EXHIBIT 2.3
SECURITIES PURCHASE AGREEMENT
BETWEEN
XXX.XXX, INC.
AND
RARE MEDIUM GROUP, INC.
Dated as of November 12, 1999
TABLE OF CONTENTS
Page
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1. Authorization of Securities . . . . . . . . . . . . . . . . . . 1
2. Sale and Purchase of the Securities; Allocation of Purchase
Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3. Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
4. Representations and Warranties of the Purchaser; Register of
Securities; Restrictions on Transfer . . . . . . . . . . . . . 2
4.1 Organization . . . . . . . . . . . . . . . . . . . . 2
4.2 Validity . . . . . . . . . . . . . . . . . . . . . . 2
4.3 No Consents . . . . . . . . . . . . . . . . . . . . . 3
4.4 No Conflicts . . . . . . . . . . . . . . . . . . . . 3
4.5 Litigation . . . . . . . . . . . . . . . . . . . . . 3
4.6 Brokers . . . . . . . . . . . . . . . . . . . . . . . 3
4.7 Investment Representations and Warranties . . . . . . 3
4.8 Acquisition for Own Account . . . . . . . . . . . . . 3
4.9 Ability to Protect Its Own Interests and Bear
Economic Risks . . . . . . . . . . . . . . . . . . . 3
4.10 Accredited Investor . . . . . . . . . . . . . . . . . 4
4.11 Access to Information . . . . . . . . . . . . . . . . 4
5. Representations and Warranties by the Company . . . . . . . . . 4
5.1 Capitalization . . . . . . . . . . . . . . . . . . . 4
5.2 Due Issuance and Authorization of Capital Stock . . . 5
5.3 Organization . . . . . . . . . . . . . . . . . . . . 6
5.4 Subsidiaries . . . . . . . . . . . . . . . . . . . . 6
5.5 No Consents . . . . . . . . . . . . . . . . . . . . . 6
5.6 Authorization; Enforcement . . . . . . . . . . . . . 6
5.7 Issuance of Shares . . . . . . . . . . . . . . . . . 7
5.8 No Conflicts . . . . . . . . . . . . . . . . . . . . 7
5.9 Material Contracts . . . . . . . . . . . . . . . . . 8
5.10 Right of First Refusal; Stockholders' Agreement;
Voting and Registration Rights . . . . . . . . . . . 8
5.11 Previous Issuances Exempt . . . . . . . . . . . . . . 9
5.12 No Integrated Offering . . . . . . . . . . . . . . . 9
5.13 Financial Statements . . . . . . . . . . . . . . . . 9
5.14 No Prior Activities; Absence of Certain Changes . . . 9
5.15 No Undisclosed Material Liabilities . . . . . . . . 10
5.16 Litigation . . . . . . . . . . . . . . . . . . . . 10
5.17 Taxes . . . . . . . . . . . . . . . . . . . . . . . 10
5.18 Employee Benefit Plans . . . . . . . . . . . . . . 14
5.19 Compliance with Laws . . . . . . . . . . . . . . . 16
5.20 Finders' or Advisors' Fees . . . . . . . . . . . . 16
5.21 Environmental Matters . . . . . . . . . . . . . . . 16
5.22 Intellectual Property Matters . . . . . . . . . . . 17
5.23 Year 2000 Compliance Matters . . . . . . . . . . . 20
5.24 Related-Party Transactions . . . . . . . . . . . . 21
5.25 Title to Property and Assets . . . . . . . . . . . 21
5.26 Insurance . . . . . . . . . . . . . . . . . . . . . 21
5.27 Receivables . . . . . . . . . . . . . . . . . . . . 21
6. Conditions of Parties' Obligations . . . . . . . . . . . . . 22
6.1 Conditions of the Purchaser's Obligations . . . . . 22
6.2 Conditions of Company's Obligations . . . . . . . . 24
6.3 Conditions of Each Party's Obligations . . . . . . 25
7. Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.1 Maintain Corporate Rights and Facilities . . . . . 25
7.2 Maintain Insurance . . . . . . . . . . . . . . . . 26
7.3 Information Rights . . . . . . . . . . . . . . . . 26
7.4 Notice of Litigation, Disputes and Adverse
Changes; Other Information . . . . . . . . . . . . 27
7.5 Conduct of Business . . . . . . . . . . . . . . . . 28
7.6 Compliance with Certificate of Incorporation and
Bylaws . . . . . . . . . . . . . . . . . . . . . . 28
7.7 Internal Accounting Controls . . . . . . . . . . . 28
7.8 Indemnification of the Board of Directors;
Directors and Officers Insurance Policy . . . . . . 28
7.9 Use of Proceeds . . . . . . . . . . . . . . . . . . 29
7.10 Reservation of Capital Stock . . . . . . . . . . . 29
7.11 Advice of Changes . . . . . . . . . . . . . . . . . 29
7.12 Protective Provisions . . . . . . . . . . . . . . . 29
8. Registration Rights . . . . . . . . . . . . . . . . . . . . . 31
9. Third Party Transfers . . . . . . . . . . . . . . . . . . . . 31
10. Registration, Transfer and Substitution of Certificates for
Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
10.1 Stock Register; Ownership of Securities . . . . . . 31
10.2 Replacement of Certificates . . . . . . . . . . . . 31
10.3 Restrictive Legends . . . . . . . . . . . . . . . . 32
10.4 Notice of Proposed Transfer; Opinions of Counsel . 32
11. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . 32
12. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . 36
12.1 Waivers and Amendments . . . . . . . . . . . . . . 36
12.2 Notices . . . . . . . . . . . . . . . . . . . . . . 36
12.3 Termination of Agreement . . . . . . . . . . . . . 38
12.4 Indemnification . . . . . . . . . . . . . . . . . . 38
12.5 Indemnification Procedures. . . . . . . . . . . . . 39
12.6 Survival of Representations and Warranties, etc . . 39
12.7 Amendments; No Waivers . . . . . . . . . . . . . . 40
12.8 Successors and Assigns . . . . . . . . . . . . . . 40
12.9 Headings . . . . . . . . . . . . . . . . . . . . . 41
12.10 Governing Law . . . . . . . . . . . . . . . . . . 41
12.11 Expenses . . . . . . . . . . . . . . . . . . . . . 41
12.12 Jurisdiction . . . . . . . . . . . . . . . . . . . 42
12.13 Waiver of Jury Trial . . . . . . . . . . . . . . . 42
12.14 Counterparts; Effectiveness . . . . . . . . . . . 42
12.15 Entire Agreement . . . . . . . . . . . . . . . . . 42
12.16 Severability . . . . . . . . . . . . . . . . . . . 43
LIST OF EXHIBITS
EXHIBIT A Certificate of Designations of Series A Convertible Preferred
Stock
EXHIBIT B Form of Series A Warrant
EXHIBIT C Registration Rights Agreement
EXHIBIT D Stockholders Agreement
SECURITIES PURCHASE AGREEMENT
This SECURITIES PURCHASE AGREEMENT (this "Agreement") is made and
entered into this 12th day of November, 1999 by and between XXX.XXX, INC.,
a Delaware corporation (the "Company"), and RARE MEDIUM GROUP, INC., a
Delaware corporation (the "Purchaser"). Certain terms used and not
otherwise defined in the text of this Agreement are defined in Section 11
of this Agreement.
W I T N E S S E T H
WHEREAS, the Company desires to issue and to sell to the Purchaser,
and the Purchaser desires to purchase from the Company, the Series A
Preferred Shares and the Warrant (each as hereinafter defined) in
connection with the transactions contemplated by the Merger (as hereinafter
defined), all in accordance with the terms and provisions of this
Agreement;
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties and covenants herein contained, the parties
hereto hereby agree as follows:
1. Authorization of Securities. The Company has authorized (i) the
issuance and sale of 1,000 shares (the "Series A Preferred Shares") of its
Series A Convertible Preferred Stock , par value $0.01 per share ("Series A
Preferred Stock"), which are convertible into shares of the Company's
common stock, par value $.01 per share (the "Common Stock"); (ii) the
issuance with the Series A Preferred Shares of a detachable two-year
warrant (the "Warrant"), which shall entitle its holder to purchase from
the Company 1,000 additional shares of the Series A Preferred Stock. The
Series A Preferred Stock will have the rights, preferences and privileges
set forth in the form of Certificate of Designations attached hereto as
Exhibit A (the "Certificate of Designations"). The Warrant will have the
rights, preferences and privileges set forth in the form of Warrant
attached hereto as Exhibit B. The Common Stock into which the Series A
Preferred Stock is convertible is sometimes referred to herein as the
"Conversion Shares"; the shares of Series A Preferred Stock that may be
purchased upon exercise of the Warrant are sometimes referred to herein as
the "Warrant Preferred Shares"; the shares of Common Stock issuable upon
conversion of the Warrant Preferred Shares are sometimes referred to herein
as the "Warrant Shares"; and the Series A Preferred Shares, the Conversion
Shares, the Warrant, the Warrant Preferred Shares and the Warrant Shares
are sometimes referred to herein collectively as the "Securities".
2. Sale and Purchase of the Securities; Allocation of Purchase
Price. Upon the terms and subject to the conditions herein contained, the
Company agrees to sell to the Purchaser, and the Purchaser agrees to
purchase from the Company, at the Closing, on the Closing Date (as
hereinafter defined), 1,000 Series A Preferred Shares and the Warrant, for
an aggregate purchase price of $7,000,000 (the "Purchase Price").
3. Closing. The closing of the sale to, and purchase by, the
Purchaser of the Series A Preferred Shares and the Warrant referred to in
Section 2 hereof (the "Closing") shall occur at the offices of Skadden,
Arps, Slate, Xxxxxxx & Xxxx LLP, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx
00000-0000, on the third business day after the satisfaction or waiver of
all of the conditions set forth in Section 6 hereof (the "Closing Date").
At the Closing, the Company shall deliver to the Purchaser certificates
evidencing the Series A Preferred Shares and the Warrant (in such
denominations as shall be specified in writing by the Purchaser), each of
which shall be registered in the Purchaser's name, against delivery to the
Company by the Purchaser of the Purchase Price payable by wire transfer of
immediately available funds to an account that the Company will designate
in writing to the Purchaser at least two business days prior to the Closing
Date.
4. Representations and Warranties of the Purchaser; Register of
Securities; Restrictions on Transfer. The Purchaser represents and
warrants to the Company as follows:
4.1 Organization. The Purchaser is duly incorporated, validly
existing and in good standing under the laws of the State of Delaware, and
has all corporate power and authority to enter into this Agreement and
consummate the transactions contemplated hereby.
4.2 Validity. The execution, delivery and performance of this
Agreement, and the other documents and instruments referred to herein, in
each case to which the Purchaser is a party, and the consummation of the
transactions contemplated hereby, have been duly authorized by all
necessary action on the part of the Purchaser. This Agreement has been
duly executed and delivered by the Purchaser and each such document
constitutes a valid and binding obligation of the Purchaser enforceable
against it in accordance with its terms.
