the acquisition, sale or lease of any assets of FMS, (v) mortgage, pledge,
conditional sales contract, security agreement or other similar contract with
respect to any property of FMS, (vi) loan agreement, credit agreement,
promissory note, guarantee, subordination agreement, letter of credit or other
similar type of contract, (vii) or any other material contract. FMS has
delivered to Newco true, correct and complete copies of the Assigned Contracts
and each contract listed on Schedule 3.10 hereto, including all amendments,
modifications, supplements, side letters or consents affecting the obligations
of any party thereunder.
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(b) Each Assigned Contract is valid and enforceable in accordance
with its terms, subject to applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and similar laws affecting creditors'
rights and remedies generally, and subject, as to enforceability, to general
principles of equity (regardless of whether enforcement is sought in a
proceeding at law or in equity). FMS is not in breach of or in default under any
Assigned Contract and, to FMS' knowledge, there has not occurred any event
which, after the giving of notice or lapse of time or both, would constitute a
default under or result in a breach of an Assigned Contract by any party subject
thereto. No previous or current party to any Assigned Contract (i) has given
notice of or made a claim with respect to any breach or default under any
Assigned Contract or (ii) has given notice of termination or non-renewal of any
Assigned Contract. Except as set forth in Schedule 3.10 hereto, each of the
Assigned Contracts is freely transferable by FMS to Newco and no third party
consents are required for such transfer.
Section 3.11. Real Property. FMS does not now own and has not ever
owned any real property. Except as set forth on Schedule 3.11 hereto, FMS is not
now and has never been a party to any lease, sublease, license, sublicense or
other agreement or arrangement with respect to any real property, and has not
used or occupied, does not use or occupy, and does not have any right to use or
occupy, now or in the future, any real property.
Section 3.12. Intangible Property. Schedule 3.12 hereto sets forth a
list of each trademark, trade name, logo, service xxxx, brand xxxx, brand name,
computer program, domain name, database, patent, industrial design and copyright
owned or used by FMS, a list of all registrations thereof and pending
applications therefor, inventions, drawings, customer lists, proprietary
know-how or information and each contract, license or other agreement relating
thereto (including, without limitation, the name "FilmTracker" and all rights
relating to the use of such name and any logos or characters developed by or on
behalf of FMS for use in connection with FMS' business) (collectively, the
"Intangible Property") and indicates, with respect to each item of Intangible
Property, the owner thereof and, if applicable, the name of the licensor and
licensee thereof. Except as set forth on Schedule 3.12, each of the foregoing
assets listed on such Schedule as being owned by FMS is owned by FMS free and
clear of any and all Liens and is in good standing and no other person or entity
(including any past or present officer, employee or consultant of FMS) has any
claim of ownership or right of use with respect thereto. The use, modification,
compilation, reproduction, public display or performance, or distribution of the
foregoing by FMS does not, and the use, modification, compilation, reproduction,
public display or performance, or distribution thereof by Newco immediately
after the Closing will not, conflict with, infringe upon, violate or interfere
with or constitute an appropriation of any right, title, interest or goodwill,
including, without limitation, any intellectual property right, trademark, trade
name, service xxxx, brand xxxx, brand name, computer program, domain name,
database, patent, industrial design, copyright or any pending application
therefor of any other person or entity and there have been no claims made and
FMS has not received any notice or otherwise acquired any knowledge that any of
the foregoing is invalid or conflicts with the asserted rights of any other
person or has not been used or enforced or has been failed to be used or
enforced in a manner that would result in the abandonment, cancellation or
unenforceability of any of the Intangible Property.
(a) Except as set forth on Schedule 3.12, FMS is not a party to or
bound by any contract, license or other agreements relating to the Intangible
Property.
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Section 3.13. Taxes. (a) For purposes of this Agreement:
(i) "Tax" or "Taxes" shall mean all taxes, charges, fees,
imposts, levies or other assessments by any governmental authority,
including all net income, gross receipts, capital, sales, use, ad
valorem, value added, transfer, franchise, profits, inventory, capital
stock, license, withholding, payroll, employment, social security,
unemployment, excise, severance, stamp, occupation, property and
estimated taxes, customs duties, fees, assessments and charges of any
kind whatsoever, and all interest, penalties, fines, additions to tax
or other amounts imposed by any governmental authority which relate in
any way to the assessment of collection of any taxes or the filing of
any Tax Return, and shall include any transferee or successor liability
in respect of taxes (whether by contract or otherwise) and any
liability in respect of any tax as a result of being a member of any
Affiliated Group, including any consolidated, combined, unitary or
similar group.
(ii) "Tax Return" means any return (including any
consolidated, combined or unitary return in which FMS is, or was,
included or includible), declaration, report, claim for refund,
separate election or information return or statement relating to Taxes,
including any schedule or attachment thereto, and including any
amendment thereof.
(iii) "Affiliated Group" means any affiliated group within the
meaning of Section 1504 of the Code, or any consolidated, combined,
unitary or similar group defined under a similar provision of state,
local or foreign law.
(iv) "Person" means any natural person, corporation, general
partnership, limited partnership, proprietorship, limited liability
company, other business organization, trust, union, association or
Government Body.
(b) Except as set forth on Schedule 3.13(b) hereto, FMS has (w)
filed when due or will file when due (taking into account extensions) with the
appropriate federal, state, local, foreign and other governmental authorities,
all Tax Returns required to be filed by it or on its behalf, all of which Tax
Returns were true or will be true, complete and correct as of the time of
filing, (x) paid when due and payable (and, through the Closing Date, will
timely pay) all required Taxes (except for Taxes which are being contested in
good faith, as set forth on Schedule 3.13(b), and for which adequate reserves
have been established in accordance with GAAP, and (y) established (and through
and including the Closing Date will establish) reserves that are adequate for
the payment of all Taxes not yet due and payable with respect to the results of
operations through the Closing Date. There are no Taxes assessed or asserted or
claimed in writing to be due by any governmental authority or otherwise in
respect of any Tax Returns filed by FMS or on FMS' behalf, and no issues have
been raised (and are currently pending) by any governmental authority in
connection with any such Tax returns.
(c) FMS has duly and timely withheld and paid over to the
appropriate governmental authorities all Taxes and other amounts required to be
so withheld and paid over for all periods under all applicable laws in
connection with amounts paid or owing to any
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employee, independent contractor, subcontractor, lender, stockholder or other
third party or other personnel supplied by any third party.
(d) There is no audit, examination, deficiency, or refund proceeding
pending with respect to any Taxes or Tax Returns of FMS, and no governmental
authority has given oral or written notice of the assessment or intent to make
any assessment or has given written or oral notice of the commencement of any
audit, examination or deficiency proceeding with respect to any Taxes or Tax
Returns of FMS. FMS has not received written or oral notice of any claim by a
governmental authority in a jurisdiction where FMS does not file Tax Returns
that FMS is or may be subject to Tax by that jurisdiction or is obliged to act
as withholding agent under the laws of that jurisdiction.
(e) Set forth on Schedule 3.13(e) is a complete list of all federal,
state, local, and foreign Tax Returns filed by, or on behalf of, FMS for taxable
periods commencing on or after FMS' inception, and all jurisdictions in which
FMS is currently subject to tax.
(f) Except as set forth in Schedule 3.13(f), FMS is not a party to
or bound by any Tax sharing, Tax indemnification or similar agreements (or
portions of any agreements) with respect to Taxes.
(g) FMS does not have, nor has FMS ever had, a permanent
establishment (within the meaning of any applicable Tax treaty) in any foreign
country, nor does it engage or has it ever engaged in a trade or business in any
foreign country that has subjected its business to Tax in such foreign country.
(h) Except as set forth in Schedule 3.13(h), FMS is not a party to
any joint venture, partnership or other arrangement that constitutes a
partnership for federal income tax purposes.
(i) Except as set forth in Schedule 3.13(i), the performance of the
transactions contemplated by this Agreement will not (either alone or upon the
occurrence of any additional or subsequent event) result in, nor do the
Liabilities assumed by Newco otherwise provide for, any payment by Newco that
would constitute an "excess parachute payment" within the meaning of Section
280G of the Code.
(j) Except as set forth in Schedule 3.13(j), none of the Assets are
(i) property required to be treated as being owned by another Person pursuant to
the provisions of Section 168(f)(8) of the Internal Revenue Code of 1954, as
amended and in effect immediately prior to the enactment of the Tax Reform Act
of 1986; (ii) "tax-exempt use property" within the meaning of Section 168(h)(l)
of the Code; (iii) tax exempt bond financed property within the meaning of
Section 168(g) of the Code; (iv) property used "predominantly outside of the
United States" within the meaning of Section 168(g)(4); or (v) "limited use
property" (as defined in Rev. Proc. 76-30).
