EXHIBIT 10.24
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
▇▇▇▇ ▇▇▇▇▇▇ ACQUISITION CO. INC.
AS PURCHASER
AND
VIDIPAX, INC.
AS SELLER
DATED AS OF OCTOBER 31, 2003
Table of Contents
Page
ARTICLE I
DEFINITIONS
Section 1.1 Definitions...................................................... 1
Section 1.2 Interpretation................................................... 9
ARTICLE II
PURCHASE AND SALE OF ASSETS
Section 2.1 Purchase and Sale of Assets...................................... 10
Section 2.2 Assumption of Liabilities........................................ 11
Section 2.3 The Purchase Price............................................... 12
Section 2.4 Earn Out Payments................................................ 12
Section 2.5 Allocation of Purchase Price; Tax Filings........................ 13
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Section 3.1 Organization; Qualification of Seller............................ 14
Section 3.2 Authorization.................................................... 14
Section 3.3 Binding Agreements............................................... 14
Section 3.4 Good Title Conveyed.............................................. 14
Section 3.5 Consents and Approvals; No Violations............................ 14
Section 3.6 Compliance with Laws............................................. 15
Section 3.7 Title to Assets; Necessary Assets................................ 15
Section 3.8 Financial Statements............................................. 15
Section 3.9 Absence of Certain Changes or Events............................. 15
Section 3.10 Accounts Receivable.............................................. 16
Section 3.11 Assumed Contracts................................................ 16
Section 3.12 Miscellaneous Assets............................................. 16
Section 3.13 Litigation....................................................... 16
Section 3.14 Labor Matters.................................................... 16
Section 3.15 Employee Benefit Plans........................................... 17
Section 3.16 Tax Matters...................................................... 17
Section 3.17 Intellectual Property............................................ 17
Section 3.18 Personal Property................................................ 18
Section 3.19 Accounts Payables................................................ 19
Section 3.20 Prepaid Expenses................................................. 19
Section 3.21 Seller's Customers............................................... 19
Section 3.22 Suppliers........................................................ 19
Section 3.23 Owned Real Property.............................................. 19
Section 3.24 Real Property Leases............................................. 19
Section 3.25 Environmental Matters............................................ 20
Section 3.26 Brokers or Finders............................................... 21
Section 3.27 Books and Records................................................ 21
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Section 3.28 Full Disclosure.................................................. 21
Section 3.29 Distributions or Dividends....................................... 21
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Section 4.1 Organization..................................................... 21
Section 4.2 Authorization.................................................... 22
Section 4.3 Binding Agreement................................................ 22
Section 4.4 Consents and Approvals; No Violations............................ 22
Section 4.5 Brokers or Finders............................................... 22
ARTICLE V
COVENANTS
Section 5.1 General Conduct of the Business.................................. 22
Section 5.2 ▇▇▇▇ ▇. ▇▇▇▇▇▇................................................... 24
Section 5.3 Access Before Closing............................................ 24
Section 5.4 Reasonable Efforts and Further Assurances........................ 24
Section 5.5 Employee Benefits................................................ 25
Section 5.6 Publicity........................................................ 25
Section 5.7 Access to Books and Records After Closing........................ 25
Section 5.8 Noncompetition................................................... 26
Section 5.9 Designated Prospects............................................. 26
Section 5.10 Government Contracts............................................. 26
Section 5.11 Museum Equipment................................................. 27
Section 5.12 Notification of Certain Matters.................................. 28
Section 5.13 Subsequent Actions............................................... 28
Section 5.14 Waiver of Bulk Sales Requirement................................. 29
Section 5.15 Purchaser's Conduct of the Business.............................. 29
Section 5.16 Change of Seller's and Affiliates' Names......................... 29
Section 5.17 Email Forwarding and Transfer of Old Emails...................... 29
Section 5.18 Reimbursements................................................... 29
ARTICLE VI
CONDITIONS
Section 6.1 Conditions to Each Party's Obligation to Effect the Closing...... 30
Section 6.2 Conditions to the Obligation of Purchaser to Effect the Closing.. 30
Section 6.3 Conditions to the Obligation of Seller to Effect the Closing..... 31
ARTICLE VII
THE CLOSING
Section 7.1 The Closing...................................................... 32
Section 7.2 Deliveries by Seller............................................. 32
Section 7.3 Deliveries by Purchaser.......................................... 33
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ARTICLE VIII
TERMINATION
Section 8.1 Termination...................................................... 33
Section 8.2 Effect of Termination............................................ 34
ARTICLE IX
INDEMNIFICATION
Section 9.1 Survival of Representations and Warranties....................... 34
Section 9.2 Terms of Indemnification......................................... 34
Section 9.3 Indemnification Procedures....................................... 35
Section 9.4 Limitations on Indemnification................................... 36
Section 9.5 Additional Indemnification Provisions............................ 36
ARTICLE X
MISCELLANEOUS
Section 10.1 Fees and Expenses................................................ 37
Section 10.2 Taxes............................................................ 37
Section 10.3 Amendment and Modification....................................... 37
Section 10.4 Notices.......................................................... 38
Section 10.5 Counterparts; Facsimile Signatures............................... 39
Section 10.6 Entire Agreement; No Third Party Beneficiaries................... 39
Section 10.7 Severability..................................................... 39
Section 10.8 Governing Law.................................................... 39
Section 10.9 Enforcement; Venue............................................... 39
Section 10.10 Extension; Waiver................................................ 40
Section 10.11 Election of Remedies............................................. 40
Section 10.12 Assignment....................................................... 40
Section 10.13 Tax Disclosure................................................... 40
EXHIBIT A ▇▇▇▇ OF SALE AND ASSIGNMENT
EXHIBIT B INSTRUMENT OF ASSUMPTION OF LIABILITIES
EXHIBIT C GUARANTY
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ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement dated as of October 31, 2003
(this "Agreement") is by and between ▇▇▇▇ ▇▇▇▇▇▇ Acquisition Co. Inc., a New
York corporation ("Purchaser"), and VidiPax, Inc., a New York corporation
("Seller"). Capitalized terms used in this Agreement have the meanings assigned
to them in Article I hereof.
WHEREAS, VidiPax is a wholly-owned subsidiary of Loudeye
Corp., a Delaware corporation ("Parent");
WHEREAS, Seller wishes to sell to Purchaser, and Purchaser
wishes to purchase from Seller, substantially all of the assets of Seller upon
the terms and conditions set forth herein; and
WHEREAS, the Board of Directors and sole stockholder of Seller
have approved, and deem it advisable and in the best interests of their
respective shareholders to consummate the acquisition of substantially all of
the assets of Seller by Purchaser, subject only to those liabilities expressly
assumed by Purchaser pursuant hereto, and otherwise upon the terms and subject
to the conditions set forth herein;
NOW, THEREFORE, in consideration of the foregoing and the
mutual representations, warranties, covenants and agreements set forth herein
and intending to be legally bound hereby, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions. For all purposes of this Agreement,
except as otherwise expressly provided or unless the context clearly requires
otherwise:
"Accounts Payables" shall have the meaning set forth in
Section 3.19.
"Accounts Receivable" shall have the meaning set forth in
Section 3.10.
"Affiliate" of any Person shall mean any other Person that
directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, such first Person.
"Agreement" shall have the meaning set forth in the preamble.
"Allocation" shall have the meaning set forth in Section 2.5.
"Ancillary Agreements" shall mean the ▇▇▇▇ of Sale and
Assignment, the Guaranty, the Instrument of Assumption of Liabilities, the
Co-Marketing and Reseller Agreement, the Escrow Agreement, the Museum Lease and
the Assignment and Assumption of Lease Agreement.
"Arbitrator" shall have the meaning set forth in Section
2.4(c).
"Assets" shall have the meaning set forth in Section 2.1.
"Assignment and Assumption of Lease Agreement" shall mean an
Assignment and Assumption of Lease Agreement between Purchaser and Parent with
respect to the Fourth Floor Lease and the Fifth Floor Lease in form and
substance mutually acceptable to the parties.
"Assumed Accounts Payable" shall have the meaning set forth in
Section 3.19.
"Assumed Contracts" shall have the meaning set forth in
Section 3.11.
"Assumed Liabilities" shall have the meaning set forth in
Section 2.2.
"Bids" shall have the meaning set forth in Section 2.1(a).
"▇▇▇▇ of Sale and Assignment" shall mean the ▇▇▇▇ of Sale and
Assignment between Seller and Purchaser in substantially the form attached
hereto as Exhibit A.
"Business" shall mean the magnetic media restoration business
heretofore conducted by Seller under the name "VidiPax," including the Assets
and the goodwill appurtenant to such business and assets.
"CERCLA" shall have the meaning set forth in Section 3.25.
"Claim" shall mean any claim, proceeding or other matter which
may give rise to a Loss.
"Closing" shall have the meaning set forth in Section 7.1.
"Closing Date" shall have the meaning set forth in Section
7.1.
"Co-Marketing and Reseller Agreement" shall mean the
Co-Marketing and Reseller Agreement between Purchaser and Parent in form and
substance mutually acceptable to the parties.
"Computer Software" shall mean computer software programs and
applications, databases and all documentation related thereto.
"Consent" shall mean any consent, approval, authorization,
clearance, exemption, waiver or similar affirmation by a Person pursuant to any
Contract, Law, Order or Permit.
"Contract" shall mean any agreement, valid quotation, purchase
order, arrangement or commitment, contract, indenture, instrument, lease or
other obligation of any kind, including obligations binding on a Person, its
capital stock, assets, properties or business.
"Current Portion" shall have the meaning set forth in Section
2.3.
"Designated Employees" shall have the meaning set forth in
Section 5.5.
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"Disclosure Schedule" shall mean the disclosure schedule
prepared and signed by Seller and delivered to Purchaser simultaneously with the
execution hereof.
"Domain Names" shall mean the Internet domain names,
▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇, ▇▇▇▇▇▇▇▇▇.▇▇▇, ▇▇▇▇▇▇▇.▇▇▇,
▇▇▇▇▇▇▇.▇▇▇ and ▇▇▇▇▇▇▇.▇▇▇.
"Earn Out Payment" shall have the meaning set forth in Section
2.4.
"Earn Out Payment Statement" shall have the meaning set forth
in Section 2.4(b).
"Earn Out Period" shall mean the two year period commencing on
the first day of the fiscal quarter next succeeding the Closing Date and ending
on the date that shall be two years thereafter.
"Electronic Records" shall mean all electronic accounting
records, all electronic correspondence and emails and the like.
"Environmental Law" shall have the meaning set forth in
Section 3.25.
"Equipment" shall mean all of the machinery, equipment,
including, but not limited to magnetic media restoration equipment, magnetic
media playback equipment, video encoding equipment and magnetic recorders, and
computer hardware, printers, copiers, fax machines, telephone system used by the
Business and all related equipment, repair parts, tools and all other office or
other equipment used in the Business. The term "Equipment" shall include any
lease or license pursuant to which the Business currently uses the Equipment,
any maintenance or service contracts relating thereto and the Museum Equipment,
but shall not include any machinery or equipment owned by any of Seller's
Affiliates, including without limitation TEN.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended.
"ERISA Affiliate" shall mean any trade or business, whether or
not incorporated, that together with Seller would be deemed a "single employer"
within the meaning of Section 4001(b) of ERISA or within the meaning of Section
414(b), (c), (m) or (o) of the Internal Revenue Code of 1986, as amended.
"Escrow Agreement" shall mean the escrow agreement in form and
substance to be mutually agreed.
"Escrow Fund" shall have the meaning set forth in the Escrow
Agreement.
"Escrow Termination Date" shall have the meaning set forth in
Section 5.11(c).
"Excluded Assets" shall mean the following assets of Seller:
(i) the consideration received by Seller pursuant to this
Agreement;
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(ii) all of Seller's rights, claims, actions, causes of
action, judgments and demands of whatever nature relating to the
Excluded Assets;
(iii) all guarantees, letters of credit, bank drafts and
similar items given by Seller for the benefit of the Business,
including but not limited to any guarantees of bank loans or lines of
credit;
(iv) all of Seller's deferred charges, advance payments,
prepaid items and assets, security and other deposits, claims for
refunds, rights of offset and credits of all kinds, relating to the
Excluded Assets, including without limitation the security deposit made
in connection with the Loft Lease;
(v) the assets of TEN; and
(vi) all other Assets set forth on Schedule 1.1 - Excluded
Assets hereto.
"Excluded Liabilities" shall mean any liability or obligation
of Seller that is not an Assumed Liability expressly assumed by Purchaser
pursuant to this Agreement, including, in particular, the Loft Lease and certain
accounts payable accrued in connection therewith relating to architects' fees
and engineering and contractor fees as more fully set forth on Schedule 3.19.
"Fifth Floor Landlord" shall mean SM Holding Corp., the
landlord of the Fifth Floor Premises.
"Fifth Floor Lease" shall mean that certain Lease Agreement of
the Fifth Floor Premises, dated as of June 13, 2000, between Fifth Floor
Landlord and Seller and all rights of Seller thereunder.
"Fifth Floor Premises" shall mean the Seller's place of
business located at ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇.
"Financial Statements" shall mean (i) the Interim Balance
Sheet and (ii) the unaudited balance sheet of Seller as of December 31 for the
year 2002, together with the statements of income, shareholders' equity and cash
flows for the year then ended.
"Fourth Floor Landlord" shall mean ▇▇▇▇▇ Bear Realty Corp.,
the landlord of the Fourth Floor Premises.
"Fourth Floor Lease" shall mean that certain Lease Agreement
of the Fourth Floor Premises, dated as of June 13, 2000, between Fourth Floor
Landlord and Seller and all rights of Seller thereunder.
"Fourth Floor Premises" shall mean Seller's place of business
located at ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇.
"GAAP" shall mean United States generally accepted accounting
principles as in effect from time to time, consistently applied.
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"Governmental Authority" shall mean any federal, state, local
or foreign court, arbitral tribunal, agency, authority, board, commission,
legislature or office of any federal, state, county, district, municipality,
city, foreign or other government unit.
"Government Contracts" shall mean the Federal Supply Service
Contract, contract number GS-25F-, issued by the General Services Administration
Office on October 1, 2001, the Solicitation/Contract/Order for Commercial Items,
contract number GS-25F-0072M, issued by USACA United States Military Academy on
September 18, 2003, the National Archives Presidential Libraries contract and
any other contracts of any Governmental Authority awarded to Seller prior to the
Closing Date.
"Guaranty" shall mean the Guaranty between Parent and
Purchaser in substantially the form attached hereto as Exhibit C.
"Indemnification Threshold" shall have the meaning set forth
in Section 9.4(c).
"Instrument of Assumption of Liabilities" shall mean the
Instrument of Assumption of Liabilities between Seller and Purchaser in
substantially the form attached hereto as Exhibit B.