4.3 No Consents. Neither the execution, delivery or performance
of this Agreement by the Purchaser, nor the consummation by it of the
obligations and transactions contemplated hereby requires any consent of,
authorization by, exemption from, filing with or notice to any governmental
authority or any other Person other than such as have been obtained, made
or given prior to the date hereof.
4.4 No Conflicts. The execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated hereby
will not result in a violation of the Certificate of Incorporation or By-
laws of the Purchaser.
4.5 Litigation. There is no action, suit, investigation or
proceeding pending against, or to the knowledge of the Purchaser threatened
against or affecting, the Purchaser before any court or arbitrator or any
governmental body, agency or official that could prevent or materially
delay the consummation of the transactions contemplated hereby.
4.6 Brokers. The Purchaser has not engaged a broker, investment
banker, financial advisor, finder or other person entitled to any
brokerage, investment banker's, financial advisor's, finder's or other fee
or commission for which the Company will be liable in connection with the
execution of this Agreement by the Purchaser or the performance by the
Purchaser of its obligations hereunder.
4.7 Investment Representations and Warranties. The Purchaser
understands that the Securities have not been registered under the
Securities Act of 1933 (the "Securities Act") and that the certificates
evidencing the Securities shall bear a legend to that effect, unless prior
to conversion of any shares of Series A Preferred Stock or Warrant
Preferred Shares, the Common Stock issuable upon conversion thereof shall
have been so registered.
4.8 Acquisition for Own Account. The Purchaser is acquiring the
Securities for its own account for investment and not with a view toward
distribution in a manner which would violate the Securities Act.
4.9 Ability to Protect Its Own Interests and Bear Economic
Risks. The Purchaser represents that by reason of its business and
financial experience, and the business and financial experience of its
management, the Purchaser has the capacity to protect its own interests in
connection with the transactions contemplated by this Agreement. The
Purchaser is not an entity formed for the specific purpose of consummating
the transactions contemplated hereby. The Purchaser further represents
that the Purchaser is able to bear the economic risk of an investment in
the Securities, and has an adequate income independent of any income
produced from an investment in the Securities and has sufficient net worth
to sustain a loss of all of its investment in the Securities without
economic hardship if such a loss should occur.
4.10 Accredited Investor. The Purchaser represents that it is an
"accredited investor" as that term is defined in Regulation D promulgated
under the Securities Act.
4.11 Access to Information. The Purchaser has been given access
to all Company documents, records, and other information, has received
physical delivery of all such documents, records and information which the
Purchaser has requested, and has had adequate opportunity to ask questions
of, and receive answers from, the Company's officers, employees, agents,
accountants, and representatives concerning the Company's business,
operations, financial concerning the Company's business, operations,
financial condition, assets, liabilities, and all other matters relevant to
its investment in the Securities.
5. Representations and Warranties by the Company. The Company
(which term as used in this Section 5 shall, except as used in
Sections 5.1, 5.2, 5.3 (excluding the last sentence thereof), 5.4,
5.5, 5.6, 5.12 and 5.14 and unless the context otherwise requires, be
deemed to include (i) Xxxxxxxxxxx.xxx, Inc. ("Xxxxxxxxxxx.xxx") and
College Media, Inc. ("CMJ") prior to the proposed merger of
Xxxxxxxxxxx.xxx and CMJ with and into the Company to be effective
immediately prior to the Closing (the "Merger") and (ii) any
Subsidiary of the Company) represents and warrants to the Purchaser
(except as set forth in the disclosure schedules delivered to the
Purchaser simultaneously with the execution of this Agreement and
attached hereto (the "Disclosure Schedules")) as follows:
5.1 Capitalization. (a) The authorized capital stock of the
Company consists of 3,000,000 shares of Common Stock, par value $.01 per
share, and 500,000 shares of preferred stock, par value $.01 per share (of
which 2,600 shares will be designated Series A Preferred Stock). As of the
date hereof there are outstanding 100 shares of Common Stock and no
preferred stock and the Company has no other shares of capital stock
authorized, issued or outstanding. Each of Xxxxxxxxxxx.xxx and CMJ owns of
record 50 shares of Common Stock. All issued and outstanding shares of
capital stock of Xxxxxxxxxxx.xxx and CMJ will be canceled in the Merger.
The Company will succeed to all the rights, permits and franchises and
licenses and is subject to all of the restrictions, disabilities and duties
of each of Xxxxxxxxxxx.xxx and CMJ as a result of the Merger. The
capitalization of the Company as of the date hereof, including, without
limitation, the authorized capital stock, the number of shares issued and
outstanding, the number of shares issuable and reserved for issuance
pursuant to the Company's stock option plans, the number of shares issuable
and reserved for issuance pursuant to securities (other than the Series A
Preferred Stock and the Warrant) exercisable for, or convertible into or
exchangeable for any shares of capital stock of the Company and the number
of shares to be reserved for issuance upon conversion of the Series A
Preferred Shares, exercise of the Warrant and Conversion of the Warrant
Preferred Shares is set forth on Schedule 5.1 of the Disclosure Schedules.
(b) Except as set forth on Schedule 5.1, as of the date of this
Agreement, (i) there are no outstanding options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to,
or securities or rights convertible into or exercisable or exchangeable
for, any shares of capital stock of the Company, or arrangements by which
the Company is or may become bound to issue additional shares of capital
stock, nor are any such issuances or arrangements contemplated, (ii) there
are no agreements or arrangements under which the Company is obligated to
register the sale of any of its securities under the Securities Act (except
as provided hereunder), (iii) the Company has no obligation (contingent or
otherwise) to purchase, redeem or otherwise acquire any of its equity
securities or any interests therein or to pay any dividend or make any
distribution in respect thereof. Schedule 5.1(b) also includes complete
and accurate copies of all stock option or stock purchase plans, including,
without limitation, a list of all outstanding options, warrants or other
rights to acquire shares of the Company's stock and a description of the
material terms of such outstanding options, warrants or other rights.
There are no securities or instruments containing antidilution or similar
provisions that will be triggered by the issuance of the Securities in
accordance with the terms of this Agreement, the Certificate of
Designations or the Warrant.
(c) The Company has furnished to the Purchaser true and correct
copies of the Company's certificate of incorporation (the "Certificate of
Incorporation") as in effect on the date hereof, and the Company's by-laws
(the "By-laws") as in effect on the date hereof.
5.2 Due Issuance and Authorization of Capital Stock. All of the
outstanding shares of capital stock of the Company have been validly issued
and are fully paid and nonassessable. No shares of capital stock of the
Company are subject to (a) preemptive rights or any other similar rights of
the stockholders of the Company or (b) any mortgage, lien, claim, judgment,
pledge, charge, security interest, escrow equity, or other encumbrance of
any kind and the sale and delivery of the Securities to the Purchaser
pursuant to the terms hereof will vest in the Purchaser legal and valid
title to the Securities, free and clear of all mortgages, liens, claims,
judgments, pledges, charges, security interests, escrow equity, or other
encumbrances of any kind.
5.3 Organization. The Company (a) is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Delaware, (b) is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction where the nature
of the property owned or leased by it or the nature of the business
conducted by it makes such qualification necessary, except where the
failure to be so qualified would not have a Material Adverse Effect on the
Company, (c) has its principal place of business and chief executive office
in New York, New York and (d) has all requisite corporate power and
authority to own or lease and operate its assets and carry on its business
as presently being conducted. For purposes of this Agreement, "Material
Adverse Effect" shall mean any material adverse effect on (i) the
Securities, (ii) the ability of the Company to perform its obligations
under this Agreement, the Certificate of Designations or the Warrant, or
(iii) the condition (financial or otherwise), properties, assets,
liabilities, business or operations of the Company and its Subsidiaries
taken as a whole.
5.4 Subsidiaries. Each Subsidiary of the Company is listed on
Schedule 5.4.
5.5 No Consents. Neither the execution, delivery or performance
of this Agreement, the Certificate of Designations or the Warrant by the
Company, nor the consummation by it of the obligations and transactions
contemplated hereby or thereby (including, without limitation, the
issuance, the reservation for issuance and the delivery of the Securities)
requires any consent of, authorization by, exemption from, filing with or
notice to any governmental authority or any other person, other than the
filing of the Certificate of Designations with the Secretary of State of
Delaware.
5.6 Authorization; Enforcement. The Company has all requisite
corporate power and has taken all necessary corporate action required for
the due authorization, execution, delivery and performance by the Company
of this Agreement and to consummate the transactions contemplated hereby
(including, without limitation, the issuance of the Securities). The
execution, delivery and performance by the Company of each of this
Agreement and the Warrant, the execution and filing of the Certificate of
Designations, and the consummation by the Company of the transactions
contemplated hereby and thereby, have been duly authorized by all necessary
corporate action on the part of the Company. The Company has taken all
actions under its Certificate of Incorporation and its By-laws as may be
necessary or advisable to provide the Purchaser with the rights hereby
contemplated.
5.7 Issuance of Shares. The Securities have been duly
authorized, a sufficient number of authorized but unissued Series A
Preferred Shares have been reserved for issuance upon exercise of the
Warrant and a sufficient number of shares of authorized but unissued Common
Stock have been reserved for issuance upon conversion of the Series A
Preferred Shares and the Warrant Preferred Shares, and upon such issuance,
conversion or exercise in accordance with the terms of this Agreement, the
Certificate of Designations or the Warrant (as applicable), all such
Securities will be duly authorized, validly issued, fully paid and non-
assessable, and free from all mortgages, liens, claims, judgments, pledges,
charges, security interests, escrow equity, or other encumbrances of any
kind, and will not be subject to preemptive rights or other similar rights
of stockholders of the Company and will not impose personal liability upon
the holder thereof.
5.8 No Conflicts. The execution, delivery and performance of
this Agreement and the Warrant, the execution and filing of the Certificate
of Designation, and the consummation of the transactions contemplated
hereby and thereby (including, without limitation, the issuance and
reservation for issuance, as applicable, of the Securities) will not (a)
result in a violation of the Certificate of Incorporation or By-laws of the
Company, (b) conflict with or result in the breach of the terms, conditions
or provisions of or constitute a default (or an event which with notice or
lapse of time or both would become a default) under, or give rise to any
right of termination, acceleration or cancellation of any right or
obligation of the Company or a loss, in whole or in part, of any benefit or
right to which the Company is entitled under, any material agreement,
lease, mortgage, indenture, instrument or other contract to which the
Company is a party or any license, franchise, permit or other similar
authorization held by the Company, (c) result in a violation of any law,
rule, regulation, order, judgment or decree (including, without limitation,
U.S. federal and state securities laws and regulations) applicable to the
Company or by which any property or asset of the Company is bound or
affected, or (d) result in the creation of any Lien upon any assets of the
Company, except in the case of clauses (b), (c) and (d), for such
contraventions, conflicts, violations, defaults, rights of termination,
cancellation or acceleration, or losses or Liens that would not,
individually or in the aggregate have a Material Adverse Effect on the
Purchaser. For purposes of this Agreement, "Lien" means, with respect to
any properties or assets, any mortgage, lien, claim, judgment, pledge,
charge, security interest, escrow equity, or other encumbrance of any kind
in respect of such property or asset, other than any such mortgage, lien,
pledge, charge, security interest or encumbrance (i) for Taxes (as defined
in Section 5.17) not yet due or being contested in good faith and for which
adequate provision has been made or (ii) which is a carriers',
warehousemen's, mechanics', materialmen's, repairmen's or other like lien
arising in the ordinary course of business. The Company is not in
violation of its Certificate of Incorporation or By-laws. The business of
the Company is not being conducted in violation of any law, ordinance or
regulation of any Governmental Entity, except for violations that, either
individually or in the aggregate, would not have a Material Adverse Effect.