(k) There are no security interests on any of the assets of FMS that
arose in connection with any failure (or alleged failure) to pay any Tax.
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(l) Except as set forth in Schedule 3.13(l), FMS (i) is not and has
never been a member of any Affiliated Group and (ii) has no liability for the
Taxes of any Person under Treasury Regulation ss. 1.1502-6 or any similar
provision of state, local or foreign law.
(m) FMS is not a "foreign person" within the meaning of Section 1445
of the Code.
Section 3.14. Permits. Schedule 3.14 hereto sets forth a list of all
approvals, authorizations, consents, franchises, licenses, permits or
certificates (collectively, "Permits") granted by any government or governmental
or regulatory body thereof or political subdivision thereof, whether federal,
state, local or foreign, or any agency or instrumentality thereof, or any court
or arbitrator (public or private) (each, a "Government Body") and applications,
if any, for any of the foregoing, held by FMS. FMS is the holder of all Permits
necessary or appropriate to enable it to continue to conduct its business as
presently conducted, except where failure to hold such Permit would not have a
material adverse effect on FMS or the Assets. Each of the Permits is in full
force and effect, except where the failure to be in full force and effect would
not have a material adverse effect on FMS or the Assets.
Section 3.15. Related Parties; Related Party Transactions. Except as
set forth on Schedule 3.15 hereto, neither FMS nor any employee of FMS owns any
direct or indirect interest of any kind in, or controls or is a director,
officer, employee or partner of, or consultant to, or lender to or borrower from
or has the right to participate in the profits of, any Person which is (A) a
competitor, supplier, customer, landlord, tenant, creditor or debtor of FMS, (B)
engaged in a business related to the business of FMS, (C) participating in any
transaction to which FMS is a party, or (D) a party to any contract, agreement,
indenture, note, bond, loan, instrument, lease, conditional sale contract,
mortgage, license, franchise, insurance policy, commitment or other arrangement
or agreement with FMS.
Section 3.16. Options. Except as set forth on Schedule 3.16 hereto,
there are no outstanding securities of FMS convertible into or evidencing the
right to purchase or subscribe for any shares of capital stock of FMS and there
are no outstanding or authorized options, warrants, calls, subscriptions,
rights, commitments or any other agreements of any character obligating FMS to
issue any shares of its capital stock or any securities convertible into or
evidencing the right to purchase or subscribe for any shares of such stock.
Section 3.17. Investor Representations. The shares of Common Stock
received by FMS pursuant to this Agreement will be acquired for FMS' own account
and not with a view to or in connection with the sale or distribution of any
part thereof except for distributions to the shareholders of FMS.
Section 3.18. Exemption from Registration. FMS understands that the
shares of Common Stock received by FMS pursuant to this Agreement will not be
registered under the Securities Act on the ground that the transfer provided for
in this Agreement is exempt from registration under the Securities Act, and that
the reliance of Newco on such exemption is predicated in part on FMS'
representations set forth in this Agreement. The certificates representing the
shares of Common Stock issued to FMS pursuant to this Agreement will bear an
appropriate legend reflecting such exempt issuance without registration.
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Section 3.19. Knowledge and Information. FMS has been furnished with
and has had access to such information related to Baseline as FMS considered
necessary to make an informed decision and determination with respect to the
acquisition of the Stock Consideration.
Section 3.20. Brokers. No broker, finder or investment banker is
entitled to any brokerage fee, finder's fee or other fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of FMS.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF XXXX
XXXX represents and warrants to FMS as follows:
Section 4.1. Organization.
-------------
(a) Newco is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and has all requisite
corporate power and authority to own, lease and operate its properties and to
carry on its business as now being conducted.
(b) Baseline is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware and has all requisite
corporate power and authority to own, lease and operate its properties and to
carry on its business as now being conducted.
(c) XXXX is a corporation duly organized, validly existing and in
good standing under the laws of the State of Florida and has all requisite
corporate power and authority to own, lease and operate its properties and to
carry on its business as now being conducted.
Section 4.2. Authorization of Agreement. Each of XXXX, Baseline and
Newco has full corporate power and authority to execute and deliver this
Agreement and each other agreement, document, instrument or certificate
contemplated by this Agreement or to be executed by it in connection with the
consummation of the transactions contemplated hereby and thereby (all of such
agreements, documents, instruments and certificates being hereinafter referred
to, collectively, as the "XXXX Documents"), and to perform fully its obligations
hereunder and thereunder. The execution, delivery and performance by each of
XXXX, Baseline and Newco of this Agreement and each XXXX Document to which it is
a party have been duly authorized by the Board of Directors of each such entity
and by all other necessary corporate action on the part of each of XXXX,
Baseline and Newco. This Agreement has been, and at or prior to the Closing,
each of the XXXX Documents to which such entity is a party will be, duly and
validly executed and delivered by each of XXXX, Baseline and Newco and (assuming
the due authorization, execution and delivery by the other parties hereto and
thereto) this Agreement constitutes, and each of the XXXX Documents to which
such entity is a party when so executed and delivered will constitute, the
legal, valid and binding obligation of each of XXXX, Baseline and Newco,
enforceable against each of XXXX, Baseline and Newco in accordance with its
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respective terms, subject to applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and similar laws affecting creditors'
rights and remedies generally and subject, as to enforceability, to general
principles of equity, including principles of commercial reasonableness, good
faith and fair dealing (regardless of whether enforcement is sought in a
proceeding at law or in equity).
Section 4.3. Consents and Approvals; No Violations.
-------------------------------------
(a) Except for filings, notifications, authorizations, consents
and approvals as may be required under federal and state securities or blue sky
laws, no filing with, notification to or consent, authorization, waiver,
approval, order, license, certificate or Permit of, any Government Body is
necessary for each of XXXX'x, Baseline's or Newco's execution, delivery or
performance of this Agreement or any of the XXXX Documents to which such entity
is a party or the consummation by Newco of the transactions contemplated by this
Agreement and the XXXX Documents to which such entity is a party.
(b) None of the execution and delivery by each of XXXX, Baseline
and Newco of this Agreement or the XXXX Documents to which such entity is a
party, the consummation of the transactions contemplated hereby or thereby or
compliance by each of XXXX, Baseline and Newco with any of the provisions hereof
or thereof will (i) conflict with or result in any breach of any provision of
the Certificates or Articles of Incorporation or By-laws of each of XXXX,
Baseline and Newco, (ii) to the best of each of XXXX'x, Baseline's and Newco's
knowledge, violate any Order or statute, rule or regulation of any Government
Body by which each of XXXX, Baseline and Newco or any of their properties or
assets are bound, or (iii) conflict with, violate, result in the breach or
termination of, or (with or without due notice or the lapse of time or both)
constitute a default or give rise to any "takeback" right or right of
termination or acceleration or right to increase the obligations under or modify
any of the terms, conditions or provisions of any note, bond, mortgage, license,
franchise, Permit, indenture, agreement or other instrument or obligation to
which XXXX, Baseline or Newco is a party, or by which XXXX, Baseline or Newco or
any of their properties or assets are or may be bound.
Section 4.4. Litigation. There are no Legal Proceedings pending or, to
the knowledge of each of XXXX, Baseline and Newco, threatened that question the
validity of this Agreement, the XXXX Documents or any action taken or to be
taken by any of XXXX, Baseline or Newco in connection with the consummation of
the transactions contemplated hereby or thereby. On and after the date hereof
until the Closing, XXXX, 0Baseline and Newco will notify FMS of the existence or
threat of any such Legal Proceeding.
Section 4.5. Capital Stock.
-------------
(a) The authorized capital stock of Newco consists solely of 3,000
shares of common stock, of which, as of the date hereof, no shares of Common
Stock were issued and outstanding. All of the outstanding shares of Newco Common
Stock are duly authorized and validly issued and outstanding, fully paid and
nonassessable. Except for the shares of Common Stock referenced above, Newco has
no other authorized, issued or outstanding equity securities or securities
containing any equity features, or any other securities convertible into,
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exchangeable for or entitling any person to otherwise acquire any other
securities of Newco containing any equity features.