"Intellectual Property" shall mean patents, trademarks, trade
names (including "VidiPax"), service marks, Domain Names, copyrights and
applications for and registrations of any of the foregoing, and copyrights, and
all technology, know-how, Computer Software and proprietary information used in,
relating to, or associated with, the Business.
"Intellectual Property Claims" shall have the meaning set
forth in Section 3.17(d).
"Interim Balance Sheet" shall mean the unaudited balance sheet
and statements of income, stockholders' equity and cash flows of Seller for the
six (6) month period ended June 30, 2003.
"Interim Balance Sheet Date" shall mean June 30, 2003.
"Knowledge" shall mean (a) with respect to an individual, an
individual will be deemed to have "Knowledge" of a particular fact or other
matter if such individual is actually aware of such fact or other matter and (b)
with respect to an entity, an entity (other than an individual) will be deemed
to have "Knowledge" of a particular fact or other matter if any of the senior
management or directors of such entity or such entity's businesses or segments
has Knowledge of such fact or other matter.
"Law" shall mean any federal, state, local or foreign law,
statute, ordinance, rule, regulation and any other executive or legislative
proclamation.
"Lien" shall mean any lien, charges, security interest,
attachment, encumbrance or charge of any kind, mortgage and pledge (including
any agreement to give any of the foregoing); provided, however, that the term
"Lien" shall not include (i) statutory liens for Taxes, which are not yet due
and payable or are being contested in good faith by appropriate proceedings;
(ii) statutory or common law liens to secure landlords, lessors or renters under
leases or rental
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agreements confined to the premises rented; (iii) deposits or pledges made in
connection with, or to secure payment of, worker's compensation, unemployment
insurance, old age pension or other social security programs mandated under
applicable Laws; (iv) statutory or common law liens in favor of carriers,
warehousemen, mechanics and material men to secure claims for labor, materials
or supplies and other like liens; and (v) restrictions on transfers of
securities imposed by applicable securities Laws.
"▇▇▇▇▇▇▇" shall mean ▇▇▇▇▇ ▇▇▇▇▇▇▇, an individual residing at
▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ - #▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇.
"▇▇▇▇▇▇▇ Stock Purchase Agreement" shall have the meaning set
forth in Section 5.11(a).
"List Price" shall mean the list price of the applicable
services as from time to time established by Purchaser for customers of similar
type.
"Litigation" shall mean any suit, action, arbitration, cause
of action, Claim, complaint, criminal prosecution, investigation, demand letter,
governmental or other administrative proceeding, whether at law or at equity,
before or by any federal, state, local or foreign court, tribunal or agency or
before any arbitrator.
"Loft Lease" shall mean the Loft Lease dated as of December
2002, between the Loft Lease Landlord and Seller for the entire seventh floor of
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇.
"Loft Lease Landlord" shall mean ▇▇▇▇ ▇▇▇▇▇▇ Associates, LLC.
"Losses" shall mean actual, direct and out-of-pocket losses,
liabilities, damages, costs and expenses (including reasonable attorney's fees
and costs of investigation).
"Material Adverse Effect" shall mean any adverse change that
is or is reasonably likely to materially impair the value of the Assets or
materially increase the obligations pursuant to the Assumed Liabilities or
materially interfere with Purchaser's use of the Assets in substantially the
same manner as currently used by the Business.
"Materials of Environmental Concern" shall have the meaning
set forth in Section 3.25.
"Miscellaneous Assets" shall mean all telephone numbers of the
Business, all Electronic Records, and all other assets of the Business not
constituting an Excluded Asset.
"Multiemployer Plan" shall mean "multiemployer plan" as
defined in Section 4001(a)(3) of ERISA to which Seller or any ERISA Affiliate is
making, or is accruing an obligation to make, contributions or has made, or been
obligated to make, contributions within the preceding six (6) years.
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"Museum Equipment" shall mean the collection of functional and
non-functional wire recorders, reel-to-reel audio decks and video recorders,
machines and artifacts as set forth in Schedule 1.1 - Museum Equipment.
"Museum Lease" shall mean the lease agreement relating to the
Museum Equipment between Seller, as lessor, and Purchaser, as lessee, in form
and substance to be mutually agreed.
"Net Income" shall mean the net income of Purchaser as and for
the four fiscal quarters commencing on the date on which the Earn Out Period
commences or the following four fiscal quarters, as applicable, before the
effect of the payment of any dividends in respect of the preferred or common
stock of Purchaser, and excluding any extraordinary gains and losses for such
period, all as determined in accordance with GAAP consistently applied.
"Old Emails" shall mean all emails sent to and from Designated
Employees and to and from any and all former employees of Seller that are not
accessible from the Microsoft Outlook folder on each such Designated Employee's
or former employee's computer as of the Closing Date, including, but not limited
to emails sent to and from the email addresses set forth on Schedule 1.1 - Old
Email Addresses.
"Order" shall mean any decision or award, decree, injunction,
judgment, order, quasi-judicial decision or award, ruling or writ of any
Governmental Authority.
"Parent" shall have the meaning set forth in the preamble.
"Permit" shall mean any federal, state, local or foreign
governmental approvals, authorization, certificate, license or permit.
"Person" shall mean a natural person, partnership,
corporation, limited liability company, business trust, joint stock company,
trust, unincorporated association, joint venture, Governmental Authority or
other entity or organization.
"Personal Property" shall mean all furniture, work stations,
filing cabinets, fixtures, Equipment, office supplies and other tangible
personal property associated with the Business, including, without limitation,
any tenant improvements.
"Plan" shall mean each defined benefit plan, deferred
compensation and each incentive compensation, stock purchase, stock option and
other equity compensation plan, program, agreement or arrangement; each
severance or termination pay, medical, surgical, hospitalization, life insurance
and other "welfare" plan, fund or program (within the meaning of Section 3(1) of
ERISA); each profit-sharing, stock bonus or other "pension" plan, fund or
program (within the meaning of Section 3(2) of ERISA); each employment,
termination or severance agreement; and each other employee benefit plan, fund,
program, agreement or arrangement, in each case, that is sponsored, maintained
or contributed to or required to be contributed to by Seller or by any ERISA
Affiliate, or to which Seller or an ERISA Affiliate is party, whether written or
oral, for the benefit of any employee of the Business.
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"Post-Closing Tax Period" shall mean any Tax period (or
portion thereof) beginning on or after the Closing Date.
"Pre-Closing Tax Period" shall mean any Tax period (or any
portion thereof) ending on or after the Closing Date.
"Prepaid Expenses" shall mean any operating costs, prepaid
expenses, credits, deferred charges, advance payments, security deposits other
than the security deposit made in connection with the Loft Lease and other
prepaid items incurred or which may be incurred in connection with the Business
after the date hereof and which were paid by Seller on or prior to the date
hereof, including, in particular, the security deposit paid on the Fourth Floor
Lease and the deposit paid to ConEdison for the provision of electricity to
Seller.
"Proceeding" shall mean any action, claim, complaint, charge,
arbitration, audit, hearing, investigation, inquiry, suit, litigation or other
proceeding (whether civil, criminal, administrative, investigative or informal)
commenced, brought, conducted or heard by or before, or otherwise involving, any
Governmental Authority or other entity.
"Profit Earn Out" shall have the meaning set forth in Section
2.4.
"Profit Earn Out Amounts" shall have the meaning set forth in
Section 2.4(a)(ii).
"Profit Earn Out Payment Date" shall mean that date that shall
not be later than 90 days following the fourth quarter of each of the first four
fiscal quarters, the first of which commences on the first day of the Earn Out
Period, and the second four fiscal quarter period of Purchaser.
"Purchase Price" shall have the meaning set forth in Section
2.3.
"Purchaser" shall have the meaning set forth in the preamble.
"Purchaser Cap" shall have the meaning set forth in Section
9.4(b).
"Purchaser Parties" shall have the meaning set forth in
Section 9.2.
"Reseller Earn Out Amounts" shall have the meaning set forth
in Section 2.4(a)(i).
"Reseller Earn Out Payment Date" shall mean not later than 30
days after the date on which Parent has notified Purchaser of the Reseller
Margin as and for the applicable fiscal quarter.
"Reseller Margin" shall mean the difference, if positive,
between Purchaser's List Price (with respect to any so-called "bundled
services") or Parent's sales price (with respect to any resale of Purchaser's
services not at that time bundled with any of Parent's services) for the
applicable services and the Vidipax Wholesale Price with respect to such
services.
"Seller" shall have the meaning set forth in the preamble.
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"Seller Cap" shall have the meaning set forth in Section
9.4(a).
"Seller Parties" shall have the meaning set forth in Section
9.2.
"Taxes" shall mean all taxes, charges, fees, duties, levies,
penalties or other assessments imposed by any Governmental Authority, including,
without limitation, all income, gross receipts, excise, property, sales, gain,
use, license, custom duty, unemployment, capital stock, transfer, franchise,
payroll, withholding, social security, minimum estimated, profit, gift,
severance, value added, disability, premium, recapture, credit, occupation,
service, leasing, employment, stamp and other taxes, and shall include interest,
penalties or additions attributable thereto or attributable to any failure to
comply with any requirement regarding Tax Returns.
"Tax Authority" shall mean any domestic, foreign, federal,
national, state, provincial, county or municipal or other local government or
any subdivision, agency, commission or authority thereof, exercising Tax
regulatory authority.
"Tax Return" shall mean any return, report or similar
statement required to be filed with respect to any Tax (including any attached
schedules), including any information return, claim for refund, amended return
or declaration of estimated Tax.
"TEN" shall mean Technology Education Network, Inc., an
Affiliate of Seller.
"Third Party" shall mean any Person other than Seller,
Purchaser, Parent or their respective Affiliates.
"Third Party Claim" shall have the meaning set forth in
Section 9.3.
"Transaction" shall have the meaning set forth in Section 2.2.
"Transfer Taxes" shall mean all sales, use, transfer,
recording, ad valorem, documentary, registration, conveyance, excise, license,
stamp or similar Taxes and fees.
"Transferred Employees" shall have the meaning set forth in
Section 5.5.
"VidiPax Wholesale Price" shall have the meaning set forth in
the Co-Marketing and Reseller Agreement.
Section 1.2 Interpretation.
(a) Whenever the words "include," "includes" or
"including" are used in this Agreement they shall be deemed to be followed by
the words "without limitation."
(b) When a reference is made in this Agreement to a
section or article, such reference shall be to a section or article of this
Agreement unless otherwise clearly indicated to the contrary.
(c) The words "hereof," "herein" and "herewith" and words
of similar import shall, unless otherwise stated, be construed to refer to this
Agreement as a whole and not to any
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particular provision of this Agreement, and article, section, paragraph, exhibit
and schedule references are to the articles, sections, paragraphs, exhibits and
schedules of this Agreement unless otherwise specified.
(d) The meaning assigned to each term defined herein
shall be equally applicable to both the singular and the plural forms of such
term, and words denoting any gender shall include all genders. Where a word or
phrase is defined herein, each of its other grammatical forms shall have a
corresponding meaning.
(e) A reference to any party to this Agreement or any
other agreement or document shall include such party's successors and permitted
assigns.
(f) A reference to any legislation or to any provision of
any legislation shall include any amendment to, and any modification or
re-enactment thereof, any legislative provision substituted therefore and all
regulations and statutory instruments issued thereunder or pursuant thereto.
(g) In the event of any inconsistency between statements
in the body of this Agreement and statements in the Disclosure Schedule
(excluding exceptions expressly set forth in the Disclosure Schedule with
respect to a specifically identified representation or warranty), the statements
in the body of this Agreement shall control.
(h) The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties, and no presumption or burden of proof
shall arise favoring or disfavoring any party by virtue of the authorship of any
provisions of this Agreement.
ARTICLE II
PURCHASE AND SALE OF ASSETS
Section 2.1 Purchase and Sale of Assets. Subject to the terms
and conditions of this Agreement, at the Closing, Seller shall sell, convey,
assign, transfer and deliver to Purchaser and Purchaser shall purchase, acquire
and accept from Seller, all of Seller's right, title and interest in and to all
of the assets and properties of Seller, except for the Excluded Assets and
except as otherwise specifically provided herein (such right, title and interest
collectively referred to herein as the "Assets"), including, without limitation,
the following:
(a) the Assumed Contracts, together with all rights to
bids, proposals and discussions that have not yet ripened into contracts or
agreements, whether written or oral ("Bids") (a list of all Bids is attached
hereto as Schedule 2.1(a));
(b) the Intellectual Property, including, without
limitation, the Domain Names, patents and patent applications, the rights to
Seller's business trade names, including, without limitation, "VidiPax" and
trademarks and all technical drawings, descriptions, documentation, know-how and
technology with respect to the foregoing;
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(c) all client, customer and supplier lists relating to
the Business;
(d) the Accounts Receivable;
(e) the Transferred Employees;
(f) the cash, marketable or other securities, commercial
paper and cash equivalents or other investments on hand or in bank accounts and
all of Seller's bank accounts as of the Closing;
(g) the Personal Property;
(h) the Prepaid Expenses;
(i) the Fourth Floor Lease and the Fifth Floor Lease;
(j) the Miscellaneous Assets; provided, however, that
Seller shall be entitled to keep copies of all Miscellaneous Assets;
(k) all guarantees, warranties, indemnities and similar
rights in favor of Seller with respect to any Asset;
(l) books and records related solely to the Assets
transferred to Purchaser pursuant to this Agreement, including books and records
relating to past or current clients, customers and vendors, future prospects,
and employment and personnel records relating to past or current employees, and
books and records currently maintained on the Great Plains Accounting Program;
and
(m) all rights, claims, credits, causes of action or
rights of set-off against Third Parties related primarily to the Assets or the
Assumed Liabilities, including, without limitation, rights under manufacturers'
and vendors' warranties and rights under insurance policies covering the Assets.
Section 2.2 Assumption of Liabilities. Subject to the terms
and conditions of this Agreement, at the Closing, Purchaser shall assume only
the liabilities and obligations of Seller as of the Closing Date with respect to
each of the following, which are collectively referred to herein as the "Assumed
Liabilities":
(a) any obligation or liability relating to the Assets or
their use to the extent arising out of events or circumstances occurring after
the Closing;
(b) any obligation or liability pursuant to the Assumed
Contracts to the extent arising after the Closing and any warranty liabilities
with respect to performance by Seller under such Assumed Contracts prior to the
Closing Date;
(c) any obligation or liability pursuant to the Assumed
Accounts Payable;
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(d) any obligation or liability pursuant to the Fourth
Floor Lease and the Fifth Floor Lease; and
(e) any liabilities relating to the Transferred Employees
to the extent arising out of any events or circumstances occurring after the
Closing.
Purchaser shall assume none of the Excluded Liabilities. The transactions
referred to in Sections 2.1 and 2.2 are referred to herein as the "Transaction."