5.9 Material Contracts. Each material contract of the Company
is set forth on Schedule 5.9. Each such contract is the legal, valid and
binding obligation of the Company, enforceable against the Company in
accordance with its terms, except to the extent that enforceability may be
limited by bankruptcy, insolvency, fraudulent conveyance or other similar
laws affecting creditors' rights generally and by general equitable
principles. There has not occurred any breach, violation or default or any
event that, with the lapse of time, the giving of notice or the election of
any person, or any combination thereof, would constitute a breach,
violation or default by the Company under any such contract or, to the
knowledge of the Company, by any other person to any such contract nor has
there occurred any event giving others (with notice or lapse of time or
both) any rights of termination, amendment, acceleration or cancellation
of, any material agreement, indenture or instrument to which the Company is
a party. The Company has not been notified that any party to any material
contract intends to cancel, terminate, not renew or exercise an option
under any material contract, whether in connection with the transactions
contemplated hereby or otherwise. Except as set forth on Schedule 5.9, the
Company is not a party to any agreement that expressly limits the ability
of the Company to compete in or conduct any line of business or compete
with any Person or in any geographic area or during any period of time
except to the extent that any such limitation, individually or in the
aggregate, would not have a Material Adverse Effect on the Company.
5.10 Right of First Refusal; Stockholders' Agreement; Voting and
Registration Rights. No party has any right of first refusal, right of
first offer, right of co-sale, preemptive right or other similar right
regarding the Company's securities. There are no provisions of the
Certificates of Incorporation or the By-laws, no agreements to which the
Company is a party and no agreements by which the Company is bound, which
(a) may affect or restrict the voting rights of the Purchaser with respect
to the Securities in its capacity as a stockholder of the Company, (b)
restrict the ability of the Purchaser, or any successor thereto or assignee
or transferee thereof, to transfer the Securities or, (c) would adversely
affect the Company's or the Purchaser's right or ability to consummate the
transactions contemplated by this Agreement or comply with the terms of the
Certificate of Designations or the Warrant and the transactions
contemplated hereby or thereby.
5.11 Previous Issuances Exempt. All shares of capital stock and
other securities issued by the Company prior to the Closing Date have been
issued in transactions exempt from the registration requirements under the
Securities Act. The Company has not violated the Securities Act in
connection with the issuance of any shares of capital stock or other
securities prior to the Closing Date. The Company has not offered any of
its capital stock, or any other securities, for sale to, or solicited any
offers to buy any of the foregoing from the Company, or otherwise
approached or negotiated with any other person in respect thereof, in such
a manner as to require registration under the Securities Act. No holder of
any of the Company's capital stock has any rescission or pre-emptive
rights.
5.12 No Integrated Offering. Neither the Company, nor any of its
Affiliates or any other person acting on the Company's behalf, has directly
or indirectly engaged in any form of general solicitation or general
advertising with respect to the Securities nor have any of such persons
made any offers or sales of any security or solicited any offers to buy any
security under circumstances that would require registration of the
Securities under the Securities Act or cause this offering of Securities to
be integrated with any prior offering of securities of the Company for
purposes of the Securities Act.
5.13 Financial Statements. The unaudited consolidated annual
financial statements for 1998 and 1997 and unaudited consolidated interim
financial statements for the first nine months of 1999 of each of
Xxxxxxxxxxx.xxx and CMJ (including any related notes and schedules) present
fairly, in all material respects, the financial position of Xxxxxxxxxxx.xxx
and CMJ and their respective Subsidiaries as of the dates thereof and their
results of operations and cash flows for the periods then ended (subject to
normal year-end adjustments and the absence of notes in the case of any
unaudited interim financial statements), in each case in conformity with
GAAP applied on a consistent basis (except as may be indicated in the notes
thereto).
5.14 No Prior Activities; Absence of Certain Changes.
Since the date of its incorporation and prior to the date hereof,
the Company has not engaged in any activities other than in connection with
or incidental to its formation, the Merger Agreement or this Agreement.
5.15 No Undisclosed Material Liabilities.
There are no material liabilities of the Company whether accrued,
contingent, absolute, determined, determinable or otherwise that would be
required to be reflected in a consolidated balance sheet of the Company
prepared in accordance with GAAP or required to be disclosed on the face
thereof or in the notes thereto in accordance with Statement of Financial
Accounting Standards No. 5 of the Financial Accounting Standards Board,
other than:
(a) liabilities disclosed or provided for in the Xxxxxxxxxxx.xxx
Balance Sheet, the CMJ Balance Sheet, or in the respective notes thereto;
(b) liabilities incurred since such date in the ordinary course
of business; or
(c) liabilities under this Agreement.
5.16 Litigation.
There is no action, suit, investigation or proceeding pending
against, or to the knowledge of the Company threatened against or
affecting, the Company or any of its properties or any of its officers or
directors before any court or arbitrator or any governmental body, agency
or official except as would not, individually or in the aggregate, have a
Material Adverse Effect on the Company or prevent or materially delay the
consummation of the transactions contemplated hereby.
5.17 Taxes.
Except as set forth in Schedule 5.17:
(a) The Company has (x) duly and timely filed (or there has been
filed on its behalf) with the appropriate governmental authorities all Tax
Returns required to be filed by it and all such Tax Returns are true,
correct and complete except to the extent any failure to file or any
inaccuracies in any filed Tax Return would not be reasonably likely to have
a Material Adverse Effect on the Company and (y) timely paid (or properly
accrued on the books of the Company) or there has been paid on its behalf
all Taxes due from it or claimed to be due from it by any tax authority
(whether or not set forth on any Tax Return) except to the extent that any
failure to pay would not be reasonably likely to have a Material Adverse
Effect on the Company;
(b) The Company has complied in all material respects with all
applicable Tax Laws relating to the payment and withholding of Taxes
(including, without limitation, withholding of Taxes pursuant to sections
1441 and 1442 of the Code and employment withholding Taxes) and has, within
the time and manner prescribed by law, withheld and paid over to the proper
Governmental Entities all amounts required to be withheld and paid over
under all applicable Tax Laws except for amounts that would not be
reasonably likely to have a Material Adverse Effect on the Company;
(c) There are no material Liens for Taxes upon the assets or
properties of the Company except for statutory Liens for current Taxes not
yet due or that are being contested in good faith in appropriate
proceedings and for which adequate reserves have been maintained in
accordance with GAAP;
(d) The Company has not requested any extension of time within
which to file any Tax Return in respect of any taxable year which has not
since been filed, and no outstanding waivers or comparable consents
regarding the application of the statute of limitations with respect to any
Taxes or Tax Returns has been given by or on behalf of the Company except
for such waiver or consent that would not be reasonably likely to have a
Material Adverse Effect on the Company;
(e) The Company has not received any written notice of any
federal, state, local or foreign audits, review, suits, investigations,
actions, claims or other administrative proceedings or court proceedings
("Audits") with regard to any Taxes or Tax Returns of the Company and to
the Company's knowledge no such Audits are currently being conducted;
(f) All Tax deficiencies which have been claimed, proposed or
asserted against the Company by any taxing authority have been fully paid,
except for such deficiency that would not be reasonably likely to have a
Material Adverse Effect on the Company. No issue has been raised by any
taxing authority in any current or prior examination which, by application
of the same principles, would reasonably be expected to result in a
proposed deficiency for any subsequent Taxable Period;
(g) The Company is not required to include in income any
adjustment pursuant to Section 481(a) of the Code, by reason of any
voluntary or involuntary change in accounting method (nor has any tax
authority notified the Company in writing of any such adjustment or change
of accounting method);
(h) To the knowledge of the Company, no power of attorney has
been granted by or with respect to the Company with respect to any matter
relating to Taxes;
(i) The Company has not filed a consent pursuant to Section
341(f) of the Code (or any predecessor provision) or agreed to have Section
341(f)(2) of the Code apply to any disposition of a subsection (f) asset
(as such term is defined in Section 341(f)(4) of the Code);
(j) The reserves for Taxes (determined in accordance with
generally accepted accounting principles consistently applied) reflected in
the Xxxxxxxxxxx.xxx Balance Sheet and the CMJ Balance Sheet are adequate
for the payment of all Taxes payable by the Company through the respective
dates of the CMJ Balance Sheet and the Xxxxxxxxxxx.xxx Balance Sheet;
(k) The Company is not a party to, or subject to, any agreement,
contract or arrangement that could result, separately or in the aggregate,
in the payment of any payments that will not be deductible by operation of
Section 162(m) of the Code;
(l) The Company has not requested or received a ruling or
determination from any tax authority or signed a closing or other agreement
with any tax authority which would be reasonably likely to have a Material
Adverse Effect on the Company;
(m) The Federal Income Tax Returns of the Company for the Tax
Periods ending before January 1, 1995 have been examined by the appropriate
Governmental Entity (or the applicable statue of limitations for the
assessment of such taxes has expired);
(n) The Company is not a party to, is not bound by, nor has any
obligation under, any Tax sharing agreement, Tax indemnification agreement
or similar contract or arrangement (collectively, "Tax Indemnification
Agreements"). As of the date of this Agreement, the Company is not aware
of any potential liability or obligation to any person as a result of, or
pursuant to, any such Tax Indemnification Agreement;
(o) The Company has previously delivered or made available to
the Purchaser complete and accurate copies of each of (a) all audit
reports, letter rulings, technical advice memoranda and similar documents
issued by a Governmental Entity relating to the United States federal,
state, local or foreign Taxes due from or with respect to the Company, (b)
the United States federal income Tax Returns, and those state, local and
foreign income Tax Returns filed by the Company (or on its behalf) and (c)
any closing agreements entered into by the Company with any tax authority.