(b) The authorized capital stock of Baseline consists of 3,000
shares of common stock, of which, as of the date hereof, 100 shares of Common
Stock were issued and outstanding. All of the outstanding shares of Baseline
Common Stock are duly authorized and validly issued and outstanding, fully paid
and nonassessable. Except for the shares of Common Stock referenced above,
Baseline has no other authorized, issued or outstanding equity securities or
securities containing any equity features, or any other securities convertible
into, exchangeable for or entitling any person to otherwise acquire any other
securities of Baseline containing any equity features.
Section 4.6. Valid Issuance of Securities. The Stock Consideration
being issued to FMS hereunder, when issued, transferred, and delivered in
accordance with the terms hereof for the consideration expressed herein, will be
duly and validly issued, fully paid and nonassessable and free of restrictions
on transfer other than restrictions of transfer under this Agreement and
applicable state and federal securities laws. The XXXX common stock (the
"Conversion Stock") issuable upon conversion of the Stock Consideration and the
Purchased Stock has been duly and validly reserved for issuance and, when such
Conversion Stock is issued in accordance with the terms hereof, shall be duly
and validly issued, fully paid and nonassessable and free of restrictions on
transfer other than restrictions on transfer under this Agreement and applicable
state and federal securities laws and will be issued in compliance with all
federal and state securities laws.
Section 4.7. Compliance with Law. Baseline has not violated or failed
to comply in any material respect with any statute, law, ordinance, regulation,
rule or Order of any Government Body.
Section 4.8. SEC Documents. XXXX has filed all Securities and Exchange
Commission Documents (the "SEC Documents") required to be filed by it with the
SEC since January 1, 1999 pursuant to the reporting requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). As of their
respective dates, the SEC Documents complied in all material respects with the
requirements of the Exchange Act and the rules and regulations of the SEC
promulgated thereunder applicable to the SEC Documents, and none of the SEC
Documents, at the time they were filed with the SEC, contained any untrue
statement of a material fact or omitted 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 misleading. As of their
respective dates (or as amended), the financial statements of XXXX included in
the SEC Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto. Such financial statements have been prepared in accordance with
generally accepted accounting principles, consistently applied, during the
periods involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto, or (ii) in the case of unaudited interim
statements, to the extent they may exclude footnotes or may be condensed or
summary statements) and fairly present in all material respects the financial
position of XXXX as of the dates thereof and the results of its operations and
cash flows for the periods then ended (subject,
13
in the case of unaudited statements, to normal year-end audit adjustments and
subject, where applicable, to amendments to such financial statements included
in the SEC Documents).
Section 4.9 Financial Statements. Baseline has delivered to FMS
condensed, unaudited income statements of Baseline for the three months ended
December 31, 1999, the twelve months ended December 31, 2000 and the nine months
ended September 30, 2001 and a condensed, unaudited balance sheet of Baseline as
of September 30, 2001 (the "Baseline Financial Statements"). The Baseline
Financial Statements were prepared in accordance with generally accepted
accounting principles (except that they exclude footnotes and are condensed
statements), and present fairly in all material respects the financial position
of Baseline as of the dates thereof and its results of operations for the
periods then ended (subject to normal end of the year adjustments and
modifications). Except as set forth in the Baseline Financial Statements,
neither Baseline nor Newco has any material liabilities or obligations, absolute
or contingent (individually or in the aggregate).
Section 4.10 Contracts. To XXXX'x knowledge, each contract or agreement
to which Baseline is a party is valid, binding and enforceable and in full force
and effect, except where failure to be valid, binding and enforceable and in
full force and effect would not have a material adverse effect on Baseline, and
to XXXX'x knowledge, Baseline is not in default thereunder, except those
defaults that would not have a material adverse effect on Baseline.
Section 4.11 Intellectual Property. To XXXX'x knowledge, XXXX
(including its affiliates other than Baseline) does not separately own or
otherwise hold any patents, trademarks, service marks, trade names, copyrights,
or other proprietary rights necessary for Baseline's business as now conducted.
There are no outstanding options, licenses, or agreements between XXXX and
Baseline of any kind relating to the foregoing. Neither the execution nor
delivery of this Agreement or the XXXX Documents will, to XXXX'x knowledge,
conflict with or result in a breach of the terms, conditions or provisions of,
or constitute a default under, any contract, covenant or instrument under which
any of the Baseline employees is now obligated.
Section 4.12 Title to Property and Assets. Except as set forth on
Schedule 4.12, Baseline owns its property and assets free and clear of all
mortgages, Liens, loans and encumbrances, except such encumbrances which do not
materially impair Baseline's ownership or use of such property or assets. With
respect to the property and assets it leases, Baseline is in compliance with
such leases in all material respects and, to the best of XXXX'x knowledge, holds
a valid leasehold interest free of any Liens, claims or encumbrances. XXXX owns
the Baseline Stock beneficially and of record free and clear of all mortgages,
Liens, loans and other encumbrances.
Section 4.13 Employees. Other than Xxxx Xxxxxxxx, the employment of
each officer and employee of Baseline is terminable at will. Baseline does not
have any collective bargaining agreements covering any of its employees.
Baseline does not have any deferred compensation, pension, profit sharing,
bonus, severance or other similar employee benefit plan or obligation covering
any of its employees other than Xxxx Xxxxxxxx or any plan subject to the
Employee Retirement Income Security Act of 1974.
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Section 4.14 Employee Benefit Plans. Except as set forth on Schedule
4.14, Baseline does not have any Employee Benefit Plan as defined in the
Employee Retirement Income Security Act of 1974.
Section 4.15 Taxes. Baseline has (i) filed when due or will file when
due (taking into account extensions) with the appropriate federal, state, local,
foreign and other governmental authorities, all Tax Returns required to be filed
by it or on its behalf, all of which Tax Returns were true or will be true,
complete and correct as of the time of filing, (ii) paid when due and payable
(and, through the Closing Date, will timely pay) all required Taxes (except for
Taxes which are being contested in good faith), and for which adequate reserves
have been established in accordance with GAAP, and (iii) established (and
through and including the Closing Date will establish) reserves that are
adequate for the payment of all Taxes not yet due and payable with respect to
the results of operations through the Closing Date. There are no Taxes assessed
or asserted or claimed in writing to be due by any governmental authority or
otherwise in respect of any Tax Returns filed by Baseline or on Baseline's
behalf, and no issues have been raised (and are currently pending) by any
governmental authority in connection with any such Tax returns.
Section 4.16 Permits. Baseline is the holder of all Permits necessary
or appropriate to enable it to continue to conduct its business as presently
conducted except where failure to hold such Permit would not have a material
adverse effect on Baseline. Each of the Permits is in full force and effect
except where the failure to be in full force and effect would not have a
material adverse effect on Baseline.
Section 4.17 Related Parties; Related Party Transactions. Neither
Baseline nor any employee of Baseline owns any direct or indirect interest of
any kind in, or controls or is a director, officer, employee or partner of, or
consultant to, or lender to or borrower from or has the right to participate in
the profits of, any Person which is (A) a competitor, supplier, customer,
landlord, tenant, creditor or debtor of Baseline, (B) engaged in a business
related to the business of Baseline, (C) participating in any transaction to
which Baseline is a party, or (D) a party to any contract, agreement, indenture,
note, bond, loan, instrument, lease, conditional sale contract, mortgage,
license, franchise, insurance policy, commitment or other arrangement or
agreement with Baseline.
Section 4.18 Brokers. No broker, finder or investment banker is
entitled to any brokerage fee, finder's fee or other fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of any of XXXX, Baseline and Newco.
ARTICLE V
COVENANTS OF FMS
Section 5.1. Access to Information. From the date of this Agreement
until the Closing Date, FMS shall permit XXXX and its representatives,
including, without limitation, its legal counsel and accountants, to conduct an
appropriate due diligence examination and
15
investigation with respect to FMS. FMS will reasonably cooperate with XXXX'x
diligence, and such cooperation will include, without limitation, the following:
(i) providing XXXX and its representatives with reasonable
access to all data, records and other information that they may request
in connection with their evaluation of the transactions contemplated by
this Agreement (including, without limitation, lists of contact
persons, marketing information, and records of negotiations with
existing and prospective customers);
(ii) allowing XXXX and its representatives to conduct a
complete business, financial and legal review of all aspects of FMS;
(iii) affording XXXX and its representatives the opportunity
to discuss the affairs, finances, operations and accounts of FMS with
FMS' officers, directors, agents and other appropriate personnel; and
(iv) facilitating conversations between XXXX and its
representatives and representatives of the other parties to the
Assigned Contracts.