Section 2.3 The Purchase Price. The consideration for the
Assets (the "Purchase Price") shall be (a) One Million Two Hundred Thousand
Dollars ($1,200,000) (the "Current Portion") plus (b) the amount of Earn Out
Payments, if any, to be paid in accordance with Section 2.4. The Current Portion
shall be payable by a cash payment of $1,200,000 in immediately available funds
to an account designated by the Escrow Agent, which funds will be disbursed in
accordance with the terms of the Escrow Agreement.
Section 2.4 Earn Out Payments.
(a) Purchaser shall pay to Seller earn out payments (each
an "Earn Out Payment") as follows:
(i) Purchaser shall pay to Seller on
the Reseller Earn Out Payment Date an amount equal to fifty
percent (50%) of the Reseller Margin (any such amounts are
hereinafter referred to as "Reseller Earn Out Amounts"),
provided that (A) no such payment shall be made unless
Purchaser shall have rendered the applicable services during
the applicable quarter and received payment of the applicable
Vidipax Wholesale Price from Parent during such quarter,
except that to the extent that Purchaser has rendered services
prior to the end of the Earn Out Period but has not received
the applicable Vidipax Wholesale Price by such date, then,
notwithstanding the passage of the end of the Earn Out Period,
Purchaser shall be obligated to pay Seller the Reseller Earn
Out Amount with respect thereto within 15 days of its receipt
of the applicable Vidipax Wholesale Price, and (B) the
Reseller Earn Out Amounts shall not exceed, in the aggregate,
$250,000; and
(ii) Purchaser shall pay to Seller on
the Profit Earn Out Payment Date an amount equal to 25% of the
Net Income of Purchaser during the Earn Out Period (any such
amounts are hereinafter referred to as "Profit Earn Out
Amounts"); provided, however, the aggregate Profit Earn Out
Amount shall not exceed, in the aggregate, $250,000.
(b) Purchaser shall deliver to Seller, on each Reseller
Earn Out Payment Date and Profit Earn Out Payment Date, whether or not any
amount is due to Seller hereunder, a written statement (each an "Earn Out
Payment Statement"), setting forth calculations made by Purchaser to determine
the Reseller Earn Out Amount or the Profit Earn Out Amount or both, as
applicable, in detail reasonably acceptable to Seller, including appropriate
supporting documentation.
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(c) In the event that Seller disputes the Earn Out
Payment Statement or the calculation of the Earn Out Payments, Seller shall
notify Purchaser in writing of the amount, nature and basis of such dispute,
within thirty (30) days after delivery of the Closing Earn Out Payment
Statement. In the event of such a dispute, Seller and Purchaser shall first use
their diligent good faith efforts to resolve the dispute within ten (10) days
after delivery of the notice of dispute. Purchaser shall furnish Seller's or its
Affiliates' representatives commercially reasonably access to Purchaser's
relevant personnel and books and records to audit same in connection with any
such dispute. Such audit shall be conducted at Seller's sole cost and expenses,
provided, however, that if Seller or any of its Affiliates identifies a
discrepancy from the Earn Out Payment Statement or the calculation of the Earn
Out Payments of more than ten percent (10%), then Purchaser shall be responsible
for the cost of the audit and shall pay same to Seller or its Affiliate within
ten (10) days following notice to Purchaser of identification of discrepancy. In
the event that the dispute is not resolved within the aforementioned ten (10)
day period, any remaining items in dispute shall be submitted to the New York
office of McGladrey & ▇▇▇▇▇▇, LLP (the "Arbitrator"), which arbitration shall be
conducted in New York, to be finally resolved by the Arbitrator within thirty
(30) days of such submission. All determinations pursuant to this paragraph (c)
shall be in writing and shall be delivered to the parties. The determination by
the Arbitrator as to the resolution of any dispute shall be binding and
conclusive upon the parties. The fees and expenses of the Arbitrator in
connection with the resolution of disputes pursuant to this paragraph (c) shall
be shared equally by Seller and Purchaser; provided that if the Arbitrator
determines that one party has adopted a position or positions with respect to
the Earn Out Payment Statement or the calculation of the Earn Out Payments that
is frivolous or clearly without merit, the Arbitrator may, in its discretion,
assign a greater portion of any such fee or expense to such party.
Section 2.5 Allocation of Purchase Price; Tax Filings. The
Purchase Price shall be allocated among the Assets in accordance with the
allocation set forth on Schedule 2.5 (the "Allocation"). Each of Purchaser and
Seller shall (i) timely file all forms (including Internal Revenue Service Form
8594) and Tax Returns required to be filed in connection with the Allocation,
(ii) be bound by the Allocation for purposes of determining Taxes, (iii) prepare
and file, and cause its Affiliates to prepare and file, its Tax Returns on a
basis consistent with the Allocation and (iv) take no position, and cause its
Affiliates to take no position, inconsistent with the Allocation on any
applicable Tax Return, in any audit or proceeding before any taxing authority,
in any report made for Tax, financial accounting or any other purposes, or
otherwise. In the event that the Allocation is disputed by any Tax Authority,
the party receiving notice of such dispute shall promptly notify the other party
hereto concerning the existence and resolution of such dispute.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Except as specifically set forth in the Disclosure Schedule
prepared and signed by Seller and delivered to Purchaser simultaneously with the
execution hereof, Seller represents and warrants to Purchaser that all of the
statements contained in this Article III are true and complete
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as of the date of this Agreement in all material respects (or, if made as of a
specified date, as of such date).
Section 3.1 Organization; Qualification of Seller. Seller (i)
is a corporation duly organized, validly existing and in good standing under the
laws of New York, (ii) has the requisite corporate power and authority to carry
on the Business as it is now being conducted and to own and operate the Assets,
and (iii) is duly qualified or licensed to do business as a foreign corporation
in good standing in every jurisdiction in which the conduct of the Business
requires such qualification and where the absence of such qualification would
not be a Material Adverse Effect.
Section 3.2 Authorization. Seller has the requisite corporate
power and authority to execute and deliver this Agreement and the Ancillary
Agreements to which it is a party and to consummate the Transaction. No further
corporate action on the part of Seller is necessary to authorize the execution,
delivery and performance by Seller of the foregoing agreements and the
consummation by it of the Transaction.
Section 3.3 Binding Agreements. This Agreement and each
Ancillary Agreement to which Seller is a party has been or will be duly executed
and delivered by Seller and, assuming due and valid authorization, execution and
delivery thereof by Purchaser, each of the foregoing agreements is a valid and
binding obligation of Seller, enforceable against Seller in accordance with its
terms, except as such enforcement may be limited by (a) applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance and other similar
laws of general application now or hereinafter in effect relating to or
affecting creditors' rights generally and (b) general principles of equity
(regardless of whether enforceability is considered in a proceeding at equity or
at law).
Section 3.4 Good Title Conveyed. The ▇▇▇▇ of Sale and
Assignment and the endorsements, assignments and other instruments to be
executed and delivered by Seller to Purchaser at the Closing will be valid and
binding obligations of Seller, enforceable in accordance with their respective
terms, and will effectively vest in Purchaser good, valid and marketable title
to all of the Assets free and clear of all Liens.
Section 3.5 Consents and Approvals; No Violations. None of the
execution, delivery or performance by Seller of this Agreement and each
Ancillary Agreement to which Seller is a party, the consummation by Seller of
the Transaction, or compliance by Seller with any of the provisions hereof or
thereof will (a) conflict with or result in any breach of any provision of the
certificate of incorporation or articles of organization, by-laws or similar
organizational documents of Seller, (b) require any filing with, Permit or
Consent of, any Governmental Authority or other Person (including, without
limitation, Consents from parties to loans, contracts, leases and other
agreements to which Seller is a party), except with respect to the Government
Contracts, (c) require any Consent or notice under, or result in a violation or
breach of, or constitute (with or without due notice or the passage of time or
both) a default (or give rise to any right of termination, amendment,
cancellation or acceleration) under, any of the terms, conditions or provisions
of any agreement to which Seller is a party, or (d) violate any Order, statute,
rule or regulation applicable to Seller or the Assets or Assumed Liabilities.
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Section 3.6 Compliance with Laws. Seller has complied in a
timely manner and in all material respects with all Laws, Orders and Permits
with respect to the Business and Assets the absence of which compliance would
not have a Material Adverse Effect, no notice, charge, Claim, action or
assertion has been received by Seller (with respect to the Business or Assets)
or has been filed, commenced or threatened against Seller alleging any violation
of any of the foregoing.
Section 3.7 Title to Assets; Necessary Assets. Seller has good
and marketable title to, or valid leasehold or other relevant interest in, all
the Assets, free and clear of all Liens. The Assets include all rights,
properties and other assets necessary to permit Purchaser to conduct the
business of the Business after the Closing in materially the same manner as it
has been conducted by Seller prior to the date hereof, except to the extent that
Seller has been using assets owned by TEN and except for the Museum Equipment.
Section 3.8 Financial Statements. True and complete copies of
the Financial Statements of Seller, together with the related auditor's reports,
are included in Schedule 3.8(a). The Financial Statements have been prepared
from, are in accordance with and accurately reflect, the books and records of
the Business and Seller, comply in all material respects with applicable
accounting requirements, have been prepared in accordance with GAAP applied on a
consistent basis during the periods involved (except as may be stated in the
notes thereto) and fairly present the financial position and the results of
operations and cash flows (and changes in financial position, if any) of the
Business and Seller.
Section 3.9 Absence of Certain Changes or Events. Since the
Interim Balance Sheet Date, Seller has conducted its business only in the
ordinary and usual course consistent with past practice, and neither the
Business nor Seller has:
(a) suffered any material adverse change in its working
capital, financial condition, results of operation, assets, liabilities
(absolute, accrued, contingent or otherwise), reserves, business, operations or
prospects;
(b) incurred any liability or obligation (absolute,
accrued, contingent or otherwise) except non-material items incurred in the
ordinary course of business and consistent with past practice, none of which
exceeds $25,000 (counting obligations or liabilities arising from one
transaction or a series of similar transactions, and all periodic installments
or payments under any lease or other agreement providing for periodic
installments or payments, as a single obligation or liability), or increased, or
experienced any change in any assumptions underlying or methods of calculating,
any bad debt, contingency or other reserves;
(c) permitted or allowed any of its property or assets
(real, personal or mixed, tangible or intangible) to be subjected to any
mortgage, pledge, lien, security interest, encumbrance, restriction or charge of
any kind, except for liens for current taxes not yet due;
(d) disposed of or permitted to lapse any rights to the
use of any Intellectual Property, or disposed of or disclosed to any Person
other than representatives of Purchaser any trade secret, formula, process,
know-how or other Intellectual Property not theretofore a matter of public
knowledge;
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(e) granted any general increase in the compensation of
officers or employees (including any such increase pursuant to any bonus,
pension, profit-sharing or other plan or commitment) or any other increase in
the compensation payable or to become payable to any officer or employee, and no
such increase is customary on a periodic basis or required by agreement or
understanding;
(f) neglected or failed to maintain the Assets in a state
of repair and condition that materially complies with Law; or
(g) agreed, whether in writing or otherwise, to take any
action described in this section.
Section 3.10 Accounts Receivable. Schedule 3.10 a complete and
accurate list of all trade and accounts receivable of Seller, as determined in
accordance with GAAP (the "Accounts Receivable"). All Accounts Receivable,
whether reflected in the Interim Balance Sheet or otherwise, represent sales
actually made in the ordinary course of business, and are collectible net of any
reserves shown on the Interim Balance Sheet.
Section 3.11 Assumed Contracts. Schedule 3.11 is a list of all
the Contracts relating to the Business and Schedule 3.11 sets forth a list of
all Contracts being transferred to Purchaser pursuant to this Agreement (such
Contracts, the "Assumed Contracts"). Each Assumed Contract is in full force and
effect, and is a legal, valid and binding obligation of Seller and each of the
parties thereto, enforceable in accordance with its terms. No condition exists
or event has occurred which would constitute a material default by Seller or
result in a right of termination under any Assumed Contract.
Section 3.12 Miscellaneous Assets. Schedule 3.12 is a complete
and accurate list of the Miscellaneous Assets.
Section 3.13 Litigation. There is no Litigation pending or, to
the Knowledge of Seller, threatened against or affecting the Assets, or which
questions or challenges the validity of this Agreement or any action taken or to
be taken by Seller pursuant to this Agreement or in connection with the
Transaction; and there is no valid basis for any such action, proceeding or
investigation. Seller is not subject to any judgment, order or decree which may
have a Material Adverse Effect.
Section 3.14 Labor Matters.
(a) Seller is, and has at all times been, in compliance,
in all material respects, with all applicable Laws respecting employment and
employment practices, terms and conditions of employment, wages, hours of work
and occupational safety and health; and there are no complaints, lawsuits or
other proceedings pending or, to the Knowledge of Seller, threatened in any
forum by or on behalf of any Designated Employees alleging breach of any express
or implied contract of employment, any laws governing employment or the
termination thereof or other discriminatory, wrongful or tortious conduct in
connection with the employment relationship.
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(b) There is no labor strike, dispute, corporate
campaign, slowdown, stoppage or lockout actually pending, or to the Knowledge of
Seller, threatened against or affecting the Business, and during the past five
(5) years there has not been any such action.
(c) Seller is not a party to or bound by any collective
bargaining or similar agreement with any labor organization or work rules or
practices agreed to with any labor organization or employee association
applicable to the Designated Employees.
(d) Schedule 3.14(d) is a complete and accurate list of
the date of hire, base salary, title and annual cash bonus opportunity of each
Designated Employee as well as group insurance programs in effect for such
Designated Employees as of the date hereof.
(e) A true and complete copy of each written personnel
policy, rule and procedure applicable to the Designated Employees is included in
Schedule 3.14(e).
Section 3.15 Employee Benefit Plans. Schedule 3.15 is a
complete and accurate list of all Plans. None of the Plans are Multiemployer
Plans. All obligations of any nature under any Plan arising prior to or after
the Closing will constitute a liability of Seller, and Purchaser shall have no
obligation or duty with respect thereto.
Section 3.16 Tax Matters.
(a) Seller has timely filed all Tax Returns relating to
the Business and the Assets that are required to be filed, and all such Tax
Returns are true, complete and accurate in all material respects. Seller has
timely paid, or provided adequate accrual for, all Taxes which are due (whether
or not shown as due on a Tax Return), or claimed or asserted by any Tax
Authority to be due.
(b) There has been no issue raised or adjustment proposed
(and none is pending) by any Tax Authority with respect to Taxes attributable to
the Assets or the Business. There are no encumbrances for Taxes upon any of the
Assets except for liens for Taxes not yet due. There is no pending Tax audit or
examination, nor any action, suit, investigation, claim or deficiency asserted
with respect to the Assets or the Business.