The Company will deliver to the Purchaser all materials with respect to the
foregoing for all matters relating to the Company arising after the date
hereof;
(p) The Company does not have nor could have any liability for
Taxes of another person under Section 1.1502-6 of the Treasury Regulations
(or any similar provision under state, local or foreign law), by contract
or otherwise;
(q) The Company does not have any deferred intercompany gain or
loss arising as a result of a deferred intercompany transaction within the
meaning of Section 1.1502-13 of the Treasury Regulations (or similar
provision under state, local or foreign law);
(r) No written notice of a claim by a taxing authority in a
jurisdiction where the Company does not file Tax Returns has been received
by the Company to the effect that the Company is or may be subject to
taxation by that jurisdiction;
(s) The Company is not a "United States real property holding
corporation" within the meaning of Section 897 of the Code;
For the purposes of this Agreement, the following terms shall
have the meanings set forth below: "Taxes" means all federal, state, local
and foreign taxes, levies, deficiencies or other assessments and other
charges of whatever nature, whether or not disputed (including income,
gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental, customs duties,
capital stock, franchise, profits, withholding, back-up withholding, social
security, unemployment, real property, personal property, sales, use,
transfer, registration, value added, alternative or add-on minimum and
other taxes or escheat liability), imposed by any taxing authority,
including any interest, penalty (civil or criminal), or addition thereto.
"Tax Law" means the law (including any applicable regulations or any
administrative pronouncement) of any governmental authority relating to any
Tax. "Tax Period" means with respect to any Tax, the period for which the
Tax is reported as provided under the applicable Tax Law. "Tax Return"
means any federal, state, local or foreign return, declaration, report,
claim for refund, amended return, declaration of estimated Tax or
information return or statement relating to Taxes, and any schedule,
exhibit, attachment or other materials submitted with any of the foregoing,
and any amendment thereto.
5.18 Employee Benefit Plans.
(a) For purposes of this Agreement, the term "Company Employee
Plans" shall mean and include: each management, consulting, non-compete,
employment, severance or similar contract, plan, arrangement or policy
applicable to any director, former director, employee or former employee of
the Company and each plan, program, policy, agreement or arrangement
(written or oral), providing for compensation, bonuses, profit-sharing,
stock option or other stock related rights or other forms of incentive or
deferred compensation, vacation benefits, insurance coverage (including any
self-insured arrangements), health or medical benefits, disability
benefits, workers' compensation, supplemental unemployment benefits,
severance benefits and post-employment or retirement benefits (including
compensation, pension, health, medical or life insurance benefits) or other
employee benefits of any kind, whether funded or unfunded, which is
maintained, administered or contributed to by the Company and covers any
employee or director or former employee or director of the Company, or
under which the Company has any liability, contingent or otherwise
(including but not limited to each material "employee benefit plan," as
defined in Section 3(3) of ERISA, but excluding any such plan that is a
"multiemployer plan," as defined in Section 3(37) of ERISA). Neither the
Company nor any of its Affiliates contributes to, or is required to
contribute to, any "multiemployer plan" as defined in Section 3(37) of
ERISA. Schedule 5.18 sets forth a true, accurate and complete list of all
Company Employee Plans.
(b) Each Company Employee Plan has been established and
maintained in compliance with its terms and with the requirements
prescribed by any and all statutes, orders, rules and regulations
(including but not limited to ERISA and the Code) which are applicable to
such Plan, except where failure to so comply would not, individually or in
the aggregate, have a Material Adverse Effect on the Company.
(c) The Company has not incurred a liability under Title IV of
ERISA that has not been satisfied in full, and no condition exists that
presents a material risk to the Company or any Affiliate of the Company of
incurring any such liability. All contributions required to be made under
the terms of any the Company Employee Plan have been made, and, where
applicable to a Company Employee Plan, the Company and its Affiliates have
complied with the minimum funding requirements under Section 412 of the
Code and Section 302 of ERISA with respect to each such Company Employee
Plan.
(d) Each Company Employee Plan which is intended to be qualified
under section 401(a) of the Code is so qualified and has been so qualified
during the period from its adoption to date, and each trust forming a part
thereof is exempt from federal income tax pursuant to section 501(a) of the
Code and, to the Company's knowledge, no circumstances exist which will
adversely affect such qualification or exception.
(e) No director or officer or other employee of the Company will
become entitled to any retirement, severance or similar benefit or enhanced
or accelerated benefit (including any acceleration of vesting or lapse of
repurchase rights or obligations with respect to any Company Employee Plans
or other benefit under any compensation plan or arrangement of the Company)
solely as a result of the transactions contemplated in this Agreement; and
(ii) no payment made or to be made to any current or former employee of
director of the Company, or any of its Affiliates by reason of the
transactions contemplated hereby (whether alone or in connection with any
other event, including, but not limited to, a termination of employment)
will constitute an "excess parachute payment" within the meaning of Section
280G of the Code.
(f) No Company Employee Plan provides material post-retirement
health and medical, life or other insurance benefits for retired employees
of the Company nor has the Company represented or promised to provide such
benefits.
(g) There has been no amendment to, or change in employee
participation or coverage under, any Company Employee Plan which would
increase materially the expense of maintaining such Company Employee Plan
above the level of the expense incurred in respect thereof by the Company
in connection with the Merger.
(h) The Company is in compliance with all applicable federal,
state, local and foreign statutes, laws (including, without limitation,
common law), judicial decisions, regulations, ordinances, rules, judgments,
orders and codes respecting employment, employment practices, labor, terms
and conditions of employment and wages and hours, and no work stoppage or
labor strike against the Company is pending or threatened, nor is the
Company involved in or threatened with any labor dispute, grievance or
litigation relating to labor matters involving any employees of the
Company, in each case except as would not, individually or in the
aggregate, have a Material Adverse Effect on the Company. There are no
suits, actions, disputes, claims (other than routine claims for benefits),
investigations or audits pending or, to the knowledge of the Company,
threatened in connection with any Company Employee Plan, but excluding any
of the foregoing which would not have a Material Adverse Effect on the
Company.
5.19 Compliance with Laws.
The Company has not violated, nor is in violation of, any
applicable provisions of any laws, statutes, ordinances or regulations
except for any violations that, individually or in the aggregate, would not
have a Material Adverse Effect on the Company.
5.20 Finders' or Advisors' Fees.
There is no investment banker, broker, finder or other
intermediary which has been retained by or is authorized to act on behalf
of the Company who might be entitled to any fee or commission in connection
with the transactions contemplated by this Agreement.
5.21 Environmental Matters.
(a) Except for matters which, individually or in the aggregate,
would not have a Material Adverse Effect on the Company (i) no written
notice, notification, demand, request for information, citation, summons,
complaint or order has been received by, and no investigation, action,
claim, suit, proceeding or review is pending or, to the knowledge of the
Company, threatened by any Person against, the Company, and no penalty has
been assessed against the Company, in each case, with respect to any
matters relating to or arising out of any Environmental Law; (ii) the
Company is in compliance with all Environmental Laws; and (iii) to the
knowledge of the Company there are no liabilities of or relating to the
Company relating to or arising out of any Environmental Law, and there is
no existing condition, situation or set of circumstances which could
reasonably be expected to result in such a liability.
(b) For purposes of this Agreement, the term "Environmental
Laws" means federal, state, local and foreign statutes, laws, judicial
decisions, regulations, ordinances, rules, judgments, orders, codes,
injunctions, permits and governmental agreements relating to human health
and the environment, including, but not limited to, Hazardous Materials;
and the term "Hazardous Material" means all substances or materials
regulated as hazardous, toxic, explosive, dangerous, flammable or
radioactive under any Environmental Law including, but not limited to: (i)
petroleum, asbestos, or polychlorinated biphenyls and (ii) in the United
States, all substances defined as Hazardous Substances, Oils, Pollutants or
Contaminants in the National Oil and Hazardous Substances Pollution
Contingency Plan.
5.22 Intellectual Property Matters.
(a) For purposes of this Agreement, "Intellectual Property"
means any United States, foreign, international and state: patents and
patent applications, industrial design registrations, certificates of
invention and utility models (collectively, "Patents"); trademarks, service
marks, and trademark or service xxxx registrations and applications, trade
names, logos, designs, slogans, and general intangibles of like nature,
together with all goodwill related to the foregoing (collectively,
"Trademarks"); Internet domain names; copyrights, copyright registrations,
renewals and applications for copyrights, including without limitation for
the Content and the Software (each as defined below in this Section 5.22)
(collectively, "Copyrights"); Content; Software, technology, trade secrets
and other confidential information, know-how, proprietary processes,
formulae, algorithms, models and methodologies (collectively, "Trade
Secrets"), rights of privacy and publicity, including but not limited to,
the names, likenesses, voices and biographical information of real persons,
and all license agreements and other agreements granting rights relating to
any of the foregoing. "Software" means any and all (i) computer programs,
including any and all software implementations of algorithms, models and
methodologies, whether in source code or object code form, (ii) databases,
compilations, and any other electronic data files, including any and all
collections of data, whether machine readable or otherwise, (iii)
descriptions, flow-charts, technical and functional specifications, and
other work product used to design, plan, organize, develop, test,
troubleshoot and maintain any of the foregoing, (iv) without limitation to
the foregoing, the software technology supporting any functionality
contained on Internet site(s), and (v) all documentation, including
technical, end-user, training and troubleshooting manuals and materials,
relating to any of the foregoing. "Content" means any and all information,
pictures, images, graphics, video, audio, text and any other content or
information, in whatever form and on any media. "Company Content" means
any and all Content published or displayed in any form, including
electronically by or on behalf of the Company, including but not limited to
all Content contained in Company publications and events.
(b) The Company owns or has the valid right to use all material
Intellectual Property, as currently used in connection with the business
of the Company, including without limitation all license agreements and
other agreements granting rights relating to any such Intellectual Property
("Company License Agreements") to which the Company is a party or is
otherwise bound (such Intellectual Property, together with the Company
License Agreements the "Company Intellectual Property").
(c) Schedule 5.22(c) sets forth, for the Company Intellectual
Property owned by the Company, a complete and accurate list of all United
States, foreign, international and state (i) patents and patent
applications, (ii) Trademark registrations and applications and material
unregistered Trademarks, (iii) Internet domain names, and (iv) Copyright
registrations and applications, and material unregistered Copyrights,
including Content and Software, indicating for each, the applicable
jurisdiction, registration number (or application number), and date issued
(or date filed).
(d) Except as set forth on Schedule 5.22(d), the Company
Intellectual Property owned by the Company is solely and exclusively owned
by the Company free and clear of all Liens, and the Company is listed in
the records of the appropriate United States, state or foreign agency as
the sole owner of record for each registration and application for any
Patent, Trademark, Internet domain name and Copyright that it owns. Except
as set forth on Schedule 5.22(d), all of the items set forth on Schedule
5.22(c) are valid and subsisting, in full force and effect, and have not
been cancelled, expired, or abandoned. There is no pending or, to the
Company's knowledge, threatened opposition, interference or cancellation
proceeding before any court or registration authority in any jurisdiction
against the items set forth on Schedule 5.22(c) or any other Company
Intellectual Property owned by the Company or, to the Company's knowledge,
against any Company Intellectual Property not owned by the Company.
(e) Except as set forth on Schedule 5.22(e), there are no
settlements, forebearances to xxx, consents, judgments, or orders or
similar obligations to which the Company is a party or is otherwise bound,
which (i) materially restrict the Company's rights to use any Company
Intellectual Property, (ii) materially restrict the Company's business in
order to accommodate a third party's Intellectual Property rights or (iii)
permit third parties to use any Intellectual Property which would otherwise
materially infringe any Company Intellectual Property. The Company has not
materially licensed or sublicensed its rights in any Company Intellectual
Property other than pursuant to the Company License Agreements set forth on
Schedule 5.22(e) and no royalties, honoraria or other fees are payable by
for the use of or right to use any Company Intellectual Property in
connection with the Company's business as currently conducted, except
pursuant to the Company License Agreements set forth on Schedule 5.22(e).