Section 5.2. Exclusivity. From the date of this Agreement until the
termination of this Agreement in accordance with its terms, FMS shall not, nor
shall FMS permit its officers, directors, affiliates, representatives or agents
to (including, without limitation, investment bankers, financial advisors,
brokers and other advisors) (collectively, the "Representatives"), directly or
indirectly do any of the following:
(i) discuss, negotiate, undertake, authorize, recommend,
propose or enter into, either as the proposed surviving, merged,
acquiring or acquired corporation, any transaction (a "Material
Transaction") involving any disposition or other change of ownership or
control of a substantial portion of FMS' stock or assets or any
assumption by FMS of substantial liabilities, including, without
limitation, any joint venture or partnership involving any of the
foregoing (other than the transaction contemplated in this Agreement);
(ii) facilitate, encourage, solicit or initiate or in any way
engage in discussions, negotiations or submissions of proposals or
offers in respect of a Material Transaction (other than the transaction
contemplated in this Agreement);
(iii) furnish or cause to be furnished to any Person (other
than XXXX or its representatives) any information concerning the
business, operations, properties or assets of FMS in connection with a
Material Transaction; or
(iv) otherwise cooperate in any way with, or assist or
participate in, facilitate or encourage, any effort or attempt by any
other Person to do or seek any of the foregoing.
FMS shall inform XXXX by telephone, within 24 hours, of FMS' receipt of any
proposal or bid (including the terms thereof and the Person making such proposal
or bid) in respect of any
16
Material Transaction other than the transaction described in this Agreement. FMS
shall, immediately upon execution of this Agreement, instruct its
Representatives to cease all further activities with respect to the sale of FMS
or FMS' assets, including, without limitation, the dissemination of information.
Section 5.3. Conduct of Business. From the date of this Agreement until
the earlier of the Closing Date or the Termination Date (as defined in Section
13.1 below) FMS (i) shall not, without the prior written consent of Newco, amend
or modify (or agree to amend or modify), enter into or cancel any agreement of
the type to be included in the Assets, (ii) shall use its best efforts to
preserve its present relationships with Persons having business dealings with
FMS, (iii) (A) shall maintain the books, accounts and records of FMS in the
ordinary course of business consistent with past practices and (B) shall comply
in all material respects with all contractual and other obligations applicable
to the operations of FMS, (iv) shall not subject any of the properties or assets
(whether tangible or intangible) of FMS to any Lien, or incur any indebtedness
for borrowed money, (v) shall not acquire any properties or assets or sell,
assign, transfer, convey, lease or otherwise dispose of any of the properties or
assets of FMS, (vi) shall not cancel or compromise any debt or claim or waive or
release any right of FMS, (vii) shall not introduce any change with respect to
the operation of FMS and (viii) shall operate only in the ordinary course of
business. The foregoing shall not restrict FMS from canceling any agreement not
included in the Assets.
Section 5.4. Public Announcements. FMS agrees that it shall not issue
any press release or make any public statement, announcement or filing
concerning this Agreement or any aspect of the transactions contemplated hereby,
except as may be required by applicable law or with the prior consent of Newco.
FMS agrees that it shall not issue any such release or make any such statement,
announcement or filing required by applicable law except after prior
consultation with an prior written approval of Newco, which approval shall not
be unreasonably withheld.
Section 5.5. No Breach of Representations and Warranties. FMS agrees
that it shall not take any action, and shall use its reasonable commercial
efforts not to permit any event to occur, which would result in any of the
representations and warranties of FMS contained in this Agreement not being true
and correct in any material respect on and as of the Closing Date with the same
force and effect as if such representations and warranties had been made on and
as of the Closing Date.
Section 5.6. Updating Information. FMS shall promptly deliver to Newco
any information concerning events subsequent to the date of this Agreement that
is necessary to supplement the representations and warranties contained herein,
including the Schedules hereto, or the information delivered by FMS pursuant to
any of the covenants contained herein, in order that such representations and
warranties (including such Schedules) or the information so delivered be
complete and accurate in all material respects, it being understood and agreed
that the delivery of such information shall not in any manner constitute a
waiver by Newco of any of the conditions precedent to the Closing hereunder,
including, without limitation, the conditions contained in Section 7.1.
17
Section 5.7. Consents. FMS shall use its diligent, good faith efforts
to obtain, at the earliest practicable date, all consents and approvals required
to consummate the transactions contemplated by this Agreement.
Section 5.8. Further Actions. FMS agrees to execute and deliver such
instruments and promptly take such other actions as may reasonably be required
to consummate the transactions contemplated hereby in accordance with the terms
hereof.
ARTICLE VI
COVENANTS OF XXXX, BASELINE AND NEWCO
Section 6.1. No Breach of Representations and Warranties. Each of XXXX,
Baseline and Newco agrees that it shall not take any action, and shall use its
reasonable commercial efforts not to permit any event to occur, which would
result in any of the representations and warranties of XXXX contained in this
Agreement not being true and correct in any material respect on and as of the
Closing Date with the same force and effect as if such representations and
warranties had been made on and as of the Closing Date.
Section 6.2. Consents and Conditions. Each of XXXX, Baseline and Newco
shall use its reasonable efforts to assist FMS in causing each of the conditions
precedent to the obligations of FMS to be satisfied.
Section 6.3. Updating Information. XXXX shall promptly deliver to FMS
any information concerning events subsequent to the date of this Agreement that
is necessary to supplement the representations and warranties contained herein,
or the information delivered by XXXX pursuant to any of the covenants contained
herein, in order that such representations and warranties or the information so
delivered be complete and accurate in all material respects, it being understood
and agreed that the delivery of such information shall not in any manner
constitute a waiver by FMS of any of the conditions precedent to the Closing
hereunder, including, without limitation, the conditions contained in Section
8.1.
Section 6.4. Further Actions. Each of XXXX, Baseline and Newco agrees
to execute and deliver such instruments and take such other actions as may
reasonably be required to consummate the transactions contemplated hereby in
accordance with the terms hereof.
ARTICLE VII
CONDITIONS PRECEDENT TO XXXX'X, BASELINE'S AND NEWCO'S OBLIGATIONS
Section 7.1. Conditions. The obligations of XXXX, Baseline and Newco to
consummate the Transaction on the Closing Date is subject to the satisfaction of
the following conditions (any or all of which may be waived by XXXX, in its sole
discretion, in whole or in part, to the extent permitted by applicable law):
18
(i) each of the representations and warranties of FMS
contained herein shall be true and correct in all material respects on
and as of the Closing Date with the same force and effect as though the
same had been made on and as of the Closing Date;
(ii) FMS shall have performed and complied, in all material
respects, with the covenants and provisions of this Agreement required
to be performed or complied with by it between the date hereof and the
Closing Date;
(iii) since the date of this Agreement, no event or
circumstance shall have occurred that has had, or is reasonably likely
to have, a material adverse effect on the business, assets, properties,
liabilities, financial condition or results of operations of FMS;
(iv) (A) no Legal Proceeding shall have been instituted or
threatened or claim or demand made against FMS or Newco seeking to
restrain or prohibit or to obtain damages with respect to the
consummation of the transactions contemplated by this Agreement, or
which might, in the reasonable opinion of Newco, result in a material
adverse change in the business, assets, properties, liabilities,
financial condition or results of operations of FMS and (B) there shall
not be in effect any Order of a Government Body of competent
jurisdiction restraining, enjoining or otherwise prohibiting the
consummation of the transactions contemplated by this Agreement;
(v) Newco or FMS shall have received all third-party consents
and approvals referred to in Schedule 3.10, all necessary governmental
and regulatory approvals and all other consents that Newco may
reasonably require with respect to its assumption of any contracts,
licenses, agreements, understandings and other arrangements and
instruments to which FMS is a party;
(vi) XXXX shall not have obtained or discovered, in the course
of its due diligence review referred to in Section 5.1 above,
information concerning FMS or the Assets which, in the sole judgment of
XXXX, could materially adversely affect the business, assets, financial
condition or results of operations of the FMS or Newco;
(vii) Newco shall have received a certificate to the effect
set forth in clauses (i), (ii) and (iii) above, dated the Closing Date
and signed by a duly authorized officer of FMS;
(viii) Newco shall have received a certificate of the
Secretary of FMS, dated the Closing Date, setting forth resolutions of
the Board of Directors and of the shareholders of FMS authorizing the
execution and delivery of the FMS Documents and each other document and
instrument required to be executed and delivered by FMS hereunder and
the consummation of the transactions contemplated hereby and thereby,
and certifying that such resolutions were duly adopted and have not
been rescinded or amended as of the Closing Date;
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(ix) Fox Studios shall have executed and delivered to Newco an
agreement in a form satisfactory to Newco providing for a payment of at
least $250,000 per year to Baseline for the license of Baseline data;
(x) FMS shall have paid all amounts due and owing and any
amounts accrued, but not yet due and owing, under each of the Assigned
Contracts and the Service Agreement between Quest and FMS and shall
furnish proof of the same in a form satisfactory to Baseline; and
(xi) FMS shall have executed and delivered to Newco (A) all
documents to be delivered at the Closing in accordance with the terms
of this Agreement and, including, without limitation, the Stock
Purchase Agreement, the Promissory Note and the other agreements and
documents with respect thereto (B) such other documents and instruments
as Newco may reasonably request and which FMS can obtain with
reasonable commercial efforts in order to consummate the transactions
contemplated by this Agreement.