(c) All amounts required to be withheld or collected for
Taxes for payments made to employees of the Business or others have been
withheld or collected and have been or will be remitted to the appropriate Tax
Authority when due.
Section 3.17 Intellectual Property.
(a) Schedule 3.17(a) sets forth a complete and accurate
list of the Intellectual Property, together with all licenses related to such
Intellectual Property, whether Seller is the licensee or licensor thereunder.
(b) Seller is the sole and exclusive owner or valid
licensee of all Intellectual Property, free and clear of all Liens.
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(c) All patents, registrations and applications for
Intellectual Property (i) are valid, subsisting, in proper form and enforceable,
and have been duly maintained, including the submission of all necessary filings
and fees in accordance with the legal and administrative requirements of the
appropriate jurisdictions, and (ii) have not lapsed, expired or been abandoned,
and no patent, registration or application therefor is the subject of any
opposition, interference, cancellation proceeding or other legal or governmental
proceeding before any Governmental Authority.
(d) To the Knowledge of Seller, there are no conflicts
with or infringements of any Intellectual Property by any Third Party. The
conduct of the Business as currently conducted does not conflict with or
infringe in any way on any proprietary right of any Third Party. There is no
claim, suit, action or proceeding pending, or to the Knowledge of Seller,
threatened against Seller ("Intellectual Property Claims") (i) alleging any such
conflict or infringement with any Third Party's proprietary rights or (ii)
challenging the ownership, use, validity or enforceability of the Intellectual
Property.
(e) The Computer Software used in the Business was either
(i) developed by employees of Seller within the scope of their employment, (ii)
developed on behalf of Seller by a Third Party, and all ownership rights therein
have been assigned or otherwise transferred to or vested in Seller pursuant to
written agreements, or (iii) licensed or acquired from a Third Party pursuant to
a written license, assignment, or other contract that is in full force and
effect and of which Seller is not in material breach.
(f) All consents, filings, and authorizations by or with
Governmental Entities or third parties necessary with respect to the
consummation of the Transaction, as they may affect the Intellectual Property,
have been obtained.
(g) Seller has not entered into any consent,
indemnification, forbearance to ▇▇▇, settlement agreement or cross-licensing
arrangement with any Person relating to the Intellectual Property or, to the
Knowledge of Seller, any Intellectual Property licensed by Seller for use in the
Business, or the Intellectual Property of any Third Party, except as contained
in any license agreements listed in Schedule 3.17(a).
(h) Seller is not, and will not be as a result of the
execution and delivery of this Agreement or the performance of its obligations
under this Agreement, in breach of any license, sublicense or other agreement
relating to the Intellectual Property.
Section 3.18 Personal Property.
(a) Schedule 3.18(a) is a complete and accurate list of
the Personal Property. All Personal Property conforms with all applicable Laws
except where failure to conform would not have a Material Adverse Effect is fit
for its intended use, and Seller has no Knowledge of any pending or threatened
change of any applicable Law with which any of such property would not conform.
(b) Schedule 3.18(b) lists each item of Equipment which
is not in the possession of Seller, if any, together, in each case, with the
name, address and telephone number of each Person who holds such property.
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Section 3.19 Accounts Payables. Schedule 3.19 is a complete
and accurate list of all accounts payable relating to the Business (such
accounts payables as set forth on Schedule 3.19, the "Accounts Payables") and
Schedule 3.19 sets forth a list of all Accounts Payable being assumed by
Purchaser pursuant to this Agreement (such Accounts Payable, the "Assumed
Accounts Payable").
Section 3.20 Prepaid Expenses. Schedule 3.20 is a complete and
accurate list of all Prepaid Expenses.
Section 3.21 Seller's Customers. Seller has no Knowledge that
any such customer intends to cancel or otherwise substantially modify its
relationship with Seller as a result of the Transaction or otherwise.
Section 3.22 Suppliers. Schedule 3.22 sets forth the lists of
all suppliers whose supplies to Seller and the Business exceeded $15,000 during
calendar year 2002. Except as set forth in Schedule 3.22, during the period from
January 1, 2003 through the date hereof, none of such suppliers has canceled or
substantially modified its agreements with, or commitments to, Seller (or
threatened in writing to do any of the foregoing). Except as set forth in
Schedule 3.22, Seller has no Knowledge that any such supplier intends to cancel
or otherwise substantially modify its relationship with Seller or limit
materially its services, supplies or materials to Seller either as a result of
the Transactions or otherwise.
Section 3.23 Owned Real Property. Seller does not own any real
property.
Section 3.24 Real Property Leases. Schedule 3.24 lists all
real property leased or subleased to Seller and lists the term of such lease,
any extension and expansion options, and the rent payable thereunder. Seller has
delivered to the Purchaser true, correct and complete copies of the leases and
subleases (as amended to date) listed in Schedule 3.24. With respect to each
lease and sublease listed in Schedule 3.24 (except the Loft Lease):
(a) the lease is legal, valid, binding, enforceable and
in full force and effect with respect to Seller, and to the Knowledge of Seller,
is legal, valid, binding, enforceable and in full force and effect with respect
to each other party thereto, subject, in each case, to (i) laws of general
application relating to bankruptcy, insolvency and the relief of debtors, and
(ii) rules of law governing specific performance, injunctive relief and other
equitable remedies;
(b) the lease or sublease will continue to be legal,
valid, binding, enforceable and in full force and effect immediately following
the Closing in accordance with the terms thereof as in effect prior to the
Closing, subject to (i) laws of general application relating to bankruptcy,
insolvency and the relief of debtors, and (ii) rules of law governing specific
performance, injunctive relief and other equitable remedies;
(c) Seller is not in breach or default thereunder, to the
Knowledge of Seller, no other party to the lease or sublease is in breach or
default, and no event has occurred which, with notice or lapse of time, would
constitute a breach or default or permit termination, modification, or
acceleration thereunder;
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(d) there are no disputes, oral agreements or enforceable
forbearance programs in effect as to the lease or sublease;
(e) Seller has not assigned, transferred, conveyed,
mortgaged, deeded in trust or encumbered any interest in the leasehold or
subleasehold;
(f) all facilities leased or subleased thereunder are
supplied with utilities and other services necessary for the operation of said
facilities; and
(g) no construction, alteration or other leasehold
improvement work with respect to the lease or sublease remains to be paid for or
performed by Seller.
Section 3.25 Environmental Matters. Seller has complied and is
in compliance with all applicable Environmental Laws (as defined below). There
is no pending or, to the Knowledge of Seller, threatened civil or criminal
litigation, written notice of violation, formal administrative proceeding, or
investigation, inquiry or information request by any Governmental Entity,
relating to any Environmental Law involving Seller, the Assets or the Business.
For purposes of this Agreement, "Environmental Law" means any federal, state or
local law, statute, rule or regulation or the common law relating to the
environment or occupational health and safety, including without limitation any
statute, regulation or order pertaining to (i) treatment, storage, disposal,
generation and transportation of toxic or hazardous substances or solid or
hazardous waste; (ii) air, water and noise pollution; (iii) groundwater and soil
contamination; (iv) the release or threatened release into the environment of
toxic or hazardous substances, or solid or hazardous waste, including without
limitation emissions, discharges, injections, spills, escapes or dumping of
pollutants, contaminants or chemicals; (v) the protection of wild life, marine
sanctuaries and wetlands, including without limitation all endangered and
threatened species; (vi) storage tanks, vessels and containers; (vii)
underground and other storage tanks or vessels, abandoned, disposed or discarded
barrels, containers and other closed receptacles; (viii) health and safety of
employees and other persons; and (ix) manufacture, processing, use,
distribution, treatment, storage, disposal, transportation or handling of
pollutants, contaminants, chemicals or industrial, toxic or hazardous substances
or oil or petroleum products or solid or hazardous waste. As used above, the
terms "release" and "environment" shall have the meaning set forth in the
federal Comprehensive Environmental Response, Compensation and Liability Act of
1980 ("CERCLA").
There have been no releases of any Materials of Environmental
Concern (as defined below) into the environment at any parcel of real property
or any facility formerly or currently owned, leased, operated or controlled by
Seller for which Seller may be liable under any Environmental Law. With respect
to any such releases of Materials of Environmental Concern, Seller has given all
required notices to Governmental Entities (copies of which have been provided to
Purchaser). Seller is not aware of any other releases of Materials of
Environmental Concern at parcels of real property or facilities (including,
without limitation, those owned, leased, operated or controlled by Seller) that
could reasonably be expected to have an impact on the real property or
facilities owned, operated or controlled by Seller. For purposes of this
Agreement, "Materials of Environmental Concern" means any chemicals, pollutants
or contaminants, hazardous substances (as such term is defined under CERCLA or
any Environmental Law), solid wastes and hazardous wastes (as such terms are
defined under the
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federal Resources Conservation and Recovery Act or any Environmental Law), toxic
materials, oil or petroleum and petroleum products, asbestos, or any other
material subject to regulation under any Environmental Law.
Set forth in Schedule 3.25 is a list of all environmental
reports, investigations and audits possessed or controlled by Seller (whether
conducted by or on behalf of Seller or a Third Party, and whether done at the
initiative of Seller or directed by a Governmental Entity or other Third Party)
issued or conducted during the past ten (10) years and relating to premises
currently or previously owned, leased, or operated by Seller. Complete and
accurate copies of each such report, and the results of each such investigation
or audit, have been provided to Purchaser
Seller is not aware of any material environmental liability on
the part of any of the solid or hazardous waste transporters and treatment,
storage and disposal facilities that have been utilized by Seller.
Section 3.26 Brokers or Finders. Seller has not entered into any agreement or
arrangement entitling any agent, broker, investment banker, financial advisor or
other firm or Person to any broker's or finder's fee or any other commission or
similar fee in connection with the Transaction.
Section 3.27 Books and Records. The books of account, minute
books and other records of Seller relating to the Business are complete and
correct in all material respects.
Section 3.28 Full Disclosure. Seller has not failed to
disclose to Purchaser any facts material to the business, results of operations,
assets, liabilities, financial condition or prospects of the Business. No
representation or warranty by Seller contained in this Agreement and no
statement contained in any document (including, without limitation, financial
statements and the Disclosure Schedule), certificate, or other writing furnished
or to be furnished by Seller to Purchaser or any of its representatives pursuant
to the provisions hereof or in connection with the Transaction, contains or will
contain any untrue statement of material fact or omits or will omit to state any
material fact necessary, in light of the circumstances under which it was made,
in order to make the statements herein or therein not misleading.
Section 3.29 Distributions or Dividends. Seller has not made
any distributions or dividends to Parent outside of the ordinary course of its
business or inconsistent with past practice on or after the Interim Balance
Sheet Date through the Closing Date.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to Seller that all of the
statements contained in this Article IV are true and complete as of the date of
this Agreement in all material respects (or, if made as of a specified date, as
of such date):
Section 4.1 Organization. Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of New York.
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Section 4.2 Authorization. Purchaser has the requisite
corporate power and authority to execute and deliver this Agreement and each
Ancillary Agreement to which it is a party and to consummate the Transaction. No
further action on the part of Purchaser is necessary to authorize the execution,
delivery and performance by Purchaser of the foregoing agreements or the
consummation of the Transaction.
Section 4.3 Binding Agreement. This Agreement and each
Ancillary Agreement to which Purchaser is party have been duly executed and
delivered by Purchaser and, assuming due and valid authorization, execution and
delivery thereof by Seller, each of the foregoing agreements is a valid and
binding obligation of Purchaser, enforceable against Purchaser in accordance
with its terms, except as such enforcement may be limited by (a) applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance and
other similar laws of general application now or hereinafter in effect relating
to or affecting creditors' rights generally and (b) general principles of equity
(regardless of whether enforceability is considered in a proceeding at equity or
at law).
Section 4.4 Consents and Approvals; No Violations. None of the
execution, delivery or performance by Purchaser of this Agreement and each
Ancillary Agreement to which Purchaser is party, the consummation by Purchaser
of the Transaction, or compliance by Purchaser with any of the provisions hereof
or thereof will (a) require any filing with Consent or Permit of any
Governmental Authority, (b) result in a violation or breach of, or constitute
(with or without due notice or the passage of time or both) a default (or give
rise to any right of termination, amendment, cancellation or acceleration) under
any Contract to which either Purchaser is party, or (c) violate any Order,
statute, rule or regulation applicable to Purchaser, excluding from the
foregoing clauses such violations, breaches or defaults which would not,
individually or in the aggregate, have a material adverse effect on the ability
of Purchaser to consummate the Transaction.
Section 4.5 Brokers or Finders. Purchaser has not entered into
any agreement or arrangement entitling any agent, broker, investment banker,
financial advisor or other firm or Person to any broker's or finder's fee or any
other commission or similar fee in connection with the Transaction, except for
▇▇▇▇▇ ▇▇▇▇ & Co. LLC, for which Purchaser shall be solely responsible.
ARTICLE V
COVENANTS
Section 5.1 General Conduct of the Business. Except as
otherwise required by this Agreement, during the period from the date of this
Agreement to the Closing, Seller shall conduct its operations in the ordinary
course of business consistent with recent past practice and in compliance with
all material laws and regulations and use commercially reasonable efforts to
preserve intact the business organization, keep its physical assets in
reasonable condition, keep available the services of its current officers and
employees and preserve its relationships with customers, suppliers and others
having business dealings with it to the end that its goodwill and ongoing
business shall not be impaired in any material respect. Without limiting the
generality of the foregoing, prior to the Closing and except as required by this
Agreement, Seller shall not,
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without the prior written consent of Purchaser which consent shall not be
unreasonably withheld or delayed:
(a) issue, sell or deliver, or agree or commit to issue,
sell or deliver (whether through the issuance or granting of options, warrants,
commitments, subscriptions, rights to Purchaser or otherwise) or authorize the
issuance, sale or delivery of, or redeem or repurchase, any stock or other
securities of Seller or any rights, warrants or options to acquire any such
stock or other securities;
(b) create, incur or assume any indebtedness (including
obligations in respect of capital leases) other than ordinary trade payables
incurred in the ordinary course of business; assume, guarantee, endorse or
otherwise become liable or responsible (whether directly, contingently or
otherwise) for the obligations of any other person or entity; or make any loans,
advances or capital contributions to, or investments in, any other person or
entity;
(c) increase any manner the compensation or fringe
benefits of, or materially modify the employment terms of, its directors,
officers or employees, generally or individually, or pay any bonus or other
benefit to its directors, officers or employees;
(d) hire any new or additional employees;
(e) acquire, sell, lease, license or dispose of any
assets or property (including without limitation any shares or other equity
interests in or securities of any corporation, partnership, association or other
business organization or division thereof), other than licenses, purchases and
sales of assets in the ordinary course of business and consistent with past
practice;
(f) mortgage or pledge any of its property or assets or
subject any such property or assets to any security interest or encumbrance;
(g) discharge or satisfy any security interest or
encumbrance or pay or assume any obligation or liability other than in the
ordinary course of business and consistent with past practice;
(h) enter into any contract, agreement or commitment
where Seller would have monetary obligations in excess of $10,000 individually
or $50,000 in the aggregate (except for renewals of client contracts existing on
the date hereof);
(i) amend, terminate, take or omit to take any action
that would constitute a violation of or default under, or waive any rights
under, any material contract or agreement;
(j) make or commit to make any capital expenditure in
excess of $10,000 per item or $50,000 in the aggregate;
(k) institute or settle any action, suit, proceeding,
claim, arbitration or investigation before any Governmental Authority or
arbitrator;
(l) take any action or fail to take any action permitted
by this Agreement with the knowledge that such action or failure to take action
would result in (i) any of the
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representations and warranties of Seller set forth in this Agreement becoming
untrue or (ii) any of the conditions set forth in Article VI not being
satisfied;
(m) agree in writing or otherwise to take any of the
foregoing actions; or
(n) make or commit to make any distributions or dividends
to Parent outside the ordinary course of business or inconsistent with past
practice.