(f) The Company License Agreements are valid and binding
obligations of the Company and, to the Company's knowledge, any other
parties thereto, enforceable in accordance with their terms, and there
exists no event or condition which will result in a violation or breach of,
or constitute (with or without due notice or lapse of time or both) a
default by the Company under any such Company License Agreement.
(g) To the Company's knowledge, no Trade Secret material to the
business of the Company as currently operated has been disclosed or
authorized to be disclosed to any third party, including any employee,
agent, contractor or other entity, other than pursuant to a non-disclosure
agreement that adequately protects the Company's proprietary interests in
and to such Trade Secrets. To the Company's knowledge, no party to any
non-disclosure agreement relating to such Trade Secrets is in breach
thereof.
(h) To the Company's knowledge, the conduct of the Company's
business as currently conducted and the Company Content do not materially
infringe upon any Intellectual Property owned or controlled by any third
party (either directly or indirectly such as through contributory
infringement or inducement to infringe) and is not materially libelous,
slanderous, defamatory, violative in any way of publicity or privacy
rights, or obscene. Except as set forth on Schedule 5.22(h), there are no
claims or suits pending or, to the Company's knowledge, threatened, and the
Company has not received any notice of a third party claim or suit, (i)
alleging that the Company's activities or the conduct of its businesses
infringes upon or constitutes the unauthorized use of the Intellectual
Property rights of any third party, nor alleging libel, slander,
defamation, or other violation of a personal right, or (ii) challenging the
ownership, use, validity or enforceability of any the Company Intellectual
Property.
(i) To the Company's knowledge, no third party is materially
misappropriating, infringing, diluting, or otherwise violating any Company
Intellectual Property, and, except as set forth on Schedule 5.22(i), no
such claims are pending against a third party by the Company.
(j) Without limitation to the representations and warranties set
forth above in this Section 5.22, the Company represents and warrants that
there are no material restrictions on the Company Content owned by the
Company.
(k) The Company (i) has (other than as set forth in the
following clause (ii)) the unrestricted right to use, copy, distribute,
create derivative works from, perform, display, transmit and otherwise
exploit the Company Content, including, but not limited to, all past,
current and future music reviews published by or on behalf of CMJ on
whatever media (the "CMJ Music Reviews") and (ii) no other person or entity
will have any rights whatsoever in or to any Company Content, except for
(A) any rights set forth in the contacts (other than the Linking Agreement,
dated as of April 20, 1998, between CMJ and CDnow, Inc., a Pennsylvania
corporation (the "CDnow Agreement")) listed on Schedule 5.22(k) and (B) the
right of CDnow, Inc., pursuant to the CDnow Agreement, (x) to be the only
online retail seller of recorded music licensed to use, copy or display the
CMJ Music Reviews over the Internet and (y) to have the right of first
refusal to license any other CMJ Content appearing in either CMJ New Music
Report or CMJ New Music Monthly, except for any chart or chart related data
appearing in either CMJ New Music Report or CMJ New Music Monthly (the
rights in the foregoing clause (B) collectively referred to herein as the
"CDnow Agreement Rights"). Notwithstanding subsection (A) above and
notwithstanding the CDnow Agreement Rights, the Company has the right to
place any and all CMJ Content, including the CMJ Music Reviews, on its
Internet sites, including in connection with its online retail sale of
recorded music. None of the agreements listed on Schedule 5.22(e) hereto
conflict with or violate any provisions of any of the other agreements
listed on Schedule 5.22(e).
5.23 Year 2000 Compliance Matters.
(a) Except as set forth on Schedule 5.23, to the Company's
knowledge after reasonable investigation, all material Date Data and Date-
Sensitive Systems used by the Company in connection with its business as
currently conducted, or in development or on order, are Year 2000
Compliant, or are reasonably expected to be Year 2000 Compliant in a timely
manner. "Date Data" means any data of any type that includes date
information or which is otherwise derived from, dependent on or related to
date information. "Date-Sensitive System" means any Software, microcode or
hardware system or component, including any electronic or electronically
controlled system or component, that processes any Date Data (other than
those licensed from third party providers). "Year 2000 Compliant" means
(i) with respect to Date Data, that such data is in proper format and
accurate for all dates in, or spanning, the twentieth and twenty-first
centuries, and (ii) with respect to Date-Sensitive Systems, that each such
system accurately processes all Date Data, including for the twentieth and
twenty-first centuries, without loss of any functionality, interoperability
or performance, including but not limited to calculating, comparing,
sequencing, storing and displaying such Date Data (including all leap year
considerations), when used as a stand-alone system, or in combination with
other Software, hardware, or Content that is Year 2000 Compliant and
properly interfaces with that Date-Sensitive System.
5.24 Related-Party Transactions.
Except as set forth on Schedule 5.24, no employee, officer, or
director of the Company or member of his or her immediate family is
currently indebted to the Company, nor is the Company indebted (or
committed to make loans or extend or guarantee credit) to any of such
individuals. Except as set forth on Schedule 5.24, to the Company's
knowledge, as of the date hereof none of such persons has any direct or
indirect ownership interest in any firm or corporation with which the
Company is affiliated or any firm or corporation that competes with the
Company except that employees, officers, or directors of the Company and
members of their immediate families may own stock in an amount not to
exceed 5% of the outstanding capital stock of publicly traded companies
that may compete with the Company. As of the date hereof, except as set
forth on Schedule 5.24, and other than with respect to agreements for
employment, copies of which have been provided to the Purchaser, no
employee, director, of officer of the Company or any of its Subsidiaries
and no member of the immediate family of any employee, officer, or director
of the Company is directly or indirectly interested in any material
contract with the Company.
5.25 Title to Property and Assets.
As of the date hereof, the Company owns its property and assets
free and clear of all Liens except such Liens that arise in the ordinary
course of business and do not materially impair the Company's ownership or
use of such property or assets. With respect to the property and assets it
leases, the Company currently is in compliance with such leases and, to the
Company's knowledge, holds a valid leasehold interest free of any Liens.
5.26 Insurance.
The Company has, in full force and effect fire and casualty
insurance policies, with extended coverage, sufficient in amount (subject
to reasonable deductibles) to allow the Company to replace any material
assets or properties of the Company that might be damaged or destroyed.
Set forth on Schedule 5.26 is a list of all insurance policies maintained
by or for the benefit of the Company and its directors, officers, employees
or agents.
5.27 Receivables.
The accounts receivable of the Company (i) arose from bona fide
sales transactions in the ordinary course of business, are payable on
ordinary trade terms in the ordinary course of business and are not subject
to setoff, counterclaims or defense, (ii) are, to the knowledge of the
Company, legal, valid and binding obligations of the respective debtors
enforceable in accordance with their terms subject to bankruptcy,
insolvency, fraudulent conveyance, moratorium or other similar laws
affecting creditors' rights generally and to general principles of equity
(regardless of whether enforcement is sought in a proceeding at law or in
equity), (iii) are subject to reserves established on the Company Balance
Sheet or, with respect to accounts receivable arising subsequent to the
date thereof, to reserves established in the ordinary course consistent
with past practice and in accordance with GAAP.
6. Conditions of Parties' Obligations.
6.1 Conditions of the Purchaser's Obligations. The obligations
of the Purchaser under Section 2 hereof are subject to the fulfillment
prior to or on the Closing Date of all of the following conditions, any of
which may be waived in whole or in part by the Purchaser.
(a) (i) The Company shall have performed in all material
respects all of its obligations hereunder required to be performed by it at
or prior to the Closing Date and (ii) the representations and warranties of
the Company contained in this Agreement shall be true and correct (without
giving effect to any limitation as to "materiality" or "Material Adverse
Effect" set forth therein) at and as of the Closing Date as if made at and
as of such time (except to the extent expressly made as of an earlier date,
in which case as of such earlier date), except where the failure of such
representations and warranties to be true and correct (without giving
effect to any limitation as to "materiality" or "Material Adverse Effect"
set forth therein) would not, individually or in the aggregate, have a
Material Adverse Effect on the Company;
(b) There shall not be any statute, rule, regulation,
injunction, order or decree, enacted, enforced, promulgated, entered,
issued or deemed applicable to this Agreement and the other transactions
contemplated hereby (or in the case of any statute, rule or regulation,
awaiting signature or reasonably expected to become law), by any court,
government or governmental authority or agency or legislative body,
domestic, foreign or supranational, that would, or would reasonably be
expected to, have a Material Adverse Effect on the Purchaser at or after
the Closing Date.
(c) Certificate of Designations. The Certificate of
Designations shall have been filed with the Secretary of State of the State
of Delaware, and the Purchaser, shall have received confirmation reasonably
satisfactory to it that such filing has occurred.
(d) Qualification Under State Securities Laws. All
registrations, qualifications, permits and approvals required under
applicable state securities laws shall have been obtained for the lawful
execution, delivery and performance of this Agreement, including without
limitation the offer and sale of the Securities.
(e) Certificate of Officer. The Company shall have delivered to
the Purchaser a certificate dated the Closing Date, executed by its Chief
Executive Officer, certifying the satisfaction of the conditions specified
in paragraphs (a) of this Section 6.1 and as to the filing of the
Certificate of Designations.
(f) Warrant. The Company shall have executed and delivered the
Warrant in the form attached hereto as Exhibit B.
(g) Registration Rights Agreement. The Purchaser, the Company
and the other stockholders of the Company shall have executed and delivered
the Registration Rights Agreement in the form attached hereto as Exhibit C.
(h) Stockholders Agreement. The Purchaser, the Company and the
other stockholders of the Company shall have executed and delivered the
Stockholders Agreement in the form attached hereto as Exhibit D.
(i) Supporting Documents. The Purchaser shall have received the
following:
(i) Copies of resolutions of the Board of Directors of the
Company, certified by the Secretary of the Company, authorizing and
approving the filing of the Certificate of Designations, the
execution, delivery and performance of this Agreement, the Warrant,
the Registration Rights Agreement, the Stockholders Agreement and all
other documents and instruments to be delivered pursuant hereto and
thereto;
(ii) A certificate of incumbency executed by the Secretary
of the Company (A) certifying the names, titles and signatures of the
officers authorized to execute the documents referred to in
subparagraph (i) above and (B) further certifying that the Certificate
of Incorporation and By- laws of the Company delivered to the
Purchaser at the time of the execution of this Agreement have been
validly adopted and have not been amended or modified, except to the
extent provided in the Certificate of Designations; and
(iii) Such additional supporting documentation and other
information with respect to the transactions contemplated by this
Agreement as the Purchaser may reasonably request.