ARTICLE VIII
CONDITIONS PRECEDENT TO FMS' OBLIGATIONS
Section 8.1. Conditions. The obligation of FMS to consummate the
Transaction on the Closing Date is subject to the satisfaction of the following
conditions (any or all of which may be waived by FMS, at the sole option of FMS,
in whole or in part to the extent permitted by applicable law):
(i) each of the representations and warranties of each of
XXXX, Baseline and Newco contained herein shall be true and correct in
all material respects on and as of the Closing Date with the same force
and effect as though the same had been made on and as of the Closing
Date;
(ii) Each of XXXX, Baseline and Newco shall have performed and
complied, in all material respects, with the covenants and provisions
of this Agreement required to be performed or complied with by it
between the date hereof and the Closing Date;
(iii) FMS shall have received from each of XXXX, Baseline and
Newco a certificate to the effect set forth in clauses (i) and (ii)
above, dated the Closing Date and signed by a duly authorized officer
of such parties;
(iv) FMS shall have received a certificate of the Secretary of
each of XXXX, Baseline and Newco, dated the Closing Date, setting forth
resolutions of the Board of Directors of each or such parties
authorizing the execution and delivery of this Agreement and each
document and instrument required to be executed and delivered by such
parties hereunder and the consummation of the transactions contemplated
hereby
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and thereby, and certifying that such resolutions were duly adopted and
have not been rescinded or amended as of the Closing Date;
(v) (A) no Legal Proceeding shall have been instituted or
threatened or claim or demand made against XXXX or Baseline seeking to
restrain or prohibit or to obtain damages with respect to the
consummation of the transactions contemplated by this Agreement, or
which might, in the reasonable opinion of FMS, result in a material
adverse change in the business, assets, properties, liabilities,
financial condition or results of operations of Baseline and (B) there
shall not be in effect any Order of a Government Body of competent
jurisdiction restraining, enjoining or otherwise prohibiting the
consummation of the transactions contemplated by this Agreement;
(vi) Each of XXXX, Baseline and Newco shall have executed and
delivered to FMS (A) all documents to be delivered at the Closing in
accordance with the terms of this Agreement, including, without
limitation, the Stock Purchase Agreement, the stock certificate
representing the Purchased Stock and the other agreements and documents
with respect thereto and (B) such other documents and instruments as
FMS may reasonably request and which each of XXXX, Baseline or Newco
can obtain with reasonable commercial efforts in order to consummate
the transactions contemplated by this Agreement; and
(vii) Baseline shall have executed and delivered to each of
Xxxx Xxxxxx, Xxxx Xxxx, Xxxx Xxxxxxx and Xxxxxx Xxxxxxxx employment
agreements in the form of Exhibit F-1 and F-2 hereto.
ARTICLE IX
THE CLOSING
Section 9.1. Closing Date. Except as hereinafter provided, the closing
of the transactions contemplated by this Agreement (the "Closing") shall take
place at the offices of Newco, or such other place as mutually agreed upon in
writing by the parties, at 10:00 a.m. on the third business day following the
date on which each of the conditions specified in Section 7.1 and Section 8.1
(other than those as to which the parties agree will be satisfied at the
Closing) of this Agreement has been fulfilled (or waived by the party entitled
to waive that condition) or at such other time and place as FMS and Newco may
mutually agree in writing. The date on which the Closing of the Transaction
occurs is referred to herein as the "Closing Date."
Section 9.2. Proceedings at the Closing. All proceedings to be taken
and all documents to be executed and delivered by FMS in connection with the
Closing shall be reasonably satisfactory in form and substance to Newco and its
counsel. All proceedings to be taken and all documents to be executed and
delivered by each of XXXX, Baseline and Newco in connection with the Closing
shall be reasonably satisfactory in form and substance to FMS and its counsel.
All proceedings to be taken and all documents to be executed and delivered by
both parties at the Closing shall be deemed to have been taken and executed
simultaneously, and no proceedings shall be deemed taken nor any documents
executed or delivered until all have been taken and delivered.
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Section 9.3. Deliveries by FMS to Newco. At the Closing, FMS shall
deliver, or shall cause to be delivered, to Newco the following:
(i) a Xxxx of Sale and Assignment and Assumption Agreement in
the form of Exhibit D hereto (the "Xxxx of Sale and Assignment and
Assumption Agreement"), duly executed by FMS;
(ii) all other assignments and other instruments or documents
as shall be reasonably necessary in the judgment of Newco to evidence
the contribution, assignment, transfer and conveyance by FMS to Newco
of the Assets in accordance with the terms hereof, free and clear of
all Liens;
(iii) copies of all approvals and consents referred to in
clause (v) of Section 7.1 above;
(iv) the certificate, signed by a duly authorized officer of
FMS, referred to in clause (vii) of Section 7.1 above;
(v) the certified resolutions of the Board of Directors and
shareholders of FMS referred to in clause (viii) of Section 7.1 above;
(vi) a certificate of the Secretary of FMS attesting to the
incumbency and signature of each officer of FMS who shall execute this
Agreement or any other FMS Document.
Section 9.4. Deliveries by XXXX and Newco to FMS. At the Closing, XXXX
and Newco shall deliver to FMS the following:
(i) a Management Services Agreement in the form of Exhibit E
hereto (the "Management Agreement"), duly executed by Hollywood
Services, Inc. and Baseline;
(ii) the certificate, signed by a duly authorized officer of
each of XXXX, Baseline and Newco, referred to in clause (iii) of
Section 8.1 above;
(iii) the certified resolutions of the Board of Directors of
each of XXXX, Baseline and Newco referred to in clause (iv) of Section
8.1 above;
(iv) a certificate of a duly authorized officer of each of
XXXX, Baseline and Newco attesting to the incumbency and signature of
each officer of such parties who shall execute this Agreement or any
other XXXX Document; and
(v) a stock certificate representing the Stock Consideration.
Section 9.5 Deliveries by XXXX to Newco. At the Closing, XXXX shall
deliver to Newco certificates representing the Baseline Stock in genuine and
unaltered form, duly endorsed or accompanied by duly executed stock powers.
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Section 9.6 Deliveries by Newco to XXXX. At the Closing, Newco
shall deliver to XXXX a stock certificate representing the XXXX Stock
Consideration.
ARTICLE X
SHAREHOLDER AND OTHER AGREEMENTS
Section 10.1. Conversion Rights.
(a) At any time during the period (the "Conversion Period")
beginning on the first date on which all principal and
accrued interest on the Promissory Note have been paid
in full and ending on the seventh anniversary of the
Closing Date, FMS shall have the right to convert all
(but not less than all) of the Stock Consideration and
the Purchased Stock into common stock, par value $0.01
per share, of XXXX ("XXXX'x Common Stock"). FMS shall
exercise this right by delivering written notice to
Newco and XXXX at any time during the Conversion Period
irrevocably electing to convert the Stock Consideration
and the Purchased Stock into XXXX'x Common Stock (the
"Conversion Stock"). Newco, XXXX and FMS shall take all
necessary actions to cause the conversion to be
completed within ten (10) business days following the
delivery of the notice of conversion.
(b) At any time beginning on the earlier of (1) the first
date on which all principal and accrued interest on the
Promissory Note have been paid in full and (2) the
fourth anniversary of the Closing Date, XXXX shall have
the right to require FMS to convert all (but not less
than all) of the Stock Consideration and the Purchased
Stock into XXXX'x Common Stock. XXXX shall exercise this
right by delivering written notice to FMS at any time
after the earlier of clause (1) and (2) above
irrevocably electing to convert the Stock Consideration
and the Purchased Stock into XXXX'x Common Stock. Newco,
XXXX and FMS shall take all necessary actions to cause
the conversion to be completed within ten (10) business
days following the delivery of the notice of conversion.