Section 5.2 ▇▇▇▇ ▇. ▇▇▇▇▇▇. Seller agrees that ▇▇▇▇ ▇. ▇▇▇▇▇▇,
as General Manager of Seller, shall report directly to ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, President
and Chief Executive of Seller, with respect to the day-to-day operations of the
Business, provided, however, that, to the extent consistent with Seller's
obligations under Law, Seller shall permit ▇▇▇▇ ▇. ▇▇▇▇▇▇, in her role as its
General Manager, operational autonomy with respect to the operation of the
Business and autonomy from the Seller's requisition process, including, but not
limited to the "EREQ" process; provided, however, that ▇▇. ▇▇▇▇▇▇ shall not take
any action or omit to take any action that will directly violate or breach or
cause Seller to violate or breach any of the terms or provisions of Section 5.1
hereof. Notwithstanding anything herein to the contrary, nothing herein shall be
deemed to alter ▇▇▇▇ ▇. ▇▇▇▇▇▇'▇ status as an employee at will of Seller and
nothing herein shall be deemed to alter or diminish ▇▇▇▇ ▇. ▇▇▇▇▇▇'▇ fiduciary
duty to Seller.
Section 5.3 Access Before Closing.
(a) From the date of this Agreement through the Closing,
upon reasonable advance notice, Seller shall (i) permit Purchaser to make such
inspections and to make copies of such books and records relating to the
Business at its own expense as it may reasonably require; and (ii) furnish
Purchaser with such financial and operating data and other information
concerning the Business as Purchaser may from time to time reasonably request.
Purchaser and its authorized representatives shall conduct all such inspections
in a manner that will minimize disruptions to the operation of the Business.
(b) Purchaser agrees that it will, and will cause its
representatives to, use any information obtained pursuant to this Section 5.3
only in connection with the consummation of the Transaction and the other
transactions contemplated by this Agreement.
Section 5.4 Reasonable Efforts and Further Assurances.
(a) Prior to the Closing, upon the terms and subject to
the conditions of this Agreement, Purchaser and Seller shall use their
respective commercially reasonable efforts to take, or cause to be taken, all
actions, and to do, or cause to be done and cooperate with each other in order
to do, all things necessary, proper or advisable (subject to any applicable
laws) to satisfy the conditions to Closing and to consummate the Closing and the
Transaction as promptly as practicable, including, but not limited to, (i) the
preparation and filing of all forms, registrations and notices required to be
filed to consummate the Closing and the Transaction; (ii) the taking of such
actions as are necessary to obtain any Permits or Consents required to be made
or obtained in connection with the Transaction; and (iii) the execution of any
additional documents or instruments which may be necessary or appropriate to
carry out the provisions of this Agreement. In addition, no party hereto shall
take any action after the date hereof that could
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reasonably be expected to materially delay the obtaining of, or result in not
obtaining, any Permit or Consent required to be obtained prior to Closing.
(b) Prior to the Closing, each party shall promptly
consult with the other party hereto with respect to, provide any necessary
information with respect to and provide the other party (or their respective
counsel) with copies of, all filings made by such party with any Governmental
Authority or any other information supplied by such party to a Governmental
Authority in connection with this Agreement and the Transaction. Each party
hereto shall promptly inform the other party, and if applicable, provide the
other party with copies, of any written or oral communication received by such
party, from any Governmental Authority regarding the Transaction. If any party
hereto or Affiliate thereof receives a request for additional information or
documentary material from any such Governmental Authority with respect to the
Transaction, then such party shall endeavor in good faith to make, or cause to
be made, as soon as reasonably practicable and after consultation with the other
party, an appropriate response in compliance with such request. To the extent
that transfers, amendments or modifications of Permits are required as a result
of the execution of this Agreement or consummation of the Transaction, Seller
shall use commercially reasonable efforts to effect such transfers, amendments
or modifications.
Section 5.5 Employee Benefits. Schedule 3.14(d) sets forth the
employees of the Business to whom Purchaser will make offers of employment (the
"Designated Employees"). Prior to the Closing Date, Purchaser shall make an
offer of employment (to be effective as of the Closing Date) to each Designated
Employee on terms substantially comparable to those set forth on Schedule
3.14(d). Those Designated Employees who accept such offers of employment shall
be referred to herein as the "Transferred Employees." Purchaser's employment of
those Designated Employees who accept offers of employment shall commence on the
Closing Date.
Section 5.6 Publicity.
(a) Seller and Purchaser will consult with each other and
will mutually agree upon any press release or public announcement pertaining to
the Transaction and shall not issue any such press release or public
announcement prior to such consultation and agreement, except as may be required
by applicable Law, including federal and state securities laws, or reasonably
deemed necessary or appropriate by Seller or its Parent as a result of it being
a publicly-traded company.
(b) Seller shall cause Parent to issue a public
announcement regarding the execution of this Agreement, which public
announcement shall be made within three business days after the execution
hereof.
Section 5.7 Access to Books and Records After Closing.
(a) On and for so long as the statute of limitations of
any Third Party Claims as it relates to this Agreement would apply after the
Closing, during normal business hours, Seller shall cooperate with Purchaser and
its authorized representatives to provide them with access to, examine and/or
make copies of all books and records of Seller relating to the Business which
are not delivered to Purchaser pursuant hereto (including correspondence,
memoranda,
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books of account and the like) and relating to transactions or events occurring
prior to the date hereof to the extent that such access is not prohibited by
Law.
(b) On and for so long as the statute of limitations of
any Third Party Claims as it relates to this Agreement would apply after the
Closing, during normal business hours, Purchaser shall cooperate with Seller and
make available to Seller such documents, books, records or information
transferred to Purchaser and relating to the Business prior to the Closing as
Seller or any of its Affiliates may reasonably request after the Closing in
connection with any Tax determination or contractual obligations to Third
Parties or to defend or prepare for the defense of any Claim against Seller or
to prosecute or prepare for the prosecution of Claims against Third Parties by
Seller relating to the Business prior to the Closing or in connection with any
governmental investigation of Seller or any of its Affiliates by a Governmental
Authority.
(c) Each party will direct its employees to render
reasonable assistance which the other party may request in examining or
utilizing records referred to in this section, provided that each party shall be
reimbursed by the other for any out-of-pocket costs and expenses which it may
incur in rendering the services provided for in this section.
Section 5.8 Noncompetition. Except as otherwise contemplated
by this Agreement, Seller shall not, and shall not permit its Parent, any
Subsidiary, or any other Affiliate to, without the written consent of Purchaser,
at any time during the three-year period after Closing, directly or indirectly
own, manage, control, or participate in the ownership, management or control of
any business that is competitive with the Business, including the restoration,
preservation and remastering of analog magnetic audio and video tapes into newer
analog and digital tape formats (other than ownership of 5% or less of any
publicly-traded company that engages in such business), except that nothing in
this covenant shall be deemed to prevent Parent and/or any Affiliate of Parent
from engaging in the ordinary course of its business in any business
historically conducted by Parent or its Affiliates (except those that were
performed solely by Seller), including, without limitation, providing music and
video encoding and hosting services, webcasting services, digital media
distribution and promotional services, digital media content management
services, music and video samples, or online radio solutions, or restoring and
remastering magnetic audio or video tapes owned by Seller or Parent.
Section 5.9 Designated Prospects. Seller and Purchaser agree
that to the extent that any of Seller's previous discussions with The Boeing
Company or Yahoo! Inc. or any of their Affiliates mature into a contract to
perform services, Seller shall cause Parent to direct to Purchaser the business
which the parties previously contemplated would be performed by Seller.
Section 5.10 Government Contracts. Seller shall be responsible
for and manage any and all efforts related to the novation and transfer of the
Government Contracts from Seller to Purchaser. Any and all costs and expenses
authorized by Seller relating to the transfer of the Government Contracts shall
be borne by Parent. To the extent that all right, title and interest in and to
the Government Contracts and any related Bids have not been irrevocably
transferred on the Closing Date to Purchaser, Seller agrees not to dissolve its
business and not to take any other action that would impede the transfer of such
rights to Purchaser.
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Section 5.11 Museum Equipment.
(a) Seller shall promptly commence diligent negotiations
with ▇▇▇▇▇▇▇ with respect to Seller's rights and title to the Museum Equipment,
and Purchaser and ▇▇▇▇ ▇. ▇▇▇▇▇▇ shall continue to refrain from any and all
contact with ▇▇▇▇▇▇▇ with respect to the Museum Equipment. In the event Seller
is unable to achieve a negotiated agreement with ▇▇▇▇▇▇▇ satisfactory to Seller
and Purchaser within 45 days of the Closing Date, Seller shall commence
arbitration proceedings with ▇▇▇▇▇▇▇ pursuant to the terms of the Stock Purchase
Agreement, dated June 14, 2000, among Parent, Seller and ▇▇▇▇▇▇▇ (the "▇▇▇▇▇▇▇
Stock Purchase Agreement").
(b) Purchaser and Seller agree that the Escrow Funds held
in escrow pursuant to the Escrow Agreement shall be released to Seller if the
following events occur:
(i) in the event and to the extent
Seller obtains the ability to transfer good and marketable
title to all (but not less than all) the Museum Equipment,
free and clear of all Liens, pursuant to a binding decision of
an arbitrator or a nonappealable order of a court; or
(ii) in the event that ▇▇▇▇▇▇▇ consents
in writing to the transfer of all (but not less than all) the
Museum Equipment by Seller to Purchaser and such consent is
subject to only two conditions: (1) so long as Purchaser's
business is financially solvent (defined to mean it has a
positive net worth), which solvency shall be conclusively
presumed by the delivery to ▇▇▇▇▇▇▇ of a certificate to such
effect executed by Purchaser's independent accounting firm not
more frequently than once per year after the end of
Purchaser's fiscal year, Purchaser may possess and use the
Museum Equipment in its business at any location in the
discretion of Purchaser without interruption by ▇▇▇▇▇▇▇ or any
Third Parties claiming by or through him, and (2) at such time
as Purchaser should sell its business (either through a stock
sale or an asset sale), ▇▇▇▇▇▇▇ shall be granted a one time
option to compel Purchaser to transfer the Museum Equipment to
a non-profit museum entity, all of which rights shall expire
if the option is not exercised within twenty (20) days of
written notice or if ▇▇▇▇▇▇▇ is unable to provide Purchaser
with a written commitment of a museum to take delivery of the
Museum Equipment within such twenty (20) day period, and, in
the event of any such exercise of such option, ▇▇▇▇▇▇▇ shall
or shall cause the recipient of the Museum Equipment to pay
all of Purchaser's out of pocket costs and expenses in
connection with its compliance herewith; provided, however, if
Seller presents conditions that are different from but
substantially similar to the conditions above, Purchaser
hereby agrees that it shall work in good faith with Seller to
accomplish the mutual objectives of the parties.
(c) If, (i) by that date which shall be the twelve-month
anniversary of the date of execution of this Agreement (the "Escrow Termination
Date"), Seller has failed to achieve either (b)(i) or (ii) above, or (ii) at any
▇▇▇▇ ▇▇▇▇▇▇ is unable to provide Purchaser with free access and use of all (but
not less than all) the Museum Equipment pursuant to the terms of the Museum
Lease, then the Escrow Fund shall be returned to Purchaser, and Seller shall
dispose of or have
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free use of the Museum Equipment as it deems fit and any such disposition or use
of the Museum Equipment shall not be deemed to violate the non-competition
provisions of Section 5.8.
Section 5.12 Notification of Certain Matters.
(a) From time to time prior to the Closing, Seller shall
promptly supplement or amend the Disclosure Schedule with respect to any matter
arising after the delivery thereof pursuant hereto that, if existing at, or
occurring on, the date of this Agreement, would have been required to be set
forth or described in the Disclosure Schedule. No supplement or amendment of the
Disclosure Schedule made after the execution hereof by Purchaser pursuant to
this section or otherwise shall be deemed to cure any breach of any
representation of or warranty made pursuant to this Agreement.
(b) Each party shall give notice to the other promptly
after becoming aware of (i) the occurrence or non-occurrence of any event whose
occurrence or non-occurrence would be likely to cause either (A) any
representation or warranty made by the notifying party contained in this
Agreement to be untrue or inaccurate in any material respect at any time from
the date hereof to the Closing Date or (B) any condition set forth in Article VI
to be satisfied by the notifying party to be unsatisfied in any material respect
at any time from the date hereof to the Closing Date and (ii) any failure of the
notifying party or any officer, director, employee or agent thereof, to comply
with or satisfy any covenant, condition or agreement to be complied with or
satisfied by it hereunder; provided, however, that (x) the delivery of any
notice pursuant to this section shall not limit or otherwise affect the remedies
available hereunder to the party receiving such notice and (y) such notice shall
not be required from and after the time the party to whom such notice is to be
given has Knowledge of the information required to be included in such notice.
(c) Seller shall deliver to Purchaser copies of (i) all
audit reports, letter rulings, technical advice memoranda and similar documents
issued by a Governmental Authority relating to Taxes due from or with respect to
the Business and (ii) any closing agreements entered into by or on behalf of
Seller relating to the Business with any taxing authority, which come into the
possession of Seller after the date hereof.
Section 5.13 Subsequent Actions.
(a) If at any time after the Closing Purchaser will
consider or be advised that any deeds, bills of sale, instruments of conveyance,
assignments, assurances or any other actions or things are necessary or
desirable to vest, perfect or confirm ownership (of record or otherwise) in
Purchaser, its right, title or interest in, to or under any or all of the Assets
or otherwise to carry out this Agreement, Seller shall execute and deliver all
deeds, bills of sale, instruments of conveyance, powers of attorney, assignments
and assurances and take and do all such other actions and things as may be
reasonably requested by Purchaser in order to vest, perfect or confirm any and
all right, title and interest in, to and under such rights, properties or assets
in Purchaser or otherwise to carry out this Agreement.