(j) No Material Adverse Change. There shall have been no
material adverse change in the business, properties, assets or condition
(financial or otherwise) of the Company from and after the date of this
Agreement.
(k) Consents and Waivers. The Company shall have obtained all
consents or waivers necessary to execute and perform its obligations under
this Agreement, and the documents contemplated herein, to issue the
Securities, and to carry out the transactions contemplated hereby and
thereby. All corporate and other action and governmental filings necessary
to effectuate the terms of this Agreement, the Securities, and other
agreements and instruments executed and delivered by the Company in
connection herewith shall have been made or taken.
6.2 Conditions of Company's Obligations. The Company's
obligations under Section 2 hereof are subject to the fulfillment prior to
or on the Closing Date of the following conditions, any of which may be
waived in whole or in part by the Company.
(a) (i) The Purchaser shall have performed in all material
respects all of its obligations hereunder required to be performed by it at
or prior to the Closing Date, (ii) the representations and warranties of
the Purchaser contained in this Agreement shall be true and correct
(without giving effect to any limitation as to "materiality" or "Material
Adverse Effect" set forth therein) at and as of the Closing Date as if made
at and as of such time (except to the extent expressly made as of an
earlier date, in which case as of such earlier date), except where the
failure of such representations and warranties to be true and correct
(without giving effect to any limitation as to "materiality" or "Material
Adverse Effect" set forth therein) would not, individually or in the
aggregate, have a Material Adverse Effect on the Purchaser, and (iii) the
Company shall have received a certificate signed by an executive officer of
the Purchaser to the foregoing effect;
(b) There shall not be any statute, rule, regulation,
injunction, order or decree, enacted, enforced, promulgated, entered,
issued or deemed applicable to this Agreement and the other transactions
contemplated hereby (or in the case of any statute, rule or regulation,
awaiting signature or reasonably expected to become law), by any court,
government or governmental authority or agency or legislative body,
domestic, foreign or supranational, that would, or would reasonably be
expected to, have a Material Adverse Effect on the Company at or after the
Closing Date.
6.3 Conditions of Each Party's Obligations. The respective
obligations of each party to consummate the transactions contemplated
hereunder are subject to the fulfillment prior to or on the Closing Date of
all of the following conditions:
(a) Effectiveness of the Merger. The Merger shall have become
effective contemporaneous with or immediately prior to the Closing.
(b) Absence of Litigation. The parties shall be satisfied as to
the absence of (i) litigation challenging or seeking damages in connection
with the transactions contemplated by this Agreement and (ii) any provision
of any applicable law or regulation, or any judgment, injunction, order or
decree prohibiting or enjoining the transactions contemplated by this
Agreement.
7. Covenants. For so long as the Purchaser beneficially owns not
less than 500 shares of Series A Preferred Stock, the Company agrees that
the Company (and each of its Subsidiaries unless the context otherwise
requires) will do the following:
7.1 Maintain Corporate Rights and Facilities. Maintain and
preserve its corporate existence and all rights, franchises, licenses,
trademarks, service marks, trade names, copyrights and other authority
reasonably deemed adequate by the Company for the conduct of its business;
maintain its properties, equipment and facilities in good order and repair;
and conduct its business in an orderly manner without voluntary
interruption.
7.2 Maintain Insurance. Maintain in full force and effect a
policy or policies of insurance issued by insurers of recognized
responsibility, insuring it and its properties and business against such
losses and risks, and in such amounts, as are customary in the case of
corporations of established reputation engaged in the same or a similar
business.
7.3 Information Rights.
(a) Access to Records. The Company shall, and shall cause each
subsidiary to, afford to the Purchaser, the affiliates of the Purchaser and
each of their respective officers, employees, advisors, counsel and other
authorized representatives (collectively with the affiliates of the
Purchaser, the "Representatives"), during normal business hours, reasonable
access, upon reasonable advance notice, to all of the books, records and
properties of the Company and its Subsidiaries and all officers and
employees of the Company and such Subsidiaries. The Purchaser shall
maintain the confidentiality of any confidential and proprietary
information regarding the Company and its Subsidiaries; provided, however,
that the foregoing shall in no way limit or otherwise restrict the ability
of the Purchaser or any of its Representatives to disclose any such
information concerning the Company and its Subsidiaries which it may be
required to disclose pursuant to or as required by law.
(b) Financial Reports. For so long as the Purchaser
beneficially owns not less than 500 shares of Series A Preferred Stock, the
Company shall furnish to the Purchaser the following:
(i) Quarterly Reports. As soon as available, but not later
than 45 days after the end of each quarterly accounting period, (A) a
consolidated balance sheet of the Company as of the end of such period
and consolidated statements of income, cash flows and changes in
stockholders' equity for such quarterly accounting period and for the
period commencing at the end of the previous fiscal year and ending
with the end of such period, setting forth in each case in comparative
form the corresponding figures for the corresponding period of the
preceding fiscal year, and including comparisons to the budget or
business plan and an analysis of the variances from the budget or
plan, all prepared in accordance with generally accepted accounting
principals consistently applied, subject to normal year-end
adjustments and the absence of footnote disclosure, and (B) a report
by management of the Company of the operating and financial highlights
of the Company and its Subsidiaries for such period, which shall
include (x) a comparison between operating and financial results and
budget and (y) an analysis of the operations of the Company and its
Subsidiaries for such period.
(ii) Annual Audit. As soon as available, but not later than
90 days after the end of each fiscal year of the Company, audited
consolidated financial statements of the Company, which shall include
statements of income, cash flows and changes in stockholders' equity
for such fiscal year and a balance sheet as of the last day thereof,
each prepared in accordance with generally accepted accounting
principles, consistently applied, and accompanied by the report of a
"Big 5" firm of independent certified public accountants selected by
the Company's Board of Directors (the "Accountants"). The Company and
its Subsidiaries shall maintain a system of accounting sufficient to
enable its Accountants to render the report referred to in this
Section 7.3(b)(ii).
(iii) Miscellaneous. Promptly upon becoming available,
each of the following:
(A) copies of all financial statements, reports, press
releases, notices, proxy statements and other documents sent by the
Company or its Subsidiaries to its stockholders generally or released
to the public and copies of all regular and periodic reports, if any,
filed by the Company or its Subsidiaries with the SEC, any securities
exchange or the NASD;
(B) notification in writing of the existence of any default
under any material agreement or instrument to which the Company or any
of its Subsidiaries is a party or by which any of their assets are
bound;
(C) upon request, copies of all reports prepared for or
delivered to the management of the Company or its Subsidiaries by its
accountants; and
(D) upon request, any other routinely collected financial
or other information available to management of the Company or its
Subsidiaries (including, without limitation, routinely collected
statistical data).
7.4 Notice of Litigation, Disputes and Adverse Changes; Other
Information. (a) Promptly notify the Purchaser of (i) each legal action,
suit, arbitration or other administrative or governmental investigation or
proceeding (whether federal, state, local or foreign) instituted or, to the
Company's knowledge, threatened against the Company (or of any occurrence
or dispute which involves a reasonable likelihood of any such action, suit,
arbitration, investigation or proceeding being instituted), or (ii) any
other occurrence or change of circumstance relating to the Company which,
in either such case, could reasonably be expected to materially and
adversely affect the Company's condition (financial or otherwise),
properties, assets, liabilities, business or operations (except for any
changes that are the effect or result of economic factors generally
affecting the economy as a whole).
(b) Promptly provide the Purchaser with such other information
relating to the Company as reasonably requested by the Purchaser including,
but not limited to, such financial or other information necessary for the
Purchaser's compliance with its reporting requirements under the Exchange
Act.
7.5 Conduct of Business. Conduct its business in accordance
with all applicable provisions of federal, state, local and foreign law.
7.6 Compliance with Certificate of Incorporation and Bylaws.
Perform and observe all of its obligations to the holders of all of its
securities set forth in the Company's Certificate of Incorporation and By-
laws.
7.7 Internal Accounting Controls. Maintain a system of internal
accounting controls administered in accordance with Section 13(b)(2) of the
Securities Exchange Act of 1934.
7.8 Indemnification of the Board of Directors; Directors and
Officers Insurance Policy. Reimburse all directors of the Company for
their reasonable out-of-pocket expenses in connection with attending
meetings of the Company's Board of Directors and all committees thereof and
all reasonable out-of-pocket expenses otherwise incurred in fulfilling
their duties as directors. The Company's By-Laws or charter shall at all
times require the indemnification of all of the Company's directors against
liability for actions and omissions to act in their capacity as directors
of the Company to the maximum extent that such individuals may lawfully be
so indemnified by the Company.
Maintain in full force and effect a directors and officer
liability insurance policy issued by issuers of recognized responsibility,
insuring its directors and officers against such losses and risks, and in
such amounts, as are customary in the case of corporations of established
reputation in the same or similar business.
7.9 Use of Proceeds. The Company will use up to $1.8 million of
the proceeds to the Company from the sale of the Series A Preferred Shares
and the Warrant for the satisfaction of all indebtedness of the Company
that shall have been inherited from CMJ as a result of the Merger. The
Company will use the remainder of such proceeds to provide the Company with
working capital and for general corporate purposes.
7.10 Reservation of Capital Stock. The Company shall reserve and
keep available out of its authorized but unissued Series A Preferred stock
and Common Stock the number of shares required for issuance upon exercise
of the Warrant and the conversion of all of the Series A Preferred Shares
and the Warrant Preferred Shares (including any additional shares which may
become so issuable by reason of the operation of the payment-in-kind
dividend provisions of the Certificate of Designations and the anti-
dilution provisions of the Certificate of Designations and the Warrant).
7.11 Advice of Changes. The Company shall confer with the
Purchaser on a regular and frequent basis as reasonably requested by the
Purchaser, orally and, if requested by the Purchaser, in writing, with
regard to any change that has had a Material Adverse Effect with respect to
the Company or its Subsidiaries. The Company shall promptly provide to the
Purchaser copies of all filings made by the Company or any subsidiary with
any Governmental Entity in connection with this Agreement and the
transactions contemplated hereby.
7.12 Protective Provisions. For so long as the Purchaser
beneficially owns not less than 500 shares of Series A Preferred Stock
(subject to appropriate adjustment in the event of any stock dividend,
subdivision, stock split or combination of the Series A Preferred Shares),
the Company shall not, and shall not permit any Subsidiary to, without the
prior written consent of the Purchaser, which consent shall not be
unreasonably withheld:
(a) amend the Certificate of Incorporation or By-laws of the
Company if such amendment would adversely alter or change the rights,
preferences or privileges of the Series A Preferred Shares or otherwise so
as to adversely effect the Series A Preferred Shares.