(c) For purposes of clauses (a) and (b) above:
(1) the full amount of the Stock Consideration
and the Purchased Stock shall be valued at
an amount equal to (A) the quotient of the
number of shares of Newco Common Stock
represented by the Stock Consideration and
the Purchased Stock divided by the total
number of shares of Newco Common Stock then
outstanding, multiplied by (B) 6.25 times
earnings before interest, taxes,
depreciation and amortization (EBITDA) for
Baseline for the four full
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fiscal quarters immediately preceding the
delivery of the notice of conversion.
(2) each share of XXXX'x Common Stock shall be
valued at the average closing price of
XXXX'x Common Stock on the Nasdaq Stock
Market for the 15 trading days preceding the
delivery of the notice of conversion;
provided, that for purposes of clause (a)
above only, each share of XXXX'x Commo0n
Stock shall be valued at no less than $7.50.
(3) FMS shall at its own expense satisfy and
remove any Liens on the Stock Consideration
and the Purchased Stock prior to any
conversion hereunder other than any Liens in
favor of XXXX or its assigns with respect to
the Promissory Note.
Section 10.2. Distribution of Operating Profits. XXXX and FMS
agree that they shall cause Newco and Baseline on a quarterly basis to
distribute to all shareholders of Newco on a pro rata basis all
operating profits of Newco in respect of the preceding quarter less a
reasonable reserve for working capital in an amount set each quarter by
Newco's management. All such distributions shall be paid on or before
the 44th day following the last day of each fiscal quarter of Newco.
Notwithstanding the foregoing, so long as the Promissory Note is
outstanding, FMS agrees that XXXX and Newco shall be entitled to deduct
from any distribution of operating profits payable to FMS pursuant to
the preceding sentence an amount equal to the greater of (1) the amount
of the next payment of principal and interest due on the Promissory
Note and (2) fifty percent (50%) of the amount of the operating profits
payable to FMS. The amount of any such deduction shall be paid to XXXX
on FMS' behalf to be applied to the next payment due on the Promissory
Note. XXXX, Baseline and Newco shall cause Newco's financial statements
to be prepared on a consolidated basis with XXXX.
Section 10.3. Use of Baseline Data. Newco, Baseline and FMS
acknowledge and agree that XXXX shall be entitled, for no
consideration, to use and exploit any and all of the data, information
and other materials compiled or produced by Baseline and its employees
at any time for the furtherance of other businesses now or hereafter
operated by XXXX and its subsidiaries.
Section 10.4. Change of Control Conversion Rights. If XXXX
proposes to sell all of the Newco Common Stock that it owns to a third
party, or proposes to enter into any transaction involving a Change of
Control (as defined below) of XXXX, Baseline or Newco, then XXXX shall
have the right to give FMS notice in writing (a "Change of Control
Notice") at least 15 days in advance of the proposed closing of the
transaction requiring FMS to convert all (but not less than all) of the
Stock Consideration and Purchased Stock into XXXX'x Common Stock. If
XXXX delivers the Change of Control Notice to FMS on or at any time
after the earlier of (1) the first date on which all principal and
accrued interest on the Promissory Note have been paid in full and (2)
the fourth anniversary of the Closing Date, then the conversion of the
Stock Consideration
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and Purchased Stock into XXXX'x Common Stock shall be on the terms set
forth in Section 10.1(b) and (c). If XXXX delivers the Change of
Control Notice to FMS at any time prior to the earlier of (1) the first
date on which all principal and accrued interest on the Promissory Note
have been paid in full and (2) the fourth anniversary of the Closing
Date, then (a) the full amount of the Stock Consideration and Purchased
Stock shall be valued at an amount equal to the greater of (i) the
value of the Stock Consideration and Purchased Stock determined under
Section 10.1(c)(1) less the unpaid amount of principal and accrued
interest on the Promissory Note and (ii) $3,000,000 less the unpaid
amount of principal and accrued interest on the Promissory Note and (b)
each share of XXXX'x Common Stock shall be valued at the average
closing price of XXXX'x Common Stock on the Nasdaq Stock Market for the
15 trading days preceding the delivery of the Change of Control Notice.
A conversion pursuant to the preceding sentence shall be deemed to be a
repayment in full of the principal and accrued interest outstanding on
the Promissory Note. FMS shall at its own expense satisfy and remove
any Liens on the Stock Consideration prior to any conversion hereunder,
other than any Liens in favor of XXXX or its assigns with respect to
the Promissory Note. Newco, XXXX and FMS shall take all necessary
actions to cause the conversion to be completed within ten (10)
business days following the delivery of the notice of conversion. As
used herein, "Change of Control" means (1) any proposed reorganization,
merger or consolidation of XXXX, Baseline or Newco (as applicable) or
any sale or other disposition of all or substantially all of the assets
of XXXX, Baseline or Newco (as applicable) or (2) the acquisition by
any individual, entity or group of beneficial ownership (within the
meaning of Rule 13d-3 of the Securities Exchange Act) of more than 50%
of either the outstanding shares of common stock of XXXX, Baseline or
Newco (as applicable) or of the combined voting power of the then
outstanding voting securities of XXXX, Baseline or Newco (as
applicable) entitled to vote generally in the election of directors.
Section 10.5 Termination Without Cause Conversion Rights. If,
prior to the date on which all principal and accrued interest on the
Promissory Note have been paid in full, (i) Baseline terminates the
employment of both Xxxx Xxxxxx and Xxxx Xxxx without "cause" or (ii)
both Xxxx Xxxxxx and Xxxx Xxxx terminate their employment with Baseline
for "good reason" (both terms as defined in the Employment Agreements
between Baseline and each of them dated as of the Closing Date) during
the Employment Periods thereunder, then at any time during the
six-month period thereafter, FMS shall have the right to convert all
(but not less than all) of the Stock Consideration and the Purchased
Stock into XXXX'x Common Stock. FMS shall exercise this right by
delivering written notice (a "Termination Conversion Notice") to XXXX
and Newco at any time during this six-month period irrevocably electing
to convert the Stock Consideration and the Purchased Stock into XXXX'x
Common Stock. For the purpose of any such conversion, (a) the full
amount of the Stock Consideration and the Purchased Stock shall be
valued at an amount equal to the greater of (i) the value of the Stock
Consideration and the Purchased Stock determined under Section
10.1(c)(1) less the unpaid amount of principal and accrued interest on
the Promissory Note and (ii) $3,000,000 less the unpaid amount of
principal and accrued interest on the Promissory Note and (b) each
share of XXXX'x Common Stock shall be valued at the average closing
price of XXXX'x Common Stock on the Nasdaq Stock Market for the 15
trading days preceding the
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delivery of the Termination Conversion Notice. A conversion pursuant to
the preceding sentence shall be deemed to be a repayment in full of the
principal and accrued interest outstanding on the Promissory Note. FMS
shall at its own expense satisfy and remove any Liens on the Stock
Consideration and the Purchased Stock prior to any conversion hereunder
other than any Liens in favor of XXXX or its assigns with respect to
the Promissory Note. Newco, XXXX and FMS shall take all necessary
actions to cause the conversion to be completed within ten (10)
business days following the delivery of the notice of conversion.
Section 10.6. FMS's Right to Nominate a Director of Baseline.
From and after the first date on which all principal and accrued
interest on the Promissory Note have been paid in full in accordance
with the terms of the Promissory Note and until such time as FMS owns
less than five percent of the outstanding common stock of Newco, FMS
shall have the right to nominate one individual to serve as a director
on Baseline's board of directors. At all times when FMS has the right
to nominate a director pursuant to the preceding sentence (1)
Baseline's board of directors shall consist of three members, two to be
nominated by XXXX and one to be nominated by FMS; and (2) XXXX, FMS and
Newco shall each vote in favor of such three nominees as members of
Baseline's board of directors. If during the period referenced in the
first sentence of this Section, any member of Baseline's board of
directors that was nominated pursuant to the preceding sentence resigns
or otherwise ceases to be a director of Baseline, then the entity who
nominated such member shall have the right to nominate a person to fill
the vacancy, and Baseline shall use all reasonable efforts to cause
such nominee to be elected by the remaining board members.
Section 10.7. Termination. The rights and obligations set
forth in this Article X shall automatically expire and be of no further
force and effect as of the first date on which FMS no longer owns any
capital stock of Newco. The rights and obligations of FMS set forth in
this Article X are not assignable or transferable by FMS without XXXX'x
prior written consent.
ARTICLE XI
ADDITIONAL POST-CLOSING COVENANTS
Section 11.1. Further Assurances by FMS.