(b) In case at any time after the Closing Date any
further action is necessary, proper or advisable to carry out the purposes of
this Agreement, as soon as reasonably
- 28 -
practicable, each party hereto shall take, or cause its proper officers or
directors to take, all such necessary, proper or advisable actions.
Section 5.14 Waiver of Bulk Sales Requirement. Each of the
parties waives compliance with any applicable bulk sales laws, including,
without limitation, the Uniform Commercial Code Bulk Transfer provisions. Seller
agrees to pay and discharge in due course and will indemnify and save harmless
Purchaser, from and against all claims made by creditors of Seller, including
expenses and attorneys' fees incurred by Purchaser in defending against such
claims, except those expressly assumed by Purchaser pursuant hereto. The
indemnification process set forth in Section 9.3 shall govern any
indemnification required pursuant to this Section 5.14.
Section 5.15 Purchaser's Conduct of the Business. From the
Closing Date until the end of the Earn Out Period, Purchaser shall conduct its
business in a commercially reasonable manner and not (i) accelerate or delay the
sale of the products of, or provision of services by, Purchaser or the
collection of accounts receivable or payment of accounts payable, except in the
ordinary course of business consistent with past practice; or (ii) make any
material change in accounting methods or principles or cost allocation
procedures that affect in any material respect the financial statements of
Purchaser.
Section 5.16 Change of Seller's and Affiliates' Names.
Immediately after Closing, Seller shall change its corporate name and that of
any Affiliate, including Vidipax Inc. of Canada with a name containing the word
"Vidipax" to such name not containing the word "VidiPax" or the words "VidiPax,
Inc."
Section 5.17 Email Forwarding and Transfer of Old Emails.
(a) Seller agrees that, for up to one year, it will
forward any and all emails sent to any of the Designated Employees that are
received by Seller without any notation back to the sender that such employees
are "former employees" or any similar designation.
(b) Seller agrees that upon request by Purchaser at any
time during the two-year period after Closing, which request shall be made in
good faith and be commercially reasonable, Seller shall cause Parent to transfer
to Purchaser such requested Old Emails using good faith and commercially
reasonable efforts. The first eight hour period spent by Parent to effectuate
the transfer of each category of Old Emails (i.e., by transaction or by
recipient name) shall be free of charge to Purchaser, thereafter, the work shall
be performed at a reasonable fee to be agreed upon by Parent and Purchaser. To
the extent work to effectuate such transfer will exceed the eight hour period,
Seller shall cause Parent to notify Purchaser of the number of hours such
request may exceed the eight hour period and shall proceed with the portion of
the transfer that extends beyond the eight hour period only upon prior approval
from Purchaser.
Section 5.18 Reimbursements. As soon as practicable after the
date hereof and prior to the Closing, Seller shall cause Parent to fund Seller
(i) an amount equal to the rental payment made by Seller to the Loft Lease
Landlord in August, 2003 in the amount of $41,376.65, and (ii) an amount not
greater than $14,000 representing sums for which ▇▇▇▇ ▇.
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▇▇▇▇▇▇ personally expended on behalf of Seller and for which Seller will
reimburse ▇▇. ▇▇▇▇▇▇ upon delivery to it of appropriate backup documentation.
ARTICLE VI
CONDITIONS
Section 6.1 Conditions to Each Party's Obligation to Effect
the Closing. The respective obligation of each party to effect the Closing is
subject to the condition that there shall not be in effect at or prior to the
Closing Date any Law or Order of any Governmental Authority of competent
jurisdiction that prohibits the consummation of the Closing as provided herein;
and there shall be no Order or injunction of a court of competent jurisdiction
in effect precluding consummation of the Closing or the Transaction.
Section 6.2 Conditions to the Obligation of Purchaser to
Effect the Closing. The obligation of Purchaser to effect the Closing is subject
to the satisfaction at or prior to the Closing Date of the following conditions,
any one or more of which may be waived by Purchaser:
(a) Representations and Warranties. All representations
and warranties set forth in Article III shall be true and correct in all
material respects, in each case, as of the date of this Agreement;
(b) Performance. Seller shall have performed in all
material respects all of its covenants and agreements under this Agreement to be
performed or complied with on or prior to the Closing Date;
(c) Material Adverse Effect. Except as a consequence of
or as contemplated by the Agreement, since the date of the Agreement, there
shall have not occurred any change or event which would be reasonably likely to
have a Material Adverse Effect;
(d) Officer's Certificate. Purchaser shall have received
on the Closing Date a certificate dated the Closing Date and executed by the
Chief Executive Officer or Chief Financial Officer of Seller certifying the
fulfillment of the conditions specified in Sections 6.2(b), (c) and (e) hereof;
(e) Consents. All Consents necessary to the consummation
of the Closing and the Transaction, including Consents from Third Parties to
Contracts and Consents from Governmental Authorities, shall have been obtained,
and a copy of each such Consent shall have been provided to Purchaser at or
prior to the Closing;
(f) Lien Search; Release of Liens. Seller shall have
delivered to Purchaser Lien searches in all applicable jurisdictions in which a
security interest can be perfected relating to the Assets and any and all Liens
on the Assets, including but not limited to Liens held by Silicon Valley Bank,
and the tax judgment Lien held by the New York City Department of Finance, shall
have been released and evidence of the same (satisfactory to Purchaser in its
sole
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discretion) shall have been delivered to Purchaser, provided, however, that the
release of the Lien held by The Terminal Marketing Group, Inc. shall not be a
condition to Closing;
(g) Leaseholds.
(i) The Fourth Floor Landlord shall
have been provided with written notice in respect to the
assignment of the Fourth Floor Lease to Purchaser; and
(ii) The Fifth Floor Landlord shall have
granted any required consent in respect to the assignment of
the Fifth Floor Lease to Purchaser;
(h) Corporate Approvals. The Board of Directors and the
shareholder of Seller shall have approved the Transaction and the Board of
Directors of Parent shall have approved the Guaranty, and respective resolutions
evidencing same shall have been delivered to Purchaser, together with an
incumbency certificate and other standard documentation;
(i) Legal Opinion. Seller's counsel and Parent's counsel
shall have delivered to Purchaser an opinion of counsel in form and substance
reasonably acceptable to Purchaser;
(j) Government Contracts Schedule. Seller shall have
received consent from the relevant Governmental Authority pursuant to its
applicable rules and regulations, with respect to the transfer of the Government
Contracts (and related Bids) to Purchaser that permits Purchaser to be listed on
the Government Contracts schedule.
(k) Transfer of Records. Seller shall have transferred
any and all Electronic Records (excluding the Old Emails) and hosting of
Purchaser's website to a new server designated by Purchaser and evidence of same
(satisfactory to Purchaser in its sole discretion) shall have been delivered to
Purchaser and Seller shall have delivered to Purchaser any and all hard copies
of all other books and records relating to the Business not otherwise expressly
excluded from the Assets and Assumed Liabilities.
(l) Consent to Name. Seller shall have executed and
delivered to Purchaser a letter in form and substance acceptable to Purchaser
consenting to Purchaser's use of the Name "VidiPax, Inc."
(m) Ancillary Agreements. Seller and Parent shall have
executed each Ancillary Agreement to which they are parties.
Section 6.3 Conditions to the Obligation of Seller to Effect
the Closing. The obligation of Seller to effect the Closing is subject to the
satisfaction at or prior to the Closing Date of the following conditions, any
one or more of which may be waived by Seller:
(a) Representations and Warranties. All representations
and warranties set forth in Article IV shall be true and complete in all
material respects as of the date of this Agreement and as of the Closing Date;
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(b) Performance. Purchaser shall have performed in all
material respects all of its covenants and agreements under this Agreement to be
performed or complied with on or prior to the Closing Date;
(c) Material Adverse Effect. Except as a consequence of
or as contemplated by the Agreement, since the date of the Agreement, there
shall have not occurred any change or event which would be reasonably likely to
have a material adverse effect on the condition, financial or otherwise, of
Purchaser;
(d) Officer's Certificate. Seller shall have received on
the Closing Date a certificate dated the Closing Date and executed by the
Purchaser certifying the fulfillment of the conditions specified in Sections
6.3(b) and (c) hereof;
(e) Corporate Approvals. The Board of Directors of
Purchaser shall have approved the Transaction and resolutions evidencing same
shall have been delivered to Seller, together with an incumbency certificate and
other standard documentation;
(f) Legal Opinion. Purchaser's counsel shall have
delivered to Seller an opinion of counsel in form and substance reasonably
acceptable to Seller;
(g) Leasehold. Seller shall have terminated the Loft
Lease;
(h) Ancillary Agreements. Purchaser shall have executed
each Ancillary Agreement to which it is a party; and
(i) Transferred Employees. Each of the Transferred
Employees shall have executed resignations and releases in form and substance
acceptable to Seller.
ARTICLE VII
THE CLOSING
Section 7.1 The Closing. The closing of the Transaction (the
"Closing") shall take place at the offices of ▇▇▇▇▇ Peabody LLP, ▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, on December 15, 2003 or as promptly as
practicable following the execution of this Agreement and the satisfaction or
waiver of each of the conditions set forth in Article VI. The date on which the
Closing occurs is referred to herein as the "Closing Date."
Section 7.2 Deliveries by Seller. At the Closing, Seller shall
deliver or cause to be delivered to Purchaser:
(a) a duly executed ▇▇▇▇ of Sale and Assignment;
(b) all documents of title and instruments of conveyance
necessary to transfer to Purchaser all of Seller's rights, title and interest in
and to the Assets, including assignments of all of Seller's rights in the Domain
Names and any registrations of patents, trademarks, trade names, assumed names,
service marks and copyrights, and all applications for any registration of
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any of the foregoing, and all other Intellectual Property which are in each case
owned by Seller and are Intellectual Property;
(c) updated Disclosure Schedules;
(d) the documents and instruments referred to in Section
6.2 hereof; and
(e) such other documents as Purchaser may reasonably
request.
Section 7.3 Deliveries by Purchaser. At the Closing, Purchaser
shall deliver or cause to be delivered to Seller:
(a) The Purchase Price, less the amount to be retained by
the Escrow Agent pursuant to the terms thereof and hereof;
(b) a duly executed Instrument of Assumption of
Liabilities;
(c) the documents and instruments referred to in Section
6.3 hereof; and
(d) such other documents as Seller may reasonably
request.
ARTICLE VIII
TERMINATION
Section 8.1 Termination. This Agreement may be terminated and
the transactions contemplated hereby abandoned at any time prior to the Closing:
(a) By mutual written consent of Purchaser and Seller;
(b) By Purchaser or Seller if the Closing shall not have
occurred on or before February 1, 2004 (provided that the right to terminate
this Agreement under this Section 8.1(b) shall not be available to any party
whose failure to fulfill any obligation under this Agreement has been the cause
of, or resulted in, the failure of the Transaction to be consummated on or
before such date);
(c) By Seller, if (i) on the date of this Agreement,
there shall have been a breach of any of the representations or warranties on
the part of Purchaser contained in this Agreement which, individually or in the
aggregate, has had or would reasonably be expected to have a material adverse
effect on the ability of Purchaser to consummate the Transaction or (ii) prior
to the Closing, there shall have been a breach of any covenant or agreement on
the part of Purchaser contained in this Agreement which individually or in the
aggregate has had or would reasonably be expected to have a material adverse
effect on the ability of Purchaser to consummate the Transaction, in either case
which breach, if capable of cure, shall not have been cured prior to thirty (30)
days following notice thereof to Purchaser; or
(d) By Purchaser, if (i) on the date of this Agreement,
there shall have been a breach of any of the representations or warranties on
the part of Seller contained in this
- 33 -
Agreement which, individually or in the aggregate, has had or would reasonably
be expected to have a Material Adverse Effect, (ii) prior to the Closing, there
shall have been a breach of any covenant or agreement on the part of Seller
contained in this Agreement which, individually or in the aggregate, has had or
would reasonably be expected to have a Material Adverse Effect, which breach, if
capable of cure, shall not have been cured prior to thirty (30) days following
notice thereof to Seller.
Section 8.2 Effect of Termination. If this Agreement is
terminated in accordance with Section 8.1, this Agreement shall become null and
void and of no further force and effect, except that (i) the terms and
provisions of this Section 8.2, Article IX (Indemnification), Section 10.1 (Fees
and Expenses), Section 10.3 (Amendment and Modification), Section 10.4
(Notices), Section 10.6 (Entire Agreement; No Third Party Beneficiaries),
Section 10.7 (Severability), Section 10.8 (Governing Law), Section 10.9
(Enforcement; Venue) and Section 10.12 (Assignment) shall remain in full force
and effect and (ii) any termination of this Agreement shall not relieve any
party hereto from any liability for any breach of its obligations hereunder.
ARTICLE IX
INDEMNIFICATION
Section 9.1 Survival of Representations and Warranties. All of
the representations and warranties of the parties contained in this Agreement,
including the schedules hereto, shall survive the Closing and shall continue in
full force and effect until the 12-month anniversary of the Closing Date, except
that the representations and warranties contained in Section 3.15 (Employee
Benefit Plans) and Section 3.16 (Tax Matters) shall survive until the expiration
of the applicable statute of limitations.
(a) Covenants and Agreements. All of the covenants and
agreements of the parties shall survive the Closing and continue in full force
and effect forever, or otherwise in accordance with their respective terms.
(b) Timely Claims. Any claim for indemnification arising
out of the breach of or inaccuracy of any representation or warranty contained
in this Agreement, including the schedules hereto, must be made prior to the
termination of the applicable time periods set forth under Section 9.1(a). Any
representation or warranty as to which a claim for indemnification (including a
contingent claim) shall have been asserted during the survival period shall
continue in effect with respect to such claim until such claim shall have been
finally resolved or settled.
Section 9.2 Terms of Indemnification. Subject to the terms and
provisions of this Article 9, (a) Seller shall indemnify the Purchaser, its
Affiliates and its respective directors, officers, employees and agents
(collectively, the "Purchaser Parties") against, and shall protect, defend and
hold harmless the Purchaser Parties from, all Losses (whether arising from
claims by third parties or otherwise incurred or suffered by the Purchaser
Parties) arising out of, relating to or resulting from (i) any breach or
inaccuracy of any of Seller's representations or warranties contained in this
Agreement, including the schedules hereto (without giving effect to any
amendment to the schedules), (ii) any failure by Seller to perform or comply
with its covenants
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or agreements contained in this Agreement, (iii) any claims brought by ▇▇▇▇▇▇▇
pursuant to the ▇▇▇▇▇▇▇ Stock Purchase Agreement; (iv) any failure by Seller to
pay or perform when due the Excluded Liabilities, (v) any Losses arising from
any Proceeding based on events or circumstances occurring prior to the Closing,
and (vi) the Lien held by The Terminal Marketing Group, Inc. to the extent that
the same has not been released prior to the Closing; and (b) Purchaser shall
indemnify Seller, its Affiliates and their respective directors, officers,
employees and agents (collectively, the "Seller Parties") against, and shall
protect, defend and hold harmless the Seller Parties from, all Losses arising
out of or resulting from (i) any breach or inaccuracy of any of Purchaser's
representations or warranties contained in this Agreement, (ii) any failure by
Purchaser to perform or comply with its covenants or agreements contained in
this Agreement, (iii) any failure by Purchaser to pay or perform when due the
Assumed Liabilities, and (iv) any Losses arising from any Proceeding based on
events or circumstances occurring after the Closing.