(b) merge, consolidate, or amalgamate with any person or entity,
except in connection with any Permitted Acquisition;
(c) effect, approve or authorize any Liquidation of the Company
or any recapitalization or reorganization of the Company or any Subsidiary;
(d) directly or indirectly declare or pay any dividend or make
any other distribution in respect thereof, or directly or indirectly redeem
or repurchase any shares of capital stock of the Company, whether in cash
or property or in obligations of the Company or any Subsidiary; provided,
however, that the Company may declare or pay any dividend on, distribution
upon or redemption of the Series A Preferred Shares and Warrant Preferred
Shares, in accordance with their terms;
(e) agree to, or permit any Subsidiary to agree to, any
provision in any agreement that would impose any restriction on the ability
of the Company to honor the exercise of any rights of the holders of the
Series A Preferred Stock or the Warrant;
(f) other than employment arrangements approved by the Board of
Directors enter into any transaction, including, without limitation, any
purchase, sale, lease or exchange of property, the rendering of any service
or the payment of any management, advisory or similar fees, with any
Affiliate unless such transaction is (a) in the ordinary course of business
of the Company and its Subsidiaries, and (b) upon fair and reasonable terms
no less favorable to the Company and its Subsidiaries than they would
obtain in a comparable arm's length transaction with a Person which is not
an Affiliate;
(g) materially alter or change the business of the Company or
any Subsidiary as it is currently conducted or planned to be conducted;
(h) hire or fire, or amend the employment terms of, the Chief
Executive Officer or the Chief Operating Officer of the Company;
(i) acquire or dispose of any business or assets in a single
transaction or a series of related transactions with an aggregate value in
such transaction or series of related transactions in excess of $500,000
(including all assumed debt, all cash payments, and the fair market value
of all securities or other property issued as consideration);
(j) adopt any employee stock option plan or stock incentive
plan, or alter in any material respect any of the Company's equity
incentive plans for executive officers;
(k) issue any equity securities other than to employees or
directors upon exercise of the stock options referred to in Section 8.3 of
the Merger Agreement;
(l) the creation or incurrence of any indebtedness, or the
guaranty of any indebtedness of any other Person, by the Company or any
Subsidiary in excess of $500,000; or
(m) agree or otherwise commit to take any of the actions set
forth above.
8. Registration Rights. The Purchaser shall be entitled to the
registration rights with respect to the Conversion Shares and the Warrant
Shares as set forth in the Registration Rights Agreement attached hereto as
Exhibit C.
9. Third Party Transfers. The Purchaser acknowledges that each
certificate evidencing the Securities shall be stamped or otherwise
imprinted with a legend (in addition to any restrictive legend set forth in
Section 10 hereof) in substantially the following form:
"The shares represented by this Certificate are subject to the
limitations and may be transferred only in compliance with the
conditions contained in Section 10.4 of the Securities Purchase
Agreement, dated as of November 12, 1999, between XXX.xxx,
Inc. and Rare Medium Group, Inc."
10. Registration, Transfer and Substitution of Certificates for
Shares.
10.1 Stock Register; Ownership of Securities. (a) The Company
will keep at its principal office a register in which the Company will
provide for the registration of transfers of the Securities. The Company
may treat the Person in whose name any of the Securities are registered on
such register as the owner thereof and the Company shall not be affected by
any notice to the contrary. All references in this Agreement to a "holder"
of any Securities shall mean the Person in whose name such Securities are
at the time registered on such register.
10.2 Replacement of Certificates. Upon receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of any certificate representing Securities, and, in the case of
any such loss, theft or destruction, upon delivery of indemnity reasonably
satisfactory to the Company in form and amount or, in the case of any such
mutilation, upon surrender of such certificate for cancellation at the
office of the Company maintained pursuant to subdivision (a) of Section
10.1 hereof, the Company at its expense will execute and deliver, in lieu
thereof, a new certificate representing Securities of like tenor.
10.3 Restrictive Legends. Each certificate evidencing Securities
shall be stamped or otherwise imprinted with a legend in substantially the
following form:
"The shares represented by this Certificate have not been
registered under the Securities Act of 1933 and may not be
transferred in the absence of such registration or an exemption
therefrom under such Act."
10.4 Notice of Proposed Transfer; Opinions of Counsel. Prior to
any transfer of any Securities, the holder thereof will give written notice
to the Company of such holder's intention to effect such transfer and to
comply in all other respects with this Section 10.4. Each such notice
shall describe the manner and circumstances of the proposed transfer. If
within 5 business days after receipt by the Company of such notice, the
Company requests an opinion of counsel for such holder that the proposed
transfer may be effected without registration of such Securities under the
Securities Act, then the Company shall not be required to register such
transfer, and the holder thereof shall not be entitled to effect such
transfer, unless and until the Company receives such an opinion (which
counsel and opinion shall each be reasonably satisfactory to the Company).
Such holder shall thereupon be entitled to transfer such Securities in
accordance with the terms of the notice delivered by such holder to the
Company. Each certificate representing such shares issued upon or in
connection with such transfer shall bear the restrictive legends required
by Sections 9 and 10.3.
11. Definitions. Unless the context otherwise requires, the terms
defined in this Section 11 shall have the meanings specified for all
purposes of this Agreement.
Except as otherwise expressly provided, all accounting terms used
in this Agreement, whether or not defined in this Section 11, shall be
construed in accordance with United States generally accepted accounting
principles. If and so long as the Company has one or more Subsidiaries,
such accounting terms shall be determined on a consolidated basis for the
Company and each of its Subsidiaries, and the financial statements and
other financial information to be furnished by the Company pursuant to this
Agreement shall be consolidated and presented with consolidating financial
statements of the Company and each of its Subsidiaries.
"Affiliate" shall mean any Person that directly or indirectly
controls, is controlled by, or is under common control with, the indicated
Person.
"Agreement" shall mean this Agreement.
"Certificate of Incorporation" shall have the meaning assigned to
it in Section 1 hereof.
"Xxxxxxxxxxx.xxx Balance Sheet" shall mean the consolidated
balance sheet of Xxxxxxxxxxx.xxx as of September 30, 1999 delivered to the
Purchaser.
"CMJ Balance Sheet" shall mean the consolidated balance sheet of
CMJ as of September 30, 1999 delivered to the Purchaser.
"Closing" shall have the meaning assigned to it in Section 3
hereof.
"Closing Date" shall have the meaning assigned to it in Section 3
hereof.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Common Stock" shall have the meaning assigned to it in Section 1
hereof.
"Company Employee Plans" shall have the meaning assigned to it in
Section 5.18 hereof.
"Conversion Shares" shall mean the shares of Common Stock,
issuable upon conversion of the Series A Preferred Stock.
"Environmental Law" shall have the meaning assigned to it in
Section 5.21(b) hereof.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"Exchange Act" shall mean the Securities Exchange Act of 1934.
"GAAP" shall mean U.S. generally accepted accounting principles.
"Governmental Entity" shall mean any national, federal, state,
municipal, local, territorial, foreign or other government or any
department, commission, board, bureau, agency, regulatory authority or
instrumentality thereof, or any court, judicial, administrative or arbitral
body or public or private tribunal.
"Hazardous Material" shall have the meaning assigned to it in
Section 5.21(b) hereof.
"Intellectual Property "shall have the meaning assigned to it in
Section 5.22(b) hereof.
"Lien" shall have the meaning assigned to it in Section 5.8
hereof.
"Liquidation" means any voluntary or involuntary liquidation,
dissolution, or winding up of the affairs of the Company, other than any
dissolution, liquidation or winding up in connection with any
reincorporation of the Company in another jurisdiction.
"Material Adverse Effect" shall have the meaning assigned to it
in Section 5.3 hereof.
"Merger" shall have the meaning assigned to it in Section 5
hereof.
"Merger Agreement" means the Agreement and Plan of Merger, dated
as of November 12, 1999, among Xxxxxxxxxxx.xxx, CMJ and the Company.
"Net Liabilities" has the meaning given in the Merger Agreement.
"Permitted Acquisition" means any acquisition by the Company or
any Subsidiary of (i) any business or assets with a purchase price of
$500,000 or less (including all assumed debt, all cash payments, and the
fair market value of all securities or other property issued as
consideration) or (ii) any business or assets for which the consent or
approval of the Purchaser has been given.
"Person" shall include all natural persons, corporations,
business trusts, associations, companies, partnerships, joint ventures,
limited liability companies and other entities and governments and agencies
and political subdivisions.
"Purchase Price" shall have the meaning assigned it in Section 2
hereof.
"Purchaser" shall have the meaning assigned it in the
introductory paragraph of this Agreement.
"SEC" shall mean the Securities and Exchange Commission.
"Securities" shall have the meaning assigned to it in Section 1
hereof.
"Securities Act" or "Act" shall mean the Securities Act of 1933,
as amended.
"Series A Preferred Shares" and "Series A Preferred Stock" shall
have the meanings assigned to such terms in Section 1 hereof.
"Subsidiary" shall mean any corporation, association or other
business entity (i) at least 50% of the outstanding voting securities of
which are at the time owned or controlled directly or indirectly by the
Company or (ii) with respect to which the Company possesses, directly or
indirectly, the power to direct or cause the direction of the affairs or
management of such person.
"Taxes" shall have the meaning assigned to it in Section 5.17
hereof.
"Tax Indemnification Agreement" shall have the meaning assigned
to it in Section 5.16 hereof.
"Tax Law" shall have the meaning assigned to it in Section 5.17
hereof.
"Tax Period" shall have the meaning assigned to it in Section
5.17 hereof.
"Tax Return" shall have the meaning assigned to it in Section
5.17 hereof.
"Warrant" shall have the meaning assigned to it in Section 1
hereof.
"Warrant Preferred Shares" shall have the meaning assigned to it
in Section 1 hereto.
"Warrant Shares" shall have the meaning assigned to it in Section
1 hereof.
12. Miscellaneous.
12.1 Waivers and Amendments. Upon the approval of the Company
and the written consent of the Purchaser (a) the obligations of the Company
and the rights of the Purchaser under this Agreement may be waived (either
generally or in a particular instance, either retroactively or
prospectively and either for a specified period of time or indefinitely),
and (b) the Company may enter into a supplementary agreement for the
purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of this Agreement, or of any supplemental
agreement or modifying in any manner the rights and obligations hereunder
or thereunder of the Purchaser and the Company.
The foregoing notwithstanding, no such waiver or supplemental
agreement shall (a) affect any of the rights of any holder of a Security
created by the Certificate of Designations, the Warrant or by the Delaware
General Corporation Law without compliance with all applicable provisions
of the Certificate of Designation, the Warrant and the Delaware General
Corporation Law, or (b) reduce the aforesaid fraction of Series A Preferred
Shares or Warrant Preferred Shares, as the case may be, the holders of
which are required to consent to any waiver or supplemental agreement,
without the consent of the holders of all the Series A Preferred Shares and
Warrant Preferred Shares, respectively.
Neither this Agreement, nor any provision hereof, may be changed,
waived, discharged or terminated orally or by course of dealing, but only
by a statement in writing signed by the party against which enforcement of
the change, waiver, discharge or termination is sought, except to the
extent provided in this Section 13.1.
12.2 Notices. All notices, requests, consents and other
communications to any party hereunder shall be in writing (including
facsimile or similar writing) and shall be given,
(a) if to the Purchaser, to:
Rare Medium Group, Inc.