-------------------------
(a) From time to time after the Closing Date, FMS will, at the
request of Newco, execute and deliver such other and further instruments of
contribution, assignment, transfer and conveyance and take such other and
further actions as Newco may reasonably request in order to make all the
benefits of the Assigned Contracts and rights of FMS included in the Assets
available to Newco, to vest in Newco and put Newco in possession of the Assets
and to transfer to Newco any contracts and rights of FMS relating to the Assets
and to assure to Newco the benefits thereof and effectuate fully the purposes of
this Agreement.
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(b) With respect to any Assigned Contract which is not assumed by
Newco at the Closing because a consent to assignment is required but not
obtained prior to the Closing, if FMS or Newco shall thereafter obtain such
consent to assignment, then FMS and Newco shall each execute and deliver such
instruments of assignment and assumption as may reasonably be required for FMS
to assign and Newco to assume such Assigned Contract, subject to all the terms
and conditions of this Agreement as if such Assigned Contract had been included
in the Assets at the Closing.
Section 11.2. Preservation of Corporate Records. FMS shall preserve and
keep the Corporate Records for a period of seven years from the Closing Date and
shall make such Corporate Records and personnel, if any, of FMS available to
Newco as Newco may reasonably require (i) in connection with, among other
things, any insurance claims by, Legal Proceedings against or governmental
investigations of Newco or (ii) in order to enable Newco to comply with its
obligations under the Code, any other applicable statute with respect to
taxation, this Agreement and each other agreement, document or instrument
contemplated hereby. If FMS wishes to destroy such Corporate Records after such
seven year period, then FMS shall first give 90 days prior written notice to
Newco and Newco shall have the right at its option and expense, upon prior
written notice given to FMS within that 90 day period, to take possession of the
Corporate Records within 180 days after the date of such notice.
Section 11.3. Confidentiality. From and after the Closing Date, none of
FMS, or any of its employees shall divulge, furnish or make available to any
person any knowledge or information with respect to the Assets, Newco or
Baseline (other than in the regular course and in furtherance of the Baseline's
business) which is, or which FMS is advised or has reason to believe is,
confidential (including, but not limited to, information relating to any
marketing, financial or personnel matters in connection with the Assets).
ARTICLE XII
INDEMNIFICATION
Section 12.1. Indemnification.
---------------
(a) FMS agrees to indemnify and hold Newco, Baseline and XXXX and
their respective employees, officers, directors and affiliates harmless from and
against any and all losses, liabilities, obligations, judgments, damages,
deficiencies, costs, penalties and expenses (including, without limitation,
reasonable attorneys' fees and expenses) (collectively, "Losses") based upon,
attributable to or resulting from:
(i) (A) any misrepresentation or breach of
warranty on the part of FMS under this Agreement or any of the
FMS Documents or (B) any breach of covenant or other agreement on
the part of FMS under this Agreement, or any of the FMS
Documents;
(ii) any Liabilities of FMS not expressly assumed
by Newco under the terms of this Agreement, including, without
limitation:
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(A) any liabilities and obligations arising out of
or based upon the conduct of the business of FMS prior to the
Closing Date (other than obligations or liabilities that are
expressly assumed by Newco under the terms of this Agreement);
(B) any liabilities and obligations arising out of
any breach of, or default under, any Assigned Contract prior to
the Closing Date;
(C) any claims for any injury to person or
property attributable to any services rendered by FMS prior to
the Closing Date, regardless of whether such claims are asserted
prior to or after the Closing;
(D) any claims by any employee or former employee
of FMS arising out of the employment or termination of employment
of the employee or former employee on or prior to the Closing
Date or as a result of the transactions contemplated by this
Agreement; and
(E) any third party claims with respect to
occurrences or events that occurred on or prior to the Closing
Date and relate to FMS, its employees or the Assets;
(iii) any liabilities and obligations, based in any way
on agreements, arrangements or understandings made by or on behalf
of FMS, for any brokerage fees, finder's fees, commissions or like
payments in respect of the transactions contemplated by this
Agreement;
(iv) any costs incurred by Newco or Baseline in
connection with any claims or disputes arising from the requirements
of any applicable bulk sales or bulk transfer or similar laws; and
(v) all actions, suits, proceedings, demands,
assessments, judgments, costs, penalties and expenses, including
reasonable attorneys' fees, incident to the foregoing.
(b) XXXX agrees to indemnify and hold FMS and its employees,
officers, directors and affiliates harmless from and against any and all Losses
attributable to or resulting from:
(i) (A) any misrepresentation or breach of warranty on
the part of XXXX, Baseline or Newco under this Agreement or any of
the XXXX Documents or (B) any breach of covenant or other agreement
on the part of XXXX, Baseline or Newco under this Agreement or any
of the XXXX Documents;
(ii) any liabilities expressly assumed by Newco pursuant
to Section 1.3 hereof;
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(iii) to the extent Newco is not indemnified with respect thereto under
Section 12.1(a), any claims that arise from Newco's ownership or
operation of the Assets subsequent to the Closing Date;
(iv) any liabilities and obligations, based in any way on agreements,
arrangements or understandings made by or on behalf of Newco, for any
brokerage fees, finder's fees, commissions or like payments in respect
of the transactions contemplated by this Agreement; and
(v) all actions, suits, proceedings, demands, assessments, judgments,
costs, penalties and expenses, including reasonable attorneys' fees,
incident to the foregoing.
Section 12.2. Procedures for Indemnification. Whenever a claim shall
arise for indemnification under Section 12.1 above, with the exception of claims
for litigation expenses in respect of a litigation as to which a notice of
claim, as provided below in this Section 12.2, has previously been given, which
expenses shall be funded on an ongoing basis, the party entitled to
indemnification (the "Indemnified Party") shall promptly notify the party from
whom indemnification is sought (the "Indemnifying Party") of such claim and,
when known, the facts constituting the basis for such claim; provided, however,
that in the event of any claim for indemnification hereunder resulting from or
in connection with any claim or Legal Proceeding by a third party, the
Indemnified Party shall give such notice thereof to the Indemnifying Party not
later than 10 business days prior to the time any response to the asserted claim
is required, if possible, and in any event within 5 business days following
receipt of notice thereof. Notwithstanding anything in the preceding sentence to
the contrary, the failure of any Indemnified Party to so notify the Indemnifying
Party shall not relieve the Indemnifying Party from any liability for
indemnification it may have if and to the extent that the Indemnifying Party
shall not have been prejudiced by such omission. In the event of any such claim
for indemnification resulting from or in connection with a claim or Legal
Proceeding by a third party, the Indemnifying Party may, at its sole cost and
expense, assume the defense thereof; provided, however, that the Indemnifying
Party shall first have agreed in writing that it does not and will not contest
its responsibility for indemnifying the Indemnified Party in respect of Losses
attributable to such claim or Legal Proceeding; and, provided, further, that FMS
shall not be entitled to assume the defense of any claim or Legal Proceeding
against Newco or Baseline for Taxes with respect to a period ending after the
Closing Date. If an Indemnifying Party assumes the defense of any such claim or
Legal Proceeding, the Indemnifying Party shall be entitled to select counsel and
take all steps necessary in the defense thereof; provided, however, that no
settlement shall be made without the prior written consent of the Indemnified
Party, which consent shall not be unreasonably withheld (and if the Indemnified
Party shall withhold its consent to any monetary settlement proposed by the
Indemnifying Party and which the other party to the action has indicated it is
prepared to accept, the Indemnified Party shall in no event be deemed for
purposes of this Agreement, to have suffered Losses in connection with such
claim or proceeding in excess of the proposed amount of such settlement);
provided, further, that the Indemnified Party may, at its own expense,
participate in any such proceeding with the counsel of its choice without any
right of control thereof. So long as the Indemnifying Party is in good faith
defending such claim or Legal Proceeding, the Indemnified Party shall not
compromise or settle such claim without the prior written consent of the
Indemnifying Party,
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which consent shall not be unreasonably withheld. If the Indemnifying Party does
not assume the defense of any such claim or Legal Proceeding in accordance with
the terms hereof, the Indemnified Party may defend (and, in the case of any
claim or Legal Proceeding against Newco or Baseline for Taxes with respect to a
period ending after the Closing Date, shall defend) against such claim or Legal
Proceeding in such manner as it may deem appropriate, including, but not limited
to, settling such claim or litigation (after giving prior written notice of the
same to the Indemnifying Party and obtaining the prior written consent of the
Indemnifying Party, which consent shall not be unreasonably withheld) on such
terms as the Indemnified Party may deem appropriate, and the Indemnifying Party
will promptly indemnify the Indemnified Party in accordance with the provisions
of this Section 12.2; provided, however, that if the Indemnified Party does not
obtain the prior written consent of the Indemnifying Party to any such
settlement, and such written consent is not unreasonably withheld by the
Indemnifying Party, the Indemnified Party shall not be entitled to
indemnification hereunder from such Indemnifying Party with respect to the claim
settled. Notwithstanding anything in this Section 12.2 to the contrary, if, in
any claim or Legal Proceeding with respect to which the Indemnified Party has
given the notice required under this Section 12.2, (i) the Indemnifying Party
shall not have promptly employed counsel reasonably satisfactory to the
Indemnified Party or (ii) such Indemnified Party shall have reasonably
concluded, based upon the opinion of its outside legal counsel, that there may
be one or more legal defenses available to it that are different from or
additional to those available to the Indemnifying Party, then in either event
(x) the Indemnified Party may participate in any such proceeding with the
counsel of its choice, the expense for which shall be borne by the Indemnifying
Party (but in no event shall the Indemnifying Party be required to pay the fees
and expenses of more than one counsel employed by the Indemnified Party with
respect to such claim or proceeding) and (y) the Indemnifying Party shall not
have the right to direct the defense of any such action on behalf of the
Indemnified Party. All payments by the Indemnifying Party pursuant to this
Article XII shall be in cash and in immediately available funds.