Section 9.3 Indemnification Procedures. The following
provisions shall apply to claims for indemnification from and against Losses
arising out of or related to any and all Proceedings made or brought by a Third
Party (each, individually, a "Third Party Claim") against any indemnified party
hereunder. The indemnified party shall promptly furnish the indemnifying party
with notice of the Third Party Claim, including any documentation received by
the indemnified party with respect to such claim, provided that the failure to
notify the indemnifying party will not relieve the indemnifying party of any
liability that it may have to the indemnified party, except to the extent that
the indemnifying party demonstrates that the defense of such Third Party Claim
is prejudiced by the indemnified party's failure to give such notice. The
indemnifying party shall have the absolute right, in its sole discretion and
expense, to elect to defend, contest or otherwise protect against any such Third
Party Claim with legal counsel of its own selection. The indemnified party shall
have the right, but not the obligation, to participate, at its own expense, in
the defense of such Third Party Claim through counsel of its own selection and
shall have the right, but not the obligation, to assert any and all cross-claims
or counterclaims it may have in connection therewith. The indemnified party
shall, and shall cause its Affiliates (and their respective directors, officers,
employees, consultants and agents), to at all times cooperate in all reasonable
ways with, make their relevant files and records available for inspection and
copying by, and otherwise render reasonable assistance to, the indemnifying
party in connection with (a) its defense of any Third Party Claim for which
indemnity is sought under this Article 9 and (b) its prosecution under the
immediately preceding sentence of any related claim, cross-claim, counterclaim
or right of subrogation. In the event the indemnifying party fails to timely or
properly defend, contest or otherwise protect against any such claim, the
indemnified party shall have the right, but not the obligation, to defend,
contest, assert cross-claims or counterclaims or otherwise protect against such
Third Party Claim at the indemnifying party's expense. No Third Party Claim may
be settled unless the indemnified party and the indemnifying party consent
thereto in writing signed by or on behalf of each of them, such consent not to
be unreasonably withheld. The indemnifying parties shall be subrogated to the
claims or rights of the indemnified parties with respect to any Losses paid by
any of the indemnifying parties under this Article 9.
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Section 9.4 Limitations on Indemnification.
(a) The maximum aggregate Losses payable by Seller in
connection with claims for indemnification made pursuant to this Article IX
shall be limited to an amount equal to the Purchase Price (the "Seller Cap"),
provided that for the purpose of calculating the Seller Cap, the portion of the
Purchase Price represented by amounts described in Section 2.3 shall be limited
to amounts actually paid to and received by Seller or any Affiliate of Seller.
(b) The maximum aggregate Losses payable by Purchaser in
connection with claims for indemnification made pursuant to this Article IX
shall be limited to an amount equal to the Purchase Price (the "Purchaser Cap").
(c) No Purchaser Party or Seller Party shall be entitled
to make any claim for indemnification pursuant to this Article IX unless and
until the aggregate amount of Losses with respect to all such claims that may be
made by Purchaser Parties on the one hand, or Seller Parties on the other hand,
pursuant to this Article IX exceeds Twenty-Five Thousand Dollars ($25,000) (the
"Indemnification Threshold"), after which Seller or Purchaser, as the case may
be, shall be liable only for the amount of Losses that exceed the
Indemnification Threshold.
Section 9.5 Additional Indemnification Provisions.
(a) Notwithstanding anything in this Article IX to the
contrary, none of the Seller Cap, the Purchaser Cap or the Indemnification
Threshold shall apply to or against, and Seller or Purchaser, as applicable,
shall be liable under this Article IX for, the entirety of any Losses resulting
from, arising out of, in the nature of, or caused by:
(i) any fraudulent, willful or
intentional breach by a party of its representations or
warranties set forth herein;
(ii) any breach or inaccuracy in the
representations and warranties of Seller contained in Section
3.16 (Tax Matters); or
(iii) any breach or failure of a party to
perform its obligations under Section 10.2.
(b) The right to indemnification or other remedy based on
any representations, warranties, obligations, covenants and agreements set forth
in this Agreement, including the schedules hereto, will not be affected by any
investigation conducted with respect to, or any notice or knowledge acquired (or
capable of being acquired) at any time, whether before or after the date hereof
or the Closing Date, with respect to the accuracy or inaccuracy of or compliance
with, any such representation, warranty, covenant or agreement; provided,
however, that Purchaser shall not have the right to seek indemnification for any
breach or inaccuracy in the representations and warranties of Seller to the
extent that ▇▇▇▇ ▇. ▇▇▇▇▇▇ had actual knowledge prior to the Closing of such
breach or inaccuracy. The waiver of any condition based on the accuracy of any
representation or warranty, or on the performance of or compliance with any
covenant or agreement, will not affect the right to indemnification or other
remedy based on such representations, warranties, covenants and agreements.
- 36 -
(c) The indemnification obligations of the parties hereto
shall constitute the sole and exclusive remedies of Purchaser and Seller,
respectively, for the recovery of money damages with respect to matters
described in this Agreement. Nothing in this Section 9.5(c) is intended to waive
or otherwise limit any equitable or other remedies to which a party hereto may
be entitled.
(d) The parties hereto intend that each representation,
warranty, covenant and agreement contained in this Agreement shall have
independent significance. If any party hereto has breached any representation,
warranty, covenant or agreement contained herein in any respect, the fact that
there exists another representation, warranty, covenant or agreement relating to
the same subject matter (regardless of the relative levels of specificity) which
such party has not breached shall not detract from or mitigate the fact that
such party is in breach of the first representation, warranty, covenant or
agreement.
ARTICLE X
MISCELLANEOUS
Section 10.1 Fees and Expenses. All costs and expenses
incurred in connection with this Agreement and the consummation of the
Transaction shall be paid by the party incurring such expenses, including,
without limitation, all legal and accounting fees and expenses, except that
Seller hereby agrees to pay up to $5,000 of Purchaser's out of pocket legal and
accounting fees and expense related to the transaction contemplated by this
Agreement.
Section 10.2 Taxes. All Transfer Taxes arising out of, in
connection with, or attributable to the Transaction, shall be borne and paid by
Seller. Purchaser shall be responsible for all other Taxes attributable to,
levied upon or incurred in connection with the Assets pertaining to the period
(or that portion of the period) beginning immediately after the Closing Date.
Seller shall be responsible for all other Taxes attributable to, levied upon or
incurred in connection with the Assets pertaining to the period (or that portion
of the period) prior to or on the Closing Date. The portion of Taxes
attributable to, levied upon, or incurred in connection with the Assets related
to the Pre-Closing Tax Period shall be deemed to be: (a) in the case of Taxes
other than income and sales and use Taxes, the amount of such Taxes for the
entire applicable Tax period multiplied by a fraction, the numerator of which is
the number of days during the applicable Tax period that are in the Pre-Closing
Tax Period, and the denominator of which is the number of days in the applicable
Tax Period; and (b) in the case of income Taxes and sales and use Taxes, as
determined from the books and records of Seller, between Pre-Closing and
Post-Closing Tax Periods as though the taxable year of Seller terminated at the
close of business on the Closing Date, and based on accounting methods,
elections, and conventions that do not have the effect of distorting income and
expenses.
Section 10.3 Amendment and Modification. This Agreement may be
amended, modified and supplemented in any and all respects, but only by a
written instrument signed by all of the parties hereto expressly stating that
such instrument is intended to amend, modify or supplement this Agreement.
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Section 10.4 Notices. All notices and other communications
hereunder shall be in writing and shall be deemed given when mailed, delivered
personally, sent by facsimile (which is confirmed) or sent by an overnight
courier service, such as Federal Express, to the parties at the following
addresses (or at such other address for a party as shall be specified by such
party by like notice):
if to Purchaser, to:
▇▇▇▇ ▇▇▇▇▇▇ Acquisition Co. Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President and CEO
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇ ▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇ ▇▇▇▇
and
if to Seller, to:
VidiPax, Inc.
c/o Loudeye Corp.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President and Chief Executive Officer
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
- 38 -
with a copy to:
▇▇▇▇▇▇▇▇ & ▇▇▇▇, LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Section 10.5 Counterparts; Facsimile Signatures. This
Agreement may be executed in counterparts, all of which shall be considered one
and the same agreement and shall become effective when two or more counterparts
have been signed by each of the parties and delivered to the other parties. This
Agreement may be executed by facsimile signatures which shall be considered
originals.
Section 10.6 Entire Agreement; No Third Party Beneficiaries.
This Agreement and the Ancillary Agreements (a) constitute the entire agreement
and supersede all prior agreements and understandings, both written and oral,
among the parties with respect to the subject matter hereof and thereof and (b)
are not intended to confer upon any Person other than the parties hereto and
thereto any rights or remedies hereunder.
Section 10.7 Severability. Any term or provision of this
Agreement that is held by a court of competent jurisdiction or other authority
to be invalid, void or unenforceable in any situation in any jurisdiction shall
not affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision in
any other situation or in any other jurisdiction. If the final judgment of a
court of competent jurisdiction or other authority declares that any term or
provision hereof is invalid, void or unenforceable, the parties agree that the
court making such determination shall have the power to reduce the scope,
duration, area or applicability of the term or provision, to delete specific
words or phrases, or to replace any invalid, void or unenforceable term or
provision with a term or provision that is valid and enforceable and that comes
closest to expressing the intention of the invalid or unenforceable term or
provision.
Section 10.8 Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of New York without
giving effect to the principles of conflicts of law thereof.
Section 10.9 Enforcement; Venue. The parties agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions of this Agreement in any court of
the United States located in the State of New York or in New York state court,
this being in addition to any other remedy to which they are entitled at law or
in equity. In addition, each of the parties hereto (a) consents to submit itself
to the personal jurisdiction of any federal court located in the State of New
York or any New York state court in the event any dispute arises out of this
Agreement or the Transaction, (b) agrees that it shall not attempt to deny or
defeat such personal jurisdiction
- 39 -
by motion or other request for leave from any such court and (c) agrees that it
shall not bring any action relating to this Agreement or the Transaction in any
court other than a federal or state court sitting in the State of New York
Section 10.10 Extension; Waiver. At any time prior to the
Closing Date, the parties may (a) extend the time for the performance of any of
the obligations or other acts of the other parties, (b) waive any inaccuracies
in the representations and warranties of the other parties contained in this
Agreement or in any document delivered pursuant to this Agreement or (c) waive
compliance by the other party with any of the agreements or conditions contained
in this Agreement. Any agreement on the part of a party to any such extension or
waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party. The failure of any party to this Agreement to assert any
of its rights under this Agreement or otherwise shall not constitute a waiver of
those rights.
Section 10.11 Election of Remedies. Neither the exercise of
nor the failure to exercise a right of set-off or to give notice of a claim
under this Agreement will constitute an election of remedies or limit Purchaser,
or any of Purchaser Indemnified Parties, in any manner in the enforcement of any
other remedies that may be available to any of them, whether at law or in
equity.
Section 10.12 Assignment. Except as expressly set forth
herein, neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by either of the parties hereto (whether by
operation of law or otherwise) without the prior written content of the other
party. Subject to the preceding sentence, this Agreement shall be binding upon,
inure to the benefit of and be enforceable by the parties and their respective
successors and assigns.
Section 10.13 Tax Disclosure. Notwithstanding anything herein
to the contrary, any party may disclose this Agreement (and any employee,
representative or other agent of such party) may disclose to any and all
persons, without limitation of any kind, the Tax treatment and Tax structure of
the Transaction and all materials of any kind (including opinions or other tax
analyses) that were provided to it relating to such Tax treatment and Tax
Structure, except that (a) Tax treatment and Tax structure shall not include the
identity of any existing or future party (or any Affiliate of such party) to
this Agreement and (b) this provision shall not permit disclosure to the extent
that non-disclosure is necessary in order to comply with applicable securities
laws.
[SIGNATURE PAGE TO FOLLOW]
- 40 -
IN WITNESS WHEREOF, Purchaser and Seller have executed this
Agreement under seal as of the date first written above.
PURCHASER:
▇▇▇▇ ▇▇▇▇▇▇ ACQUISITION CO. INC.
By:__________________________________
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President and Chief
Executive Officer
SELLER:
VIDIPAX, INC.
By:__________________________________
Name:
Title:
EXHIBIT A
▇▇▇▇ OF SALE AND ASSIGNMENT
▇▇▇▇ OF SALE AND ASSIGNMENT, made, executed and delivered as
of __________ __, 2003 by VidiPax, Inc., a New York corporation ("Grantor"), in
favor ▇▇▇▇ ▇▇▇▇▇▇ Acquisition Co. Inc., a New York corporation ("Grantee").
WHEREAS, Grantor and Grantee are parties to an Asset Purchase
Agreement, dated as of October 31, 2003 (the "Asset Purchase Agreement"),
providing for, among other things, the sale, transfer, conveyance, assignment
and delivery to Grantee of the entire right, title and interest of Grantor in
the Assets, for consideration in the amount and on the terms and conditions
provided in the Asset Purchase Agreement (capitalized terms used and not
otherwise defined in this ▇▇▇▇ of Sale and Assignment shall have the meanings
ascribed to such terms in the Asset Purchase Agreement);
WHEREAS, all of the terms and conditions precedent provided in
the Asset Purchase Agreement have been met and performed or waived by the
respective parties thereto, and such parties now desire to carry out the intent
and purpose of the Asset Purchase Agreement by, among other things, Grantor's
execution and delivery to Grantee of this ▇▇▇▇ of Sale and Assignment; and
WHEREAS, this ▇▇▇▇ of Sale and Assignment is made, executed
and delivered pursuant to and in accordance with the Asset Purchase Agreement,
the terms of which shall not be merged hereinto but shall survive the execution
hereof as and to the extent provided therein.
NOW, THEREFORE, in consideration of the premises and of other
valuable consideration to Grantor in hand paid by Grantee, at or before the
execution and delivery hereof, the receipt and sufficiency of which by Grantor
is hereby acknowledged, Grantor hereby agrees as follows:
Section 1. Grantor does hereby sell, assign, transfer, convey
and deliver to Grantee all of Grantor's right, title and interest in, the
Assets.