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx X. Xxxxx, General Counsel
Facsimile No.: (000) 000-0000
with a copy to:
Skadden, Arps, Slate, Xxxxxxx & Xxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000-0000
Attention: Xxxxxxx X. Xxxxxxxxx, Esq.
Facsimile No.: (000) 000-0000
or (b) if to the Company, to:
XXX.xxx, Inc.
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx Xxxxxx
Facsimile No.: (000) 000-0000
with copies to:
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxxxxxx, Esq.
Facsimile No.: (000) 000-0000
and
Rosenman & Colin LLP
000 Xxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxx X. Xxxxxx, Esq.
Facsimile No.: (000) 000-0000
or at such other address or facsimile number as the Company or the
Purchaser each may hereafter specify for the purpose by notice to the other
party. Each such notice, request, or other communication shall be
effective
(a) if given by facsimile, when such facsimile is transmitted to
the facsimile number specified in this Section and the appropriate
facsimile confirmation is received or (b) if given by any other means, when
delivered at the address specified in this Section.
12.3 Termination of Agreement. This Agreement may be terminated
prior to the Closing as follows:
(a) by mutual consent of the Purchaser and the Company; or
(b) at the election of the Purchaser or the Company, if the
Merger has not been consummated as of February 12, 2000.
(c) upon termination of the Merger Agreement pursuant to Section
11.1 thereof.
In the event that the Purchaser elects to terminate this
Agreement pursuant to clause (b) of this Section 13.3, it shall give
written notice of such termination to the Company in accordance with the
provisions of Section 13.2.
If this Agreement is terminated pursuant to this Section 13.3,
this Agreement shall become void and of no effect with no liability on the
part of any party hereto, except that the agreements contained in this
Section 13.3, and in Section 13.11, shall survive the termination hereof.
12.4 Indemnification. (a) The Company hereby indemnifies the
Purchaser against and agrees to hold it harmless from any and all damage,
loss, liability and expense (including, without limitation, reasonable
expenses of investigation and reasonable attorneys' and accountants' fees
and expenses in connection with any action, suit or proceeding)
(collectively, "Loss") incurred or suffered by the Purchaser arising out of
any misrepresentation or breach of warranty, covenant or agreement made or
to be performed by the Company pursuant to this Agreement, the Certificate
of Designations or the Warrant; provided that no claim for indemnification
against any Loss under this Section 12.4(a) shall be asserted unless and
until the cumulative total of the asserted Losses exceeds $25,000.
(b) The Purchaser indemnifies the Company against and agrees to
hold it harmless from any and all Loss incurred or suffered by the Company
arising out of any misrepresentation or breach of warranty, covenant or
agreement made or to be performed by the Purchaser pursuant to this
Agreement; provided that no claim for indemnification against any Loss
under this Section 12.4(b) shall be asserted unless and until the
cumulative total of the asserted Losses exceeds $25,000.
(c) Notwithstanding the foregoing, the indemnification
provisions referred to in Section 12.4(a) above shall not be enforceable by
the Purchaser to the extent that any misrepresentation or breach of
warranty, covenant or agreement by the Company hereunder is attributable to
Xxxxxxxxxxx.xxx and the Purchaser had knowledge of such misrepresentation
or breach prior to consummation of the Merger.
12.5 Indemnification Procedures.
(a) The party seeking indemnification under Section 12.4 (the
"Indemnified Party") agrees to give prompt notice to the party against whom
indemnity is sought (the "Indemnifying Party") of the assertion of any
claim, or the commencement of any suit, action or proceeding in respect of
which indemnity may be sought under such Section. The Indemnifying Party
may, and at the request of the Indemnified Party shall, participate in and
control the defense of any such suit, action or proceeding at its own
expense. The Indemnifying Party shall not be liable under Section 12.4 for
any settlement effected without its consent of any claim, litigation or
proceeding in respect of which indemnity may be sought hereunder; provided
that such consent is not unreasonably withheld.
(b) The Indemnified Party shall cooperate fully in all aspects
of any matter for which indemnity is sought pursuant to Section 12.4 with
respect to an action brought by a third party, including, in such case, by
providing reasonable access to employees and officers (as witnesses or
otherwise) and other information.
12.6 Survival of Representations and Warranties, etc. The
representations and warranties contained (i) in Sections 4.1, 4.2, 4.3,
4.4, 4.7, 4.8, 4.9, 4.10, 4.11, 5.1, 5.2, 5.3, 5.5, 5.6, 5.7, 5.8, 5.10,
5.11, 5.12 and 5.22(k) hereof shall survive the Closing Date for the period
of the statute of limitations applicable to a claim for breach of such
representations and warranties (ii) in Sections 4.5, 5.14, 5.16, 5.19,
5.21, 5.23, 5.24, 5.26 hereof shall survive through the first anniversary
of the Closing Date and (iii) in all other Sections of this Agreement shall
survive through the second anniversary of the Closing Date, notwithstanding
any investigation at any time made by or on behalf of the Purchaser, and
the sale and purchase of the Securities and payment therefor; and all
statements contained in any certificate, instrument or other writing
delivered by or on behalf of the Company pursuant hereto or in connection
with or contemplation of the transactions herein contemplated shall
constitute representations and warranties by the Company hereunder.
At the end of the applicable survival period set forth above, the
Company and the Purchaser shall, without further action as to such
representations and warranties, be deemed to have fully released each other
from any and all responsibilities arising thereunder unless during such
period a party shall have notified the other party in writing of the nature
and particulars of any claimed misrepresentation or breach by the other
party.
12.7 Amendments; No Waivers.
(a) Any provision of this Agreement (including the Exhibits and
Schedules hereto) may be amended or waived prior to the Closing Date, if,
and only if, such amendment or waiver is in writing and signed by each of
the parties hereto;
(b) No failure or delay by any party in exercising any right,
power or privilege hereunder shall operate as a waiver thereof nor shall
any single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other right, power or privilege.
The rights and remedies herein provided shall be cumulative and not
exclusive of any rights or remedies provided by law.
12.8 Successors and Assigns. All the terms and provisions of
this Agreement shall be binding upon and inure to the benefit of and be
enforceable by the respective parties hereto, the successors and assigns of
the Purchaser and the successors of the Company, whether so expressed or
not (each of which is expressly deemed to be a third party beneficiary
hereunder). Neither party hereto may assign any of its rights or
obligations hereunder without the prior written consent of the other party
hereto, except that the Purchaser may, without the prior consent of the
Company, (a) assign its rights to purchase the Securities hereunder to any
of its Affiliates and (b) in connection with any transfer of at least 50%
of its original investment in the Series A Preferred Shares hereunder
(whether in the form of Series A Preferred Stock, Conversion Shares or a
combination thereof) assign any or all of its rights hereunder or under the
Certificate of Designations. This Agreement shall not inure to the benefit
of or be enforceable by any other Person.
12.9 Headings. The headings of the Sections and paragraphs of
this Agreement have been inserted for convenience of reference only and do
not constitute a part of this Agreement.
12.10 Governing Law. It is the intention of the parties that
the internal laws, and not the laws of conflicts, of New York should govern
the enforceability and validity of this Agreement, the construction of its
terms and the interpretation of the rights and duties of the parties.
12.11 Expenses. The Company agrees, subject to the
consummation of the transactions contemplated hereby, to pay, reimburse and
hold the Purchaser harmless from liability for the payment of, all
reasonable expenses incurred by the Purchaser in connection with the
preparation and negotiation of this Agreement, and the consummation of the
transactions contemplated hereby and thereby, including, without
limitation:
(i) the fees and expenses of its counsel and accountants
and the Purchaser's out of pocket expenses, arising in connection with
the preparation, negotiation and execution of this Agreement, the
Certificate of Designations and the Warrant and the consummation of
the transactions contemplated hereby (the fees and expenses of such
counsel may be paid by check delivered to such counsel at the Closing
by the Purchaser, the amount of such check being deducted from the
aggregate amount to be paid by the Purchaser at the Closing for the
Securities to be purchased by it hereunder),
(ii) the fees and expenses incurred with respect to any
amendments to this Agreement, the Certificate of Designations or the
Warrant proposed by the Company (whether or not the same become
effective),
(iii) the fees and expenses incurred in connection with
any requested waiver of the right of any holder of Securities or the
consent of any holder of Securities to contemplated acts of the
Company not otherwise permissible by the terms of this Agreement, the
Certificate of Designations or the Warrant,
(iv) stamp and other taxes, excluding income taxes, which
may be payable with respect to the execution and delivery of this
Agreement, or the issuance, delivery or acquisition of the Series A
Preferred Shares or the Warrant or upon the conversion of the Series A
Preferred Shares or the exercise of the Warrant, and
(v) all costs of the Company's performance and compliance
with this Agreement, the Certificate of Designations and the Warrant.
12.12 Jurisdiction.
Any suit, action or proceeding seeking to enforce any provision of, or
based on any matter arising out of or in connection with, this Agreement or
the transactions contemplated hereby may be brought in any federal or state
court located in the State of New York, and each of the parties hereby
consents to the jurisdiction of such courts (and of the appropriate
appellate courts therefrom) in any such suit, action or proceeding and
irrevocably waives, to the fullest extent permitted by law, any objection
which it may now or hereafter have to the laying of the venue of any such
suit, action or proceeding in any such court or that any such suit, action
or proceeding which is brought in any such court has been brought in an
inconvenient forum. Process in any such suit, action or proceeding may be
served on any party anywhere in the world, whether within or without the
jurisdiction of any such court. Without limiting the foregoing, each party
agrees that service of process on such party as provided in Section 13.2
shall be deemed effective service of process on such party.
12.13 Waiver of Jury Trial.
EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT
TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
12.14 Counterparts; Effectiveness. This Agreement may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, with the same effect as if all parties had signed
the same document. All such counterparts shall be deemed an original,
shall be construed together and shall constitute one and the same
instrument. This Agreement shall become effective when each party hereto
shall have received counterparts hereof signed by all of the other parties
hereto.
12.15 Entire Agreement. This Agreement contains the entire
agreement among the parties hereto with respect to the subject matter
hereof and such Agreement supersedes and replaces all other prior
agreements, written or oral, among the parties hereto with respect to the
subject matter hereof.
12.16 Severability.
If any term, provision, covenant or restriction of this Agreement is
held by a court of competent jurisdiction or arbitrator having jurisdiction
to be invalid, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or
invalidated so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner materially adverse to any
party. Upon such a determination, the parties shall negotiate in good
faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner in order that the
transactions contemplated hereby be consummated as originally contemplated
to the fullest extent possible.
IN WITNESS WHEREOF, the parties hereto have caused this
Securities Purchase Agreement to be duly executed as of the day and year
first above written.
XXX.XXX, INC.
By:/s/ Xxxxxx Xxxxx
--------------------------------------
Name: Xxxxxx Xxxxx
Title: Chief Executive Officer
and President
RARE MEDIUM GROUP, INC.
By:/s/ Xxxxxx Xxxxx
--------------------------------------
Name: Xxxxxx Xxxxx
Title: Vice President, General Counsel
and Secretary