ARTICLE XIII
TERMINATION
Section 13.1. Termination. This Agreement may be terminated (i) by the
written agreement of FMS, Newco and XXXX, or (ii) by either FMS, Newco or XXXX
by written notice to the others given after the date that is 90 days after the
date of this Agreement if the Closing shall not have occurred on or before such
date. The date of any such termination is referred to herein as the "Termination
Date."
Section 13.2. Liabilities After Termination. Upon any termination of
this Agreement pursuant to Section 13.1 above, no party hereto shall thereafter
have any further liability or obligation hereunder; provided, however, that no
such termination shall relieve any party hereto of any liability for any breach
of this Agreement prior to the date of such termination and provided, further,
that FMS shall remain bound by Section 5.4 above and the parties shall remain
bound by Section 14.5 below.
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ARTICLE XIV
MISCELLANEOUS
Section 14.1. Survival of Representations and Warranties. FMS, Newco
and XXXX hereby agree that the representations and warranties contained in this
Agreement, as supplemented or modified by any amendments to the Schedules hereto
made on or prior to the Closing Date, shall survive the execution and delivery
of this Agreement and shall further survive the Closing hereunder for a period
of two years from the Closing Date, regardless of any investigation made by the
parties hereto; provided, however, that the representations and warranties
contained in Sections 3.13 and 4.16 shall survive for the applicable statute of
limitations plus 90 days.
Section 14.2. Entire Agreement. This Agreement (with its Schedules and
Exhibits) contains, and is intended as, a complete statement of, all of the
terms and the arrangements between the parties hereto with respect to the
matters provided for herein, and supersedes any previous agreements and
understandings among the parties hereto with respect to those matters.
Section 14.3. Governing Law; Construction. This Agreement and all
agreements related thereto shall be governed by and construed in accordance with
the laws of the State of New York applicable to contracts to be made, executed,
delivered and performed wholly in such state, but without regard to conflicts of
law principles of such state. The table of contents, captions and headings in
this Agreement are for reference purposes only and shall be given no effect in
the construction and interpretation of this Agreement. No provision of this
Agreement shall be construed against either party because such party drafted or
caused to be drafted such provision. Each provision of this Agreement shall be
construed as if such provision were proposed by both Newco and FMS.
Section 14.4. Transfer Taxes. FMS shall pay when due (i) all transfer
and documentary taxes and fees imposed with respect to instruments of conveyance
in the transactions contemplated hereby and (ii) all sales, use and other
transfer or similar taxes on the transfer of the Assets contemplated hereby.
Newco shall execute and deliver to FMS at the Closing any certificates or other
documents as FMS may reasonably request to perfect any exemption from any such
transfer, documentary, sales or use tax.
Section 14.5. Expenses. Each of the parties shall bear its own expenses
(including, without limitation, all fees and expenses of financial institutions,
accountants, legal counsel, brokers, investment bankers and other advisors),
incurred in connection with the negotiation, preparation, execution, review,
delivery and performance of this Agreement, each of the other documents and
instruments executed in connection with or contemplated by this Agreement or
related hereto, and the consummation of the transactions contemplated hereby and
thereby.
Section 14.6. Notices. Any notice, request, instruction or other
communication to be given under this Agreement or otherwise in connection with
the Transaction shall be in writing and shall be delivered by hand or prepaid
telecopy, or sent, postage prepaid, by registered, certified or express mail, or
reputable overnight courier service and shall be deemed given when so delivered
by hand or telecopied, or if mailed, three days after mailing (one business day
in the
31
case of express mail or overnight courier service) to a party at the
following address (or at such other address as such party may have specified by
notice given to the other party pursuant to this provision):
if to FMS at: Prior to the Closing Date:
0 Xxxxx Xxxxxx, #000
Xxxxxx Xxx Xxx, XX 00000
Attn: Xxxx Xxxxxx
Telecopier No.: 000-000-0000
After the Closing Date:
Same as Above
if to Newco at: Baseline Acquisitions Corp.
0000 Xxxxxx Xxxx, Xxxxx 000X
Xxxx Xxxxx, XX 00000
Attn: Xxxxxxxx Xxxxxxxxxx
Telecopier No.: (000) 000-0000
with a copy to:
Baseline Acquisitions Corp.
0000 Xxxxxx Xxxx, Xxxxx 000X
Xxxx Xxxxx, XX 00000
Attn: General Counsel
Telecopier No.: (000) 000-0000
if to XXXX at: Hollywood Media Corp.
0000 Xxxxxx Xxxx
Xxxxx 000X
Xxxx Xxxxx, Xxxxxxx 00000
Attention: Xxxxxxxx Xxxxxxxxxx
Telecopier No.: (000) 000-0000
with a copy to: Hollywood Media Corp.
0000 Xxxxxx Xxxx
Xxxxx 000X
Xxxx Xxxxx, Xxxxxxx 00000
Attention: General Counsel
Telecopier No.: (000) 000-0000
Section 14.7. Severability. If any provision of this Agreement, or the
application of such provision to XXXX, Baseline, Newco, FMS, or any Person or
circumstance, shall be held invalid, then the remainder of this Agreement, or
the application of such provision to persons, entities or circumstances other
than those as to which it is held invalid, shall not be affected thereby.
32
Section 14.8. Binding Effect; No Assignment.
-----------------------------
(a) This Agreement shall be binding upon and inure to the benefit of
the parties and their respective successors and permitted assigns. Nothing in
this Agreement shall create or be deemed to create any third party beneficiary
rights in any Person not party to this Agreement. Except as expressly permitted
below, no assignment of this Agreement or of any rights or obligations hereunder
may be made by either party (by operation of law or otherwise) without the prior
written consent of the other party hereto and any attempted assignment without
such required consent shall be void.
(b) Prior to the Closing, Newco may assign any and all of its rights
and obligations under this Agreement to any third party, if Newco directly and
unconditionally guarantees the obligations of such assignee under this
Agreement. After the Closing, Newco may assign any or all of its rights and
obligations with respect to the Assets without the consent of FMS, provided that
Newco shall cause its obligations to FMS under this Agreement in respect of the
Transaction to be binding upon any successor to Newco and Newco shall directly
and unconditionally guarantee the obligations of such successor.
Section 14.9. Amendments. This Agreement may be amended, supplemented
or modified, and any provision hereof may be waived, only pursuant to a written
instrument making specific reference to this Agreement signed by each of the
parties hereto.
Section 14.10. Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have executed this instrument
as of the date and year first above written.
FOUNTAINHEAD MEDIA SERVICES, INC.
By:
-----------------------------------------------
Name:
Title:
BASELINE ACQUISITIONS CORP.
By:
-----------------------------------------------
Name: Xxxxxxxx Xxxxxxxxxx
Title: Chairman and Chief Executive Officer
HOLLYWOOD MEDIA CORP.
By:
-----------------------------------------------
Xxxxxxxx Xxxxxxxxxx
Chairman of the Board and
Chief Executive Officer
BASELINE, INC.
By:
-----------------------------------------------
Name: Xxxxxxxx Xxxxxxxxxx
Title: Co-Chief Executive Officer
34