Section 2. Subject to the terms and conditions of the Asset
Purchase Agreement, Grantor hereby covenants that, from time to time after the
delivery of this ▇▇▇▇ of Sale and Assignment, at Grantee's request and without
further consideration, Grantor will do, execute, acknowledge and deliver, or
will cause to be done, executed, acknowledged and delivered, all such further
acts, deeds, transfers, conveyances, assignments, powers of attorney and
instruments of further assurances as may reasonably be necessary to carry out
the provisions of this ▇▇▇▇ of Sale and Assignment, and to put Grantee in
possession of, all of Grantor's right, title and interest in and to the Assets,
except as specifically provided in the Agreement, and, in the case of Contracts
and rights, if any, which cannot be effectively transferred to Grantee without
the consent of Third Parties, to endeavor to obtain such consents promptly and
if any be unobtainable, to use commercially reasonable efforts to assure to
Grantee the benefits thereof
A-1
(provided, that Grantee shall agree to perform the obligations of Grantor
arising thereunder to the extent Grantee has control over the resources required
to do so).
Section 3. Notwithstanding any of the foregoing provisions,
this instrument shall not constitute an assignment to Grantee of any claim
(including claims for refunds of taxes), contract, license, lease, commitment,
customer order or purchase order if an attempted assignment of the same without
the consent of the other party thereto would constitute a breach thereof or in
any way impair the rights of Grantee thereunder.
Section 4. Nothing in this ▇▇▇▇ of Sale and Assignment,
express or implied, is intended or shall be construed to confer upon, or to give
to, any person, firm or corporation other than Grantee and its successors and
assigns, any remedy or claim under or by reason of this ▇▇▇▇ of Sale and
Assignment or any terms, covenants or conditions hereof, and all the terms,
covenants and conditions, promises and agreements contained in this ▇▇▇▇ of Sale
and Assignment shall be for the sole and exclusive benefit of Grantee and its
successors and assigns.
Section 5. This ▇▇▇▇ of Sale and Assignment is executed by
Grantor and Grantee, and shall be binding upon, Grantor, Grantee and their
respective successors and assigns, for the uses and purposes above set forth and
referred to, effective immediately upon its delivery to Grantee.
Section 6. This ▇▇▇▇ of Sale and Assignment shall be governed
by and construed and enforced in accordance with the laws of the State of New
York without giving effect to the principles of conflicts of law thereof.
[SIGNATURE PAGE TO FOLLOW]
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IN WITNESS WHEREOF, Grantor has caused this ▇▇▇▇ of Sale and
Assignment to be signed by its duly authorized officer under seal as of the date
first written above.
VIDIPAX, INC.
By:__________________________________
Name:
Title:
Agreed and accepted as
of the date first
written above.
▇▇▇▇ ▇▇▇▇▇▇ ACQUISITION CO. INC.
By:__________________________________
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President and Chief Executive Officer
EXHIBIT B
INSTRUMENT OF ASSUMPTION OF LIABILITIES
INSTRUMENT OF ASSUMPTION OF LIABILITIES made, executed and
delivered as of __________ ___, 2003, by ▇▇▇▇ ▇▇▇▇▇▇ Acquisition Co. Inc., a New
York corporation ("Purchaser"), in favor of VidiPax, Inc., a New York
corporation ("Seller").
WHEREAS, Seller and Purchaser are parties to an Asset Purchase
Agreement, dated as of October 31, 2003 (the "Asset Purchase Agreement"),
providing for, among other things, the assumption by Purchaser of certain
liabilities and obligations of Seller on the terms and conditions provided in
the Asset Purchase Agreement (capitalized terms used and not otherwise defined
in this Instrument of Assumption of Liabilities shall have the meanings ascribed
to such terms in the Asset Purchase Agreement);
WHEREAS, all of the terms and conditions precedent provided in
the Asset Purchase Agreement have been met and performed or waived by the
respective parties thereto, and such parties now desire to carry out the intent
and purpose of the Asset Purchase Agreement by, among other things, Purchaser's
execution and delivery to Seller of this Instrument of Assumption of
Liabilities; and
WHEREAS, this Instrument of Assumption of Liabilities is made,
executed and delivered pursuant to and in accordance with the Asset Purchase
Agreement, the terms of which shall not be merged hereinto but shall survive the
execution hereof as and to the extent provided therein.
NOW, THEREFORE, in consideration of the premises and of other
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, Purchaser hereby agrees as follows:
Section 1. Purchaser, by this Instrument of Assumption of
Liabilities, hereby assumes the Assumed Liabilities.
Section 2. The assumption by Purchaser of the Assumed
Liabilities shall not be construed, as between Purchaser on the one hand and the
obligees of such Assumed Liabilities on the other hand, to defeat, impair or
limit in any way any rights or remedies of Purchaser to contest or dispute the
validity or amount thereof; provided, that this provision shall not in any way
impair Seller's rights to indemnification from Purchaser with respect to the
Assumed Liabilities pursuant to the Asset Purchase Agreement.
Section 3. Subject to the terms and conditions of the Asset
Purchase Agreement, from time to time after the delivery of this Instrument of
Assumption of Liabilities, without further consideration, Purchaser will do,
execute, acknowledge and deliver, or will cause to be done, executed,
acknowledged and delivered, all such further acts, deeds, assignments,
transfers, conveyances, powers of attorney and instruments of further assurances
which Seller may reasonably request in order to more fully effectuate the
assumption of the Assumed
B-1
Liabilities provided for in this Instrument of Assumption of Liabilities. This
Instrument of Assumption of Liabilities is executed by, and shall be binding
upon, Purchaser and its successors and assigns, for the uses and purposes above
set forth and referred to, effective immediately upon its delivery to Seller.
Section 4. This Instrument of Assumption of Liabilities shall
be governed by and construed and enforced in accordance with the laws of the
State of New York without giving effect to the principles of conflicts of law
thereof.
[SIGNATURE PAGE TO FOLLOW]
B-2
IN WITNESS WHEREOF, Purchaser has caused this Instrument of
Assumption of Liabilities to be signed under seal by its duly authorized officer
as of the date first written above.
▇▇▇▇ ▇▇▇▇▇▇ ACQUISITION CO. INC.
By:__________________________________
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President and Chief
Executive Officer
Agreed and accepted
as of the date first
written above.
VIDIPAX, INC.
By:__________________________________
Name:
Title:
EXHIBIT C
GUARANTY
GUARANTY made, executed and delivered as of October 31, 2003
by Loudeye Corp., a Delaware corporation ("Guarantor"), in favor of ▇▇▇▇ ▇▇▇▇▇▇
Acquisition Co. Inc., a New York corporation ("Company").
WHEREAS, VidiPax, Inc., a New York corporation and wholly
owned subsidiary of Guarantor ("Seller") and Company are parties to an Asset
Purchase Agreement dated as of October 31, 2003 (the "Asset Purchase
Agreement"), pursuant to which the Seller has agreed to sell to Company, and
Company has agreed to purchase, the Assets, for consideration in the amount and
on the terms and conditions, provided in the Asset Purchase Agreement
(capitalized terms used and not otherwise defined in this Guaranty shall have
the meaning ascribed to such terms in the Asset Purchase Agreement);
WHEREAS, Company has relied upon the execution and delivery of
this Guaranty by Guarantor in entering into the Asset Purchase Agreement; and
WHEREAS, the Guaranty is made, executed and delivered pursuant
to and in accordance with the Asset Purchase Agreement, the terms of which shall
not be merged hereinto but shall survive the execution hereof as and to the
extent provided herein.
NOW, THEREFORE, in consideration of the premises and of other
valuable consideration accruing to Guarantor, the receipt and sufficiency of
which are hereby acknowledged, and intending to be legally bound hereby,
Guarantor hereby makes the following representations and warranties to Company
and hereby covenants and agrees with Company as follows:
Section 1. Guarantor, as primary obligor and not merely as
surety, hereby absolutely, irrevocably and unconditionally guarantees the full
and prompt payment and performance or discharge when due of all obligations and
liabilities of Seller now existing, hereafter incurred under, arising out of or
in connection with the Asset Purchase Agreement and the Ancillary Agreements
related thereto (collectively, the "Guaranteed Obligations"). This Guaranty
shall become effective upon execution and shall remain in full force and effect
until all of the Guaranteed Obligations have been fully paid, performed or
discharged by Guarantor.
Section 2. Guarantor hereby waives notice of any obligation or
liability to which this Guaranty may apply, and waives presentment, demand of
payment, protest, notice of dishonor or non-payment of any such obligation or
liability, suit or taking of other action by Seller against, and any other
notice to any party liable thereon (including Guarantor).
Section 3. The Guaranteed Obligations are absolute and
unconditional and shall be enforceable against Guarantor to the fullest extent
set forth herein.
C-1
Section 4. While this Guaranty is in full force and effect
pursuant to Section 1 hereof, it shall not be affected by or impaired by any of
the following:
(a) the occurrence or continuance of any event of
bankruptcy, reorganization or insolvency with respect to Seller, or the
dissolution, liquidation or winding up of Seller;
(b) the exercise, non-exercise or delay in
exercising, by Company or any of its rights and remedies under this Guaranty or
the Asset Purchase Agreement;
(c) any sale, transfer or other disposition by
Guarantor of any direct or indirect interest it may have in Seller; or
(d) the absence of any notice to, or knowledge by,
Guarantor of the existence or occurrence of any of the matters or events set
forth in the foregoing clauses.
Section 5. Guarantor makes the following representations,
warranties and agreements:
(a) Guarantor is a duly organized and validly
existing corporation in good standing under the laws of the State of Washington,
has all requisite power and authority to own lease and operate its assets and
properties and to carry on its business as it now is being conducted, and is
duly qualified to do business and in good standing in each jurisdiction where
failure to so qualify or be in good standing would have a material adverse
effect on Guarantor.
(b) Guarantor has all requisite power and authority
to execute, deliver and perform the terms and provisions of this Guaranty. The
execution and delivery of this Guaranty by Guarantor and the performance of the
terms and provisions of the Guaranty have been duly and validly authorized by
all necessary action required on the part of Guarantor and no other proceedings
on the part of Guarantor are necessary to authorize this Guaranty. This Guaranty
has been duly and validly executed and delivered by Guarantor and constitutes
the legal, valid and binding obligation of Guarantor, enforceable against
Guarantor, in accordance with its terms.
(c) None of the execution, delivery or performance of
the terms and provisions of this Guaranty (i) will contravene any provision of
any law, statute, rule or regulation or any order, writ, injunction or decree of
any court or governmental instrumentality, (ii) will conflict or be inconsistent
with or result in any breach of any of the terms, covenants, conditions or
provisions of or constitute a default under, or result in the creation or
imposition of (or the obligation to create or impose) any lien upon any of the
property or assets of Guarantor pursuant to the terms of any indenture,
mortgage, deed of trust, credit agreement, loan agreement or any other
agreement, contract or instrument to which Guarantor is a party or by which it
or any of its property or assets is bound or which it may be subject or (iii)
will violate any provision of its organizational documents.
(d) No consent, authorization or approval of,
declaration, filing or registration with, or notice to, any Governmental
Authority is necessary for the execution, delivery or performance of the terms
and provisions of this Guaranty, other than (i) such
C-2
consents, authorizations, approvals, declarations, filings, registrations with,
or notices, which, if not obtained or made, would not, individually or in the
aggregate, prevent Guarantor from performing its material obligations under this
Guaranty, (ii) such consents, authorizations, approvals, declarations, filings,
registrations with, or notices which become applicable to Guarantor as a result
of any facts that specifically relate to the business or activities in which
Company (or any of its Affiliates) is or proposes to be engaged, and (iii) such
consents, authorizations, approvals, declarations, filings, registrations with,
or notices, which Seller is required to obtain in order to consummate the
transactions contemplated by the Asset Purchase Agreement.
(e) There are no actions, suits or proceedings
pending or, to the knowledge of Guarantor, threatened, that are reasonably
likely to materially and adversely affect the business, operations, property,
assets or financial condition of Guarantor.
(f) Guarantor is in compliance with all applicable
statutes, regulations and orders of, and all applicable restrictions imposed by,
all governmental bodies, domestic or foreign, in respect of the conduct of its
business and the ownership or its property, except such noncompliance as would
not, in the aggregate, have a material adverse effect on the business,
operations, property, assets or financial condition of Guarantor or materially
impair Guarantor's ability to perform its obligations hereunder.
Section 6. The obligations of Guarantor hereunder are
independent of the obligations of Seller with respect to all or any part of the
Guaranteed Obligations and, in the event of any default hereunder, a separate
action or actions may be brought and prosecuted against Guarantor.
Section 7. All payments hereunder shall be made by Guarantor
in currency and type of funds specified for payments in the Asset Purchase
Agreement. Except as provided in the Asset Purchase Agreement, any and all
payments made by Guarantor hereunder shall be made free and clear of and without
deductions for any and all present and future taxes, levies, imposts,
deductions, charges and withholdings, and all liabilities with respect thereto,
or any set-off or counterclaim.
Section 8. The obligations of Guarantor set forth herein
constitute the full recourse obligations of Guarantor enforceable against
Guarantor to the full extent of all the assets and the properties of Guarantor.
Section 9. This Guaranty shall be binding upon Guarantor and
its successors and assigns and shall inure to the benefit of Company and its
successors and assigns; provided, however, that Guarantor may not assign or
transfer any of its rights or obligations hereunder without the prior written
consent of Company.
Section 10. Neither this Guaranty nor any provision hereof may
be changed, waived, discharged or terminated, except as specified in Section 1
or by an instrument in writing signed by Guarantor and Company.
C-3
Section 11. Guarantor acknowledges that an executed (or
conformed) copy of the Asset Purchase Agreement has been made available to its
principal executive officers and such officers are familiar with the contents
thereof.
Section 12. All notices and other communications hereunder
shall be made to Company or Guarantor, as the case may be, at the address, in
the manner and with the effect provided in Section 10.4 of the Asset Purchase
Agreement, or at such other address as may be notified in writing by Company or
Guarantor, as the case may be, to the other.
Section 13. This Guaranty and the rights and obligations of
Company and Guarantor hereunder shall be governed by and construed and enforced
in accordance with the laws of the State of New York without giving effect to
the principles of conflicts of law thereof.
[SIGNATURE PAGE TO FOLLOW]
C-4
IN WITNESS WHEREOF, Guarantor has caused this Guaranty to be
signed under seal by its duly authorized officer as of the date first written
above.
LOUDEYE CORP.
By:__________________________________
Name:
Title:
Agreed and accepted
as of the date first
written above.
▇▇▇▇ ▇▇▇▇▇▇ ACQUISITION CO. INC.
By:__________________________________
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President and Chief Executive Officer